UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from __________ to __________.
Commission File Number 0-12989
COMMERCIAL NET LEASE REALTY, INC.
(exact name of registrant as specified in its charter)
Maryland 56-1431377
(State or other jurisdiction of (I.R.S. Employment Identification No.)
incorporation or organization)
450 South Orange Avenue, Orlando, Florida 32801 (Address of
principal executive offices, including zip code)
(407) 265-7348
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
30,315,681 shares of Common Stock, $0.01 par value, outstanding as of May 1,
2000.
<PAGE>
The Form 10-Q of Commercial Net Lease Realty, Inc. for the quarterly period
ended March 31, 2000, is being amended to provide additional disclosure under
Part I, Item 1, "Notes to Consolidated Financial Statements - Basis of
Presentation."
<PAGE>
COMMERCIAL NET LEASE REALTY, INC.
and SUBSIDIARIES
CONTENTS
Part I
Item 1. Financial Statements: Page
Condensed Consolidated Balance Sheets..............................1
Condensed Consolidated Statements of Earnings......................2
Condensed Consolidated Statements of Cash Flows....................3
Notes to Condensed Consolidated Financial Statements...............5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..........................................9
Item 3. Quantitative and Qualitative Disclosures About Market Risk........12
Part II
Other Information..........................................................13
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)
ASSETS March 31, December 31,
2000 1999
------------ ------------
Real estate:
Accounted for using the operating method, net
of accumulated depreciation and amortization
of $23,885 and $22,023, respectively $ 541,794 $ 546,193
Accounted for using the direct financing method 123,985 125,491
Investment in unconsolidated subsidiary 2,994 4,502
Investment in unconsolidated partnership 3,842 3,844
Mortgages and accrued interest receivable 17,988 16,241
Mortgages and other receivables from
unconsolidated subsidiary 34,115 27,597
Cash and cash equivalents 4,510 3,329
Receivables 1,610 2,119
Accrued rental income 13,871 13,182
Debt costs, net of accumulated amortization of
$3,095 and $2,894, respectively 2,763 2,964
Other assets 4,409 4,327
----------- -----------
Total assets $ 751,881 $ 749,789
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Line of credit payable $ 111,600 $ 108,700
Mortgages payable 38,842 40,429
Notes payable, net of unamortized discount of
$570 and $592, respectively, and unamortized
interest rate hedge gain of $2,316 and
$2,434, respectively 201,747 201,842
Accrued interest payable 3,349 2,744
Accounts payable and accrued expenses 1,309 1,717
Other liabilities 3,821 2,995
----------- -----------
Total liabilities 360,668 358,427
----------- -----------
Stockholders' equity:
Preferred stock, $0.01 par value. Authorized
15,000,000 shares; none issued or outstanding - -
Common stock, $0.01 par value. Authorized
90,000,000 shares; issued and outstanding
30,315,681 and 30,255,939 shares at March 31,
2000 and December 31, 1999, respectively 303 303
Excess stock, $0.01 par value. Authorized
105,000,000 shares; none issued or outstanding - -
Capital in excess of par value 396,988 396,403
Accumulated dividends in excess of net earnings (6,078) (5,344)
----------- -----------
Total stockholders' equity 391,213 391,362
----------- -----------
$ 751,881 $ 749,789
=========== ===========
See accompanying notes to condensed consolidated financial statements.
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(dollars in thousands, except per share data)
Quarter Ended
March 31,
2000 1999
---------- ----------
Revenues:
Rental income from operating leases $ 15,727 $ 13,855
Earned income from direct financing leases 3,321 3,644
Contingent rental income 272 133
Development and asset management fees from
related parties 96 1,044
Interest 1,077 58
Other 94 96
---------- ----------
20,587 18,830
---------- ----------
Expenses:
General operating and administrative 1,250 2,339
Real estate expenses 100 98
Interest 6,646 4,777
Depreciation and amortization 2,288 1,993
Expenses incurred in acquiring advisor from
related party 491 4,928
---------- ----------
10,775 14,135
---------- ----------
Earnings before equity in earnings of
unconsolidated subsidiary and unconsolidated
partnership, and gain on sale of real estate 9,812 4,695
Equity in earnings of unconsolidated subsidiary (1,261) -
Equity in earnings of unconsolidated partnership 93 92
Gain on sale of real estate - 5,043
---------- ----------
Net earnings $ 8,644 $ 9,830
========== ==========
Net earnings per share of common stock:
Basic $ 0.29 $ 0.33
========== ==========
Diluted $ 0.28 $ 0.32
========== ==========
Weighted average number of shares outstanding:
Basic 30,325,685 30,038,818
========== ==========
Diluted 30,335,622 30,253,944
========== ==========
See accompanying notes to condensed consolidated financial statements.
