===============================================================================
CNL HEALTH CARE PROPERTIES, INC.
Supplement No. 1, dated March 23, 2000
to Prospectus, dated May 24, 1999
===============================================================================
CNL Health Care Properties, Inc., which we sometimes refer to as the
"Company," is a Maryland corporation which operates for federal income tax
purposes as a real estate investment trust, or a REIT. On December 2, 1999, the
Company formed CNL Health Care Partners, LP, a Delaware limited partnership. CNL
Health Care GP Corp. and CNL Health Care LP Corp. are wholly owned subsidiaries
of the Company and are the general and limited partner, respectively, of CNL
Health Care Partners, LP. Properties acquired are expected to be held by the
partnership and, as a result, owned by the Company through the partnership. The
term "Company" includes CNL Health Care Properties, Inc. and its subsidiaries,
CNL Health Care GP Corp., CNL Health Care LP Corp. and CNL Health Care Partners,
LP. Our address is CNL Center at City Commons, 450 South Orange Avenue, Orlando,
Florida 32801, and our telephone number is (407) 650-1000 or toll free (800)
522-3863.
This Supplement is part of, and should be read in conjunction with, the
Prospectus dated May 24, 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 the proposed property for which the Company has
received an initial commitment is presented as of March 13, 2000, and all
references to commitments should be read in that context. Proposed properties
for which the Company receives initial commitments, as well as property
acquisitions that occur after March 13, 2000, will be reported in a subsequent
Supplement.
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 March 13, 2000, the Company had
received aggregate subscription proceeds of $6,181,104 (618,110 Shares),
including $12,540 (1,254 Shares) issued pursuant to the Reinvestment Plan. As of
March 13, 2000, the Company had approximately $5,192,000 available to invest
in Properties, following deduction of Selling Commissions, marketing support and
due diligence expense reimbursement fees, Organizational and Offering Expenses
of approximately three percent and Acquisition Fees and Acquisition Expenses.
<PAGE>
RISK FACTORS
OFFERING-RELATED RISKS
WE MAY RECEIVE INSUFFICIENT OFFERING PROCEEDS. We are making this
offering on a best efforts basis and there can be no assurance that we will sell
the maximum number of shares. Because we are making this offering on a best
efforts basis, our potential profitability and our ability to diversify our
investments, both geographically and by type of properties purchased, will be
limited by the amount of funds we raise.
THIS IS AN UNSPECIFIED PROPERTY OFFERING.
YOU CANNOT EVALUATE PROPERTIES THAT WE HAVE NOT YET ACQUIRED OR
IDENTIFIED FOR ACQUISITION. We have established certain criteria for evaluating
particular properties and the operators of the properties in which we may
invest. We have not set fixed minimum standards relating to creditworthiness of
tenants and therefore the Board of Directors has flexibility in assessing
potential tenants. As of the date of this Prospectus, we had entered into an
initial commitment to acquire one property. You can read the section of the
Prospectus under the caption "Business - Pending Investments" for a description.
The acquisition of this property is subject to the fulfillment of certain
conditions and there can be no assurance that any or all of the conditions will
be satisfied or, if satisfied, that this property will be acquired by the
Company. Accordingly, this is an unspecified property offering, and as a
prospective investor, you have no information to assist you in evaluating the
merits of any additional properties to be purchased or developed by the Company.
In addition, the Board of Directors may approve future offerings, the proceeds
of which may be invested in properties; therefore, you will not have an
opportunity to evaluate all of the properties that will be in our portfolio. You
can read the sections of this Prospectus under the captions "Business-- General"
and "Business-- Standards for Investment in Properties" if you want more
information about the types of properties in which we plan to invest and our
criteria for evaluating properties.
THERE MAY BE DELAYS IN INVESTING THE PROCEEDS OF THIS OFFERING. We may
delay investing the proceeds of this offering for up to the later of two years
from the commencement of this offering or one year after termination of the
offering; although, we expect to invest substantially all net offering proceeds
by the end of that period. The "Prior Performance Information" section provides
a summary description of the investment experience of affiliates of the advisor
in prior CNL programs, but you should be aware that previous experience is not
necessarily indicative of the rate at which the proceeds of this offering will
be invested.
COMPANY-RELATED RISKS
WE HAVE LIMITED OPERATING HISTORY. As of the date of this Prospectus,
we have not yet acquired any properties and prior to July 13, 1999, the date our
operations commenced, had no previous performance history. As a result, you
cannot be sure how the Company will be operated, whether it will pursue the
objectives described in this Prospectus or how it will perform financially.
WE MAY NOT HAVE SUFFICIENT WORKING CAPITAL. We cannot assure you that
we will have sufficient working capital. As of December 31, 1999, we had
stockholder's equity of $3,292,137. If we do not have sufficient capital, we may
not be able to pay certain expenses or loan payments due on permanent financing
which could result in our defaulting under such loans.
REAL ESTATE AND OTHER INVESTMENT RISKS
POSSIBLE LACK OF DIVERSIFICATION INCREASES THE RISK OF INVESTMENT.
Based on the estimated purchase price of each health care facility ranging from
$1,000,000 to $30,000,000, we anticipate owning or financing with the net
proceeds of this offering between four and 126 properties, depending on the
types of properties if the maximum offering proceeds are raised. Assuming an
average purchase price of $10,000,000 per property, based on our present
expectation of the prices of properties in which we will most likely invest, and
assuming gross proceeds of only $15,000,000 are raised, we would acquire or
finance approximately one property with the net proceeds from this offering.
Assuming maximum gross proceeds of $150,000,000 are raised, we would acquire or
finance approximately 12 properties with the net proceeds from this offering.
Depending on the purchase price of each health care facility, we may not be able
to achieve diversification by tenant, facility type or geographic location.
WE WILL NOT CONTROL THE MANAGEMENT OF OUR PROPERTIES. Our tenants will
be responsible for maintenance and other day-to-day management of the
properties. Because our revenues will largely be derived from rents, our
financial condition will be dependent on the ability of third-party tenants that
we do not control to operate the properties successfully. We intend to enter
into leasing agreements only with tenants having substantial prior experience in
the operation of health care facilities. While our initial commitment to acquire
one property meets that criterion, there can be no assurance that we will be
able to make such arrangements on other transactions. If our tenants are unable
to operate the properties successfully, they may not be able to pay their rent,
which could adversely affect our financial condition.
FINANCING RISKS
WE HAVE NO COMMITMENTS FOR LONG-TERM FINANCING. We intend to obtain a
line of credit and long-term financing; however, we have not yet obtained a
commitment for any long-term financing, and we cannot be sure that we will be
able to obtain any long-term financing on satisfactory terms. As of March 13,
2000, we have obtained a commitment for an initial $25,000,000 line of credit to
be used to acquire or construct health care properties; however, there is no
assurance that we will obtain the line of credit. If we do not obtain the line
of credit or long-term financing, we may not be able to acquire as many
properties or make as many loans and leases as we anticipated, which could limit
the diversification of our investments and our ability to achieve our investment
objectives. If we do not obtain a line of credit or long-term financing, we will
not enter into any secured equipment leases.
ANTICIPATED BORROWING CREATES RISKS. We may borrow money to acquire
assets, to preserve our status as a REIT or for other corporate purposes. We may
mortgage or put a lien on one or more of our assets in connection with any
borrowing. The Board of Directors anticipates that we will obtain one or more
revolving lines of credit up to $45,000,000 to provide financing for the
acquisition of assets. As of March 13, 2000, we have obtained a commitment for
an initial $25,000,000 line of credit to be used to acquire or construct health
care properties. We may also obtain long-term, permanent financing. The line of
credit may be increased at the discretion of the Board of Directors. We may
repay the line of credit with proceeds from this offering, working capital or
permanent financing. Initially, we expect to repay and amounts borrowed under
the Line of Credit as we receive additional offering proceeds. If we do not
receive enough offering proceeds to repay the amounts due under the Line of
Credit, we will not have to seek additional equity or debt financing. We may not
borrow more than 300% of our net assets. Borrowing may be risky if the cash flow
from our real estate and other investments is insufficient to meet our debt
obligations. In addition, our lenders may seek to impose restrictions on future
borrowings, distributions and operating policies. If we mortgage or pledge
assets as collateral and we cannot meet our debt obligations, the lender could
take the collateral, and we would lose both the asset and the income we were
deriving from it. We are not limited on the amount of assets we may use as
security for the repayment of indebtedness.
TAX RISKS
WE MAY HAVE TO BORROW FUNDS OR SELL ASSETS TO MEET OUR DISTRIBUTION
REQUIREMENTS. Subject to some adjustments that are unique to REITs, a REIT
generally must distribute 95% of its taxable income (90% in 2001 and
thereafter). For the purpose of determining taxable income, we may be required
to accrue interest, rent and other items treated as earned for tax purposes but
that we have not yet received. In addition, we may be required not to accrue as
expenses for tax purposes some items which actually have been paid or some of
our deductions might be disallowed by the Internal Revenue Service. As a result,
we could have taxable income in excess of cash available for distribution. If
this occurs, we may have to borrow funds or liquidate some of our assets in
order to meet the distribution requirement applicable to a REIT.
SUITABILITY STANDARDS AND HOW TO SUBSCRIBE
HOW TO SUBSCRIBE
An investor who meets the suitability standards described above may
subscribe for Shares by completing and executing the Subscription Agreement and
delivering it to a Soliciting Dealer, together with a check for the full
purchase price of the Shares subscribed for, payable to "SouthTrust Bank, N.A.,
Escrow Agent." See "The Offering-- Subscription Procedures." Certain Soliciting
Dealers who have "net capital," as defined in the applicable federal securities
regulations, of $250,000 or more may instruct their customers to make their
checks for Shares subscribed for payable directly to the Soliciting Dealer. Care
should be taken to ensure that the Subscription Agreement is filled out
correctly and completely. Partnerships, individual fiduciaries signing on behalf
of trusts, estates, and in other capacities, and persons signing on behalf of
corporations and corporate trustees may be required to obtain additional
documents from Soliciting Dealers. Any subscription may be rejected by the
Company in whole or in part, regardless of whether the subscriber meets the
minimum suitability standards.
ESTIMATED USE OF PROCEEDS
The table set forth below summarizes certain information relating to
the anticipated use of offering proceeds by the Company, assuming that no more
than 1,500,000 Shares are sold (618,110 Shares had been sold as of March 13,
2000) and assuming 15,000,000 Shares are sold. The Company estimates that 84% of
gross offering proceeds computed at $10 per share sold ("Gross Proceeds") will
be available for the purchase of properties (the "Properties") and the making of
mortgage loans ("Mortgage Loans"), and approximately 9% of Gross Proceeds will
be paid in fees and expenses to affiliates of the Company (the "Affiliates") for
their services and as reimbursement for organizational and offering expenses
(the "Organizational and Offering Expenses") and acquisition expenses incurred
on behalf of the Company; the balance will be used to pay other expenses of the
offering. While the estimated use of proceeds set forth in the table below is
believed to be reasonable, this table should be viewed only as an estimate of
the use of proceeds that may be achieved.
<TABLE>
<CAPTION>
Assuming sale of
1,500,000 Shares (1) Maximum Offering (1) (2)
---------------------------- ---------------------------
Amount Percent Amount Percent
------------- --------- ------------- ----------
<S> <C> <C> <C> <C> <C>
GROSS PROCEEDS TO THE COMPANY(3)................. $15,000,000 100.0% $150,000,000 100.0%
Less:
Selling Commissions to CNL
Securities Corp.(3)....................... 1,125,000 7.5% 11,250,000 7.5%
Marketing Support and Due Diligence
Expense Reimbursement Fee to CNL
Securities Corp.(3)....................... 75,000 0.5% 750,000 0.5%
Organizational and Offering Expenses(4)...... 450,000 3.0% 4,500,000 3.0%
------------- --------- ------------- ----------
NET PROCEEDS TO THE COMPANY...................... 13,350,000 89.0% 133,500,000 89.0%
Less:
Acquisition Fees to the Advisor(5)........... 675,000 4.5% 6,750,000 4.5%
Acquisition Expenses(6)...................... 75,000 0.5% 750,000 0.5%
Initial Working Capital Reserve.............. (7) (7)
------------- --------- ------------- ----------
CASH PAYMENT FOR PURCHASE OF PROPERTIES
AND THE MAKING OF MORTGAGE LOANS BY
THE COMPANY(8)............................... $12,600,000 84.0% $126,000,000 84.0%
============= ========= ============= ==========
</TABLE>
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FOOTNOTES:
(1) Excludes the purchase of 20,000 shares of common stock ("Common Stock")
by CNL Health Care Corp. (the "Advisor") in exchange for its $200,000
investment in the Company. The Advisor may, but is not required to,
purchase additional Shares of the Company.
(2) Excludes 500,000 Shares that may be sold pursuant to the Reinvestment
Plan and 600,000 shares that may be sold upon exercise of the warrants
(the "Soliciting Dealer Warrants").
(3) Gross Proceeds of the offering are calculated as if all Shares are sold
at $10.00 per Share and do not take into account any reduction in selling
commissions ("Selling Commissions"). See "The Offering -- Plan of
Distribution" for a description of the circumstances under which Selling
Commissions may be reduced, including commission discounts available for
purchases by registered representatives or principals of the Managing
Dealer or Soliciting Dealers, certain directors and officers and certain
investment advisers. Selling Commissions are calculated assuming that
reduced commissions are not paid in connection with the purchase of any
Shares. The Shares are being offered to the public through CNL Securities
Corp., which will receive Selling Commissions of 7.5% on all sales of
Shares and will act as Managing Dealer. The Managing Dealer is an
Affiliate of the Advisor. Other broker-dealers may be engaged as
Soliciting Dealers to sell Shares and be reallowed Selling Commissions of
up to 7%, with respect to Shares which they sell. In addition, all or a
portion of the marketing support and due diligence expense reimbursement
fee may be reallowed to certain Soliciting Dealers for expenses incurred
by them in selling the Shares, including reimbursement for bona fide
expenses incurred in connection with due diligence activities, with prior
written approval from, and in the sole discretion of, the Managing
Dealer. See "The Offering -- Plan of Distribution" for a more complete
description of this fee. The Company also will issue to the Managing
Dealer, a Soliciting Dealer Warrant to purchase one share of Common Stock
for every 25 Shares sold, to be exercised, if at all, during the
five-year period
<PAGE>
commencing with the date the offering begins (the "Exercise Period"), at
a price of $12.00 per share. All or any part of such Soliciting Dealer
Warrants may be reallowed to certain Soliciting Dealers with prior
written approval of, and in the sole discretion of, the Managing Dealer,
unless prohibited by federal or state securities laws. See "Summary of
the Articles of Incorporation and Bylaws -- Description of Capital Stock
-- Soliciting Dealer Warrants" and "The Offering -- Plan of
Distribution."
(4) Organizational and Offering Expenses include legal, accounting, printing,
escrow, filing, registration, qualification, and other expenses of the
organization of the Company and the offering of the Shares, but exclude
Selling Commissions and the marketing support and due diligence expense
reimbursement fee. The Advisor will pay all Organizational and Offering
Expenses which exceed 3% of Gross Proceeds. The Organizational and
Offering Expenses paid by the Company in connection with the formation of
the Company, together with the 7.5% Selling Commissions and 0.5%
marketing support and due diligence expense reimbursement fee incurred by
the Company will not exceed 13% of the proceeds raised in connection with
this offering.
(5) Acquisition fees ("Acquisition Fees") include all fees and commissions
paid by the Company to any person or entity in connection with the
selection or acquisition of any Property or the making of any Mortgage
Loan, including to Affiliates or nonaffiliates. Acquisition Fees do not
include acquisition expenses ("Acquisition Expenses").
(6) Represents Acquisition Expenses that are neither reimbursed to the
Company nor included in the purchase price of the Properties, and on
which rent is not received, but does not include certain expenses
associated with Property acquisitions that are part of the purchase price
of the Properties, that are included in the basis of the Properties, and
on which rent is received. Acquisition Expenses include any and all
expenses incurred by the Company, the Advisor, or any Affiliate of the
Advisor in connection with the selection or acquisition of any Property
or the making of any Mortgage Loan, whether or not acquired or made,
including, without limitation, legal fees and expenses, travel and
communication expenses, costs of appraisals, nonrefundable option
payments on property not acquired, accounting fees and expenses, taxes,
and title insurance, but exclude Acquisition Fees. The expenses that are
attributable to the seller of the Properties and part of the purchase
price of the Properties are anticipated to range between 1% and 2% of
Gross Proceeds.
(7) Because leases generally will be on a "triple-net" basis, it is not
anticipated that a permanent reserve for maintenance and repairs will be
established. However, to the extent that the Company has insufficient
funds for such purposes, the Advisor may, but is not required to,
contribute to the Company an aggregate amount of up to 1% of the net
offering proceeds available to the Company for maintenance and repairs.
The Advisor also may, but is not required to, establish reserves from
offering proceeds, operating funds, and the available proceeds of any
sales of Company assets ("Sale").
(8) Offering proceeds designated for investment in Properties or the making
of Mortgage Loans temporarily may be invested in short-term, highly
liquid investments with appropriate safety of principal. The Company may,
at its discretion, use up to $100,000 per calendar quarter of offering
proceeds for redemptions of Shares. See "Redemption of Shares."
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
Relationships and Related Transactions."
<PAGE>
CONFLICTS OF INTEREST
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 chart indicates the relationship between the Company, the
Advisor and CNL Financial Group, Inc., including its Affiliates that will
provide services to the Company.
<TABLE>
<CAPTION>
CNL FINANCIAL GROUP, INC. (1)
Subsidiaries, Affiliates and Strategic Business Units
<S> <C>
Capital Markets: Retail:
--------------- ------
CNL Capital Markets, Inc. (2) Commercial Net Lease Realty, Inc. (6)
CNL Investment Company
CNL Securities Corp. (3) Restaurant:
----------
CNL Institutional Advisors, Inc. CNL American Properties Fund, Inc. (7)
Administrative Services: Hospitality:
----------------------- -----------
CNL Shared Services, Inc. (4) CNL Hospitality Properties, Inc. (8)
Real Estate Services: HEALTH CARE:
-------------------- -----------
CNL Real Estate Services, Inc. (5) CNL HEALTH CARE PROPERTIES, INC. (9)
CNL Hospitality Corp.
CNL Hotel Development Company Financial Services:
------------------
CNL HEALTH CARE CORP. CNL Finance, Inc.
(FORMERLY CNL HEALTH CARE ADVISORS, INC.) CNL Capital Corp.
CNL HEALTH CARE DEVELOPMENT, INC. CNL Advisory Services, Inc.
CNL Corporate Properties, Inc.
CNL Community Development Corp.
CNL Properties, Inc.
</TABLE>
- -----------------------
(1) CNL Financial Group, Inc. (formerly CNL Group, Inc.) is a wholly owned
subsidiary of CNL Holdings, Inc. James M. Seneff, Jr., Chairman of the
Board and Chief Executive Officer of the Company, shares ownership and
voting control of CNL Holdings, Inc. with Dayle L. Seneff, his wife.
(2) CNL Capital Markets, Inc. is a wholly owned subsidiary of CNL Financial
Group, Inc. and is the parent company of CNL Investment Company.
(3) CNL Securities Corp. is a wholly owned subsidiary of CNL Investment
Company and has served as managing dealer in the offerings for various
CNL public and private real estate programs, including the Company.
(4) CNL Shared Services, Inc. (formerly CNL Corporate Services, Inc.) is a
wholly owned subsidiary of CNL Holdings, Inc., and together with other
Affiliates provides administrative services for various CNL entities,
including the Company.
(5) CNL Real Estate Services, Inc., a wholly owned subsidiary of CNL
Financial Group, Inc., is the parent company of CNL Hospitality Corp.;
CNL Health Care Corp.; CNL Corporate Properties, Inc.; CNL Properties,
Inc.; and CNL Community Development Corp.
(6) 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.
<PAGE>
(7) 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.
(8) CNL Hospitality Properties, Inc. is a public, unlisted REIT. James M.
Seneff, Jr. holds the positions of Chief Executive Officer and Chairman
of the Board, and Robert A. Bourne holds the positions of President and
Vice Chairman of the Board of CNL Hospitality Properties, Inc. CNL
Hospitality Corp., a majority owned subsidiary of CNL Real Estate
Services, Inc., provides management and advisory services to the
Company pursuant to an advisory agreement.
(9) CNL Health Care Properties, Inc. is a public, unlisted REIT. James M.
Seneff, Jr. holds the positions of Chief Executive Officer and Chairman
of the Board, and Robert A. Bourne holds the positions of President and
director of CNL Health Care Properties, Inc. CNL Health Care Corp., a
wholly owned subsidiary of CNL Real Estate Services, Inc., provides
management and advisory services to the Company pursuant to the
Advisory Agreement.
BUSINESS
GENERAL
The Company is a Maryland corporation that was organized on December
22, 1997. On December 2, 1999, the Company formed CNL Health Care Partners, LP,
a Delaware limited partnership ("Health Care Partners"). CNL Health Care GP
Corp. and CNL Health Care LP Corp. are wholly owned subsidiaries of the Company
and are the general and limited partner, respectively, of Health Care Partners.
Properties acquired are expected to be held by Health Care Partners and, as a
result, owned by the Company through Health Care Partners. The term "Company"
includes CNL Health Care Properties, Inc. and its subsidiaries, CNL Health Care
GP Corp., CNL Health Care LP Corp. and CNL Health Care Partners, LP.
The Company has been formed primarily to acquire Properties related to
Health Care Facilities located across the United States. The Health Care
Facilities may include congregate living, assisted living and skilled nursing
facilities, continuing care retirement communities and life care communities,
and medical office buildings and walk-in clinics. The Properties will be leased
on a long-term (generally, 10 to 20 years, plus renewal options for an
additional 10 to 20 years), "triple-net" basis to operators of Health Care
Facilities. "Triple-net" means that the tenant generally will be responsible for
repairs, maintenance, property taxes, utilities, and insurance. The Properties
may consist of land and building, the land underlying the building with the
building owned by the tenant or a third party, or the building only with the
land owned by a third party. The Company may provide Mortgage Loans to operators
of Health Care Facilities secured by real estate owned by the operators. To a
lesser extent, the Company also intends to offer Secured Equipment Leases to
operators of Health Care Facilities pursuant to which the Company will finance,
through loans or direct financing leases, the Equipment.
The Properties, which typically will be freestanding and will be
located across the United States, will be leased to operators of Health Care
Facilities to be selected by the Advisor and approved by the Board of Directors.
<PAGE>
Each Property acquisition and Mortgage Loan will be submitted to the Board of
Directors for approval. The Company has not specified any percentage of Net
Offering Proceeds to be invested in any particular type of Health Care Facility.
It is anticipated that the Health Care Facilities will be leased to selected
national and regional operators. Properties purchased by the Company are
expected to be leased under arrangements generally requiring base annual rent
equal to a specified percentage of the Company's cost of purchasing a particular
Property with (i) automatic fixed increases in base rent or (ii) increases in
the base rent based on increases in consumer price indices, over the term of the
lease. See "Description of Property Leases -- Computation of Lease Payments,"
below.
The Company believes that demographic trends are significant when
looking at the potential for future growth in the health care industry.
According to data released from the U.S. Bureau of Census in January 2000, the
elderly population is projected to more than double between now and the year
2050, to 82 million.
<TABLE>
<CAPTION>
ELDERLY POPULATION ESTIMATES
Date Over 85 Population (000) Over 65 Population (000)
- ----------------- --------------------------- ---------------------------
<S> <C> <C>
July 1, 1998 4,054 34,401
July 1, 2000 4,312 34,835
July 1, 2005 4,968 36,370
July 1, 2010 5,786 39,715
July 1, 2015 6,396 45,959
July 1, 2020 6,763 53,733
July 1, 2025 7,441 62,641
July 1, 2030 8,931 70,319
July 1, 2035 11,486 74,774
July 1, 2040 14,284 77,177
July 1, 2045 17,220 79,142
July 1, 2050 19,352 81,999
</TABLE>
SOURCE: U.S. BUREAU OF CENSUS
In addition to the growth in the number of elderly people, life
expectancies are increasing. Those 85 and over are the most rapidly growing
elderly age group. Between 1960 and 1994, this group grew 274%. During this same
period of time, the entire population of the United States grew 45%.