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Quarter Ended
March 31,
2000 1999
-------- --------
Cash flows from operating activities:
Net earnings $ 8,644 $ 9,830
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 2,288 1,993
Amortization of notes payable discount 22 5
Amortization of deferred interest rate
hedge gain (118) -
Gain on sale of real estate - (5,043)
Expenses incurred in acquiring advisor from
related party 491 4,928
Equity in earnings of unconsolidated
subsidiary, net of deferred intercompany
profits 1,508 -
Distributions from unconsolidated
partnership in excess of equity in
earnings 1 1
Decrease in real estate leased to others
using the direct financing method 492 448
Decrease in leasehold interests 1,455 -
Increase in mortgages and accrued interest
receivable (5) (38)
Decrease in receivables 409 1,016
Increase in accrued rental income (825) (900)
Increase in other assets (40) (167)
Increase (decrease) in accrued interest
payable 605 (1,814)
Increase (decrease) in accounts payable and
accrued expenses (248) 402
Increase in other liabilities 826 432
-------- --------
Net cash provided by operating activities 15,505 11,093
-------- --------
Cash flows from investing activities:
Proceeds from the sale of real estate 838 36,406
Additions to real estate accounted for using the
operating method (134) (57,369)
Additions to real estate accounted for using the
direct financing method - (1,901)
Increase in mortgages receivable (309) (3,952)
Mortgage payments received 79 -
Increase in mortgages and other receivables from
unconsolidated subsidiary (6,605) -
Increase in other assets (153) (61)
Other (63) (64)
-------- --------
Net cash used in investing activities (6,347) (26,941)
-------- --------
Cash flows from financing activities:
Proceeds from line of credit payable 9,100 26,300
Repayment of line of credit payable (6,200) (3,300)
Repayment of mortgages payable (1,587) (445)
Payment of debt costs - (50)
Proceeds from issuance of common stock 143 1,709
Payment of stock issuance costs - 65
Payment of dividends (9,378) (9,267)
Other (55) (25)
-------- --------
Net cash provided by (used in) financing
activities (7,977) 14,987
-------- --------
See accompanying notes to condensed consolidated financial statements.
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(dollars in thousands)
Quarter Ended
March 31,
2000 1999
-------- --------
Net increase (decrease) in cash and cash equivalents 1,181 (861)
Cash and cash equivalents at beginning of quarter 3,329 1,442
-------- --------
Cash and cash equivalents at end of quarter $ 4,510 $ 581
======== ========
Supplemental schedule of non-cash investing an financing activities:
Issued 50,711 and 372,000 shares of common stock
in 2000 and 1999, respectively, in connection
with the acquisition of the Company's advisor $ 491 $ 4,928
======== ========
Mortgage note accepted in connection with sale of
real estate $ 1,425 $ 2,500
======== ========
See accompanying notes to condensed consolidated financial statements.
<PAGE>
COMMERCIAL NET LEASE REALTY, INC.
and SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Quarters
Ended March 31, 2000 and 1999
1. Basis of Presentation:
---------------------
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and note disclosures required by generally
accepted accounting principles. The financial statements reflect all
adjustments, consisting of normal recurring adjustments, which are, in the
opinion of management, necessary for a fair presentation of the results for
the interim periods presented. Operating results for the quarter ended
March 31, 2000, may not be indicative of the results that may be expected
for the year ending December 31, 2000. Amounts as of December 31, 1999,
included in the financial statements, have been derived from the audited
financial statements as of that date.
These unaudited financial statements should be read in conjunction with the
financial statements and notes thereto included in the Form 10-K of
Commercial Net Lease Realty, Inc. for the year ended December 31, 1999.
The consolidated financial statements include the accounts of Commercial
Net Lease Realty, Inc. and its wholly-owned subsidiaries (the "Company").
All significant intercompany accounts and transactions have been eliminated
in consolidation.
Basic earnings per share are calculated based upon the weighted average
number of common shares outstanding during each period and diluted earnings
per share are calculated based upon weighted average number of common
shares outstanding plus dilutive potential common shares.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The Statement establishes accounting
and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred
to as derivatives), and for hedging activities. The Statement requires that
an entity recognize all derivatives as either assets or liabilities in the
balance sheet and measure those instruments at fair value.
In June 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133, an Amendment of FASB Statement No. 133." Statement No.
137 defers the effective date of Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities" for one year. Statement No.
133, as amended, is now effective for all fiscal quarters of all fiscal
years beginning after June 15, 2000. The Company is currently reviewing the
Statement, as amended, to see what impact, if any, it will have on the
Company's consolidated financial statements.
In December 1999, the Securities and Exchange Commission (the "SEC")
published Staff Accounting Bulletin 101, "Revenue Recognition." The
Bulletin expressed the SEC's position regarding revenue recognition in
financial statements, including income statement presentation and
disclosures. The implementation date of the Bulletin is no later than the
second quarter of fiscal years beginning after December 15, 1999. The
Company does not believe the implementation of this Bulletin will have a
material effect on the Company's financial position or results of
operations.
2. Leases:
------
The Company generally leases its real estate to operators of major retail
businesses. As of March 31, 2000, 181 of the leases have been classified as
operating leases and 83 leases have been classified as direct financing
leases. For the leases classified as direct financing leases, the building
portions of the property leases are accounted for as direct financing
leases while the land portions of 47 of these leases are accounted for as
operating leases. Substantially all leases have initial terms of 10 to 20
years (expiring between 2001 and 2020) and provide for minimum rentals. In
addition, the majority of the leases provide for contingent rentals and/or
scheduled rent increases over the terms of the leases. The tenant is also
generally required to pay all property taxes and assessments, substantially
maintain the interior and exterior of the building and carry insurance
coverage for public liability, property damage, fire and extended coverage.
The lease options generally allow tenants to renew the leases for two to
four successive five-year periods subject to substantially the same terms
and conditions as the initial lease.
3. Earnings Per Share:
------------------
The following represents the calculations of earnings per share and the
weighted average number of shares of dilutive potential common stock for
the quarters ended March 31:
2000 1999
---------- ----------
Basic Earnings Per Share:
Net earnings $8,644,00 $9,830,000
========== ==========
Weighted average number of shares
outstanding 30,258,141 29,591,214
Merger contingent shares 67,544 447,604
---------- ----------
Weighted average number of shares
used in basic earnings per share 30,325,685 30,038,818
========== ==========
Basic earnings per share $ 0.29 $ 0.33
========== ==========
Diluted Earnings Per Share:
Net earnings $8,644,000 $9,830,000
========== ==========
Weighted average number of shares
outstanding 30,258,141 29,591,214
Effect of dilutive securities:
Stock options 11 4,508
Merger contingent shares 77,470 658,222
---------- ----------
Weighted average number of shares
outstanding used in diluted
earnings per share 30,335,622 30,253,944
========== ==========
Diluted earnings per share $ 0.28 $ 0.32
========== ==========
For the quarters ended March 31, 2000 and 1999, options on 1,665,925 and
1,661,269 shares of common stock, respectively, were not included in
computing diluted earnings per share because their effects were
antidilutive.
4. Related Party Transactions:,
----------------------------
In connection with the mortgages and other receivables from the Company's
unconsolidated subsidiary, Commercial Net Lease Realty Services, Inc.
("Services"), the Company received $1,145,000 in interest and fees during
the quarter ended March 31, 2000. In addition, Services paid the Company
$102,000 in expense reimbursements for accounting services provided by the
Company during the quarter ended March 31, 2000.
5. Segment Information:
-------------------
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information." This Statement requires that a public
business enterprise report financial and descriptive information about its
reportable operating segments. Operating segments are components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how
to allocate resources and in assessing performance. While the Company does
not have more than one reportable segment as defined by the Statement, the
Company has identified two primary sources of revenue: (i) rental and
earned income from the triple net leases and (ii) fee income from
development, property management and asset management services.