LIFE EXPECTANCY TRENDS
AT AGE 65 (IN YEARS)
Year Male Female
- ------------ ------- ----------
1965 12.9 16.3
1980 14.0 18.4
1985 14.4 18.6
1990 15.0 19.0
1991 15.1 19.1
1992 15.2 19.2
1993 15.1 19.0
1994 15.3 19.0
1995 15.3 19.0
1996* 15.8 19.1
1997* 15.6 19.2
1998** 15.7 19.2
1999** 15.7 19.3
* preliminary data
** estimated
<PAGE>
SOURCE: SOCIAL SECURITY ADMINISTRATION OFFICE OF PROGRAMS: DATA FROM
THE OFFICE OF THE ACTUARY
Based on information from the Economic and Statistic Administration of
the U.S. Department of Commerce, management believes that all of these trends
suggest that as more people live to the oldest ages, there may also be more who
face chronic, limiting illnesses or conditions. These conditions result in
people becoming dependent on others for help in performing the activities of
daily living. The U.S. General Accounting Office anticipates that the number of
older people needing assistance with activities of daily living will increase to
14 million by 2020, from 7 million in 1994.
PERCENT OF PERSONS NEEDING ASSISTANCE WITH
ACTIVITIES OF DAILY LIVING (ADLS)
Years of Age Percentage
------------------ --------------
65-69 9%
70-74 11%
75-79 20%
80-84 31%
85+ 50%
SOURCE: U.S. BUREAU OF CENSUS, 1991 DATA
In addition to an aging population, according to 1997 data from the
U.S. Department of Commerce, a significant segment of the elderly population has
the financial resources to afford seniors' housing facilities. The mean
household income for those age 65 and over is more than $32,000 per year. In
addition, according to June 30, 1999 data from the U.S Bureau of Census, the
average household wealth for those age 65 and over exceeds the national average
for all age groups by 54%, and 27% of those households have an annual income in
excess of $50,000. Management believes that other changes and trends in the
health care industry will create opportunities for growth of seniors' housing
facilities, including (i) the growth of operators serving specific health care
niches, (ii) the consolidation of providers and facilities through mergers,
integration of physician practices, and elimination of duplicative services,
(iii) the pressures to reduce the cost of providing quality health care, (iv)
more dual-income and single-parent households leaving fewer family members
available for in-home care of aging parents and necessitating more senior care
facilities, and (v) an anticipated increase in the number of insurance companies
and health care networks offering privately funded long-term care insurance.
According to the Health Care Financing Administration and the National
Health Statistics Group, the health care industry represents over 13.5% of the
United States' gross domestic product ("GDP") with at least $1.092 trillion in
annual expenditures. The U.S. Department of Health and Human Services expects
this figure to rise to over 23.6% of the GDP by 2008, with $2.18 trillion in
annual expenditures. According to the U.S. Bureau of Census, U.S. health care
construction expenditures are estimated to be $17.4 billion per year and
growing. With regard to housing for seniors, there are three major contributors
to growth and the attraction of capital, according to the National Investment
Conference for the Senior Living and Long Term Care Industries in 1996. They are
(i) demographics, (ii) the limited supply of new product, and (iii) the
investment community's increased understanding of the industry. The Company
believes the growth in demand and facilities will continue at least 50 years due
to the favorable demographics, the increase in public awareness of the industry,
the preference of seniors for obtaining care in non-institutional settings and
the cost savings realized in a non-institutional environment.
<PAGE>
ESTIMATE OF EFFECTIVE DEMAND FOR SENIORS' HOUSING CATEGORIES
ELDERLY POPULATION WITH INCOME OVER $25,000
THOUSANDS OF BEDS
<TABLE>
<CAPTION>
Base Independent Living Assisted Living Skilled Nursing
- ------------ --------------------- ------------------ ------------------
<S> <C> <C> <C>
1996 826 427 524
2000 849 457 567
2005 887 492 619
2010 963 537 681
2015 1,108 597 752
2020 1,292 671 834
2025 1,507 778 957
2030 1,694 903 1,120
</TABLE>
SOURCE: PRICE WATERHOUSE, LLP FOR THE NATIONAL INVESTMENT CONFERENCE FOR THE
SENIOR LIVING AND LONG TERM CARE INDUSTRIES, OCTOBER 1996
The Company intends to capitalize on the growing real estate needs in
the seniors' housing and health care industries primarily by acquiring
Properties and leasing them to health care operators on a long-term (generally,
10 to 20 years, plus renewal options for an additional 10 to 20 years),
"triple-net" basis. The Properties that the Company will acquire and lease are
expected to include one or more of the following types:
o SENIORS' HOUSING, WHICH INCLUDES CONGREGATE LIVING AND ASSISTED LIVING
FACILITIES. Congregate living communities offer a lifestyle choice,
including residential accommodations with access to services, such as
housekeeping, transportation, dining and social activities, for those
who wish to maintain their lifestyles independently. The fastest
growing segment of the seniors' housing industry is assisted living.
While skilled nursing facilities focus on more intensive care, assisted
living facilities provide housing for seniors that need assistance with
activities of daily living, such as grooming, dressing, bathing, and
eating. Assisted living facilities provide accommodations with limited
health care available when needed but do not have an institutional
feel. Certain assisted living facilities are also now specializing in
meeting the needs of Alzheimer's and dementia patients prior to the
time that their condition warrants a nursing home setting or, in some
instances, in competition with what would otherwise be provided in a
nursing home setting. According to the U.S. Department of Health and
Human Services, at least 15%, and possibly as much as 70%, of the
patients in nursing homes could more appropriately be cared for in a
less institutional and more cost effective setting. In addition,
seniors' housing facilities include continuing care retirement
communities and life care communities which provide a full range of
long-term care services in one location, such as congregate living,
assisted living and skilled nursing facilities and home health care.
o SKILLED NURSING FACILITIES. Skilled nursing facilities provide
extensive skilled nursing and other long-term care services to patients
that may require full time medical observation, medication monitoring,
ventilation and intravenous therapies, sub-acute care, and
Alzheimer's/dementia care. Throughout much of the United States, the
supply of new skilled nursing facilities is limited by complex
Certificate of Need Laws or similar state licensing regulations, as a
result of the National Health Planning and Resources Development Act of
1974, which require nursing home providers to obtain prior approval
from regulators before undertaking any major new construction or
renovation projects. As a result, the supply of skilled nursing
facilities is growing very slowly. Demand for skilled nursing
facilities is coming from a rapidly growing population over 75 years of
age and the shift of sub-acute patients to lower cost formats for
treatment. Some states have eliminated Certificate of Need Laws
allowing the market to address the issue of supply and demand. If
trends such as this continue, it is probable that new skilled nursing
facilities will be constructed to meet the demand, thereby providing
potential development and investment opportunities for the Company.
o MEDICAL OFFICE BUILDINGS. Medical office buildings, including doctors'
offices, special purpose facilities, such as diagnostic, cancer
treatment and outpatient centers, and walk-in clinics also provide
investment
<PAGE>
opportunities as more small physician practices consolidate to save on
the increasing costs of private practice and single purpose medical
facilities become more common.
CONTINUUM OF LONG-TERM CARE FACILITIES*
<TABLE>
<CAPTION>
Retirement/Congregate
Living Assisted Living Skilled Nursing Facility Acute Care Hospitals
- --------------------------- --------------------------- -------------------------- ---------------------------
<S> <C> <C> <C>
Informal concierge, 24-hour supervision, 24-hour medical care and Short-term acute medical
emergency call system, personal assistance as protective oversight, care
housekeeping & needed, emergency medication management,
main-tenance, some group response system, social emergency response
activities, food service activities, housekeeping system, 3 meals per day,
and transportation and maintenance, 3 meals assistance with ADLs
per day, transportation,
assistance with
medication and shopping
</TABLE>
* Interspersed throughout the continuum are visits to physicians offices,
physical therapy, occupational therapy, and other short-term necessary
health care services.
Legg Mason Wood Walker, Inc. in its industry analysis, HEALTH FACILITY
REITS SUBSTANTIAL GROWTH AHEAD (December 15, 1997), estimates the value of
health care facilities in the United States to be $584 billion. Management
believes, based on historical costs of property owned by publicly traded health
care REITs, only a small portion of health care facilities in the United States
are owned by REITs. Management believes that this fact, coupled with the health
care industry trends previously discussed, provides a significant investment
opportunity for the Company. Demographic trends may vary depending on the
properties and regions selected for investment. The success of the future
operations of the Company's Properties will depend largely on each operator's
ability to adapt to dominant trends in the health care and seniors' housing
industry in each specific region, including, among others, greater competitive
pressures, increased consolidation and changing demographics. There can be no
assurance that the operators of the Company's Properties will be able to adapt
to such trends.
Management intends to structure the Company's leases to require the
tenant to pay base annual rent with (i) automatic fixed increases in the base
rent or (ii) increases in the base rent based on increases in consumer price
indices over the term of the lease. In an effort to provide regular cash flow to
the Company, the Company intends generally to structure its leases to provide a
minimum level of rent, with automatic increases in the minimum rent, which is
payable regardless of the amount of gross revenues at a particular Property. The
Company also will endeavor to maximize growth and minimize risks associated with
ownership and leasing of real estate that operates in this industry segment
through careful selection and screening of its tenants (as described in
"Standards for Investment in Properties" below) in order to reduce risks of
default, monitoring statistics relating to operators of Health Care Facilities
and continuing to develop relationships in the industry in order to reduce
certain risks associated with investment in real estate. See "Standards for
Investment in Properties" below for a description of the standards which the
Board of Directors will employ in selecting operators and particular Properties
for investment.
Management expects to acquire Properties in part with a view to
diversification among facility type and in the geographic location of the
Properties. There are no restrictions on the types of Health Care Facilities in
which the Company may invest. In addition, there are no restrictions on the
geographic area or areas within the United States in which Properties acquired
by the Company may be located. It is anticipated that the Properties acquired by
the Company will be located in various states and regions within the United
States.
The Company also intends to provide Mortgage Loans to operators of
Health Care Facilities, or their affiliates, to enable them to acquire the land,
land and buildings or buildings. The Mortgage Loans will be secured by property
owned by the borrower. The Company expects that the interest rate and terms
(generally, 10 to 20 years) of the Mortgage Loans will be similar to those of
its leases.
To a lesser extent, the Company also intends to offer Secured Equipment
Leases to operators of Health Care Facilities. The Secured Equipment Leases will
consist primarily of leases of, and loans for the purchase of, Equipment. As of
the date of this Prospectus, the Company has neither identified any prospective
operators that will
<PAGE>
participate in such financing arrangements nor negotiated any specific terms of
a Secured Equipment Lease. The Company cannot predict terms and conditions of
the Secured Equipment Leases, although the Company expects that the Secured
Equipment Leases will (i) have terms that equal or exceed the useful life of the
subject Equipment (although such terms will not exceed 7 years), (ii) in the
case of the leases, include an option for the lessee to acquire the subject
Equipment at the end of the lease term for a nominal fee, (iii) include a stated
interest rate, and (iv) in the case of the leases, provide that the Company and
the lessees will each treat the Secured Equipment Leases as loans secured by
personal property for federal income tax purposes. See "Federal Income Tax
Considerations -- Characterization of Secured Equipment Leases." In addition,
the Company expects that each of the Secured Equipment Leases will be secured by
the Equipment to which it relates. Payments received from lessees under Secured
Equipment Leases will be treated as payments of principal and interest. All
Secured Equipment Leases will be negotiated by the Advisor and approved by the
Board of Directors including a majority of the Independent Directors.
The Company will borrow money to acquire Properties, Mortgage Loans and
Secured Equipment Leases (collectively, the "Assets") and to pay certain fees.
The Company intends to encumber Assets in connection with the borrowing. The
Company plans to obtain one or more revolving Lines of Credit in an aggregate
amount up to $45,000,000, and may, in addition, obtain Permanent Financing. As
of March 13, 2000, we have obtained a commitment from a bank for an initial
$25,000,000 revolving Line of Credit (the "Commitment") to be used to acquire or
construct health care Properties. See "Business -- Borrowing" for a description
of the Commitment. The Line of Credit may be increased at the discretion of the
Board of Directors. The Board of Directors anticipates that the aggregate amount
of any Permanent Financing, if obtained, shall not exceed 30% of the Company's
total assets. In any event, the Company's total borrowings will be limited to
300% of Net Assets. The Permanent Financing would be used to acquire Assets, and
pay a fee of 4.5% of any Permanent Financing, excluding amounts to fund Secured
Equipment Leases, as Acquisition Fees, to the Advisor for identifying the
Properties, structuring the terms of the acquisition and leases of the
Properties and structuring the terms of the Mortgage Loans. The Line of Credit
may be repaid with offering proceeds, working capital or Permanent Financing.
The Line of Credit and Permanent Financing are the only source of funds for
making Secured Equipment Leases and for paying the Secured Equipment Lease
Servicing Fee to the Advisor. 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. In addition, although as of March
13, 2000, we have received a commitment for a $25,000,000 Line of Credit, there
is no assurance we will obtain such financing.
As of the date of this Prospectus, the Company had an initial
commitment to acquire one Property. As of such date, the Company had not entered
into any arrangements that create a reasonable probability that the Company will
enter into any Mortgage Loan or Secured Equipment Lease. Moreover, no Mortgage
Loan borrowers or Secured Equipment Lease lessees or borrowers have been
specifically identified.
INVESTMENT OF OFFERINGS PROCEEDS
The Company has undertaken to supplement this Prospectus during the
offering period to disclose the acquisition of Properties at such time as the
Company believes that a reasonable probability exists that any such Property
will be acquired by the Company. Based upon the experience and acquisition
methods of the Affiliates of the Company and the Advisor, this normally will
occur, with regard to acquisition of Properties, as of the date on which (i) a
commitment letter is executed by a proposed lessee, (ii) a satisfactory credit
underwriting for the proposed lessee has been completed, and (iii) a
satisfactory site inspection has been completed. 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.
Acquisition of a Property for a Health Care Facility generally involves
an investment in land and building ranging from approximately $1,000,000 to
$30,000,000, although higher or lower amounts for individual Properties are
possible. In light of current market conditions, if the maximum number of Shares
is sold, the Company could invest in approximately four to 126 Properties
depending on the types of Properties, and assuming an average purchase price of
$10,000,000 per Property, the Company would acquire or finance approximately 12
Properties with the net proceeds from this offering. Assuming an average
purchase price of $10,000,000, if gross proceeds of only $15,000,000 are raised,
we would acquire or finance approximately one Property with the net proceeds of
the offering. In certain cases, the Company may become a co-venturer in a Joint
Venture that will own the Property. In
<PAGE>
each such case, the Company's cost to purchase an interest in such Property will
be less than the total purchase price and the Company therefore will be able to
acquire interests in a greater number of Properties. In addition, the Board of
Directors may determine to engage in future offerings of common stock, the
proceeds of which could be used to acquire additional Properties or make
Mortgage Loans. The Company may also borrow to acquire Properties. See " --
Borrowing." Management estimates that 15% to 25% of the Company's investment
will be for the cost of land and 75% to 85% for the cost of buildings. See
"Joint Venture Arrangements" below and "Risk Factors -- Real Estate and Other
Investment Risks -- Possible lack of diversification increases the risk of
investment." Management cannot estimate the number of Mortgage Loans that may be
entered into. The Company may also borrow money to make Mortgage Loans.
Although management cannot estimate the number of Secured Equipment
Leases that may be entered into, it expects to fund the Secured Equipment Lease
program from the proceeds of the Line of Credit or Permanent Financing in an
amount not to exceed 10% of the Company's total assets and management has
undertaken, consistent with its objective of qualifying as a REIT for federal
income tax purposes, to ensure that the total value of all Secured Equipment
Leases will not exceed 25% of the Company's total assets, and that Secured
Equipment Leases to a single lessee, in the aggregate, will not exceed 5% of
total assets.
PENDING INVESTMENTS
As of March 13, 2000, the Company had an initial commitment to acquire
one assisted living property. The property is a Brighton Gardens(R) by
Marriott(R) in Orland Park, Illinois. The acquisition of this property 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 this
property will be acquired by the Company. If acquired, the lease of this
property is expected to be entered into on substantially the same terms
described in " -- Description of Property Leases." In order to acquire this
property, the Company must obtain additional funds through the receipt of
additional offering proceeds and or/debt financing. Initially, the Company plans
to fund this acquisition with advances of up to $8.1 million under the
$25,000,000 line of credit with the balance to be paid from net offering
proceeds. The property will be operated and managed by Marriott Senior Living
Services, Inc., a wholly owned subsidiary of Marriott International, Inc.
LEASES. Set forth below are summarized terms expected to apply to the
lease for the property. More detailed information relating to the property and
its related lease will be provided at such time, if any, as the property is
acquired.
<PAGE>
<TABLE>
<CAPTION>
Estimated Purchase Lease Term and Minimum Annual
Property Price Renewal Options Rent
- ------------------------------------- --------------------- ------------------------- -------------------------------
<S> <C> <C> <C>
Brighton Gardens by Marriott $13,848,900 15 years; four $1,350,268 for the first and
Orland Park, IL five-year renewal second lease years and
(the "Brighton Gardens Orland Park options $1,384,890 for each lease year
Property") thereafter (2)
Existing Health Care Facility
Percentage Rent
-------------------------
(1)
</TABLE>
(1) Percentage rent will be 7% 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.
(2) Based on estimated purchase price.
<PAGE>
ORLAND PARK PROPERTY. The Orland Park Property, which opened in October
1999, is a 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. The property is located in a suburb southwest of Chicago,
which according to Herman/Turner data, is the third largest seniors market in
the country. The number of seniors in the ten-mile area surrounding the Orland
Park Property is expected to grow by 11% between 1999 and 2004. The Health Care
Facility is within six miles of two hospitals and less than two miles from the
Orland Square Shopping Center. As an area known for business in the Midwest,
Chicago has 35 Fortune 500 companies headquartered in the Metropolitan area.
Chicago is ranked number three in the country for total business establishments.
It is ranked number two in the country for the number of households with an
effective buying income of $150,000 or more.
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." 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.
JOINT VENTURE ARRANGEMENTS
The Company may acquire Properties from time to time by issuing limited
partnership units in CNL Health Care Partners, LP to sellers of such Properties
pursuant to which the seller, as owner, would receive partnership interests
convertible at a later date into Common Stock of the Company. CNL Health Care GP
Corp. is a wholly owned subsidiary of the Company and is the general partner of
CNL Health Care Partners, LP. This structure enables a property owner to
transfer property without incurring immediate tax liability, and therefore may
allow the Company to acquire Properties on more favorable terms than otherwise.
BORROWING
The Company will borrow money to acquire Assets and to pay certain
related fees. The Company intends to encumber Assets in connection with the
borrowing. The Company plans to obtain one or more revolving Lines of Credit in
an aggregate amount up to $45,000,000, and may also obtain Permanent Financing.
The Line of Credit may be increased at the discretion of the Board of Directors
and may be repaid with proceeds of the offering, working capital or Permanent
Financing. The Line of Credit and Permanent Financing are the only source of
funds for making Secured Equipment Leases and for paying the Secured Equipment
Lease Servicing Fee.
The Company has obtained a Commitment from a bank for an initial
$25,000,000 revolving Line of Credit to be used by the Company to acquire or
construct health care Properties. The Commitment provides that the term of the
Line of Credit shall be five years with an annual review to be performed by the
bank to indicate that there has been no substantial deterioration, in the bank's
reasonable opinion, of the credit quality. Advances under the Line of Credit
will bear interest at competitive rates. Interest expense on each advance shall
be payable monthly, with all unpaid interest and principal due no later than
five years. Each loan made under the Line of Credit will be secured by an
assignment of rents and leases. In addition, the Commitment 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. As of March 13, 2000,
the $25,000,000 Line of Credit closing has not occurred. The Company anticipates
closing on the $25,000,000 Line of Credit by the end of March 2000; although,
there is no assurance that the Company will obtain such 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.
Management believes that any financing obtained during the offering
period will allow the Company to make investments in Assets that the Company
otherwise would be forced to delay until it raised a sufficient amount of
proceeds from the sale of Shares. By eliminating this delay the Company will
also eliminate the risk that these investments will no longer be available, or
the terms of the investment will be less favorable, when the Company has raised
sufficient offering proceeds. Alternatively, Affiliates of the Advisor could
make such investments, pending receipt by the Company of sufficient offering
proceeds, in order to preserve the investment opportunities for the Company.
However, Assets acquired by the Company in this manner would be subject to
closing costs both on the original purchase by the Affiliate and on the
subsequent purchase by the Company, which would increase the amount of expenses
associated with the acquisition of Assets and reduce the amount of offering
proceeds available for investment in income-producing assets. Management
believes that the use of borrowings will enable the
<PAGE>
Company to reduce or eliminate the instances in which the Company will be
required to pay duplicate closing costs, which may be substantial in certain
states.
Similarly, management believes that the borrowings, if obtained, will
benefit the Company by allowing it to take advantage of its ability to borrow at
favorable interest rates. Specifically, the Company intends to structure the
terms of any financing so that the lease rates for Properties acquired and the
interest rates for Mortgage Loans and Secured Equipment Leases made with the
loan proceeds will exceed the interest rate payable on the financing. To the
extent that the Company is able to structure the financing on these terms, the
Company will increase its net revenues. In addition, the use of financing will
increase the diversification of the Company's portfolio by allowing it to
acquire more Assets than would be possible using only the Gross Proceeds from
the offering.
As a result of existing relationships between Affiliates of the Advisor
and certain financing sources, the Company may have the opportunity to obtain
financing at more favorable interest rates than the Company could otherwise
obtain. In connection with any financing obtained by the Company as a result of
any such relationship, the Company will pay a loan origination fee to the
Affiliate. In addition, certain lenders may require, as a condition of providing
financing to the Company, that the Affiliate with which the lender has an
existing relationship act as a loan servicing agent. In connection with any such
arrangement, the Company will pay a loan servicing fee to the Affiliate. Any
loan origination fee or loan servicing fee paid to an Affiliate of the Company
is subject to the approval by a majority of the Board of Directors (including a
majority of the Independent Directors) not otherwise interested in the
transaction as fair and reasonable to the Company and on terms not less
favorable to the Company than those available from unaffiliated third parties
and not less favorable than those available from the Advisor or its Affiliates
in transactions with unaffiliated third parties. See "Conflicts of Interest --
Certain Conflict Resolution Procedures."
The Company may also borrow funds for the purpose of preserving its
status as a REIT. For example, the Company may borrow to the extent necessary to
permit the Company to make Distributions required in order to enable the Company
to qualify as a REIT for federal income tax purposes; however, the Company will
not borrow for the purpose of returning Invested Capital to the stockholders
unless necessary to eliminate corporate-level tax to the Company. The aggregate
borrowing of the Company, secured and unsecured, shall be reasonable in relation
to Net Assets of the Company and shall be reviewed by the Board of Directors at
least quarterly. The Board of Directors anticipates that the Company will have
one or more Lines of Credit initially in amounts up to $45,000,000 and that the
aggregate amount of the Permanent Financing will not exceed 30% of the Company's
total assets. The Board of Directors may determine, in its discretion, to
increase the Lines of Credit. However, in accordance with the Company's Articles
of Incorporation, the maximum amount of borrowing in relation to Net Assets,
shall not exceed 300% of Net Assets.
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>
1999 (1) 1998 (2) 1997 (2) (3)
------------ -------------- --------------
<S> <C> <C> <C>
Year Ended December 31:
Revenues $ 86,231 $ -- $ --
General operating and administrative expenses 79,621 -- --
Organizational costs 35,000 -- --
Net loss (28,390) -- --
Cash distributions declared (4) 50,404 -- --
Cash from operations 12,851 -- --
Funds from operations (5) (28,39) -- --
Loss per Share (.07) -- --
Cash distributions declared per Share .125 -- --
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
-- --
Weighted average number of Shares outstanding (6) 412,713 -- --
At December 31:
Total assets $5,088,560 $976,579 $280,330
Total stockholders' equity 3,292,137 200,000 200,000
</TABLE>
(1) No operations commenced until the Company received minimum offering
proceeds of $2,500,000 and funds were released from escrow on July 14,
1999.
(2) No significant operations had commenced because the Company was in its
development stage.
(3) Selected financial data for 1997 represents the period December 22,
1997 (date of inception) through December 31, 1997.
(4) For the year ended December 31, 1999, 100% of cash distributions
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
organization costs that were expensed for GAAP purposes. The Company
has not treated such amount as a return of capital for purposes of
calculating Invested Capital and the Stockholders' 8% Return.
(5) Funds from operations ("FFO"), based on the revised definition adopted
by the Board of Governors of NAREIT and as used herein, means net
earnings determined in accordance with GAAP, excluding gains or losses
from debt restructuring and sales of property, plus depreciation and
amortization of real estate assets and after adjustments for
unconsolidated partnerships and joint ventures. FFO was developed by
NAREIT as a relative measure of performance and liquidity of an equity
REIT in order to recognize that income-producing real estate
historically has not depreciated on the basis determined under GAAP.
However, FFO (i) does not represent cash generated from operating
activities determined in accordance with GAAP (which, unlike FFO,
generally reflects all cash effects of transactions and other events
that enter into the determination of net earnings), (ii) is not
necessarily indicative of cash flow available to fund cash needs and
(iii) should not be considered as an alternative to net earnings
determined in accordance with GAAP as an indication of the Company's
operating performance, or to cash flow from operating activities
determined in accordance with GAAP as a measure of either liquidity or
the Company's ability to make distributions. Accordingly, the Company
believes that in order to facilitate a clear understanding of the
consolidated historical operating results of the Company, FFO should be
considered in conjunction with the Company's net earnings and cash
flows as reported in the accompanying financial statements and notes
thereto.
(6) 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
This information contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Although the Company believes that the expectations
reflected in such forward-looking statements are based upon reasonable
assumptions, the Company's actual results could differ materially from those set
forth in the forward-looking statements. Certain factors that might cause such a
difference include the following: changes in general economic conditions,
changes in real estate conditions, availability of proceeds from the Company's
offering, the ability of the Company to obtain a Line of Credit or Permanent
Financing on satisfactory terms, 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 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.
INTRODUCTION
CNL Health Care Properties, Inc. is a Maryland corporation that was
organized on December 22, 1997. CNL Health Care GP Corp. and CNL Health Care LP
Corp. are wholly owned subsidiaries of CNL Health Care Properties,
<PAGE>
Inc., organized in Delaware in December 1999. CNL Health Care Partners, LP is a
Delaware limited partnership formed in December 1999. CNL Health Care GP Corp.
and CNL Health Care LP Corp. are the general and limited partner, respectively,
of CNL Health Care Partners, LP. Assets acquired are expected to be held by CNL
Health Care Partners, LP and, as a result, owned by CNL Health Care Properties,
Inc. through the Partnership. The term "Company" includes CNL Health Care
Properties, Inc. and its subsidiaries, CNL Health Care GP Corp., CNL Health Care
LP Corp. and CNL Health Care Partners, LP.
The Company was formed to acquire Properties related to health care and
seniors' housing facilities located across the United States. The Health Care
Facilities may include congregate living, assisted living and skilled nursing
facilities, continuing care retirement communities and life care communities,
and medical office buildings and walk-in clinics. The Properties will be leased
on a long-term, "triple-net" basis. The Company may also provide Mortgage Loans
to operators of Health Care Facilities in the aggregate principal amount of
approximately 5% to 10% of the Company's total assets. The Company also may
offer Secured Equipment Leases to operators of Health Care Facilities. The
aggregate principal amount of Secured Equipment Leases is not expected to exceed
10% of the Company's total assets.
The Company's primary investment objectives are to preserve, protect,
and enhance the Company's Assets while (i) making Distributions commencing in
the initial year of Company operations; (ii) obtaining fixed income through the
receipt of base rent, and increasing the Company's income (and Distributions)
and providing protection against inflation through automatic fixed increases in
base rent or increases in the base rent based on increases in consumer price
indices, over the terms of the leases, and obtaining fixed income through the
receipt of payments from Mortgage Loans and Secured Equipment Leases; (iii)
qualifying and remaining qualified as a REIT for federal income tax purposes;
and (iv) providing stockholders of the Company with liquidity of their
investment within five to ten years after commencement of the offering, either
in whole or in part, through (a) Listing of the Shares or (b) the commencement
of the orderly Sale of the Company's Assets, and distribution of the proceeds
thereof (outside the ordinary course of business and consistent with its
objective of qualifying as a REIT).
LIQUIDITY AND CAPITAL RESOURCES
During the period December 22, 1997 (date of inception) through
December 31, 1998, a capital contribution of $200,000 from the Advisor was the
Company's sole source of capital. Until the Company sold the minimum number of
250,000 Shares ($2,500,000), subscription funds were deposited with the escrow
agent for the offering of Shares.
In connection with this offering, the Company registered for sale an
aggregate of $155,000,000 of Shares (15,500,000 Shares at $10 per Share),
500,000 of such Shares available only to stockholders who elect to participate
in the Company's Reinvestment Plan. The Company has elected to extend the
offering of Shares until a date no later than September 18, 2000. The Board of
Directors may determine to engage in future offerings of Common Stock up to the
number of unissued authorized Shares of Common Stock.
On July 14, 1999, the Company had received aggregate subscription
proceeds of $2,751,052 (275,105 Shares), 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 the Company receives
aggregate subscriptions of at least $7,775,000.
As of December 31, 1999, the Company had received aggregate
subscription proceeds of $5,435,283 (543,528 Shares), including $12,540 (1,254
Shares) through its Reinvestment Plan and $235,000 from Pennsylvania investors.
As of December 31, 1999, the Company had approximately $4,368,000 available to
invest in Properties and Mortgage Loans following the deduction of Selling
Commissions, marketing support and due diligence expense reimbursement fees,
Organization and Offering Expenses of approximately three percent, and
Acquisition Fees.
As of March 13, 2000, the Company had received subscription proceeds
(excluding the capital contribution from the Advisor and subscriptions from
Pennsylvania investors) of $6,181,104 (618,110 Shares) from this offering. As of
March 13, 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 totalled approximately $5,192,000. As of
March 13, 2000, the Company had not acquired any Properties or entered into any
Mortgage Loans.
<PAGE>
The Company will use Net Offering Proceeds (Gross Proceeds less fees
and expenses of the offering) from this offering to purchase Properties and to
invest in Mortgage Loans. See "Investment Objectives and Policies." In addition,
the Company intends to borrow money to acquire Assets and to pay certain related
fees. The Company intends to encumber Assets in connection with such borrowing.
The Company plans to obtain one or more revolving Lines of Credit initially in
an amount up to $45,000,000, and may, in addition, also obtain Permanent
Financing. The Line of Credit may be increased at the discretion of the Board of
Directors and may be repaid with offering proceeds, working capital or Permanent
Financing. Although the Board of Directors anticipates that the Lines of Credit
initially may be in the amount of up to $45,000,000 and the aggregate amount of
any Permanent Financing shall not exceed 30% of the Company's total Assets, the
maximum amount the Company may borrow is 300% of the Company's Net Assets.
As of March 13, 2000, the Company had obtained a Commitment from a bank
for an initial $25,000,000 revolving Line of Credit to be used by the Company to
acquire or construct health care Properties. The Commitment provides that the
term of the Line of Credit shall be five years with an annual review to be
performed by the bank to indicate that there has been no substantial
deterioration, in the bank's reasonable opinion, of the credit quality. Advances
under the Line of Credit will bear interest at competitive rates. Interest
expense on each advance shall be payable monthly, with all unpaid interest and
principal due no later than five years. Each loan made under the Line of Credit
will be secured by the assignment of rents and leases. In addition, the
Commitment 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. As of March 13, 2000, the $25,000,000 Line of Credit closing had not
occurred. The Company anticipates closing on the $25,000,000 Line of Credit by
the end of March 2000; although, there is no assurance that the Company will
obtain such 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.
Properties are expected to be leased on a long-term, triple-net basis,
meaning that tenants are generally required to pay all repairs and maintenance,
property taxes, insurance and utilities. Rental payments under the leases are
expected to exceed the Company's Operating Expenses. For these reasons, no
short-term or long-term liquidity problems currently are anticipated by
management.
Until Properties are acquired or Mortgage Loans are entered into, Net
Offering Proceeds are held in short-term, highly-liquid investments which
management believes to have appropriate safety of principal. This investment
strategy provides high liquidity in order to facilitate the Company's use of
these funds to acquire Properties at such time as Properties suitable for
acquisition are located or to fund Mortgage Loans. At December 31, 1999, the
Company had $4,744,222 invested in such short-term investments as compared to
$92 at December 31, 1998. The increase in the amount invested in short-term
investments reflects subscriptions proceeds received from the sale of Shares
during the year ended December 31, 1999. These funds will be used primarily to
purchase Properties, to make Mortgage Loans, to pay Offering Expenses and
Acquisition Expenses, to pay Distributions to stockholders, to meet other
Company expenses and, in management's discretion, to create cash reserves.
During the years ended December 31, 1999 and 1998 and the period
December 22, 1997 (date of inception) through December 31, 1997, Affiliates of
the Company incurred on behalf of the Company $421,878, $562,739 and $43,398,
respectively, for certain Organizational and Offering Expenses. In addition,
during the year ended December 31, 1999, Affiliates of the Company incurred
$98,206 for certain Acquisition Expenses and $41,307 for certain Operating
Expenses on behalf of the Company. As of December 31, 1999 and 1998, the Company
owed the Advisor and its Affiliates $1,775,256 and $685,372, respectively, for
such amounts, unpaid fees and administrative expenses. The Advisor has agreed to
pay or reimburse the Company all Organizational and Offering Expenses (excluding
Selling Commissions and marketing support and due diligence expense
reimbursement fees) in excess of three percent of Gross Proceeds.
Since the commencement of the offering through December 31, 1999,
approximately $416,023 has been incurred by the Company in Selling Commissions
and marketing support and due diligence expense reimbursement fees to related
parties, the majority of which were subsequently paid to unrelated broker-dealer
firms. In addition, since the commencement of the offering through December 31,
1999, the Company has reimbursed Affiliates approximately $135,339 for certain
Organizational and Offering Expenses incurred on behalf of the Company and
administrative services related to the offering.
During the year ended December 31, 1999, the Company generated cash
from operations (which includes interest received less cash paid for Operating
Expenses) of $12,851. Based on current and anticipated future cash from
operations, the Company declared Distributions to its stockholders of $50,404
during the period July 14, 1999 (the date
<PAGE>
operations commenced) through December 31, 1999. No Distributions were paid or
declared for the period December 22, 1997 (date of inception) through July 13,
1999 because operations had not commenced. On January 1, 2000 and February 1,
2000, the Company declared Distributions to stockholders of record on January 1,
2000 and February 1, 2000, totalling $13,501 and $14,530, respectively (each
representing $0.025 per Share), payable in March 2000. For the year ended
December 31, 1999, 100% of the Distributions received by stockholders were
considered to be ordinary income for federal income tax purposes. No amounts
distributed or to be distributed to the stockholders as of March 13, 2000, were
required to be or have been treated by the Company as a return of capital for
purposes of calculating the Stockholders' 8% Return on Invested Capital.
Due to anticipated low Operating Expenses, rental income expected to be
obtained from Properties after they are acquired, the fact that the Line of
Credit and Permanent Financing have not been obtained and that the Company has
not entered into Mortgage Loans or Secured Equipment Leases, management does not
believe that working capital reserves will be necessary at this time. Management
has the right to cause the Company to maintain reserves if, in their discretion,
they determine such reserves are required to meet the Company's working capital
needs.
As of March 13, 2000, the Company had an initial commitment to acquire
one Property. The Company had not entered into any arrangements creating a
reasonable probability that a particular Mortgage Loan or Secured Equipment
Lease would be funded. The number of Properties to be acquired and the number of
Mortgage Loans to be invested in by the Company will depend upon the amount of
Net Offering Proceeds available and the amount of funds borrowed to acquire
Properties and make Mortgage Loans. The number of Secured Equipment Leases to be
offered is currently undetermined, but the Company will fund the Secured
Equipment Leases with the proceeds from the Line of Credit or Permanent
Financing. The Company intends to fund its initial acquisition using net
offering proceeds and advances from the $25,000,000 Line of Credit. The amounts
borrowed under the Line of Credit are expected to be repaid as the Company
receives additional offering proceeds. In the event the Company did not receive
enough offering proceeds to repay the advances when due, it would seek
additional equity or debt financing.
Management expects that the cash to be generated from operations will
be adequate to pay Operating Expenses and to make Distributions to stockholders.
Management is not aware of any material trends, favorable or
unfavorable, in either capital resources or the outlook for long-term cash
generation, nor does management expect any material changes in the availability
and relative cost of such capital resources, other than as referred to in the
Prospectus.
RESULTS OF OPERATIONS
No operations commenced until the Company received the minimum offering
proceeds of $2,500,000 on July 14, 1999. The Company did not acquire any
Properties or enter into any Mortgage Loans during the year ended December 31,
1999.
During the year ended December 31, 1999, the Company earned $86,231 in
interest income from investments in money market accounts. Interest income is
expected to increase as the Company invests subscription proceeds received in
the future in highly liquid investments pending investment in Properties and
Mortgage Loans. However, as Net Offering Proceeds are invested in Properties and
used to make Mortgage Loans, the percentage of the Company's total revenues from
interest income from investments in money market accounts or other short-term,
highly liquid investments is expected to decrease.
Operating expenses were $114,621, including organizational expenses of
$35,000, for the year ended December 31, 1999. Operating expenses represent only
a portion of operating expenses which the Company is expected to incur during a
full year in which the Company owns Properties or in which the Company is
operational. The dollar amount of operating expenses is expected to increase as
the Company acquires Properties and invests in Mortgage Loans. Organizational
expenses represent the cost related to forming a new entity and are not expected
to be incurred on an ongoing basis.
When the Company files its 1999 income tax return, it will elect,
pursuant to Internal Revenue Code Section 856(c)(1), to be taxed as a REIT under
Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, and
related regulations. As a REIT, for federal income tax purposes, the Company
generally will not be subject to federal income tax on income that it
distributes to its stockholders. If the Company fails to qualify as a REIT in
any taxable year, it will be subject to federal income tax on its taxable income
at regular corporate rates and will not be permitted to qualify for treatment as
a REIT for federal income tax purposes for four years following the year during
<PAGE>
which qualification is lost. Such an event could materially affect the Company's
net earnings. However, the Company believes that it is organized and operates in
such a manner as to qualify for treatment as a REIT for the year ended December
31, 1999. In addition, the Company intends to continue to operate the Company so
as to remain qualified as a REIT for federal income tax purposes.
The Company anticipates that its leases will be triple-net leases and
will contain provisions that management believes will mitigate the effect of
inflation. Such provisions will include clauses requiring the payment of
percentage rent based on certain gross sales above a specified level and/or
automatic increases in base rent at specified times during the term of the
lease. Management expects that increases in gross sales volumes due to inflation
and real sales growth should result in an increase in rental income over time.
Continued inflation also may cause capital appreciation of the Company's
Properties. Inflation and changing prices, however, also may have an adverse
impact on the sales of the Properties and on potential capital appreciation of
the Properties.
In April of 1998, the American Institute of Certified Public
Accountants issued Statement of Position ("SOP") 98-5, "Reporting on the Costs
of Start-Up Activities," which became effective for the Company January 1, 1999.
This SOP requires start-up and organization costs to be expensed as incurred and
also requires previously deferred start-up costs to be recognized as a
cumulative effect adjustment in the statement of earnings. During the year ended
December 31, 1999, operating expenses include a charge of $35,000 for
organizational costs.
Management is not aware of any known trends or uncertainties, other
than national economic conditions, which may reasonably be expected to have a
material impact, favorable or unfavorable, on revenues or income from the
acquisition and operations of real properties, other than those Properties
referred to in this Prospectus.
There currently are no material changes being considered in the
objectives and policies of the Company as set forth in this Prospectus.
YEAR 2000 READINESS DISCLOSURE
OVERVIEW OF YEAR 2000 COMPLIANCE ISSUES
The year 2000 compliance issues concern the ability 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.
READINESS STATUS
The Advisor and its Affiliates generally provide all services requiring
the use of information and some non-information technology systems pursuant to
the Advisory Agreement with the Company. The Company generally does not directly
own information technology systems. In early 1998, Affiliates of the Advisor
formed a year 2000 committee ("the Y2K Team") that assessed the readiness of any
systems that were date sensitive and completed upgrades for the hardware
equipment and software that was not year 2000 compliant, as necessary. The cost
for these upgrades and other remedial measures was the responsibility of the
Advisor and its Affiliates. The Company has not incurred, and the Advisor and
its Affiliates do not expect that the Company will incur, any costs in
connection with the year 2000 readiness measures. In addition, the Y2K team
requested and received certifications of compliance from other companies with
which the Advisor, its Affiliates, and the Company have material third party
relationships.
In assessing the risks presented by the year 2000 compliance issues,
the Y2K Team identified potential worst case scenarios involving the failure of
the information and non-information technology systems used by the Company's
transfer agent and financial institutions. As of March 13, 2000, the Advisor and
its Affiliates have tested the information and non-information technology
systems used by the Company and have not experienced material disruption or
other significant problems. In addition, as of the same date, the Advisor is not
aware of any material year 2000 compliance issues relating to information and
non-information technology systems of third parties with which the Company
maintains material relationships, including those of the Company's transfer
agent and financial institutions. In addition, in the Company's interactions
with its transfer agent and financial institutions, the systems of these third
parties have functioned normally. Until the Company's first Distribution in 2000
and the delivery of the information by the transfer agent to stockholders in
early 2000, the Advisor will continue to monitor the year 2000 compliance of the
transfer agent. In addition, the Advisor will continue to monitor the systems
used by the Company and to maintain contact with third parties with which the
Company has material relationships with respect to year 2000 compliance and any
year 2000
<PAGE>
issues that may arise at a later date. The Advisor will develop contingency
plans relating to ongoing year 2000 issues at the time that such issues are
identified and such plans are deemed necessary.
Based on the information provided to the Y2K Team, the upgrades and
remedial measures by the Advisor and its Affiliates, and the normal functioning
to date of information and non-information technology systems used by the
Company and those third parties, the Advisor does not foresee significant risks
associated with its year 2000 compliance at this time. In addition, the Advisor
and its Affiliates do not expect to incur any material additional costs in
connection with the year 2000 compliance efforts. However, there can be no
assurance that the Advisor and its Affiliates or any third parties will not have
ongoing year 2000 compliance issues that may have adverse effects on the
Company.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Directors and executive officers of the Company are listed below:
<TABLE>
<CAPTION>
Name Age Position with the Company
- ----------------------------- ------ ---------------------------------------------------------------
<S> <C> <C>
James M. Seneff, Jr. 53 Director, Chairman of the Board, and Chief Executive Officer
Robert A. Bourne 52 Director and President
David W. Dunbar 47 Independent Director
Timothy S. Smick 48 Independent Director
Edward A. Moses 57 Independent Director
Phillip M. Anderson, Jr. 40 Chief Operating Officer and Executive Vice President
Thomas J. Hutchinson III 58 Executive Vice President
Jeanne A. Wall 41 Executive Vice President
Lynn E. Rose 51 Secretary and Treasurer
</TABLE>
JAMES M. SENEFF, JR. Director, Chairman of the Board and Chief
Executive Officer. Mr. Seneff is a director, Chairman of the Board and Chief
Executive Officer of CNL Health Care Corp., the Advisor to the Company, and CNL
Health Care Investors, Inc., a real estate investment trust in which the Company
owns an interest. Mr. Seneff is a principal stockholder of CNL Holdings, Inc.,
the parent company of CNL Financial Group, Inc. (formerly CNL Group, Inc.), a
diversified real estate company, and has served as a director, Chairman of the
Board and Chief Executive Officer of CNL Financial Group, Inc. since its
formation in 1980. CNL Financial Group, Inc. is the parent company, either
directly or indirectly through subsidiaries, of CNL Real Estate Services, Inc.,
CNL Health Care Corp., CNL Capital Markets, Inc., CNL Investment Company and CNL
Securities Corp., the Managing Dealer in this offering. He also serves as a
director, Chairman of the Board and Chief Executive Officer of CNL Hospitality
Properties, Inc., a public, unlisted real estate investment trust, as well as
CNL Hospitality Corp., its advisor. Since 1992, Mr. Seneff has served as
Chairman of the Board and Chief Executive Officer of Commercial Net Lease
Realty, Inc., a public real estate investment trust that is listed on the New
York Stock Exchange. In addition, he has served as a director and Chairman of
the Board since inception in 1994, and served as Chief Executive Officer from
1994 through August 1999, of CNL American Properties Fund, Inc., a public,
unlisted real estate investment trust. He 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., until it merged with the Company in
September 1999. Mr. Seneff has also served as a director, Chairman of the Board
and Chief Executive Officer of CNL Securities Corp. since 1979; CNL Investment
Company since 1990; and CNL Institutional Advisors, a registered investment
advisor for pension plans, since 1990. Mr. Seneff formerly served as a director
of First Union National Bank of Florida, N.A., and currently serves as the
Chairman of the Board of CNLBank. 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 co-venturer
in over 100 real estate ventures. These ventures have involved the financing,
acquisition, construction, and leasing of restaurants, office buildings,
<PAGE>
apartment complexes, hotels, and other real estate. Mr. Seneff 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 is Florida's principal
investment advisory and money management agency and oversees the investment of
more than $60 billion of retirement funds. Mr. Seneff received his degree in
Business Administration from Florida State University in 1968.
ROBERT A. BOURNE. Director and President. Mr. Bourne serves as a
director and President of CNL Health Care Corp., the Advisor to the Company, and
CNL Health Care Investors, Inc., a real estate investment trust in which the
Company owns an interest. Mr. Bourne is also the President and Treasurer of CNL
Financial Group, Inc. (formerly CNL Group, Inc.); a director, Vice Chairman of
the Board and President of CNL Hospitality Properties, Inc., a public, unlisted
real estate investment trust; as well as, a director and President of CNL
Hospitality Corp., its advisor. Mr. Bourne also serves as a director of CNLBank.
He has served as a director since 1992, Vice Chairman of the Board since
February 1996, Secretary and Treasurer from February 1996 through 1997, and
President from July 1992 through February 1996, of Commercial Net Lease Realty,
Inc., a public real estate investment trust listed on the New York Stock
Exchange. Mr. Bourne has served as a director since inception in 1994, President
from 1994 through February 1999, Treasurer from February 1999 through August
1999, and Vice Chairman of the Board since February 1999, of CNL American
Properties Fund, Inc., a public, unlisted real estate investment trust. He also
served as a director and held various executive positions for CNL Fund Advisors,
Inc., the advisor to CNL American Properties Fund, Inc. prior to its merger with
the company, from 1994 through August 1999. Mr. Bourne also serves as a
director, President and Treasurer for various affiliates of CNL Financial Group,
Inc., including CNL Investment Company, CNL Securities Corp., the Managing
Dealer for this offering, and CNL Institutional Advisors, Inc., a registered
investment advisor for pension plans. Since joining CNL Securities Corp. in
1979, Mr. Bourne has participated as a general partner or co-venturer in over
100 real estate ventures involved in the financing, acquisition, construction,
and leasing of restaurants, office buildings, apartment complexes, hotels, and
other real estate. Mr. Bourne began his career as a certified public accountant
employed by Coopers & Lybrand, Certified Public Accountants, from 1971 through
1978, where he attained the position of tax manager in 1975. Mr. Bourne
graduated from Florida State University in 1970 where he received a B.A. in
Accounting, with honors.
DAVID W. DUNBAR. Independent Director. Mr. Dunbar serves as chairman
and chief executive officer of Peoples Bank, which he organized and founded in
1996. Mr. Dunbar is also a member of the board of trustees of Bay Care Health
Systems, an alliance of ten non-profit hospitals in the Tampa Bay area, as well
as a member of the board of directors of Morton Plant Mease Health Care, Inc.,
an 841-bed, not-for-profit hospital and North Bay Hospital, a 122-bed facility.