The following tables represent the revenues, expenses and asset allocation
for the two segments and the Company's consolidated totals at March 31,
2000 and 1999, and for the quarters then ended (dollars in thousands):
Rental and
Earned Fee Consolidated
Income Income Corporate Totals
----------- ----------- ----------- ------------
2000
Revenues $ 19,821 $ 766 $ - $ 20,587
General operating and
administrative expenses 948 48 254 1,250
Real estate expenses 100 - - 100
Interest expense 6,646 - - 6,646
Depreciation and
amortization 2,260 24 4 2,288
Expenses incurred in
acquiring advisor
from related party - - 491 491
Equity in earnings of
unconsolidated
subsidiary - (1,261) - (1,261)
Equity in earnings of
unconsolidated
partnership 93 - - 93
=========== =========== =========== ============
Net earnings $ 9,960 $ (567) $ (749) $ 8,644
=========== =========== =========== ============
Assets $ 751,717 $ 82 $ 82 $ 751,881
=========== =========== =========== ============
Additions to long-lived
assets:
Real estate $ 134 $ - $ - $ 134
=========== =========== =========== ============
Other $ 29 $ 1 $ - $ 30
=========== =========== =========== ============
1999
Revenues $ 17,715 $ 1,115 $ - $ 18,830
General operating and
administrative expenses 1,539 491 309 2,339
Real estate expenses 98 - - 98
Interest expense 4,777 - - 4,777
Depreciation and
amortization 1,959 26 8 1,993
Expenses incurred in
acquiring advisor from
related party - - 4,928 4,928
Equity in earnings of
unconsolidated
partnership 92 - - 92
Gain on sale of real
estate 5,043 - - 5,043
=========== =========== =========== ============
Net earnings $ 14,477 $ 598 $ (5,245) $ 9,830
=========== =========== =========== ============
Assets $ 713,244 $ 266 $ 83 $ 713,593
=========== =========== =========== ============
Additions to long-lived
assets:
Real estate $ 24,639 $ - $ - $ 24,639
=========== =========== =========== ============
Other $ 104 $ 158 $ 28 $ 290
=========== =========== =========== ============
6. Subsequent Event:
----------------
In April 2000, the Company declared dividends to its shareholders of
$9,398,000 or $0.31 per share of common stock, payable in May 2000.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Introduction
------------
Commercial Net Lease Realty, Inc. is a fully integrated, self-administrated real
estate investment trust that acquires, owns, manages and indirectly develops
high-quality, freestanding properties that are generally leased to major retail
businesses under long-term commercial net leases. As of March 31, 2000,
Commercial Net Lease Realty, Inc. and its subsidiaries (the "Company") owned,
either directly or through a partnership interest, 276 properties (the
"Properties") substantially all of which are leased to major retail businesses.
Liquidity and Capital Resources
-------------------------------
General. Historically, the Company's only demand for funds has been for the
payment of operating expenses and dividends, for property acquisitions and
development, either directly or through investment interests, and for the
payment of interest on its outstanding indebtedness. Generally, cash needs for
items other than property acquisitions and development have been met from
operations and property acquisitions and development have been funded by equity
and debt offerings, bank borrowings, the sale of Properties and, to a lesser
extent, from internally generated funds. Potential future sources of capital
include proceeds from the public or private offering of the Company's debt or
equity securities, secured or unsecured borrowings from banks or other lenders,
proceeds from the sale of Properties, as well as undistributed funds from
operations. For the quarters ended March 31, 2000 and 1999, the Company
generated $15,505,000 and $11,093,000 respectively, in net cash provided by
operating activities. The increase in cash from operations for the quarter ended
March 31, 2000, as compared to the quarter ended March 31, 1999, is primarily
the result of changes in revenues and expenses as discussed in "Results of
Operations."
The Company's leases typically provide that the tenant bears responsibility for
substantially all property costs and expenses associated with ongoing
maintenance and operation including utilities, property taxes and insurance. In
addition, the Company's leases generally provide that the tenant is responsible
for roof and structural repairs. Certain of the Company's Properties are subject
to leases under which the Company retains responsibility for certain costs and
expenses associated with the Property. Because many of the Properties which are
subject to leases that place these responsibilities on the Company are recently
constructed, management anticipates that capital demands to meet obligations
with respect to these Properties will be minimal for the foreseeable future and
can be met with funds from operations and working capital. The Company may be
required to use bank borrowings or other sources of capital in the event of
unforeseen significant capital expenditures.