He is a former member of the board of directors of Morton Plant Mease Hospital
Foundation. In addition, Mr. Dunbar serves as a member of the Florida Elections
Commission, the body responsible for investigating and holding hearings
regarding alleged violations of Florida's campaign finance laws. During 1994 and
1995, Mr. Dunbar was a member of the board of directors and an executive officer
of Peoples State Bank. Mr. Dunbar was the chief executive officer of Republic
Bank from 1981 through 1988 and from 1991 through 1993. From 1988 through 1991,
Mr. Dunbar developed commercial and medical office buildings and, through a
financial consulting company he founded, provided specialized lending services
for real estate development clients, specialized construction litigation support
for national insurance companies and strategic planning services for
institutional clients. In 1990, Mr. Dunbar was the chief executive officer,
developer and owner of a 60,000 square foot medical office building located on
the campus of Memorial Hospital in Tampa, Florida. In addition, in 1990, Mr.
Dunbar served as the Governor's appointee to the State of Florida Taxation and
Budget Reform Commission, a 25 member, blue ribbon commission established to
review, study and make appropriate recommendations for changes to state tax
laws. Mr. Dunbar received a degree in finance from Florida State University. He
is also a graduate of the American Bankers Association National Commercial
Lending School at the University of Oklahoma and the School of Banking of the
South at Louisiana State University.
TIMOTHY S. SMICK. Independent Director. Mr. Smick is currently an
independent investor. From 1996 through February 1998, he served as chief
operating officer, executive vice president and a member of the board of
directors of Sunrise Assisted Living, Inc., one of the nation's leading
providers of assisted living care for seniors with 68 communities located in 13
states. In addition, Mr. Smick served as president of Sunrise Management Inc., a
wholly owned subsidiary of Sunrise Assisted Living, Inc. During 1995, Mr. Smick
served as a senior housing consultant to LaSalle Advisory, Ltd., a pension fund
advisory company. From 1985 through 1994, Mr. Smick was chairman and chief
executive officer of PersonaCare, Inc., a company he co-founded that provided
sub-acute, skilled nursing and assisted living care with 12 facilities in six
states. Mr. Smick's health care industry experience also includes serving as the
regional operations director for Manor Healthcare, Inc., a division of
ManorCare, Inc., and as operations director for Allied Health and Management,
Inc. Prior to co-founding PersonaCare, Inc., Mr. Smick was a partner in Duncan &
<PAGE>
Smick, a commercial real estate development firm. Mr. Smick received a B.A. in
English from Wheaton College and pursued graduate studies at Loyola College.
EDWARD A. MOSES. Independent Director. Dr. Moses has served as dean of
the Roy E. Crummer Graduate School of Business at Rollins College since 1994,
and as a professor and NationsBank professor of finance since 1989. As dean, Dr.
Moses is presently establishing a comprehensive program of executive education
for health care management at the Roy E. Crummer Graduate School of Business.
From 1985 to 1989 he served as dean and professor of finance at the University
of North Florida. He has also served in academic and administrative positions at
the University of Tulsa, Georgia State University and the University of Central
Florida. Dr. Moses has written six textbooks in the fields of investments and
corporate finance as well as numerous articles in leading business journals. He
has held offices in a number of professional organizations, including president
of the Southern Finance and Eastern Finance Associations, served on the Board of
the Southern Business Administration Association, and served as a consultant for
major banks as well as a number of Fortune 500 companies. He currently serves as
a faculty member in the Graduate School of Banking at Louisiana State
University, and is a member of the board of directors of HTE, Inc. Dr. Moses
received a B.S. in Accounting from the Wharton School at the University of
Pennsylvania in 1965 and a Masters of Business Administration (1967) and Ph.D.
in finance from the University of Georgia in 1971.
PHILLIP M. ANDERSON, JR. Chief Operating Officer and Executive Vice
President. Mr. Anderson joined CNL Health Care Corp. in January 1999 and is
responsible for the planning and implementation of CNL's interest in health care
industry investments, including acquisitions, development, project analysis and
due diligence. He currently serves as the Chief Operating Officer of both CNL
Health Care Corp., the Company's Advisor, and of CNL Health Care Development,
Inc. From 1987 through 1998, Mr. Anderson was employed by Classic Residence by
Hyatt. Classic Residence by Hyatt ("Classic") is affiliated with Hyatt Hotels
and Chicago's Pritzker family. Classic acquires, develops, owns and operates
seniors' housing, assisted living, skilled nursing and Alzheimer's facilities
throughout the United States. Mr. Anderson's responsibilities grew from
overseeing construction of Classic's first properties to acquiring and
developing new properties. After assuming responsibility for acquisitions, Mr.
Anderson doubled the number of senior living apartments/beds ("units") in the
portfolio by adding over 1,200 units. In addition, the development of an
additional 1,000 units of seniors' housing commenced under Mr. Anderson's
direction. Mr. Anderson also served on Classic's Executive Committee charged
with the responsibility of monitoring performance of existing properties and
development projects. Mr. Anderson has been a member of the American Senior
Housing Association since 1994 and currently serves on the executive board. He
graduated from the Georgia Institute of Technology in 1982, where he received a
B.S. in Civil Engineering, with honors.
THOMAS J. HUTCHISON III. Executive Vice President. Mr. Hutchison serves
as President and Chief Operating Officer of CNL Real Estate Services, Inc.,
which is the parent company of CNL Health Care Corp., the Advisor of the
Company, and CNL Hospitality Corp. He also serves as the Chief Operating Officer
of CNL Community Development Corp. Mr. Hutchison joined CNL in January 2000 with
more than 30 years of senior management and consulting experience in the real
estate development and services industries. He currently serves on the board of
directors of Restore Orlando, a nonprofit community volunteer organization.
Prior to joining CNL, Mr. Hutchison was president and owner of numerous real
estate services and development companies. From 1995 to 2000, he was chairman
and chief executive officer of Atlantic Realty Services, Inc. and TJH
Development Corporation. Since 1990, he has fulfilled a number of long-term
consulting assignments for large corporations, including managing a number of
large international joint ventures. From 1990 to 1991, Mr. Hutchison was the
court-appointed president and chief executive officer of General Development
Corporation, a real estate community development company, where he assumed the
day-to-day management of the $2.6 billion NYSE-listed company entering
re-organization. From 1986 to 1990, he was the chairman and chief executive
officer of a number of real estate-related companies engaged in the master
planning and land acquisition of forty residential, industrial and office
development projects. From 1978 to 1986, Mr. Hutchison was the president and
chief executive officer of Murdock Development Corporation and Murdock
Investment Corporation, as well as Murdock's nine service divisions. In this
capacity, he managed an average of $350 million of new development per year for
over nine years. Additionally, he expanded the commercial real estate activities
to a national basis, and established both a new extended care division and a
hotel division that grew to 14 properties. Mr. Hutchison was educated at Purdue
University and the University of Maryland Business School.
JEANNE A. WALL. Executive Vice President. Ms. Wall serves as Executive
Vice President of CNL Health Care Corp., the Advisor to the Company. Ms. Wall
also serves as Executive Vice President of CNL Hospitality Properties, Inc., a
public, unlisted real estate investment trust, and serves as Executive Vice
President and a director of CNL Hospitality Corp., its advisor. She also serves
as a director of CNLBank. Ms. Wall serves as Executive Vice President of CNL
Financial Group, Inc. (formerly CNL Group, Inc.). Ms. Wall has served as Chief
Operating
<PAGE>
Officer of CNL Investment Company and of CNL Securities Corp. since 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, 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. Ms. Wall served as Vice President of Commercial Net Lease Realty, Inc.,
a public real estate investment trust listed on the New York Stock Exchange,
from 1992 through 1997, and served as Vice President of CNL Realty Advisors,
Inc., from its inception in 1991 through 1997. Ms. Wall also served as Executive
Vice President of CNL American Properties Fund, Inc., a public, unlisted real
estate investment trust, from 1994 through August 1999, and as Executive Vice
President of CNL Fund Advisors, Inc., its advisor, from 1994 through August
1999, at which time it merged with CNL American Properties Fund, Inc. Ms. Wall
currently serves as a trustee on the Board of the Investment Program
Association, is a member of the Corporate Advisory Council for the International
Association for Financial Planning and is a member of the International Women's
Forum. In addition, she previously served on the Direct Participation Program
committee for the National Association of Securities Dealers, Inc. Ms. Wall
holds a B.A. in Business Administration from Linfield College and is a
registered principal of CNL Securities Corp.
LYNN E. ROSE. Secretary and Treasurer. Ms. Rose also serves as
Secretary, Treasurer and a director of CNL Health Care Corp., the Advisor to the
Company, and as Secretary of the subsidiaries of the Company. Ms. Rose is
Secretary and Treasurer of CNL Hospitality Properties, Inc., a public, unlisted
real estate investment trust, and serves as Secretary of its subsidiaries. In
addition, she serves as Secretary, Treasurer and a director of CNL Hospitality
Corp., its advisor. Ms. Rose served as Secretary of CNL American Properties
Fund, Inc., a public, unlisted real estate investment trust, from 1994 through
August 1999, and served as Treasurer from 1994 through February 1999. She also
served as Treasurer of CNL Fund Advisors, Inc., from 1994 through July 1998, and
served as Secretary and a director from 1994 through August 1999, at which time
it merged with CNL American Properties Fund, Inc. 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, and as Secretary and a director of CNL Realty Advisors, Inc., its advisor,
from its inception in 1991 through 1997. She also served as Treasurer of CNL
Realty Advisors, Inc. from 1991 through February 1996. Ms. Rose, a certified
public accountant, has served as Secretary of CNL Financial Group, Inc.
(formerly CNL Group, Inc.) since 1987, served as Controller from 1987 to 1993
and has served as Chief Financial Officer since 1993. She also serves as
Secretary of the subsidiaries of CNL Financial Group, Inc. and holds various
other offices in the subsidiaries. In addition, she serves as Secretary for
approximately 50 additional corporations affiliated with CNL Financial Group,
Inc. and its subsidiaries. Ms. Rose has served as Chief Financial Officer and
Secretary of CNL Securities Corp. since July 1994. Ms. Rose oversees the tax and
legal compliance for over 375 corporations, partnerships and joint ventures, and
the accounting and financial reporting for over 200 entities. 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 Health Care Corp. (formerly CNL Health Care Advisors, Inc.) is a
Florida corporation organized in July 1997 to provide management, advisory and
administrative services. The Company originally entered into the Advisory
Agreement with the Advisor effective September 15, 1998. CNL Health Care Corp.,
as Advisor, has a fiduciary responsibility to the Company and the stockholders.
The directors and officers of the Advisor are as follows:
<TABLE>
<CAPTION>
<S> <C>
James M. Seneff, Jr. Chairman of the Board, Chief Executive Officer, and Director
Robert A. Bourne President and Director
Phillip M. Anderson, Jr. Chief Operating Officer
Jeanne A. Wall Executive Vice President
Lynn E. Rose Secretary, Treasurer and Director
</TABLE>
The backgrounds of these individuals are described above under
"Management -- Directors and Executive Officers."
THE ADVISORY AGREEMENT
The Advisory Agreement, which was entered into by the Company with the
unanimous approval of the Board of Directors, including the Independent
Directors, expires one year after the date of execution, subject to successive
one-year renewals upon mutual consent of the parties. The current Advisory
Agreement expires on September 16, 2000. In the event that a new Advisor is
retained, the previous Advisor will cooperate with the Company and the Directors
in effecting an orderly transition of the advisory functions. The Board of
Directors (including a majority of the Independent Directors) shall approve a
successor Advisor only upon a determination that the Advisor possesses
sufficient qualifications to perform the advisory functions for the Company and
that the compensation to be received by the new Advisor pursuant to the new
Advisory Agreement is justified.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Managing Dealer is entitled to receive Selling Commissions
amounting to 7.5% of the total amount raised from the sale of Shares for
services in connection with the offering of Shares, a substantial portion of
which will be paid as commissions to other broker-dealers. For the period
January 1, 2000 through March 13, 2000 and the years ended December 31, 1999 and
1998, the Company had incurred $ 73,562, $388,109 and $1,912, respectively of
such fees, of which approximately $68,600, $370,690 and $1,785, respectively,
has been or will be paid by CNL Securities Corp. 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, all or a portion of which may be
reallowed to other broker-dealers. For the period January 1, 2000 through March
13, 2000 and the years ended December 31, 1999 and 1998, the Company had
incurred $4,904, $25,874 and $128, respectively, of such fees, the majority of
which has been or will be reallowed to other broker-dealers and from which all
bona fide due diligence expenses will be paid.
In addition, the Company has agreed to issue and sell Soliciting Dealer
Warrants to the Managing Dealer. 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 from the Company at a price of $12.00 during the five-year period
commencing with the date the offering begins. No Soliciting Dealer Warrant,
however, will be exercisable until one year from the date of issuance. As of
December 31, 1999, CNL Securities Corp. was entitled to receive approximately
19,000 Soliciting Dealer Warrants; however, no such warrants had been issued as
of that date.
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 Total Proceeds. During the period January 1, 2000 through March 13,
2000, and the years ended December 31, 1999 and 1998, the Company incurred
$44,137, $232,865 and $1,148, respectively, of such fees. Such fees are included
in other assets.
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. For
the years ended December 31, 1999 and 1998 and the period December 22, 1997
(date of inception) through December 31, 1997, the Company incurred $373,480,
$196,184 and $15,202, respectively, for these services. For the year ended
December 31, 1999, $328,229 of such costs represented stock issuance costs,
$6,455 represented acquisition related costs and $38,796 represented general
operating and administrative expenses. For 1998 and 1997, such amounts are
included in deferred offering costs.
The Company believes that all amounts paid or payable by the Company to
Affiliates are fair and comparable to amounts that would be paid for similar
services provided by unaffiliated third parties.
<PAGE>
PRIOR PERFORMANCE INFORMATION
The information presented in this section represents the historical
experience of certain real estate programs organized by certain officers and
directors of the Advisor. PRIOR PUBLIC PROGRAMS HAVE INVESTED ONLY IN RESTAURANT
PROPERTIES AND HOTEL PROPERTIES AND HAVE NOT INVESTED IN HEALTH CARE FACILITIES.
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 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 unlisted REITs has been
audited by the IRS. Of course, there is no guarantee that the Company will not
be audited. Based on an analysis of the operating results of the prior 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 Hospitality Properties
Inc., an unlisted public REIT organized to invest in hotel properties, mortgage
loans and secured equipment leases. Both of the unlisted public REITs have
investment objectives similar to those of the Company. As of December 31, 1999,
the 18 partnerships and the two unlisted REITs had raised a total of
approximately $1.7 billion from a total of approximately 91,000 investors, and
owned approximately 1,400 fast-food, family-style and casual-dining restaurant
properties, and 11 hotels. None of the 18 public partnerships or the two
unlisted public REITs has invested in Health Care Facilities. 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.
<TABLE>
<CAPTION>
NUMBER OF DATE 90% OF NET
LIMITED PROCEEDS FULLY
MAXIMUM PARTNERSHIP INVESTED OR
NAME OF OFFERING UNITS OR COMMITTED TO
ENTITY AMOUNT (1) DATE CLOSED SHARES SOLD INVESTMENT (2)
- ------ ---------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
CNL Income $15,000,000 December 31, 1986 30,000 December 1986
Fund, Ltd. (30,000 units)
CNL Income $25,000,000 August 21, 1987 50,000 November 1987
Fund II, Ltd. (50,000 units)
CNL Income $25,000,000 April 29, 1988 50,000 June 1988
Fund III, Ltd. (50,000 units)
CNL Income $30,000,000 December 6, 1988 60,000 February 1989
Fund IV, Ltd. (60,000 units)
CNL Income $25,000,000 June 7, 1989 50,000 December 1989
Fund V, Ltd. (50,000 units)
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)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
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)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF DATE 90% OF NET
LIMITED PROCEEDS FULLY
MAXIMUM PARTNERSHIP INVESTED OR
NAME OF OFFERING UNITS OR COMMITTED TO
ENTITY AMOUNT (1) DATE CLOSED SHARES SOLD INVESTMENT (2)
- ------ ---------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
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 $35,000,000 February 6, 1998 3,500,000 December 1997
Fund 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 Hospitality $425,072,637 (4) (4) (4)
Properties, Inc. (42,507,264 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 July 9, 1997, CNL Hospitality Properties, Inc. ("CHP")
commenced an offering of up to 16,500,000 shares ($165,000,000) of common
stock. On June 17, 1999, the initial offering closed upon receipt of
subscriptions totalling $150,072,637 (15,007,264 shares), including
$72,637 (7,264 shares) through the reinvestment plan. Following
completion of the initial offering on June 17, 1999, CHP commenced a
subsequent offering (the "1999 Offering") of up to 27,500,000 shares
($275,000,000) of common stock. As of December 31, 1999, CHP had received
subscriptions totalling $138,885,350
<PAGE>
(13,888,535 shares), including $431,182 (43,118 shares) through the
reinvestment plan, from the 1999 Offering. As of such date, CHP had
purchased, directly or indirectly, 11 properties.
As of December 31, 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 December 31, 1999. These 69
partnerships raised a total of $185,927,353 from approximately 4,600 investors,
and purchased, directly or through participation in a joint venture or limited
partnership, interests in a total of 216 projects as of December 31, 1999. These
216 projects consist of 19 apartment projects (comprising 10% of the total
amount raised by all 69 partnerships), 11 office buildings (comprising 4% 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),
ten commercial/retail properties (comprising 11% 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 37 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 December 31, 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 December 31,
1999, regarding property acquisitions by the 18 limited partnerships and the two
unlisted REITs.
<TABLE>
<CAPTION>
NAME OF TYPE OF METHOD OF TYPE OF
ENTITY PROPERTY LOCATION FINANCING PROGRAM
------ -------- -------- --------- -------
<S> <C> <C> <C> <C>
CNL Income Fund, 22 fast-food or AL, AZ, CA, FL, GA, All cash Public
Ltd. family-style LA, MD, OK, PA, TX,
restaurants VA, WA
CNL Income Fund II, 50 fast-food or AL, AZ, CO, FL, GA, All cash Public
Ltd. family-style IL, IN, KS, LA, MI,
restaurants MN, MO, NC, NM, OH,
TN, TX, WA, WY
CNL Income Fund 40 fast-food or AL, AZ, CA, CO, FL, All cash Public
III, Ltd. family-style GA, IA, IL, IN, KS,
restaurants KY, MD, MI, MN, MO,
NC, NE, OK, TX
CNL Income Fund IV, 47 fast-food or AL, DC, FL, GA, IL, All cash Public
Ltd. family-style IN, KS, MA, MD, MI,
restaurants MS, NC, OH, PA, TN,
TX, VA
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NAME OF TYPE OF METHOD OF TYPE OF
ENTITY PROPERTY LOCATION FINANCING PROGRAM
------ -------- -------- --------- -------
<S> <C> <C> <C> <C>
CNL Income Fund V, 36 fast-food or AZ, FL, GA, IL, IN, All cash Public
Ltd. family-style MI, NH, NY, OH, SC,
restaurants TN, TX, UT, WA
CNL Income Fund VI, 59 fast-food or AR, AZ, FL, GA, IL, All cash Public
Ltd. family-style IN, KS, MA, MI, MN,
restaurants NC, NE, NM, NY, OH,
OK, PA, TN, TX, VA,
WA, WY
CNL Income Fund 51 fast-food or AL, AZ, CO, FL, GA, All cash Public
VII, Ltd. family-style IN, LA, MI, MN, NC,
restaurants OH, SC, TN, TX, UT, WA
CNL Income Fund 43 fast-food or AZ, FL, IN, LA, MI, All cash Public
VIII, Ltd. family-style MN, NC, NY, OH, TN,
restaurants TX, VA
CNL Income Fund IX, 46 fast-food or AL, CA, CO, FL, GA, All cash Public
Ltd. family-style IL, IN, LA, MI, MN,
restaurants MS, NC, NH, NY, OH,
SC, TN, TX
CNL Income Fund X, 55 fast-food or AL, AZ, CA, CO, FL, All cash Public
Ltd. family-style ID, IL, LA, MI, MO,
restaurants MT, NC, NE, NH, NM,
NY, OH, PA, SC, TN,
TX, WA
CNL Income Fund XI, 44 fast-food or AL, AZ, CA, CO, CT, All cash Public
Ltd. family-style FL, KS, LA, MA, MI,
restaurants MS, NC, NH, NM, OH,
OK, PA, SC, TX, VA,
WA
CNL Income Fund 51 fast-food or AL, AZ, CA, FL, GA, All cash Public
XII, Ltd. family-style LA, MO, MS, NC, NM,
restaurants OH, SC, TN, TX, WA
CNL Income Fund 50 fast-food or AL, AR, AZ, CA, CO, All cash Public
XIII, Ltd. family-style FL, GA, IN, KS, LA,
restaurants MD, NC, OH, PA, SC,
TN, TX, VA
CNL Income Fund 65 fast-food or AL, AZ, CO, FL, GA, All cash Public
XIV, Ltd. family-style KS, LA, MN, MO, MS,
restaurants NC, NJ, NV, OH, SC,
TN, TX, VA
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NAME OF TYPE OF METHOD OF TYPE OF
ENTITY PROPERTY LOCATION FINANCING PROGRAM
------ -------- -------- --------- -------
<S> <C> <C> <C> <C>
CNL Income Fund XV, 56 fast-food or AL, CA, FL, GA, KS, All cash Public
Ltd. family-style KY, MN, MO, MS, NC,
restaurants NJ, NM, OH, OK, PA,
SC, TN, TX, VA
CNL Income Fund 49 fast-food or AZ, CA, CO, DC, FL, All cash Public
XVI, Ltd. family-style GA, ID, IN, KS, MN,
restaurants MO, NC, NM, NV, OH,
TN, TX, UT, WI
CNL Income Fund 31 fast-food, CA, FL, GA, IL, IN, All cash Public
XVII, Ltd. family-style or MI, NC, NV, OH, SC,
casual-dining TN, TX, WA
restaurants
CNL Income Fund 25 fast-food, AZ, CA, FL, GA, IL, All cash Public
XVIII, Ltd. family-style or KY, MD, MN, NC, NV,
casual-dining NY, OH, TN, TX, VA
restaurants
CNL American 679 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 Hospitality 11 limited AZ, CA, GA, NV, PA, (2) Public REIT
Properties, Inc. service, extended TX, WA
stay or full
service hotels
</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) In 1998, CHP used proceeds from its line of credit and net offering
proceeds to fund the acquisition of two of its properties. As of December
31, 1999, CHP had repaid amounts borrowed on its line of credit using
additional net offering proceeds. In 1999, CHP acquired an interest in
seven additional properties through CNL Hotel Investors, Inc. ("CHI"), a
real estate investment trust jointly owned by CHP and Five Arrows Realty
Securities II L.L.C. ("Five Arrows"). In connection with the acquisition
of these seven properties, CHI used proceeds from permanent financing, in
addition to net offering proceeds from CHP and cash contributions from
Five Arrows.
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
<PAGE>
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 Hospitality 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 January 1995 and December 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
GENERAL
In order to qualify as a REIT for federal income tax purposes, among
other things, the Company must make distributions each taxable year (not
including any return of capital for federal income tax purposes) equal to at
least 95% of its real estate investment trust taxable income (90% in 2001 and
thereafter), although the Board of Directors, in its discretion, may increase
that percentage as it deems appropriate. See "Federal Income Tax Considerations
- -- Taxation of the Company -- Distribution Requirements." The declaration of
Distributions is within the discretion of the Board of Directors and depends
upon the Company's distributable funds, current and projected cash requirements,
tax considerations and other factors.
DISTRIBUTIONS
The 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
--------------------- --------------- ----------------
August 1999 $ 7,422 $ 0.025
September 1999 9,038 0.025
October 1999 10,373 0.025
November 1999 11,289 0.025
December 1999 12,282 0.025
In addition, in January and February 2000, the Company declared
Distributions totalling $13,501 and $14,530, respectively (each representing
$0.025 per Share), payable in March 2000. The Company intends to continue to
make regular Distributions to stockholders. 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 (90% in 2001 and thereafter) to maintain its
objective of qualifying as a REIT. Generally, income distributed will not be
taxable to the Company under federal income tax laws if the Company complies
with the provisions relating to qualification as a REIT. If the cash available
to the Company is insufficient to pay such Distributions, the Company may obtain
the necessary funds by borrowing, issuing new securities, or selling Assets.
These methods of obtaining funds could affect future Distributions by increasing
operating costs. To the extent that Distributions to stockholders exceed
earnings and profits, such amounts constitute a return capital for federal
income tax purposes, although such Distributions will not reduce stockholders'
aggregate Invested Capital. Distributions in kind shall not be permitted, except
for distributions of readily marketable securities; distributions of beneficial
interests in a liquidating trust established for the dissolution of the Company
and the liquidation of its assets in accordance with the terms of the Articles
of Incorporation; or distributions of in-kind property as long as the Directors
(i) advise each stockholder of the risks associated with direct ownership of the
property; (ii) offer each stockholder the election of receiving in-kind property
distributions; and (iii) distribute in-kind property only to those stockholders
who accept the Directors' offer.
For the period July 13, 1999 (the date operations of the Company
commenced) through December 31, 1999, 100% of the Distributions declared and
paid were considered to be ordinary income for federal income tax purposes. Due
to the fact that the Company had not yet acquired any Properties and was still
in the offering stage as
<PAGE>
of December 31, 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.
SUMMARY OF THE
ARTICLES OF INCORPORATION AND BYLAWS
DESCRIPTION OF CAPITAL STOCK
GENERAL. The Company has authorized a total of 206,000,000 shares of
capital stock, consisting of 100,000,000 shares of Common Stock, $0.01 par value
per share, 3,000,000 shares of Preferred Stock ("Preferred Stock"), and
103,000,000 additional shares of excess stock ("Excess Shares"), $0.01 par value
per share. Of the 103,000,000 Excess Shares, 100,000,000 are issuable in
exchange for Common Stock and 3,000,000 are issuable in exchange for Preferred
Stock as described below at "Restriction of Ownership." As of March 13, 2000,
the Company had 638,110 Shares of Common Stock outstanding (including 20,000
Shares issued to the Advisor prior to the commencement of the offering and 1,254
Shares issued pursuant to the Reinvestment Plan) and no Preferred Stock or
Excess Shares outstanding. The Board of Directors may determine to engage in
future offerings of Common Stock of up to the number of unissued authorized
shares of Common Stock available.
INSPECTION OF BOOKS AND RECORDS
The Advisor will keep, or cause to be kept, on behalf of the Company,
full and true books of account on an accrual basis of accounting, in accordance
with generally accepted accounting principles. All of such books of account,
together with all other records of the Company, including a copy of the Articles
of Incorporation and any amendments thereto, will at all times be maintained at
the principal office of the Company, and will be open to inspection,
examination, and, for a reasonable charge, duplication upon reasonable notice
and during normal business hours by a stockholder or his agent. Stockholders
will also have access to the books of account and records of CNL Health Care
Partners, LP to the same extent that they have access to the books of account
and records of the Company.
<PAGE>
FEDERAL INCOME TAX CONSIDERATIONS
TAXATION OF THE COMPANY
REQUIREMENTS FOR QUALIFICATION AS A REIT. As discussed more fully
below, the Code defines a REIT as a corporation, trust or association (i) which
is managed by one or more trustees or directors; (ii) the beneficial ownership
of which is evidenced by transferable shares, or by transferable certificates of
beneficial interest; (iii) which, but for Sections 856 through 860 of the Code,
would be taxable as a domestic corporation; (iv) which is neither a financial
institution nor an insurance company; (v) the beneficial ownership of which is
held (without reference to any rules of attribution) by 100 or more persons;
(vi) which is not closely held as defined in section 856(h) of the Code; and
(vii) which meets certain other tests regarding the nature of its assets and
income and the amount of its distributions.
In the case of a REIT which is a partner in a partnership, Treasury
Regulations provide that the REIT will be deemed to own its proportionate share
of the assets of the partnership and will be deemed to be entitled to the income
of the partnership attributable to such share. In addition, the assets and gross
income (as defined in the Code) of the partnership attributed to the REIT shall
retain the same character as in the hands of the partnership for purposes of
Section 856 of the Code, including satisfying the gross income tests and the
asset tests described below. Thus, the Company's proportionate share of the
assets, liabilities and items of income of Health Care Partners and of any Joint
Venture, as described in "Business -- Joint Venture Arrangements," will be
treated as assets, liabilities and items of income of the Company for purposes
of applying the asset and gross income tests described herein.
DISTRIBUTION REQUIREMENTS. A REIT must distribute to its stockholders
for each taxable year ordinary income dividends in an amount equal to at least
(a) 95% (90% in 2001 and thereafter) of the sum of (i) its "real estate
investment trust taxable income" (before deduction of dividends paid and
excluding any net capital gains) and (ii) the excess of net income from
foreclosure property over the tax on such income, minus (b) certain excess
non-cash income . Real estate investment trust taxable income generally is the
taxable income of a REIT computed as if it were an ordinary corporation, with
certain adjustments. Distributions must be made in the taxable year to which
they relate or, if declared before the timely filing of the REIT's tax return
for such year and paid not later than the first regular dividend payment after
such declaration, in the following taxable year.
The Company has represented that it intends to make Distributions to
stockholders that will be sufficient to meet the 95% distribution requirement
(90% in 2001 and thereafter). Under some circumstances, however, it is possible
that the Company may not have sufficient funds from its operations to make cash
Distributions to satisfy the 95% distribution requirement. For example, in the
event of the default or financial failure of one or more tenants or lessees, the
Company might be required to continue to accrue rent for some period of time
under federal income tax principles even though the Company would not currently
be receiving the corresponding amounts of cash. Similarly, under federal income
tax principles, the Company might not be entitled to deduct certain expenses at
the time those expenses are incurred. In either case, the Company's cash
available for making Distributions might not be sufficient to satisfy the 95%
distribution requirement. If the cash available to the Company is insufficient,
the Company might raise cash in order to make the Distributions by borrowing
funds, issuing new securities or selling assets. If the Company ultimately were
unable to satisfy the 95% distribution requirement, it would fail to qualify as
a REIT and, as a result, would be subject to federal income tax as an ordinary
corporation without any deduction or adjustment for dividends paid to holders of
the Shares. If the Company fails to satisfy the 95% distribution requirement, as
a result of an adjustment to its tax returns by the Service, under certain
circumstances, it may be able to rectify its failure by paying a "deficiency
dividend" (plus a penalty and interest) within 90 days after such adjustment.
This deficiency dividend will be included in the Company's deductions for
Distributions paid for the taxable year affected by such adjustment. However,
the deduction for a deficiency dividend will be denied, if any part of the
adjustment resulting in the deficiency is attributable to fraud with intent to
evade tax or to willful failure to timely file an income tax return.
NEW TAX LEGISLATION. On December 17, 1999, President Clinton signed the
Work Incentives Improvement Act of 1999. This law includes several provisions
that pertain to REITs, two of which will affect the Company. First, the
distribution requirement, discussed in " -- Distribution Requirements" above,
will be reduced so that the Company will be required to distribute dividends
equal to 90% (rather than 95%) of its net taxable income. Second, another
provision will change the method for measuring whether a lease violates the
restriction that rent attributable to personal property leased in connection
with a lease of real property is no more than 15 percent of the total rent
received under the lease. Under current law, the percentage is determined by
reference to the adjusted tax bases of the real property and the personal
property; under the recently passed law, the percentage will be determined by
reference to their respective fair market values. These provisions will be
effective beginning in 2001.
THE OFFERING
GENERAL
A maximum of 15,000,000 Shares ($150,000,000) are being offered at a
purchase price of $10.00 per share. In addition, the Company has registered an
additional 500,000 Shares ($5,000,000) available only to stockholders who
receive a copy of this Prospectus and who elect to participate in the
Reinvestment Plan. Any participation in such plan by a person who becomes a
stockholder otherwise than by participating in this offering will require
solicitation under a separate prospectus. See "Summary of Reinvestment Plan."
The Board of Directors may determine to engage in future offerings of Common
Stock of up to the number of unissued authorized shares of Common Stock
available following termination of this offering.
A minimum investment of 250 Shares ($2,500) is required. IRAs, Keogh
plans, and pension plans must make a minimum investment of at least 100 Shares
($1,000). For Minnesota investors, IRAs and qualified plans must make a minimum
investment of 200 Shares ($2,000) and, for Iowa investors, IRAs and qualified
plans must make a minimum investment of 250 Shares ($2,500). Any investor who
makes the required minimum investment may purchase additional Shares in
increments of one Share. See " -- General," " -- Subscription Procedures" and
"Summary of Reinvestment Plan."
Pursuant to the requirements of the Commissioner of Securities of the
State of Pennsylvania, subscriptions from Pennsylvania residents may not be
released from escrow until subscriptions for Shares totalling at least
$7,775,000 have been received from all sources. Until subscription funds for the
Company total $7,775,000, the Pennsylvania funds will be held in escrow by
SouthTrust Bank, N.A., and interest earned on such funds will accrue to the
benefit of subscribers.
PLAN OF DISTRIBUTION
Prior to a subscriber's admission to the Company as a stockholder,
funds paid by such subscriber will be deposited in an interest-bearing escrow
account with SouthTrust Bank, N.A. The Company, within 30 days after the date a
subscriber is admitted to the Company, will pay to such subscriber the interest
(generally calculated on a daily basis) actually earned on the funds of those
subscribers whose funds have been held in escrow by such bank for at least 20
days. Stockholders otherwise are not entitled to interest earned on Company
funds or to receive interest on their Invested Capital. See "Escrow
Arrangements" below.
SUBSCRIPTION PROCEDURES
PROCEDURES APPLICABLE TO ALL SUBSCRIPTIONS. In order to purchase
Shares, the subscriber must complete and execute the Subscription Agreement. Any
subscription for Shares must be accompanied by cash or check payable to
"SouthTrust Bank, N.A., Escrow Agent" or to the Company, in the amount of $10.00
per Share. See
<PAGE>
"Escrow Arrangements" below. Certain Soliciting Dealers who have "net capital,"
as defined in the applicable federal securities regulations, of $250,000 or more
may instruct their customers to make their checks for Shares for which they have
subscribed payable directly to the Soliciting Dealer. In such case, the
Soliciting Dealer will issue a check made payable to the order of the Escrow
Agent for the aggregate amount of the subscription proceeds.
Subscriptions of Pennsylvania investors whose subscriptions are
accepted prior to the release of such payments from escrow will be admitted as
stockholders within 15 days after such release of payments. All other,
subscribers will be admitted as stockholders not later than the last day of the
calendar month following acceptance of their subscriptions.
ESCROW ARRANGEMENTS
The Escrow Agreement between the Company and SouthTrust Bank, N.A. (the
"Bank") provides that escrowed funds will be invested by the Bank in an
interest-bearing account with the power of investment in short-term, highly
liquid securities issued or guaranteed by the U.S. Government, other investments
permitted under Rule 15c2-4 of the Securities Exchange Act of 1934, as amended,
or, in other short-term, highly liquid investments with appropriate safety of
principal. Such subscription funds will be released periodically (at least once
per month) upon admission of stockholders to the Company.
The interest, if any, earned on subscription proceeds will be payable
only to those subscribers whose funds have been held in escrow by the Bank for
at least 20 days. Stockholders will not otherwise be entitled to interest earned
on Company funds or to receive interest on their Invested Capital.
<PAGE>
EXPERTS
The audited consolidated balance sheets of the Company as of December
31, 1999 and 1998, and the related consolidated statements of earnings,
stockholders' equity and cash flows for the years ended December 31, 1999 and
1998 and for the period December 22, 1997 (date of inception) through December
31, 1997, included in this Prospectus, have been included herein in reliance on
the report of PricewaterhouseCoopers LLP, independent certified public
accountants, given on the authority of that firm as experts in accounting and
auditing.
The audited statement of assets and liabilities of Brighton Gardens by
Marriott, Orland Park, Illinois (an unincorporated division of Marriott Senior
Living Services, Inc.) at December 31, 1999, and the related statements of
revenues and operating expenses, of excess of assets over liabilities and of
cash flows for the period October 11, 1999 (date of opening) through December
31, 1999, included in this Prospectus, have been included herein in reliance on
the report of PricewaterhouseCoopers, LLP, independent certified public
accountants, given on the authority of that firm as experts in accounting and
auditing.
DEFINITIONS
"ADVISOR" means CNL Health Care Corp. (formerly CNL Health Care
Advisors, Inc.), a Florida corporation, any successor advisor to the Company, or
any person or entity to which CNL Health Care Corp. or any successor advisors
subcontracts substantially all of its functions.
"BANK" means SouthTrust Bank, N.A., escrow agent for the offering.
"CNL" means CNL Financial Group, Inc. (formerly CNL Group Inc.), the
parent company either directly or indirectly of CNL Real Estate Services, Inc.,
CNL Capital Markets, Inc., the Advisor and the Managing Dealer.
"COMMITMENT" means the written commitment from a bank for an initial
$25,000,000 revolving line of credit to be used by the Company to acquire or
construct health care Properties.
"LINE OF CREDIT" means one or more lines of credit initially in an
aggregate amount up to $45,000,000, the proceeds of which will be used to
acquire Properties and make Mortgage Loans and Secured Equipment Leases and
<PAGE>
to pay the Secured Equipment Lease Servicing Fee. The Line of Credit
may be in addition to any Permanent Financing.
<PAGE>
APPENDIX B
FINANCIAL INFORMATION
-------------------------------------------
| THE FINANCIAL STATEMENTS INCLUDED IN |
| THIS APPENDIX B UPDATE AND REPLACE |
| APPENDIX B TO THE ATTACHED |
| PROSPECTUS, DATED MAY 24, 1999. |
-------------------------------------------
<PAGE>
INDEX TO FINANCIAL STATEMENTS
CNL HEALTH CARE PROPERTIES, INC.
<TABLE>
<CAPTION>
Page
----
Pro Forma Consolidated Financial Information (unaudited):
<S> <C>
Pro Forma Consolidated Balance Sheet as of December 31, 1999 B-2
Pro Forma Consolidated Statement of Operations for the year ended
December 31, 1999 B-3
Notes to Pro Forma Consolidated Financial Statements for the year
ended December 31, 1999 B-4
Audited Consolidated Financial Statements:
Report of Independent Certified Public Accountants B-6
Consolidated Balance Sheets as of December 31, 1999 and 1998 B-7
Consolidated Statements of Operations for the years ended December 31, 1999
and 1998 and the period December 22, 1997 (date of inception)
through December 31, 1997 B-8
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1999 and 1998 and the period December 22, 1997 (date
of inception) through December 31, 1997 B-9
Consolidated Statements of Cash Flows for the years ended December 31, 1999
and 1998 and the period December 22, 1997 (date of inception) through
December 31, 1997 B-10
Notes to Consolidated Financial Statements for the years ended December 31,
1999 and 1998 and the period December 22, 1997 (date of inception)
through December 31, 1997 B-12
</TABLE>
B-1
<PAGE>
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 $980,821 in gross offering proceeds from the sale
of 98,082 additional shares for the period January 1, 2000 through March 13,
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.
B-1
<PAGE>
CNL HEALTH CARE PROPERTIES, INC.
AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Pro Forma
ASSETS Historical Adjustments Pro Forma
-------------- -------------- ---------------
<S> <C> <C> <C>
Land, buildings and equipment on operating
leases $ -- $14,600,970 (a) $14,600,970
Cash and cash equivalents 4,744,222 (4,661,333)(a) 82,889
Loan costs -- 40,500 (a) 40,500
Other assets 344,338 (334,463)(a) 9,875
-------------- -------------- ---------------
$ 5,088,560 $ 9,645,674 $14,734,234
============== ============== ===============
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 89,362 (a) 1,864,618
Security deposits -- 553,956 (a) 553,956
-------------- -------------- ---------------
Total liabilities 1,796,423 8,743,318 10,539,741
-------------- -------------- ---------------
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, 638,110 shares
5,400 981 (a) 6,381
Capital in excess of par value 3,365,531 901,375 (a) 4,266,906
Accumulated deficit (78,794) -- (78,794)
-------------- -------------- ---------------
Total stockholders' equity 3,292,137 902,356 4,194,493
-------------- -------------- ---------------
$ 5,088,560 $ 9,645,674 $14,734,234
============== ============== ===============
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements.
B-2
<PAGE>
CNL HEALTH CARE PROPERTIES, INC.
AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<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 (48,005)(3) 38,226
--------------- -------------- --------------
86,231 267,255 353,486
--------------- -------------- --------------
Expenses:
Interest -- 159,750 (4) 159,750
General operating an
administrative 79,621 -- 79,621
Asset management fees to
related party -- 14,601 (5) 14,601
Organizational costs 35,000 -- 35,000
Depreciation and amortization -- 108,727 (6) 108,727
--------------- -------------- --------------
114,621 283,078 397,699
--------------- -------------- --------------
Net Loss $ (28,390) $ (15,823) $ (44,213)
=============== ============== ==============
Loss Per Share of Common Stock
(Basic and Diluted) (7) $ (.07) $ (.09)
============== ==============
Weighted Average Number of Shares of Common
Stock Outstanding 412,713 488,847
============== ==============
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements.
B-3
<PAGE>
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 $980,821 from the sale of 98,082 shares
during the period January 1, 2000 though March 13, 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 $4,661,333 of cash
and cash equivalents used (i) to acquire a property for $13,848,900,
(ii) to pay acquisition fees and costs of $278,150 ($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
$128,560 which have been netted against stockholders' equity ($50,094
of which was accrued and due to related parties at December 31, 1999)
and (iv) to pay loan costs of $40,500 related to the assumed borrowings
from the line of credit. Also represents the accrual of $373,470 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 proposed to be acquired by the Company as of March 13, 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 as additional rent. 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. Also represents amortization
of the loan origination fee of $40,500 (.5% on the $8,100,000 from
borrowings on the line of credit) amortized under the straight-line
method over a period of five years.
B-4
<PAGE>
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 Statements 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.
(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 618,110 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 98,082 of
these shares of common stock were actually sold subsequently, during
the period January 1, 2000 and March 13, 2000, the weighted average
number of shares outstanding for the pro forma period was adjusted.
B-5
<PAGE>
Report of Independent Certified Public Accountants
To the Board of Directors
CNL Health Care Properties, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of stockholders' equity and of cash flows
present fairly in all material respects, the financial position of CNL Health
Care Properties, Inc. (a Maryland corporation) and its subsidiaries at December
31, 1999 and 1998, and the results of their operations and their cash flows for
each of the two years ended December 31, 1999 and 1998, and the period December
22, 1997 (date of inception) through December 31, 1997, in conformity with
accounting principles generally accepted in the United States. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
/s/ PRICEWATERHOUSECOOPERS LLP
Orlando, Florida
January 14, 2000
B-6
<PAGE>
CNL HEALTH CARE PROPERTIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
1999 1998
------------ -----------
ASSETS
<S> <C> <C>
Cash $4,744,222 $ 92
Deferred offering and organizational costs -- 975,339
Other assets 344,338 1,148
------------- ------------
$5,088,560 $976,579
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Due to related parties $1,775,256 $685,372
Accounts payable and accrued expenses 21,167 91,207
------------- ------------
Total liabilities 1,796,423 776,579
------------- ------------
Stockholders' equity:
Preferred stock, without par value per share
Authorized and unissued 3,000,000 shares -- --
Excess shares, $.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 and 20,000 shares,
respectively 5,400 200
Capital in excess of par value 3,365,531 199,800
Accumulated deficit (78,794 ) --
------------- ------------
Total stockholders' equity 3,292,137 200,000
------------- ------------
$5,088,560 $976,579
============= ============
</TABLE>
See accompanying notes to consolidated financial statements.
B-7
<PAGE>
CNL HEALTH CARE PROPERTIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
December 22,
1997
(Date of
Inception)
Year Ended through
December 31, December 31,
1999 1998 1997
------------ ------------ -------------
Revenues:
<S> <C> <C> <C>
Interest income $ 86,231 $ -- $ --
------------- ------------- --------------
Expenses:
General operating and
administrative 79,621 -- --
Organizational costs 35,000 -- --
------------- ------------- --------------
114,621 -- --
------------- ------------- --------------
Net Loss $ (28,390 ) $ -- $ --
============= ============= ==============
Net Loss Per Share of Common
Stock (Basic and Diluted) $ (.07 ) $ -- $ --
============= ============= ==============
Weighted Average Number of
Shares of Common Stock
Outstanding 412,713 -- --
============= ============= ==============
</TABLE>
See accompanying notes to consolidated financial statements.
B-8
<PAGE>
CNL HEALTH CARE PROPERTIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1999 and 1998 and the
Period December 22, 1997 (Date of Inception) through
December 31, 1997
<TABLE>
<CAPTION>
Common stock
---------------------- Capital in
Number Par excess of Accumulated
of Shares value par value deficit Total
---------- ---------- ------------ ----------------- ------------
<S> <C> <C> <C> <C> <C>
Balance at December 22, 1997 -- $ -- $ -- $ -- $ --
Sale of common stock to related
party 20,000 200 199,800 -- 200,000
---------- ---------- ------------ ----------------- ------------
Balance at December 31, 1997 20,000 200 199,800 -- 200,000
Subscriptions received for common
stock through public offering 2,550 26 25,474 -- 25,500
Subscriptions held in escrow at
December 31, 1998 (2,550 ) (26 ) (25,474 ) -- (25,500 )
---------- ---------- ------------ ----------------- ------------
Balance at December 31, 1998 20,000 200 199,800 -- 200,000
Subscriptions received for common
stock through public offering
and distribution reinvestment
plan 543,528 5,435 5,429,848 -- 5,435,283
Subscriptions held in escrow at
December 31, 1999 (23,500 ) (235 ) (234,765 ) -- (235,000 )
Stock issuance costs -- -- (2,029,352 ) -- (2,029,352 )
Net loss -- -- -- (28,390 ) (28,390 )
Distributions declared and paid
($.125 per share) -- -- -- (50,404 ) (50,404 )
---------- ---------- ------------ ----------------- ------------
Balance at December 31, 1999 540,028 $ 5,400 $3,365,531 $ (78,794 ) $3,292,137
========== ========== ============ ================= ============
</TABLE>
See accompanying notes to consolidated financial statements.
B-9
<PAGE>
CNL HEALTH CARE PROPERTIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
December 22,
1997
(Date of
Inception)
Year Ended through
December 31, December 31,
1999 1998 1997
------------- ------------- -------------
Increase (Decrease) in Cash and Cash Equivalents:
<S> <C> <C> <C>
Operating Activities:
Interest received $ 86,231 $ -- $ --
Cash paid for expenses (73,380 ) -- --
-------------- -------------- -------------
Net cash provided by operating activities 12,851 -- --
-------------- -------------- -------------
Financing Activities:
Reimbursement of amounts paid by related
parties on behalf of the Company (2,447 ) (135,339 ) --
Sale of common stock to related party -- -- 200,000
Subscriptions received from stockholders 5,200,283 -- --
Distributions to stockholders (50,404 ) -- --
Payment of stock issuance costs (416,153 ) (64,569 ) --
-------------- -------------- -------------
Net cash provided by (used in)
financing activities 4,731,279 (199,908 ) 200,000
-------------- -------------- -------------
Net Increase (Decrease) in Cash and Cash 4,744,130 (199,908 ) 200,000
Equivalents
Cash and Cash Equivalents at Beginning
of Period 92 200,000 --
-------------- -------------- -------------
Cash and Cash Equivalents at End of
Period $ 4,744,222 $ 92 $ 200,000
============== ============== =============
</TABLE>
See accompanying notes to consolidated financial statements.