Management believes that the Company's current capital resources (including cash
on hand), coupled with the Company's borrowing capacity, are sufficient to meet
its liquidity needs for the foreseeable future.
Dividends. One of the Company's primary objectives, consistent with its policy
of retaining sufficient cash for reserves and working capital purposes and
maintaining its status as a real estate investment trust, is to distribute a
substantial portion of its funds available from operations to its stockholders
in the form of dividends. For the quarters ended March 31, 2000 and 1999, the
Company declared and paid dividends to its stockholders of $9,378,000 and
$9,267,000, respectively, or $0.31 per share of common stock. In April 2000, the
Company declared dividends to its shareholders of $9,398,000 or $0.31 per share
of common stock, payable in May 2000.
Results of Operations
---------------------
As of March 31, 2000 and 1999, the Company owned 267 and 272 wholly-owned
Properties, respectively, 264 and 268, respectively, of which were leased to
operators of major retail businesses. In addition, during the quarter ended
March 31, 2000, the Company sold one property which was leased during 2000.
During the quarter ended March 31, 1999, the Company sold 38 properties which
were leased during 1999 and one property which was vacant. During the quarters
ended March 31, 2000 and 1999, the Company earned $19,320,000 and $17,632,000,
respectively, in rental income from operating leases, earned income from direct
financing leases and contingent rental income ("Rental Income"). The increase in
Rental Income during the quarter ended March 31, 2000, is primarily a result of
the facts that (i) the 36 Properties acquired and 15 buildings upon which
construction was completed during 1999 were operational for a full quarter in
2000 and (ii) the Company received non-recurring additional rental income of
$1,096,000 related to the termination of leases on two of its properties.
During the quarters ended March 31, 2000 and 1999, the Company earned $96,000
and $1,044,000, respectively, in development and asset management fees. The fees
earned during 1999 were primarily earned by the Company's build-to-suit
development operation. In May 1999, the Company transferred its build-to-suit
development operation to a 95 percent owned, taxable unconsolidated subsidiary,
Commercial Net Lease Realty Services, Inc. ("Services"). Development fees earned
by Services during the quarter ended March 31, 2000 are included in the
Company's equity in earnings of unconsolidated subsidiary.
During the quarters ended March 31, 2000 and 1999, the Company earned $1,077,000
and $58,000, respectively, in interest income. The increase in interest earned
during 2000 is attributable to the interest earned on the mortgages receivable
and the mortgages and other receivables from Services issued during 1999.
During the quarters ended March 31, 2000 and 1999, operating expenses, excluding
interest and including depreciation and amortization, were $4,129,000 and
$9,358,000, respectively, (20.0% and 49.7%, respectively, of total revenues).
The decrease in operating expenses for the quarter ended March 31, 2000, as
compared to the quarter ended March 31, 1999, is attributable to the decrease in
charges related to the costs incurred in acquiring the Company's Advisor from a
related party and the decrease in general operating and administrative expenses
as a result of the transfer of the Company's build-to-suit development operation
to Services. The decrease in operating expenses for the quarter ended March 31,
2000, as compared to the quarter ended March 31, 1999, is also attributable to
the increase in depreciation and amortization expense as a result of a full
quarter of depreciation and amortization expense relating to the 36 Properties
and 15 buildings acquired during 1999. The increase in depreciation and
amortization expense was partially offset by a decrease in depreciation and
amortization expense related to the sale of 42 properties during the nine months
ended September 30, 1999.
The Company recognized $6,646,000 and $4,777,000 in interest expense for the
quarters ended March 31, 2000 and 1999, respectively. Interest expense increased
during the quarter ended March 31, 2000, primarily as a result of the higher
average interest rate on the Company's Credit Facility and the interest incurred
related to the issuance of the $100,000,000 in notes payable in June 1999.
However, the increase was partially offset by a decrease in the average
borrowing levels of the Company's Credit Facility and the maturity of a
$13,150,000 mortgage payable in December 1999.