B-10
<PAGE>
CNL HEALTH CARE PROPERTIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
December 22,
1997
(Date of
Inception)
Year Ended through
December 31, December 31,
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Reconciliation of Net Loss to Net Cash Provided
by Operating Activities:
Net loss $ (28,390) $ -- $ --
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Organizational costs 20,000 -- --
Changes in operating assets and
liabilities:
Other assets (5,535) -- --
Accounts payable and -- --
other accrued expenses 20,037
Due to related parties 6,739 -- --
-------------- -------------- -------------
Net cash provided by operating
activities $ 12,851 $ -- $ --
============== ============== =============
Supplemental Schedule of Non-Cash
Financing Activities:
Amounts incurred by the Company and
paid by related parties on behalf of the
Company and its subsidiaries are as
follows:
Acquisition costs $98,206 $ -- $ --
Organizational costs -- 20,000 --
Deferred offering costs -- 542,739 43,398
Stock issuance costs 421,878 -- --
-------------- -------------- --------------
$ 520,084 $ 562,739 $ 43,398
============== ============== ==============
Costs incurred by the Company and unpaid
at period end are as follows:
Acquisition costs $ 239,449 $ 1,148 $ --
Deferred offering costs -- 267,701 36,932
Stock issuance costs 235,982 -- --
-------------- -------------- --------------
$ 475,431 $ 268,849 $ 36,932
============== ============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
B-11
<PAGE>
CNL HEALTH CARE PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1999 and 1998 and the
Period December 22, 1997 (Date of Inception) through
December 31, 1997
1. Significant Accounting Policies:
-------------------------------
Organization and Nature of Business - CNL Health Care Properties, Inc.
was organized pursuant to the laws of the state of Maryland on December
22, 1997. CNL Health Care GP Corp. and CNL Health Care LP Corp. are
wholly owned subsidiaries of CNL Health Care Properties, Inc., each of
which were organized pursuant to the laws of the state of Delaware in
December 1999. CNL Health Care Partners, LP is a Delaware limited
partnership formed in December 1999. CNL Health Care GP Corp. and CNL
Health Care LP Corp. are the general and limited partners,
respectively, of CNL Health Care Partners, LP. The term "Company"
includes, unless the context otherwise requires, CNL Health Care
Properties, Inc., CNL Health Care Partners, LP, CNL Health Care GP
Corp. and CNL Health Care LP Corp.
The Company intends to use the proceeds from its public offering (the
"Offering") (see Note 2), after deducting offering expenses, primarily
to acquire real estate properties (the "Properties") related to health
care and seniors' housing facilities (the "Health Care Facilities")
located across the United States. The Health Care Facilities may
include congregate living, assisted living and skilled nursing
facilities, continuing care retirement communities and life care
communities, and medical office buildings and walk-in clinics. The
Company may provide mortgage financing (the "Mortgage Loans") to
operators of Health Care Facilities in the aggregate principal amount
of approximately 5 to 10 percent of the Company's total assets. The
Company also may offer furniture, fixture and equipment financing
("Secured Equipment Leases") to operators of Health Care Facilities.
Secured Equipment Leases will be funded from the proceeds of a loan in
an amount up to ten percent of the Company's total assets.
The Company was a development stage enterprise from December 22, 1997
through July 13, 1999. Since operations had not begun, activities
through July 13, 1999 were devoted to organization of the Company.
Principles of Consolidation - The accompanying consolidated financial
statements include the accounts of CNL Health Care Properties, Inc. and
its wholly owned subsidiaries, CNL Health Care GP Corp. and CNL Health
Care LP Corp., as well as the accounts of CNL Health Care Partners, LP.
All significant intercompany balances and transactions have been
eliminated.
Cash and Cash Equivalents - The Company considers all highly liquid
investments with a maturity of three months or less when purchased to
be cash equivalents. Cash and cash equivalents consist of demand
deposits at commercial banks and money market funds (some of which are
backed by government securities). Cash equivalents are stated at cost
plus accrued interest, which approximates market value.
Cash accounts maintained on behalf of the Company in demand deposits at
commercial banks and money market funds may exceed federally insured
levels; however, the Company has not experienced any losses in such
accounts. The Company limits investment of temporary cash investments
to financial institutions with high credit standing; therefore,
management believes it is not exposed to any significant credit risk on
cash and cash equivalents.
B-12
<PAGE>
CNL HEALTH CARE PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1999 and 1998 and the
Period December 22, 1997 (Date of Inception) through
December 31, 1997
1. Significant Accounting Policies - Continued:
-------------------------------------------
Income Taxes - When the Company files its 1999 income tax return, it
will elect, pursuant to Internal Revenue Code Section 856(c)(1), to be
taxed as a REIT under Sections 856 through 860 of the Internal Revenue
Code of 1986, as amended, and related regulations. The Company
generally will not be subject to federal corporate income taxes on
amounts distributed to stockholders, providing it distributes at least
95 percent of its REIT taxable income and meets certain other
requirements for qualifying as a REIT. For the year ended December 31,
1999, the Company believes it has qualified as a REIT; accordingly, no
provision for federal income taxes has been made in the accompanying
consolidated financial statements.
Earnings Per Share - Basic earnings per share are calculated based upon
net earnings (income available to common stockholders) divided by the
weighted average number of shares of common stock outstanding during
the period. The weighted average number of shares of common stock
outstanding for the period July 14, 1999 through December 31, 1999 was
412,713. As of December 31, 1999, the Company did not have any
potentially dilutive common shares.
Reclassification - Certain items in the prior years' financial
statements have been reclassified to conform with the 1999
presentation. These reclassifications had no effect on stockholders'
equity or net earnings.
Use of Estimates - Management of the Company has made a number of
estimates and assumptions relating to the reporting of assets and
liabilities to prepare these financial statements in conformity with
generally accepted accounting principles. Actual results could differ
from those estimates.
2. Public Offering:
---------------
The Company has filed a currently effective registration statement on
Form S-11 with the Securities and Exchange Commission. A maximum of
15,500,000 shares ($155,000,000) may be sold, including 500,000 shares
($5,000,000) which are available only to stockholders who elect to
participate in the Company's reinvestment plan. The Company has adopted
a reinvestment plan pursuant to which stockholders may elect to have
the full amount of their cash distributions from the Company reinvested
in additional shares of common stock of the Company. In addition, the
Company has registered 600,000 shares issuable upon the exercise of
warrants granted to the managing dealer of the Offering. As of December
31, 1999, the Company had received subscription proceeds of $5,435,283
(543,528 shares), including $12,540 (1,254 shares) through the
distribution reinvestment plan and $235,000 (23,500 shares) from
Pennsylvania investors which will be held in escrow until the Company
receives aggregate subscriptions of at least $7,775,000.
B-13
<PAGE>
CNL HEALTH CARE PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1999 and 1998 and the
Period December 22, 1997 (Date of Inception) through
December 31, 1997
3. Other Assets:
------------
Other assets as of December 31, 1999 and 1998 were $344,338 and $1,148,
respectively, which consisted of acquisition fees and miscellaneous
acquisition expenses that will be allocated to future properties and
miscellaneous prepaid expenses.
4. Stock Issuance Costs:
--------------------
The Company has incurred certain expenses of its Offering, including
commissions, marketing support and due diligence expense reimbursement
fees, filing fees, legal, accounting, printing and escrow fees, which
have been deducted from the gross proceeds of the Offering. Preliminary
costs incurred prior to raising capital were advanced by an affiliate
of the Company, CNL Health Care Corp. (formerly known as CNL Health
Care Advisors, Inc.) (the "Advisor"). The Advisor has agreed to pay all
organizational and offering expenses (excluding commissions and
marketing support and due diligence expense reimbursement fees) which
exceed three percent of the gross proceeds received from the sale of
shares of the Company in connection with the Offering.
During the years ended December 31, 1999 and 1998, the Company incurred
$1,089,013 and $975,339, respectively, in organizational and offering
costs, including $413,983 and $2,040, respectively, in commissions and
marketing support and due diligence expense reimbursement fees (see
Note 6). Of these amounts $1,074,013 and $955,339, respectively, have
been treated as stock issuance costs and $15,000 and $20,000,
respectively, have been treated as organization costs and expensed in
the current year. The stock issuance costs have been charged to
stockholders' equity subject to the three percent cap described above.
5. Distributions:
-------------
For the year ended December 31, 1999, 100 percent of the distributions
paid to stockholders were considered ordinary income for federal income
tax purposes. No amounts distributed to the stockholders for the year
ended December 31, 1999 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.
B-14
<PAGE>
CNL HEALTH CARE PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1999 and 1998 and the
Period December 22, 1997 (Date of Inception) through
December 31, 1997
6. Related Party Arrangements:
--------------------------
On December 22, 1997 (date of inception), the Advisor contributed
$200,000 in cash to the Company and became its sole stockholder.
Certain directors and officers of the Company hold similar positions
with the Advisor and the managing dealer of the Offering, CNL
Securities Corp. These affiliates are entitled to receive fees and
compensation in connection with the Offering, and the acquisition,
management and sale of the assets of the Company.
During the years ended December 31, 1999 and 1998, the Company incurred
$388,109 and $1,912, respectively, in selling commissions due to CNL
Securities Corp. for services in connection with the Offering. A
substantial portion of these amounts ($370,690 and $1,785,
respectively) was or will be paid by CNL Securities Corp. as
commissions to other broker-dealers.
In addition, CNL Securities Corp. is entitled to receive a marketing
support and due diligence expense reimbursement fee equal to 0.5
percent of the total amount raised from the sale of shares, a portion
of which may be reallowed to other broker-dealers. During the years
ended December 31, 1999 and 1998, the Company incurred $25,874 and
$128, respectively, of such fees, the majority of which were reallowed
to other broker-dealers and from which all bona fide due diligence
expenses were paid.
In addition, the Company has agreed to issue and sell soliciting dealer
warrants ("Soliciting Dealer Warrants") to CNL Securities Corp. The
price for each warrant will be $0.0008 and one warrant will be issued
for every 25 shares sold by the managing dealer, except when prohibited
by federal or state securities laws. 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 with the date the
offering begins. No Soliciting Dealer Warrants, however, will be
exercisable until one year from the date of issuance. As of December
31, 1999, CNL Securities Corp. was entitled to receive approximately
19,000 Soliciting Dealer Warrants; however, no such warrants had been
issued as of that date.
The Advisor is entitled to receive acquisition fees for services in
identifying Properties and structuring the terms of leases of the
Properties and Mortgage Loans equal to 4.5 percent of the gross
proceeds of the Offering, loan proceeds from permanent financing and
amounts outstanding on the line of credit, if any, at the time of
listing, but excluding that portion of the permanent financing used to
finance Secured Equipment Leases. During the years ended December 31,
1999 and 1998, the Company incurred $232,865 and $1,148, respectively,
of such fees. Such fees are included in other assets.
B-15
<PAGE>
CNL HEALTH CARE PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1999 and 1998 and the
Period December 22, 1997 (Date of Inception) through
December 31, 1997
6. Related Party Arrangements - Continued:
--------------------------------------
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, 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 two percent of average
invested assets or 25 percent of net income (the "Expense Cap"). Due to
the fact that the Company commenced operations in July 1999, the
Advisor will be required to reimburse the Company any amounts in excess
of the Expense Cap commencing with the Expense Year ending June 30,
2000.
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), on
a day-to-day basis. The expenses incurred for these services were
classified as follows:
<TABLE>
<CAPTION>
December 22,
1997
(Date of)
Inception)
Year Ended Through
December 31, December 31,
1999 1998 1997
----------- ----------- ---------------
<S> <C> <C> <C>
Deferred offering costs $ -- $196,184 $15,202
Stock issuance costs 328,229 -- --
Other assets 6,455 -- --
General operating and
administrative expenses 38,796 -- --
----------- ----------- ------------
$373,480 $196,184 $15,202
=========== =========== ============
</TABLE>
B-16
<PAGE>
CNL HEALTH CARE PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1999 and 1998 and the
Period December 22, 1997 (Date of Inception) through
December 31, 1997
6. Related Party Arrangements - Continued:
--------------------------------------
Amounts due to related parties consisted of the following at December
31:
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
Due to the Advisor:
Expenditures incurred for organizational
and offering expenses on behalf
of the Company $1,432,291 $470,798
Accounting and administrative
services 6,739 211,386
Acquisition fees 336,226 1,148
------------- -----------
1,775,256 683,332
------------- -----------
Due to CNL Securities Corp.:
Commissions -- 1,912
Marketing support and due diligence
expense reimbursement fee -- 128
------------- -----------
-- 2,040
------------- -----------
$1,775,256 $685,372
============= ===========
</TABLE>
7. Subsequent Events:
-----------------
During the period January 1, 2000 through January 14, 2000, the Company
received subscription proceeds for an additional 30,329 shares
($303,290) of common stock.
In addition, on January 1, 2000, the Company declared distributions
totalling $13,501 or $0.025 per share of common stock, payable in March
2000, to stockholders of record on January 1, 2000.
B-17
<PAGE>
INDEX TO OTHER FINANCIAL STATEMENTS
------------------------------------
The following financial information is provided in connection with the Company's
pending acquisition of the Orland Park Property. Due to the fact that the tenant
of the Company is a newly formed entity, the information presented represents
the historical financial information of the operations of the assisted living
facility. The Orland Park Property became operational on October 11, 1999. This
information was obtained from the seller of the Property. The Company intends to
acquire the Property and will not own any interest in the tenant's operations of
the assisted living facility. For information on the Property and the long-term,
triple-net lease in which the Company intends to enter, see "Business --Pending
Investments."
BRIGHTON GARDENS BY MARRIOTT
Orland Park, Illinois
(An Unincorporated Division of Marriott Senior Living Services, Inc.)
Audited Financial Statements:
Report of Independent Certified Public Accountants B-19
Statement of Assets and Liabilities as of December 31, 1999 B-20
Statement of Revenues and Operating Expenses for the period
October 11, 1999 (date of opening) through December 31, 1999 B-21
Statement of Excess of Assets Over Liabilities for the period
October 11, 1999 (date of opening) through December 31, 1999 B-22
Statement of Cash Flows for the period October 11, 1999 (date
of opening) through December 31, 1999 B-23
Notes to Financial Statements for the period October 11, 1999
(date of opening) through December 31, 1999 B-24
B-18
<PAGE>
Report of Independent Certified Public Accountants
To the Board of Directors
Marriott Senior Living Services, Inc.
In our opinion, the accompanying statement of assets and liabilities and the
related statements of revenues and operating expenses, of excess of assets over
liabilities and of cash flows present fairly, in all material respects, the
financial position of Brighton Gardens by Marriott, Orland Park, Illinois (an
unincorporated division of Marriott Senior Living Services, Inc.) at December
31, 1999, and the results of its operations and its cash flows for the period
from October 11, 1999 (date of opening) to December 31, 1999 in conformity with
accounting principles generally accepted in the United States. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
auditing standards generally accepted in the United States which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Orlando, Florida
March 20, 2000
B-19
<PAGE>
Brighton Gardens by Marriott
Orland Park, Illinois
(An Unincorporated Division of Marriott Senior Living Services, Inc.)
Statement of Assets and Liabilities
December 31, 1999
Assets
Current Assets:
Cash $ 16,529
Accounts receivable 7,333
Other assets 7,759
--------------
Total current assets 31,621
Property and Equipment, at cost, less accumulated
depreciation of $90,759 12,694,051
--------------
$ 12,725,672
Liabilities and Excess of Assets Over Liabilities
Current Liabilities:
Accounts payable and accrued expenses $ 15,224
Due to Marriott Senior Living Services, Inc. 176,559
--------------
Total current liabilities 191,783
Excess of Assets Over Liabilities 12,533,889
--------------
$ 12,725,672
==============
The accompanying notes are an integral part of these financial statements.
B-20
<PAGE>
Brighton Gardens by Marriott
Orland Park, Illinois
(An Unincorporated Division of Marriott Senior Living Services, Inc.)
Statement of Revenues and Operating Expenses
Period from October 11, 1999 (Date of Opening) through December 31, 1999
Revenue:
Resident fees $ 277,089
Other income 5,048
-----------
282,137
-----------
Expenses:
Operating, selling, general and administrative 442,299
Depreciation 90,759
-----------
533,058
-----------
Excess of Operating Expenses Over Revenues $ (250,921)
===========
The accompanying notes are an integral part of these financial statements.
B-21
<PAGE>
Brighton Gardens by Marriott
Orland Park, Illinois
(An Unincorporated Division of Marriott Senior Living Services, Inc.)
Statement of Excess of Assets Over Liabilities
Period from October 11, 1999 (Date of Opening) through December 31, 1999
Balance at Beginning of Period $ -
Contribution of property and equipment 12,784,810
Excess of operating expenses over revenues (250,921)
-------------
Excess of Assets Over Liabilities at December 31, 1999 $ 12,533,889
=============
The accompanying notes are an integral part of these financial statements.
B-22
<PAGE>
Brighton Gardens by Marriott
Orland Park, Illinois
(An Unincorporated Division of Marriott Senior Living Services, Inc.)
Statement of Cash Flows
Period from October 11, 1999 (Date of Opening) through December 31, 1999
Cash Flows from Operating Activities:
Net loss $ (250,921)
Depreciation 90,759
Chages in assets and liabilities:
Decrease (increase) in assets:
Increase in accounts receivable (7,333)
Increase in other assets (7,759)
Increase (decrease) in liabilities:
Increase in accounts payable and accrued expenses 15,224
Increase in due to Marriott Senior Living Services, Inc. 176,559
-------------
Net cash provided by operating activities 16,529
Cash at Beginning of Period -
-------------
Cash at End of Period $ 16,529
=============
Summary of Non-Cash Financing Transaction:
On October 11, 1999, the property became operational and property and
equipment with a cost of $12,784,810 were recognized as a contribtuion
from Marriott Senior Living Services, Inc.
The accompanying notes are an integral part of these financial statements.
B-23
<PAGE>
Brighton Gardens by Marriott
Orland Park, Illinois
(An Unincorporated Division of Marriott Senior Living Services, Inc.)
Notes to Financial Statements
Period from October 11, 1999 (Date of Opening) through December 31, 1999
- --------------------------------------------------------------------------------
1. Organization and Nature of Business:
Brighton Gardens by Marriott (the "Property") is an assisted-living
facility located in Orland Park, Illinois. The Property includes 82
assisted-living units and 24 Alzheimer's units. The Property is an
unincorporated division of Marriott Senior Living Services, Inc. (the
"Owner"), a subsidiary of Marriott International, Inc.
2. Summary of Significant Accounting Policies:
Significant accounting policies followed by the Property are described
below:
Basis of Presentation
The accompanying statements have been prepared to present only the
accounts which relate to the Property since it became operational.
Revenue Recognition
The Property charges fees to residents of its assisted-living facilities
pursuant to short-term operating lease agreements. Resident fees are
recognized as revenue ratably over the term of the related leases. Other
revenues are recognized as the related services are performed.
Property and Equipment
Land is carried at cost. Buildings and improvements and equipment are
carried at cost less accumulated depreciation. Additions, improvements
and expenditures for repairs and maintenance that extend the life of the
assets are capitalized. Other expenditures for repairs and maintenance
are charged to expense.
Depreciation is computed by the straight-line method based on the
following estimated useful lives:
Buildings and improvements 40 years
Equipment 2-10 years
Income Taxes
The operations of the Property does not represent a legal entity for
income tax reporting purposes; therefore, all income and expenses of the
Property are combined into the operations of the Owner for the filing of
applicable tax returns.
Due to Marriott Senior Living Services, Inc.
Due to Marriott Senior Living Services, Inc. comprises short-term
working capital advances made by the Owner to the Property in the normal
course of business.
B-24
<PAGE>
Brighton Gardens by Marriott
Orland Park, Illinois
(An Unincorporated Division of Marriott Senior Living Services, Inc.)
Notes to Financial Statements - Continued
Period from October 11, 1999 (Date of Opening) through December 31, 1999
- --------------------------------------------------------------------------------
2. Summary of Significant Accounting Policies - Continued:
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual amounts could differ from those
estimates.
3. Property and Equipment:
Property and equipment is comprised of the following:
Land $ 1,437,429
Building and improvements 10,377,634
Equipment 969,747
--------------
12,784,810
Less accumulated depreciation (90,759)
--------------
$12,694,051
==============
B-25
<PAGE>
APPENDIX C
PRIOR PERFORMANCE TABLES
---------------------------------------
| THE FOLLOWING INFORMATION UPDATES |
| AND REPLACES THE CORRESPONDING |
| INFORMATION IN APPENDIX C TO |
| THE ATTACHED PROSPECTUS, DATED |
| MAY 24, 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 Hospitality Properties, Inc., to invest in hotel
properties. No Prior Public Programs sponsored by the Company's Affiliates have
invested in health care facilities leased on a triple-net basis to operators of
health care facilities.
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 Hospitality 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 restaurant properties, or in the case of CNL
Hospitality Properties, Inc., through investment in hotel 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 December 31, 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 January 1995 and December 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.
C-1
<PAGE>
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 January 1995 and December 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 December 31, 1999.
TABLE III - OPERATING RESULTS OF PRIOR PROGRAMS
Table III presents a summary of operating results for the period from
inception through December 31, 1999, of the Prior Public Programs, the offerings
of which became fully subscribed between January 1995 and December 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 January 1995 and December
1999.
The Table includes the selling price of the property, the cost of the
property, the date acquired and the date of sale.
C-2
<PAGE>
TABLE I
EXPERIENCE IN RAISING AND INVESTING FUNDS
<TABLE>
<CAPTION>
CNL Income CNL American CNL Income
Fund XVI, Properties Fund, Fund XVII,
Ltd. Inc. Ltd.
------------- ----------------- -------------
(Note 1)
<S> <C> <C> <C>
Dollar amount offered $45,000,000 $747,464,420 $30,000,000
============= ================= =============
Dollar amount raised 100.0 % 100.0 % 100.0 %
------------- ----------------- -------------
Less offering expenses:
Selling commissions and discounts (8.5 ) (7.5 ) (8.5 )
Organizational expenses (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 )
------------- ----------------- -------------
(12.0 ) (10.2 ) (12.0 )
------------- ----------------- -------------
Reserve for operations -- -- --
------------- ----------------- -------------
Percent available for investment 88.0 % 89.8 % 88.0 %
============= ================= =============
Acquisition costs:
Cash down payment 82.5 % 85.3 % 83.5 %
Acquisition fees paid to affiliates 5.5 4.5 4.5
Loan costs -- -- --
------------- ----------------- -------------
Total acquisition costs 88.0 % 89.8 % 88.0 %
============= ================= =============
Percent leveraged (mortgage financing
divided by total acquisition costs) -- -- --
Date offering began 9/02/94 4/19/95, 2/06/97 9/02/95
and 3/02/98
Length of offering (in months) 9 22, 13 and 9, 12
respectively
Months to invest 90% of amount
available for investment measured
from date of offering 11 23, 16 and 11, 15
respectively
</TABLE>
Note 1: Pursuant to a Registration Statement on Form S-11 under the
Securities Act of 1933, as amended, effective March 29, 1995,
CNL American Properties Fund, Inc. ("APF") registered for sale
$165,000,000 of shares of common stock (the "Initial
Offering"), including $15,000,000 available only to
stockholders participating in the company's reinvestment plan.
The Initial Offering of APF commenced April 19, 1995, and upon
completion of the Initial Offering on February 6, 1997, had
received subscription proceeds of $150,591,765 (7,529,588
shares), including $591,765 (29,588 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 (12,593,633 shares), including
$1,872,648 (93,632 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 (17,250,000
shares), from the 1998 Offering, including $3,107,848 (155,393
shares) 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.
C-3
<PAGE>
CNL Income CNL Hospitality
Fund XVIII, Properties,
Ltd. Inc.
- ---------------- ------------------
(Note 2)
$35,000,000 $150,072,637
================ ==================
100.0% 100.0%
- --------------- ------------------
(8.5) (7.5)
(3.0) (3.0)
(0.5) (0.5)
- --------------- ------------------
(12.0) (11.0)
- --------------- ------------------
-- --
- --------------- ------------------
88.0% 89.0%
=============== ==================
83.5% 84.5%
4.5 4.5%
-- --
- ---------------- ------------------
88.0% 89.0%
================ ==================
-- --
9/20/96 7/09/97
17 23
17 29
Note 2: Pursuant to a Registration Statement on Form S-11 under the
Securities Act of 1933, as amended, effective July 9, 1997,
CNL Hospitality Properties, Inc. ("CHP") 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 CHP commenced September 11, 1997, and
upon completion of the Initial Offering on June 17, 1999 had
received $150,072,637 (15,007,264 shares), including $72,637
(7,264 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 June 17, 1999,
CHP registered for sale $275,000,000 of shares of common stock
(the "1999 Offering"), including $25,000,000 available only to
stockholders participating in the Company's reinvestment plan.
The 1999 Offering of CHP commenced following the completion of
the Initial Offering on June 17, 1999. As of December 31,
1999, CHP had received subscription proceeds of $138,885,350
(13,888,530 shares) from its 1999 Offering, including $431,182
(43,118 shares) issued pursuant to the reinvestment plan.