In May 1999, Services was formed to enable the Company to perform additional
development, leasing and disposition services. The Company accounts for its
investment in Services under the equity method, and therefore, recognizes 95
percent of the income or loss of Services as equity in earnings of
unconsolidated subsidiary. The net losses incurred by Services for the quarter
ended March 31, 2000 are primarily due to the nature of the development, leasing
and real estate disposition business which provides for revenue recognition upon
completion of construction, leasing or disposition of the real estate, while
many of the related expenses are recognized as incurred.
Investment Considerations. In June 1998, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities." The Statement establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. The Statement requires that an entity
recognize all derivatives as either assets or liabilities in the balance sheet
and measure those instruments at fair value
In June 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 137, "Accounting for Derivative Instruments
and Hedging Activities-Deferral of the Effective Date of FASB Statement No. 133,
an Amendment of FASB Statement No. 133." Statement No. 137 defers the effective
date of Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities" for one year. Statement No. 133, as amended, is now effective for
all fiscal quarters of all fiscal years beginning after June 15, 2000. The
Company is currently reviewing the Statement, as amended, to see what impact, if
any, it will have on the Company's consolidated financial statements.
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 a
difference include the following: changes in general economic conditions,
changes in real estate market conditions, continued availability of proceeds
from the Company's debt or equity capital, the ability of the Company to locate
suitable tenants for its Properties and the ability of tenants to make payments
under their respective leases.
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in quantitative and qualitative disclosures
about market risk as previously reported in the Form 10-K for the year ended
December 31, 1999.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
No material developments in legal proceedings as previously reported on
the Form 10-K for the year ended December 31, 1999.
Item 2. Changes in Securities and Use of Proceeds. Not applicable.
Item 3. Defaults Upon Senior Securities. Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders. Not applicable.
Item 5. Other Information. Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are filed as a part of this report.
3.1 Articles of Incorporation of the Registrant (filed as
Exhibit 3.3(i) to the Registrant's Registration Statement
No. 1-11290 on Form 8-B, and incorporated herein by
reference).
3.2 Bylaws of the Registrant (filed as Exhibit 3.3(ii) to
Amendment No. 2 to the Registrant's Registration Statement
No. 1-11290 on Form 8-B, and incorporated herein by
reference).
3.3 Articles of Amendment to the Articles of Incorporation of
Registrant (filed as Exhibit 3.3 to the Registrant's Form
10-Q for the quarter ended September 30, 1996, and
incorporated herein by reference).
3.4 Articles of Amendment to the Articles of Incorporation of
the Registrant (filed as Exhibit 3.4 to the Registrant's
Current Report on Form 8-K dated February 18, 1998, and
filed with the Securities and Exchange Commission on
February 19, 1998, and incorporated herein by reference).
3.5 First Amended and Restated Articles of Incorporation of the
Registrant (filed as Exhibit 3.1 to the Registrant's
Registration Statement No. 333-64511 on Form S-3, and
incorporated herein by reference).
4.1 Specimen Certificate of Common stock, par value $0.01 per
share, of the Registrant (filed as Exhibit 3.4 to the
Registrant's Registration Statement No. 1-11290 on Form
8-B, and incorporated herein by reference).
4.2 Form of Indenture dated March 25, 1998, by and among
Registrant and First Union National Bank, Trustee, relating
to $100,000,000 of 7.125% Notes due 2008 and $100,000,000
of 8.125% Notes due 2004 (filed as Exhibit 4.1 to the
Registrant's Current Report on Form 8-K dated March 20,
1998, and incorporated herein by reference).
4.3 Form of Supplemental Indenture No. 1 dated March 25, 1998,
by and among Registrant and First Union National Bank,
Trustee, relating to $100,000,000 of 7.125% Notes due 2008
(filed as Exhibit 4.2 to the Registrant's Current Report on
Form 8-K dated March 20, 1998, and incorporated herein by
reference).
4.4 Form of 7.125% Notes due 2008 (filed as Exhibit 4.3 to the
Registrant's Current Report on Form 8-K dated March 20,
1998, and incorporated herein by reference).
4.5 Form of Supplemental Indenture No. 2 dated June 21, 1999,
by and among Registrant and First Union National Bank,
Trustee, relating to $100,000,000 of 8.125% Notes due 2004
(filed as Exhibit 4.2 to the Registrant's Current Report on
Form 8-K dated June 17, 1999, and incorporated herein by
reference).