C-4
<PAGE>
TABLE II
COMPENSATION TO SPONSOR
<TABLE>
<CAPTION>
CNL Income CNL American CNL Income
Fund XVI, Properties Fund, Fund XVII,
Ltd. Inc. Ltd.
------------- ----------------- --------------
(Note 1)
<S> <C> <C> <C>
Date offering commenced 9/02/94 4/19/95, 2/06/97 9/02/95
and 3/02/98
Dollar amount raised $45,000,000 $747,464,420 $30,000,000
============= ================= ==============
Amount paid to sponsor from proceeds of offering:
Selling commissions and discounts 3,825,000 56,059,832 2,550,000
Real estate commissions -- -- --
Acquisition fees (Notes 5 and 6) 2,475,000 33,604,618 1,350,000
Marketing support and due diligence
expense reimbursement fees
(includes amounts reallowed to
unaffiliated entities) 225,000 3,737,322 150,000
------------- ----------------- --------------
Total amount paid to sponsor 6,525,000 93,401,772 4,050,000
============= ================= ==============
Dollar amount of cash generated from
operations before deducting payments
to sponsor:
1999 (Note 7) 3,327,199 311,630,414 2,567,164
1998 3,765,104 42,216,874 2,638,733
1997 3,909,781 18,514,122 2,611,191
1996 3,911,609 6,096,045 1,340,159
1995 2,619,840 594,425 11,671
1994 212,171 -- --
1993 -- -- --
Amount paid to sponsor from operations
(administrative, accounting and
management fees) (Note 6):
1999 175,968 4,369,200 117,146
1998 141,410 3,100,599 117,814
1997 129,357 1,437,908 116,077
1996 157,883 613,505 107,211
1995 138,445 95,966 2,659
1994 7,023 -- --
1993 -- -- --
Dollar amount of property sales and
refinancing before deducting payments
to sponsor:
Cash (Note 3) 2,052,695 14,349,067 1,675,385
Notes -- -- --
Amount paid to sponsors from property
sales and refinancing:
Real estate commissions -- -- --
Incentive fees -- -- --
Other (Notes 2 and 6) -- -- --
</TABLE>
Note 1: Pursuant to a Registration Statement on Form S-11 under the
Securities Act of 1933, as amended, effective March 29, 1995,
CNL American Properties Fund, Inc. ("APF") registered for sale
$165,000,000 of shares of common stock (the "Initial
Offering"), including $15,000,000 available only to
stockholders participating in the company's reinvestment plan.
The Initial Offering of APF commenced April 19, 1995, and upon
completion of the Initial Offering on February 6, 1997, had
received subscription proceeds of $150,591,765 (7,529,588
shares), including $591,765 (29,588 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 (12,593,633 shares), including
$1,872,648 (93,632 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 (17,250,000
shares), from the 1998 Offering, including $3,107,848 (155,393
shares) 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.
C-5
<PAGE>
CNL Income CNL Hospitality
Fund XVIII, Properties,
Ltd. Inc.
- ---------------- --------------------
(Note 4)
9/20/96 7/9/97 and 6/17/99
$35,000,000 $288,957,987
================ ====================
2,975,000 20,546,879
-- --
1,575,000 12,892,314
175,000 1,369,792
- ---------------- --------------------
4,725,000 34,808,985
================ ====================
2,921,071 13,348,795
2,964,628 2,985,455
1,459,963 29,358
30,126 --
-- --
-- --
-- --
124,031 458,634
132,890 208,490
98,207 6,889
2,980 --
-- --
-- --
-- --
688,997 --
-- --
-- --
-- --
-- --
Note 2: For negotiating secured equipment leases and supervising
the secured equipment lease program, APF was required to pay
its external advisor 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
(see Note 6). During the years ended December 31, 1999, 1998,
1997 and 1996, APF incurred $77,317, $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 July 9, 1997,
CNL Hospitality Properties, Inc. 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 offering of shares of CNL Hospitality Properties, Inc.
commenced September 11, 1997, and upon completion of the
Initial Offering on June 17, 1999, had received subscription
proceeds of $150,072,637 (15,007,264 shares), including
$72,637 (7,264 shares) issued pursuant to the reinvestment
plan. Pursuant to a Registration Statement on Form S-11, as
amended, effective June 17, 1999, CNL Hospitality Properties,
Inc. registered for sale $275,000,000 of shares of common
stock (the "1999 Offering"). The 1999 Offering of CNL
Hospitality Properties, Inc. commenced following the
completion of the Initial Offering on June 17, 1999. The
amounts shown represent the combined results of the Initial
Offering and the 1999 Offering, including subscription
proceeds issued pursuant to the reinvestment plan as of
December 31, 1999.
C-6
<PAGE>
TABLE II - COMPENSATION TO SPONSOR - CONTINUED
Note 5: In addition to acquisition fees paid on gross proceeds from
the offerings, prior to becoming self advised on September 1,
1999 APF 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 December 31, 1999, APF had
incurred $6,175,521 of such fees (see note 6).
Note 6: On September 1, 1999, APF issued 6,150,000 shares of common
stock (with an exchange value of $20 per share) to affiliates
of APF to acquire its external advisor and two companies which
make and service mortgage loans and securitize portions of
such loans. As a result of the acquisition, APF ceased payment
of acquisition fees, administrative, accounting, management
and equipment lease servicing fees.
Note 7: In September 1999, APF acquired two companies which make
and service mortgage loans and securitize portions of loans.
Effective with these acquisitions, APF classifies its
investments in mortgage loans, proceeds from sale of mortgage
loans, collections of mortgage loans, proceeds from
securitization transactions and purchases of other investments
as operating activities in its financial statements. Prior to
these acquisitions, these types of transactions were
classified as investing activities in its financial
statements.
C-7
<PAGE>
TABLE III
Operating Results of Prior Programs
CNL INCOME FUND XVI, LTD.
<TABLE>
<CAPTION>
1993
(Note 1) 1994 1995 1996
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Gross revenue $ 0 $ 186,257 $ 2,702,504 $ 4,343,390
Equity in earnings from joint venture 0 0 0 19,668
Gain/(loss) from sale of properties (Notes 4, 5
and 10) 0 0 0 124,305
Provision for loss on building (Note 8) 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 (loss) on sale (Notes 4, 5
and 10) 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, 5 and 10) 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 cash flow from prior period 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, 5 and 10) 0 0 0 0
============== ============== ============== =============
</TABLE>
C-8
<PAGE>
1997 1998 1999
- ---------------- -------------- -------------
$ 4,308,853 $ 3,901,555 $ 3,852,222
73,507 132,002 158,580
41,148 0 (84,478)
0 (266,257) 0
73,634 60,199 49,008
(272,932) (270,489) (359,311)
0 (24,652) (212,093)
0 0 0
(563,883) (555,360) (588,920)
- ---------------- -------------- -------------
3,660,327 2,976,998 2,815,008
================ ============== =============
3,178,911 3,153,618 2,835,955
================ ============== =============
64,912 0 (102,397)
================ ============== =============
3,780,424 3,623,694 3,151,231
610,384 0 667,311
0 0 0
- ---------------- -------------- -------------
4,390,808 3,623,694 3,818,542
(3,600,000) (3,623,694) (3,151,231)
0 (66,306) (448,769)
- ---------------- -------------- -------------
790,808 (66,306) 218,542
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 (25,866)
- ---------------- -------------- -------------
127,666 (70,280) 34,164
================ ============== =============
70 69 62
================ ============== =============
0 0 0
================ ============== =============
1 0 (2)
================ ============== =============
C-9
<PAGE>
TABLE III - CNL INCOME FUND XVI, LTD. (continued)
<TABLE>
<CAPTION>
1993
(Note 1) 1994 1995 1996
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 0 1 45 76
- from capital gain 0 0 0 0
- from investment income from prior
period 0 0 0 0
-------------- ------------- ------------- -------------
Total distributions on GAAP basis (Note 6) 0 1 45 76
============== ============= ============= =============
Source (on cash basis)
- from sales 0 0 0 0
- from refinancing 0 0 0 0
- from operations 0 1 45 76
- 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 9) 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, 5 and 10) N/A 100% 100% 100%
</TABLE>
Note 1: Pursuant to a registration statement on Form S-11 under the
Securities Act of 1933, as amended, CNL Income Fund XVI, Ltd.
("CNL XVI") and CNL Income Fund XV, Ltd. each registered for
sale $40,000,000 units of limited partnership interests
("Units"). The offering of Units of CNL Income Fund XV, Ltd.
commenced February 23, 1994. Pursuant to the registration
statement, CNL XVI could not commence until the offering of
Units of CNL Income Fund XV, Ltd. was terminated. CNL Income
Fund XV, Ltd. terminated its offering of Units on September 1,
1994, at which time the maximum offering proceeds of
$40,000,000 had been received. Upon the termination of the
offering of Units of CNL Income Fund XV, Ltd., CNL XVI
commenced its offering of Units. Activities through September
22, 1994, were devoted to organization of the partnership and
operations had not begun.
Note 2: Cash generated from operations includes cash received from
tenants, less cash paid for expenses, plus interest received.
Note 3: Cash generated from operations per this table agrees to
cash generated from operations per the statement of cash flows
included in the financial statements of CNL XVI.
Note 4: In April 1996, CNL XVI 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,
CNL XVI 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 XVI 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,
CNL XVI 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
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, CNL XVI 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.
C-10
<PAGE>
1997 1998 1999
- ------------------ -------------- ---------------
80 65 62
0 0 0
0 17 18
- ------------------ -------------- ---------------
80 82 80
================== ============== ===============
0 0 0
0 0 0
80 81 70
0 1 10
- ------------------ -------------- ---------------
80 82 80
================== ============== ===============
8.00% 8.20% 8.00%
202 284 364
100 % 100 % 99 %
Note 9: Total cash distributions as a percentage of original $1,000
investment are calculated based on actual distributions
declared for the period. (See Note 6 above)
Note 10: In November 1999, CNL XVI sold one of its properties and
received net sales proceeds of $667,311, resulting in a loss
of $84,478 for financial reporting purposes. CNL XVI intends
to reinvest the net sales proceeds from the sale of this
property in an additional property.
C-11
<PAGE>
TABLE III
Operating Results of Prior Programs
CNL AMERICAN PROPERTIES FUND, INC.
<TABLE>
<CAPTION>
1994 1997
(Note 1) 1995 1996 (Note 2)
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
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 assets (Notes 7 and 15) 0 0 0 0
Provision for losses on assets (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)
Advisor acquisition expense (Note 16) 0 0 0 0
Minority interest in income of consolidated
joint venture 0 (76) (29,927) (31,453)
------------ ------------ ------------- -------------
Net income (loss) - 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 (Notes 7 and 15) 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 (Notes 7 and 15) 0 0 0 6,289,236
Cash generated from refinancing 0 0 0 0
------------ ------------ ------------- -------------
Cash generated from operations, sales and 0 498,459 5,482,540 23,365,450
refinancing
Less: Cash distributions to investors (Note 9)
- from operating cash flow (Note 4) 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 distributions 0 (136,827) 43,136 6,511,153
Special items (not including sales of real estate
and refinancing):
Subscriptions received from stockholders 0 38,454,158 100,792,991 222,482,560
Sale of common stock to CNL Fund
Advisors, Inc. 200,000 0 0 0
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 (redemption of) certificates of
deposit 0 0 0 (2,000,000)
Proceeds of borrowing on line of credit and
note payable 0 0 3,666,896 19,721,804
Payment on line of credit 0 0 (145,080) (20,784,577)
Reimbursement of organization, acquisition,
and deferred offering and stock issuance costs
paid on behalf of CNL American Properties Fund,
Inc. by related parties (199,036) (2,500,056) (939,798) (2,857,352)
Increase in intangibles and other assets 0 (628,142) (1,103,896) 0
Proceeds from borrowings on mortgage
warehouse facility 0 0 0 0
Payments on mortgage warehouse facility 0 0 0 0
Payments 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
============ ============ ============= =============
</TABLE>
C-12
<PAGE>
1998 1999
(Note 3) (Note 3)
- --------------- ---------------
$33,202,491 $ 62,165,451
16,018 97,307
0 (1,851,838)
(611,534) (7,779,195)
8,984,546 13,335,146
(5,354,859) (12,833,224)
0 (6,798,803)
0 (10,205,197)
(4,054,098) (9,591,787)
0 (76,333,516)
(30,156) (41,678)
- --------------- ---------------
32,152,408 (49,837,334)
=============== ===============
33,553,390 58,152,473
=============== ===============
(149,948) (789,861)
=============== ===============
39,116,275 307,261,214
2,385,941 5,302,433
0 0
- --------------- ---------------
41,502,216 312,563,647
(39,116,275) (60,078,825)
0 0
(265,053) 0
(67,821) 0
- --------------- ---------------
2,053,067 252,484,822
385,523,966 210,736
0 0
(639,528) (50,891)
0 740,621
(34,073) (66,763)
(34,579,650) (737,190)
(200,101,667) (286,411,210)
(47,115,435) (63,663,720)
0 2,252,766
(974,696) (187,452)
(16,083,055) 0
(2,886,648) (4,041,427)
291,990 393,468
(7,837,750) (26,963,918)
1,263,633 3,500,599
0 2,000,000
7,692,040 439,941,245
(8,039) (61,580,289)
(4,574,925) (1,492,310)
(6,281,069) (1,862,036)
0 27,101,067
0 (352,808,966)
0 (5,947,397)
(95,101) 0
- --------------- ---------------
75,613,060 (77,188,245)
=============== ===============
C-13
<PAGE>
TABLE III - CNL AMERICAN PROPERTIES FUND, INC. (continued)
<TABLE>
<CAPTION>
1994 1997
(Note 1) 1995 1996 (Note 2)
-------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED (Note 6)
Federal income tax results:
Ordinary income (loss) (Notes 9 and 11)
- from operations (Note 8) 0 20 61 67
============== ============= ============== =============
- from recapture 0 0 0 0
============== ============= ============== =============
Capital gain (loss) (Note 7) 0 0 0 0
============== ============= ============== =============
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 (Note 4) 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%
</TABLE>
Note 1: Pursuant to a Registration Statement on Form S-11 under the
Securities Act of 1933, as amended, effective March 29, 1995,
CNL American Properties Fund, Inc. ("APF") registered for sale
$165,000,000 of shares of common stock (the "Initial
Offering"), including $15,000,000 available only to
stockholders participating in the company's reinvestment plan.
The Initial Offering of APF commenced April 19, 1995, and upon
completion of the Initial Offering on February 6, 1997, had
received subscription proceeds of $150,591,765 (7,529,588
shares), including $591,765 (29,588 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 (12,593,633 shares), including
$1,872,648 (93,632 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 (17,250,000
shares), from the 1998 Offering, including $3,107,848 (155,393
shares) 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 from inception through
September 1999 included cash received from tenants, less cash
paid for expenses, plus interest received. In September 1999,
APF acquired two companies which make and service mortgage
loans and securitize portions of loans. Effective with these
acquisitions, APF classifies its investments in mortgage
loans, proceeds from sale of
C-14
<PAGE>
1998 1999
(Note 3) (Note 3)
- ------------------ ---------------
63 74
================== ===============
0 0
================== ===============
0 (1)
================== ===============
60 0
0 0
0 0
14 76
- ------------------ ---------------
74 76
================== ===============
0 0
0 0
73 76
1 0
0 0
- ------------------ ---------------
74 76
================== ===============
7.625% 7.62%
246 322
100% 100%
Note 4
(Continued): mortgage loans, collections of mortgage loans, proceeds from
securitization transactions and purchases of other investments
as operating activities in its financial statements. Prior to
these acquisitions, these types of transactions were
classified as investing activities in its financial
statements.
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 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.
Note 8: Taxable income presented is before the dividends paid
deduction.
Note 9: For the years ended December 31, 1999, 1998, 1997, 1996 and
1995, 97%, 84.87%, 93.33%, 90.25% and 59.82%, respectively, of
the distributions received by stockholders were considered to
be ordinary income and 15%, 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 years ended December 31, 1999, 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.
C-15
<PAGE>
TABLE III - CNL AMERICAN PROPERTIES FUND, INC. (continued)
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 (loss) 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. During the year ended December 31, 1999, accumulated
net loss included a non-cash deduction for the advisor
acquisition expense of $76,333,516 (see Note 16).
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. During 1999,
as a result of the stockholders approving a one-for-two
reverse stock split of common stock, the Company agreed to
redeem fractional shares (2,545 shares).
Note 14: During the year ended December 31, 1999, APF recorded
provisions for losses on buildings in the amount of $7,779,495
for financial reporting purposes relating to several
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, 1999 and the estimated net realizable value for
these properties.
Note 15: During the year ended December 31, 1999, APF sold six
properties and received aggregate net sales proceeds of
$5,302,433, which resulted in a total aggregate loss of
$781,192 for financial reporting purposes. APF reinvested the
proceeds from the sale of properties in additional properties.
In addition, APF recorded a loss on securitization of
$1,070,646 for financial reporting purposes.
Note 16: On September 1, 1999, APF issued 6,150,000 shares of
common stock to affiliates of APF to acquire its external
advisor and two companies which make and service mortgage
loans and securitize portions of loans. APF recorded an
advisor acquisition expense of $76,333,516 relating to the
acquisition of the external advisor, which represented the
excess purchase price over the net assets acquired.
C-16
<PAGE>
TABLE III
Operating Results of Prior Programs
CNL INCOME FUND XVII, LTD.
<TABLE>
<CAPTION>
1995
(Note 1) 1996 1997 1998
-------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
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
Loss on dissolution of consolidated joint
venture (Note 7) 0 0 0 0
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 (loss) on sale (Note 7) 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 (Note7) 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)
Distribution to holder of minority interest from
dissolution of consolidated joint venture 0 0 0 0
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) (Note 7) 0 0 0 0
============== ============== ============= ==============
</TABLE>
C-17
<PAGE>
1999
- -----------------
$ 2,403,040
182,132
(82,914)
44,184
(219,361)
(71,366)
0
(384,985)
(31,461)
- -----------------
1,839,269
=================
2,003,243
=================
(23,150)
=================
2,450,018
2,094,231
0
- -----------------
4,544,249
(2,400,000)
0
- -----------------
2,144,249
0
0
0
(46,567)
(417,696)
0
0
0
(527,864)
0
0
0
0
- -----------------
1,152,122
=================
66
=================
0
=================
(1)
=================
C-18
<PAGE>
TABLE III - CNL INCOME FUND XVII, LTD. (continued)
<TABLE>
<CAPTION>
1995
(Note 1) 1996 1997 1998
-------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
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) (Notes 6 and 7) N/A 100% 100% 100%
</TABLE>
Note 1: Pursuant to a registration statement on Form S-11 under the
Securities Act of 1933, as amended, effective 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 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 XVII 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 1999, CNL XVII 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 CNL
XVII which has the same general partners.
Note 7: During 1999, CNL/El Cajon Joint Venture, CNL XVII's
consolidated joint venture in which CNL XVII owned an 80%
interest, sold its property to the 20% joint venture partner
and dissolved the joint venture. CNL XVII did not recognize
any gain or loss from the sale of the property for financial
reporting purposes. CNL XVII intends to reinvest the proceeds
from the dissolution in an additional property. As a result of
the dissolution, CNL XVII recognized a loss on dissolution of
$82,914 for financial reporting purposes.
C-19
<PAGE>
1999
- ------------------
61
0
19
- ------------------
80
==================
0
0
80
- ------------------
80
==================
8.00%
260
94%
C-20
<PAGE>
TABLE III
Operating Results of Prior Programs
CNL INCOME FUND XVIII, LTD.
<TABLE>
<CAPTION>
1995
(Note 1) 1996 1997 1998
-------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Gross revenue $ 0 $ 1,373 $ 1,291,416 $ 2,956,349
Equity in earnings of joint venture 0 0 0 0
Gain on sale of properties (Note 7) 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 (Note 7) 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 (Note 7) 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 cash flow from prior period 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) (Note 7) 0 0 0 0
============== ============== ============= ==============
</TABLE>
C-21
<PAGE>
1999
- ---------------
$ 3,075,379
61,656
46,300
0
55,336
(256,060)
(74,734)
0
(392,521)
- ---------------
2,515,356
===============
2,341,350
===============
80,170
===============
2,797,040
688,997
0
- ---------------
3,486,037
(2,797,040)
(2,958)
- ---------------
686,039
0
0
0
0
(25,792)
0
(526,138)
(688,997)
(2,495)
0
(117)
- --------------
(557,500)
==============
66
==============
0
==============
2
==============
C-22
<PAGE>
TABLE III - CNL INCOME FUND XVIII, LTD. (continued)
<TABLE>
<CAPTION>
1995
(Note 1) 1996 1997 1998
-------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
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 (Note 7) 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) (Note 7) N/A 100% 100% 100%
</TABLE>
Note 1: Pursuant to a registration statement on Form S-11 under the
Securities Act of 1933, as amended, effective 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 1999 are not included in the 1996, 1997, 1998
and 1999 totals, respectively.
Note 5: During the year ended December 31, 1998, CNL XVIII
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: In December 1999, CNL XVIII sold one of its properties and
received net sales proceeds of $688,997, resulting in a gain
of $46,300 for financial reporting purposes. CNL XVIII intends
to reinvest the net sales proceeds from the sale of this
property in an additional property.
C-23
<PAGE>
1999
- ----------------
71
1
8
- ----------------
80
================
0
0
80
- ----------------
80
================
8.00%
189
98%
C-24
<PAGE>
TABLE III
Operating Results of Prior Programs
CNL HOSPITALITY PROPERTIES, INC.
<TABLE>
<CAPTION>
1996 1997 1999
(Note 1) (Note 1) 1998 (Note 2)
------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Gross revenue $ 0 $ 0 $ 1,316,599 $ 4,230,995
Dividend income (Note 10) 0 0 0 2,753,506
Interest and other income 0 46,071 638,862 3,693,004
Less: Operating expenses 0 (22,386) (257,646) (802,755)
Interest expense 0 0 (350,322) (248,094)
Depreciation and amortization 0 (833) (388,554) (1,267,868)
Equity in loss of unconsolidated
subsidiary after deduction of preferred stock
dividends (Note 10) 0 0 0 (778,466)
Minority interest 0 0 0 (64,334)
------------- ------------- -------------- --------------
Net income - GAAP basis 0 22,852 958,939 7,515,988
============= ============= ============== ==============
Taxable income
- from operations (Note 6) 0 46,071 886,556 7,488,184
============= ============= ============== ==============
- from gain (loss) on sale 0 0 0 0
============= ============= ============== ==============
Cash generated from operations (Notes 3 and 4) 0 22,469 2,776,965 12,890,161
Less: Cash distributions to investors (Note 7)
- from operating cash flow 0 (22,469) (1,168,145) (10,765,881)
- from sale of properties 0 0 0 0
- from cash flow from prior period 0 0 0 0
- from return of capital (Note 8) 0 (7,307) 0 0
------------- ------------- -------------- --------------
Cash generated (deficiency) after cash
distributions 0 (7,307) 1,608,820 2,124,280
Special items (not including sales of real estate
and refinancing):
Subscriptions received from stockholders 0 11,325,402 31,693,678 245,938,907
Sale of common stock to CNL Hospitality
Corp. (formerly CNL Hospitality Advisors,
Inc.) 200,000 0 0 0
Contribution from minority interest 0 0 0 7,150,000
Distributions to holders of minority 0 0 0 0
interest
Stock issuance costs (197,916) (1,979,371) (3,948,669) (26,472,318)
Acquisition of land, buildings and 0 0 (28,752,549) (85,089,887)
equipment
Investment in unconsolidated subsidiary 0 0 0 (39,879,638)
Investment in certificate of deposit 0 0 (5,000,000) 0
Increase in restricted cash 0 0 (82,407) (193,223)
Proceeds of borrowing on line of credit 0 0 9,600,000 0
Payment on line of credit 0 0 0 (9,600,000)
Payment of loan costs 0 0 (91,262) (47,334)
Increase in intangibles and other assets 0 (463,470) (676,026) (5,068,727)
Retirement of shares of common stock 0 0 0 (118,542)
Other 0 (7,500) 7,500 0
------------- ------------- -------------- --------------
Cash generated (deficiency) after cash
distributions and special items 2,084 8,867,754 4,359,085 88,743,518
============= ============= ============== ==============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED (Note 5)
Federal income tax results:
Ordinary income (loss) (Note 9)
- from operations (Note 6) 0 7 37 47
============= ============= ============== ==============
- from recapture 0 0 0 0
============= ============= ============== ==============
Capital gain (loss) (Note 7) 0 0 0 0
============= ============= ============== ==============
</TABLE>
25
<PAGE>
TABLE III - CNL HOSPITALITY PROPERTIES, INC. (continued)
<TABLE>
<CAPTION>
1996 1997 1999
(Note 1) (Note 1) 1998 (Note 2)
-------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 0 3 40 47
- from capital gain 0 0 0 0
- from investment income from prior
period 0 0 0 0
- from return of capital (Note 8) 0 1 9 21
-------------- -------------- ------------- -------------
Total distributions on GAAP basis (Note 9) 0 4 49 68
============== ============== ============= =============
Source (on cash basis)
- from sales 0 0 0 0
- from refinancing 0 0 0 0
- from operations 0 3 49 68
- from cash flow from prior period 0 0 0 0
- from return of capital (Note 8) 0 1 0 0
-------------- ------------- ------------- --------------
Total distributions on cash basis (Note 9) 0 4 49 68
============== ============== ============= =============
Total cash distributions as a percentage of
original $1,000 investment (Note 5) N/A 3.00% 4.67% 7.19%
Total cumulative cash distributions per
$1,000 investment from inception N/A 4 53 121
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 N/A 100% 100%
</TABLE>
Note 1: Pursuant to a Registration Statement on Form S-11 under the
Securities Act of 1933, as amended, effective July 9, 1997,
CNL Hospitality Properties, Inc. ("CHP") 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 CHP commenced September 11, 1997, and
upon completion of the Initial Offering on June 17, 1999, had
received subscription proceeds of $150,072,637 (15,007,264
shares), including $72,637 (7,264 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 June 17, 1999, CHP registered for sale $275,000,000
of shares of common stock (the "1999 Offering"), including
$25,000,000 available only to stockholders participating in
the company's reinvestment plan. The 1999 Offering of CHP
commenced following the completion of the Initial Offering on
June 17, 1999. As of December 31, 1999, CHP had received
subscription proceeds totalling $138,885,350 from the 1999
Offering, including $431,182 issued pursuant to the company's
reinvestment plan. Activities through October 15, 1997, were
devoted to organization of CHP and operations had not begun.