4.6 Form of 8.125% Notes due 2004 (filed as Exhibit 4.3 to the
Registrant's Current Report on Form 8-K dated June 17,
1999, and incorporated herein by reference).
10.1 Letter Agreement dated July 10, 1992, amending Stock
Purchase Agreement dated January 23, 1992 (filed as Exhibit
10.34 to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1992, and incorporated
herein by reference).
10.2 Advisory Agreement between Registrant and CNL Realty
Advisors, Inc. effective as of April 1, 1993 (filed as
Exhibit 10.04 to Amendment No. 1 to the Registrant's
Registration Statement No. 33-61214 on Form S-2, and
incorporated herein by reference).
10.3 1992 Commercial Net Lease Realty, Inc. Stock Option Plan
(filed as Exhibit No. 10(x) to the Registrant's
Registration Statement No. 33-83110 on Form S-3, and
incorporated herein by reference).
10.4 Second Amended and Restated Line of Credit and Security
Agreement, dated December 7, 1995, among Registrant,
certain lenders listed therein and First Union National
Bank of Florida, as the Agent, relating to a $100,000,000
loan (filed as Exhibit 10.14 to the Registrant's Current
Report on Form 8-K dated January 18, 1996, and incorporated
herein by reference).
10.5 Secured Promissory Note, dated December 14, 1995, among
Registrant and Principal Mutual Life Insurance Company
relating to a $13,150,000 loan (filed as Exhibit 10.15 to
the Registrant's Current Report on Form 8-K dated January
18, 1996, and incorporated herein by reference).
10.6 Mortgage and Security Agreement, dated December 14, 1995,
among Registrant and Principal Mutual Life Insurance
Company relating to a $13,150,000 loan (filed as Exhibit
10.16 to the Registrant's Current Report on Form 8-K dated
January 18, 1996, and incorporated herein by reference).
10.7 Loan Agreement, dated January 19, 1996, among Registrant
and Principal Mutual Life Insurance Company relating to a
$39,450,000 loan (filed as Exhibit 10.12 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995, and incorporated herein by reference).
10.8 Secured Promissory Note, dated January 19, 1996 among
Registrant and Principal Mutual Life Insurance Company
relating to a $39,450,000 loan (filed as Exhibit 10.13 to
the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1995, and incorporated herein by
reference).
10.9 Third Amended and Restated Line of Credit and Security
Agreement, dated September 3, 1996, by and among
Registrant, certain lenders and First Union National Bank
Florida, as the Agent, relating to a $150,000,000 loan
(filed as Exhibit 10.11 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1996, and incorporated herein by reference).
10.10 Second Renewal and Modification Promissory Note, dated
September 3, 1996, by and among Registrant and First Union
National Bank Florida, as the Agent, relating to a
$150,000,000 loan (filed as Exhibit 10.12 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996, and incorporated herein by
reference).
10.11 Agreement and Plan of Merger dated May 15, 1997, by and
among Commercial Net Lease Realty, Inc. and Net Lease
Realty II, Inc. and CNL Realty Advisors, Inc. and the
Stockholders of CNL Realty Advisors, Inc. (filed as Exhibit
10.1 to the Registrant's Current Report on Form 8-K dated
May 16, 1997, and incorporated herein by reference).
10.12 Fourth Amended and Restated Line of Credit and Security
Agreement, dated August 6, 1997, by and among Registrant,
certain lenders and First Union National Bank, as the
Agent, relating to a $200,000,000 loan (filed as Exhibit 10
to the Registrant's Current Report on Form 8-K dated
September 12, 1997, and incorporated herein by reference).
10.13 Fifth Amended and Restated Line of Credit and Security
Agreement, dated September 23, 1999, by and among
Registrant, certain lenders and First Union National Bank,
as the Agent, relating to a $200,000,000 loan (filed
herewith).
27 Financial Data Schedule (filed herewith).
(b) No reports on Form 8-K were filed during the quarter ended March
31, 2000.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATED this 13th day of June, 2000.
COMMERCIAL NET LEASE REALTY, INC.
By: /s/ Gary M. Ralston
-------------------
Gary M. Ralston
President
By: /s/ Kevin B. Habicht
--------------------
Kevin B. Habicht
Chief Financial Officer