Note 2: The amounts shown represent the combined results of the
Initial Offering and the 1999 Offering.
Note 3: Cash generated from operations includes cash received from
tenants and dividend, interest and other income, less cash
paid for operating expenses. Cash generated from operations
for the year ended December 31, 1999 does not include amounts
received subsequent to December 31, 1999 representing dividend
income of approximately $1,216,000.
Note 4: Cash generated from operations per this table agrees to
cash generated from operations per the statement of cash flows
included in the consolidated financial statements of CHP.
Note 5: Total cash distributions as a percentage of original $1,000
investment are calculated based on actual distributions
declared for the period.
Note 6: Taxable income presented is before the dividends paid
deduction.
Note 7: For the years ended December 31, 1999, 1998 and 1997,
approximately 75%, 76% and 100%, respectively, of the
distributions received by stockholders were considered to be
ordinary income and approximately 25%, 24% and 0%,
respectively, were considered a return of capital for federal
income tax purposes. No amounts distributed to stockholders
for years ended December 31, 1999, 1998 and 1997 are required
to be or have been treated by the company as a return of
capital for purposes of calculating the stockholders' return
on their invested capital.
C-26
<PAGE>
TABLE III - CNL HOSPITALITY PROPERTIES, INC. (continued)
Note 8: 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.
In addition, cash distributions presented as a return of
capital on a cash basis represents the amount of cash
distributions in excess of cash generated from operating cash
flow and excess cash flows from prior periods. These amounts
have not been treated as a return of capital for purposes of
calculating the amount of stockholders' invested capital.
Note 9: Tax and distribution data and total distributions on GAAP
basis were computed based on the weighted average shares
outstanding during each period presented.
Note 10: In February 1999, the company executed a series of
agreements with Five Arrows Realty Securities II, L.L.C. to
jointly own a real estate investment trust, CNL Hotel
Investors, Inc., for the purpose of acquiring eight hotels.
During the year ended December 31, 1999, the company recorded
$2,753,506 in dividend income and $778,466 in an equity in
loss after deduction of preferred stock dividends, resulting
in net earnings of $1,975,040 attributable to this investment.
C-27
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
<TABLE>
<CAPTION>
Selling Price, Net of
Closing Costs and GAAP Adjustments
---------------------------------------------------------------
Purchase
money Adjustments
Cash Mortgage mortgage resulting
received net balance taken from
Date Date of of closing at time back by application
Property Acquired Sale costs of sale program of GAAP Total
============================== ============= ============ ============== ========== ========== ============ ============
<S> <C> <C> <C> <C> <C> <C> <C>
CNL Income Fund, Ltd.:
Burger King -
San Dimas, CA (14) 02/05/87 06/12/92 $1,169,021 0 0 0 $1,169,021
Wendy's -
Fairfield, CA (14) 07/01/87 10/03/94 1,018,490 0 0 0 1,018,490
Wendy's -
Casa Grande, AZ 12/10/86 08/19/97 795,700 0 0 0 795,700
Wendy's -
North Miami, FL (9) 02/18/86 08/21/97 473,713 0 0 0 473,713
Popeye's -
Kissimmee, FL (14) 12/31/86 04/30/98 661,300 0 0 0 661,300
Golden Corral -
Kent Island, MD (21) 11/20/86 10/15/99 870,457 0 0 0 870,457
CNL Income Fund II, Ltd.:
Golden Corral -
Salisbury, NC 05/29/87 07/21/93 746,800 0 0 0 746,800
Pizza Hut -
Graham, TX 08/24/87 07/28/94 261,628 0 0 0 261,628
Golden Corral -
Medina, OH (11) 11/18/87 11/30/94 825,000 0 0 0 825,000
Denny's -
Show Low, AZ (8) 05/22/87 01/31/97 620,800 0 0 0 620,800
KFC -
Eagan, MN 06/01/87 06/02/97 623,882 0 42,000 0 665,882
KFC -
Jacksonville, FL 09/01/87 09/09/97 639,363 0 0 0 639,363
Wendy's -
Farmington Hills, MI (12) 05/18/87 10/09/97 833,031 0 0 0 833,031
Wendy's -
Farmington Hills, MI 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
Little House -
Littleton, CO 10/07/87 11/05/99 150,000 0 0 0 150,000
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
<CAPTION>
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
============================== ============ ============= ============ =============
<S> <C> <C> <C> <C>
CNL Income Fund, Ltd.:
Burger King -
San Dimas, CA (14) 0 $955,000 $955,000 $214,021
Wendy's -
Fairfield, CA (14) 0 861,500 861,500 156,990
Wendy's -
Casa Grande, AZ 0 667,255 667,255 128,445
Wendy's -
North Miami, FL (9) 0 385,000 385,000 88,713
Popeye's -
Kissimmee, FL (14) 0 475,360 475,360 185,940
Golden Corral -
Kent Island, MD (21) 0 726,600 726,600 143,857
CNL Income Fund II, Ltd.:
Golden Corral -
Salisbury, NC 0 642,800 642,800 104,000
Pizza Hut -
Graham, TX 0 205,500 205,500 56,128
Golden Corral -
Medina, OH (11) 0 743,000 743,000 82,000
Denny's -
Show Low, AZ (8) 0 484,185 484,185 136,615
KFC -
Eagan, MN 0 601,100 601,100 64,782
KFC -
Jacksonville, FL 0 405,000 405,000 234,363
Wendy's -
Farmington Hills, MI (12) 0 679,000 679,000 154,031
Wendy's -
Farmington Hills, MI 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
Little House -
Littleton, CO 0 330,456 330,456 (180,456 )
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
</TABLE>
C-28
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
<TABLE>
<CAPTION>
Selling Price, Net of
Closing Costs and GAAP Adjustments
------------------------------------------------------------------
Purchase Adjustments
Cash Mortgage money resulting
received net balance mortgage from
Date Date of of closing at time taken back application
Property Acquired Sale costs of sale by program of GAAP Total
============================== ============= ============ ============== ========== ============= ============ =============
<S> <C> <C> <C> <C> <C> <C> <C>
CNL Income Fund III, Ltd.
(Continued):
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
Wendy's -
Mason City, IA 02/29/88 10/24/97 217,040 0 0 0 217,040
Taco Bell -
Fernandina Beach, FL (14) 04/09/88 01/15/98 721,655 0 0 0 721,655
Denny's -
Daytona Beach, FL (14) 07/12/88 01/23/98 1,008,976 0 0 0 1,008,976
Wendy's -
Punta Gorda, FL 02/03/88 02/20/98 665,973 0 0 0 665,973
Po Folks -
Hagerstown, MD 06/21/88 06/10/98 788,884 0 0 0 788,884
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) (24) 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
<CAPTION>
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
============================== =========== ============= ============ =============
<S> <C> <C> <C> <C>
CNL Income Fund III, Ltd.
(Continued):
Pizza Hut -
Kissimmee, FL 0 474,755 474,755 198,404
Burger King -
Roswell, GA 0 775,226 775,226 167,755
Wendy's -
Mason City, IA 0 190,252 190,252 26,788
Taco Bell -
Fernandina Beach, FL (14) 0 559,570 559,570 162,085
Denny's -
Daytona Beach, FL (14) 0 918,777 918,777 90,799
Wendy's -
Punta Gorda, FL 0 684,342 684,342 (18,369 )
Po Folks -
Hagerstown, MD 0 1,188,315 1,188,315 (399,431 )
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) (24) 0 996,769 996,769 134,243
Franklin National Bank -
Franklin, TN 0 1,138,164 1,138,164 (177,423 )
</TABLE>
C-29
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
<TABLE>
<CAPTION>
Selling Price, Net of
Closing Costs and GAAP Adjustments
------------------------------------------------------------------
Purchase Adjustments
Cash Mortgage money resulting
received net balance mortgage from
Date Date of of closing at time taken back application
Property Acquired Sale costs of sale by program of GAAP Total
============================== ============= ============ ============== ========== ============= ============ =============
<S> <C> <C> <C> <C> <C> <C> <C>
CNL Income Fund V, Ltd.
(Continued):
Shoney's -
Smyrna, TN 03/22/89 05/13/97 636,788 0 0 0 636,788
KFC -
Salem, NH 05/31/89 09/22/97 1,272,137 0 0 0 1,272,137
Perkins -
Port St. Lucie, FL 11/14/89 09/23/97 1,216,750 0 0 0 1,216,750
Hardee's -
Richmond, 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
<CAPTION>
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
============================== ========== ============= ============ =============
<S> <C> <C> <C> <C>
CNL Income Fund V, Ltd.
(Continued):
Shoney's -
Smyrna, TN 0 554,200 554,200 82,588
KFC -
Salem, NH 0 1,079,310 1,079,310 192,827
Perkins -
Port St. Lucie, FL 0 1,203,207 1,203,207 13,543
Hardee's -
Richmond, 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 )
</TABLE>
C-30
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
<TABLE>
<CAPTION>
Selling Price, Net of
Closing Costs and GAAP Adjustments
------------------------------------------------------------------
Purchase Adjustments
Cash Mortgage money resulting
received net balance mortgage from
Date Date of of closing at time taken back application
Property Acquired Sale costs of sale by program of GAAP Total
============================== ============= ============ ============== ========== ============= ============ =============
<S> <C> <C> <C> <C> <C> <C> <C>
CNL Income Fund VI, Ltd.
(Continued):
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
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)(25) 04/30/90 12/01/95 0 0 240,000 0 240,000
Shoney's -
Colorado Springs, CO 07/03/90 07/24/96 1,044,909 0 0 0 1,044,909
Hardee's -
Hartland, MI 07/10/90 10/23/96 617,035 0 0 0 617,035
Hardee's -
Columbus, IN 09/04/90 05/30/97 223,590 0 0 0 223,590
KFC -
Dunnellon, FL 08/02/90 10/07/97 757,800 0 0 0 757,800
Jack in the Box -
Yuma, AZ (10) 07/14/94 10/31/97 471,372 0 0 0 471,372
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) (14) 09/28/90 12/01/95 0 0 240,000 0 240,000
Church's Fried Chicken -
Jacksonville, FL (5) (14) 09/28/90 12/01/95 0 0 220,000 0 220,000
Ponderosa -
Orlando, FL (6) (14) 12/17/90 10/24/96 0 0 1,353,775 0 1,353,775
<CAPTION>
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
============================== ========== ============= ============ =============
<S> <C> <C> <C> <C>
CNL Income Fund VI, Ltd.
(Continued):
Perkin's -
Melbourne, FL 0 692,850 692,850 (139,940 )
Hardee's -
Bellevue, NE 0 899,512 899,512 488
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)(25) 0 233,728 233,728 6,272
Shoney's -
Colorado Springs, CO 0 893,739 893,739 151,170
Hardee's -
Hartland, MI 0 841,642 841,642 (224,607 )
Hardee's -
Columbus, IN 0 219,676 219,676 3,914
KFC -
Dunnellon, FL 0 546,333 546,333 211,467
Jack in the Box -
Yuma, AZ (10) 0 413,614 413,614 57,758
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) (14) 0 238,153 238,153 1,847
Church's Fried Chicken -
Jacksonville, FL (5) (14) 0 215,845 215,845 4,155
Ponderosa -
Orlando, FL (6) (14) 0 1,179,210 1,179,210 174,565
</TABLE>
C-31
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
<TABLE>
<CAPTION>
Selling Price, Net of
Closing Costs and GAAP Adjustments
------------------------------------------------------------------
Purchase Adjustments
Cash Mortgage money resulting
received net balance mortgage from
Date Date of of closing at time taken back application
Property Acquired Sale costs of sale by program of GAAP Total
============================== ============= ============ ============== ========== ============= ============ =============
<S> <C> <C> <C> <C> <C> <C> <C>
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
Shoney's -
Fort Myers Beach, FL 09/08/95 08/26/99 931,725 0 0 0 931,725
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 -
Columbus, 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 (23) 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
<CAPTION>
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
============================== =========== ============= ============ =============
<S> <C> <C> <C> <C>
CNL Income Fund IX, Ltd.:
Burger King -
Woodmere, OH (15) 0 918,445 918,445 0
Burger King -
Alpharetta, GA 0 713,866 713,866 339,705
Shoney's -
Corpus Christi, TX 0 1,224,020 1,224,020 125,980
Perkins -
Rochester, NY 0 1,064,815 1,064,815 (14,815 )
CNL Income Fund X, Ltd.:
Shoney's -
Denver, CO 0 987,679 987,679 62,507
Jack in the Box -
Freemont, CA 0 1,102,766 1,102,766 263,784
Jack in the Box -
Sacramento, CA 0 969,423 969,423 264,752
Pizza Hut -
Billings, MT 0 302,000 302,000 57,990
Perkins -
Amherst, NY 0 1,141,444 1,141,444 8,556
Shoney's -
Fort Myers Beach, FL 0 931,725 931,725 0
CNL Income Fund XI, Ltd.:
Burger King -
Philadelphia, PA 0 818,850 818,850 225,900
Burger King -
Columbus, OH (19) 0 795,264 795,264 0
Burger King -
Nashua, NH 0 1,217,015 1,217,015 413,281
CNL Income Fund XII, Ltd.:
Golden Corral -
Houston, TX 0 1,636,643 1,636,643 3,357
Long John Silver's -
Monroe, NC 0 239,788 239,788 243,762
Long John Silver's -
Morganton, NC (23) 0 304,002 304,002 218,298
CNL Income Fund XIII, Ltd.:
Checkers -
Houston, TX 0 286,411 286,411 0
Checkers -
Richmond, VA 0 413,288 413,288 136,712
</TABLE>
C-32
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
<TABLE>
<CAPTION>
Selling Price, Net of
Closing Costs and GAAP Adjustments
------------------------------------------------------------------
Purchase Adjustments
Cash Mortgage Money resulting
received net balance mortgage from
Date Date of of closing at time taken back application
Property Acquired Sale costs of sale by program of GAAP Total
================================== ============= ============ ============== ========== ============= ============ =============
<S> <C> <C> <C> <C> <C> <C> <C>
CNL Income Fund XIII, Ltd.
(Continued):
Denny's -
Orlando, FL 09/01/93 10/24/97 932,849 0 0 0 932,849
Jack in the Box -
Houston, TX 07/27/93 07/16/99 1,063,318 0 0 0 1,063,318
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
Long John Silver's -
Shelby, NC 06/22/94 11/12/99 494,178 0 0 0 494,178
Checker's -
Kansas City, MO 03/31/94 12/10/99 268,450 0 0 0 268,450
Checker's -
Houston, TX 03/31/94 12/15/99 385,673 0 0 0 385,673
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
Long John Silver's -
Gastonia, NC 07/15/94 11/12/99 631,304 0 0 0 631,304
<CAPTION>
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
================================== ========= ============= =========== =============
<S> <C> <C> <C> <C>
CNL Income Fund XIII, Ltd.
(Continued):
Denny's -
Orlando, FL 0 934,120 934,120 (1,271 )
Jack in the Box -
Houston, TX 0 861,321 861,321 201,997
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 )
Long John Silver's -
Shelby, NC 0 608,611 608,611 (114,433 )
Checker's -
Kansas City, MO 0 209,329 209,329 59,121
Checker's -
Houston, TX 0 311,823 311,823 73,850
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
Long John Silver's -
Gastonia, NC 0 776,248 776,248 (144,944 )
</TABLE>
C-33
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
<TABLE>
<CAPTION>
Selling Price, Net of
Closing Costs and GAAP Adjustments
------------------------------------------------------------------
Purchase Adjustments
Cash Mortgage money resulting
received net balance mortgage from
Date Date of of closing at time taken back application
Property Acquired Sale costs of sale by program of GAAP Total
============================== ============= ============ ============== ========== ============= ============ =============
<S> <C> <C> <C> <C> <C> <C> <C>
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
Boston Market -
Lawrence, KS 05/08/98 11/23/99 667,311 0 0 0 667,311
CNL Income Fund XVII, Ltd.:
Boston Market -
Troy, OH (18) 07/24/96 06/16/98 857,487 0 0 0 857,487
Golden Corral -
El Cajon, CA (22) 04/29/97 12/02/99 1,675,385 0 0 0 1,675,385
CNL Income Fund XVIII, Ltd.:
Black Eyed Pea -
Atlanta, GA 03/26/97 12/06/99 688,997 0 0 0 688,997
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 (26) 08/18/95 04/14/98 950,361 0 0 0 950,361
Boston Market -
Grand Island, NE (27) 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 (28) 10/04/95 05/08/98 969,159 0 0 0 969,159
Boston Market -
Merced, CA (29) 10/06/96 05/08/98 930,834 0 0 0 930,834
Boston Market -
Arvada, CO (30) 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
<CAPTION>
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
============================== ========== ============= ============ =============
<S> <C> <C> <C> <C>
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
Boston Market -
Lawrence, KS 0 774,851 774,851 (107,540 )
CNL Income Fund XVII, Ltd.:
Boston Market -
Troy, OH (18) 0 857,487 857,487 0
Golden Corral -
El Cajon, CA (22) 0 1,692,994 1,692,994 (17,609 )
CNL Income Fund XVIII, Ltd.:
Black Eyed Pea -
Atlanta, GA 0 617,610 617,610 71,387
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 (26) 0 950,361 950,361 0
Boston Market -
Grand Island, NE (27) 0 837,656 837,656 0
Burger King -
Indian Head Park, IL 0 670,867 670,867 3,453
Boston Market -
Dubuque, IA (28) 0 969,159 969,159 0
Boston Market -
Merced, CA (29) 0 930,834 930,834 0
Boston Market -
Arvada, CO (30) 0 1,152,262 1,152,262 0
Boston Market -
Ellisville, MO 0 1,026,746 1,026,746 (203,922 )
</TABLE>
C-34
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
<TABLE>
<CAPTION>
Selling Price, Net of
Closing Costs and GAAP Adjustments
------------------------------------------------------------------
Purchase Adjustments
Cash Mortgage money resulting
received net balance mortgage from
Date Date of of closing at time taken back application
Property Acquired Sale costs of sale by program of GAAP Total
============================== ============= ============ ============== ========== ============= ============ =============
<S> <C> <C> <C> <C> <C> <C> <C>
CNL American Properties
Fund, Inc.
(Continued):
Golden Corral -
Brooklyn, OH 08/23/96 05/18/99 974,560 0 0 0 974,560
Boston Market -
Edgewater, CO 08/19/97 08/11/99 634,122 0 0 0 634,122
Black Eyed Pea -
Houston, TX (31) 10/01/97 08/24/99 648,598 0 0 0 648,598
Big Boy -
Topeka, KS (32) 02/26/99 09/22/99 939,445 0 0 0 939,445
Boston Market -
LaQuinta, CA 12/16/96 10/13/99 833,140 0 0 0 833,140
Sonny's -
Jonesboro, GA 06/02/98 12/22/99 1,098,342 0 0 0 1,098,342
<CAPTION>
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
============================== ========== ============= ============ =============
<S> <C> <C> <C> <C>
CNL American Properties
Fund, Inc.
(Continued):
Golden Corral -
Brooklyn, OH 0 997,296 997,296 (22,736 )
Boston Market -
Edgewater, CO 0 904,691 904,691 (270,569 )
Black Eyed Pea -
Houston, TX (31) 0 648,598 648,598 0
Big Boy -
Topeka, KS (32) 0 1,062,633 1,062,633 (123,188 )
Boston Market -
LaQuinta, CA 0 987,034 987,034 (153,894 )
Sonny's -
Jonesboro, GA 0 1,098,342 1,098,342 0
</TABLE>
(1) Amounts shown do not include pro rata share of original offering costs or
acquisition fees.
(2) Amount shown is face value and does not represent discounted current
value. The mortgage note bears interest at a rate of 10.25% per annum and
provides for a balloon payment of $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 March 1999 in
advance from the borrower.
(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. owned 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.
C-35
<PAGE>
(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) Cash received net of closing costs includes $50,000 received as a lease
termination fee.
(22) CNL Income Fund XVII, Ltd. owned an 80 percent interest in this joint
venture. The amounts presented represent the partnership's percent
interest in the property owned by El Cajon Joint Venture. A third party
owned the remaining 20 percent interest in this joint venture.
(23) 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.
(24) 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.
(25) 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.
(26) 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.
(27) 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.
(28) 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.
(29) 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.
(30) 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.
(31) The Black Eyed Pea property in Houston, TX was exchanged on August 24,
1999 for a Black Eyed Pea property in Dallas, TX at the option of the
tenant as permitted under the terms of the lease agreement. Due to the
exchange, the Black Eyed Pea property in Dallas, TX is being leased under
the same lease as the Black Eyed Pea property in Houston, TX.
(32) This property was being constructed and was sold prior to completion of
construction.
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<PAGE>
APPENDIX E
STATEMENT OF ESTIMATED
TAXABLE OPERATING RESULTS
BEFORE DIVIDENDS PAID DEDUCTION
<PAGE>
CNL HEALTH CARE PROPERTIES, INC.
STATEMENT OF ESTIMATED TAXABLE OPERATING RESULTS
BEFORE DIVIDENDS PAID DEDUCTION
PROPERTIES ACQUIRED FROM INCEPTION
THROUGH MARCH 13, 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 for which the Company
had an initial commitment as of March 13, 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) (483,965)
-----------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction $ (3,486)
===========
SEE FOOTNOTES
<PAGE>
- -----------------------
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 as
additional rent. In connection therewith, FF&E Reserve income will be earned
at 1% of gross revenues for the lease years 1-4 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 90 day LIBOR as of February 29,
2000 plus 250 basis points assuming $8.1 million was borrowed on the
Company's line of credit to acquire the Orland Park Property.
(5) Estimated at 8% of gross rental income, based on the previous experience of
Affiliate of the Advisor with another public REIT. Amount does not include
soliciting dealer servicing fee due to the fact that such fee will not be
incurred until December 31 of the year following the year in which the
offering terminates.
(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 $11,558,146 $1,308,378
(7) A loan origination fee of $40,500 (.5% on the $8.1 million from borrowings
on the line of credit) amortized under the straight-line method over a
period of five years.
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