Rule 424(b)(3)
No. 33-78790
CNL AMERICAN PROPERTIES FUND, INC.
This Supplement is part of, and should be read in conjunction with, the
Prospectus dated April 26, 1996. This Supplement replaces the Supplements
dated April 30, 1996, May 15, 1996, May 24, 1996 and June 11, 1996.
Capitalized terms used in this Supplement have the same meaning as in the
Prospectus unless otherwise stated herein.
Information as to proposed properties for which the Company has received
initial commitments and as to the number and types of Properties acquired by
the Company is presented as of June 14, 1996, and all references to
commitments or Property acquisitions should be read in that context. Proposed
properties for which the Company receives initial commitments, as well as
property acquisitions that occur after June 14, 1996, will be reported in a
subsequent Supplement.
THE OFFERING
As of June 14, 1996, the Company had received aggregate subscription
proceeds of $73,450,708 (7,345,071 Shares) from 4,318 stockholders, including
$128,151 (12,815 Shares) issued pursuant to the Reinvestment Plan. As of June
14, 1996, the Company had invested or committed for investment approximately
$59,200,000 of such proceeds in 65 Properties (including one Property through
a joint venture arrangement which consists of land and building, five
Properties which consist of building only, 33 Properties which consist of land
only and 26 Properties which consist of land and building), in providing
mortgage financing to the tenant of the 33 Properties consisting of land only
and to pay Acquisition Fees and Acquisition Expenses, leaving approximately
$4,500,000 in offering proceeds available for investment in Properties and
Mortgage Loans. As of June 14, 1996, the Company had incurred $3,305,282 in
Acquisition Fees to the Advisor.
BUSINESS
PROPERTY ACQUISITIONS
Between April 10, 1996 and June 14, 1996, the Company acquired 17
Properties, including two Properties consisting of building only, five
Properties consisting of land and building and ten Properties consisting of
land only. The Properties are one TGI Friday's Property (in Hamden,
Connecticut), three Wendy's Properties (one in each of Knoxville and
Sevierville, Tennessee, and Camarillo, California), one Golden Corral Property
(in Port Richey, Florida), two Denny's Properties (one in each of Hillsboro
and McKinney, Texas) and ten Pizza Hut Properties (one in each of Beaver,
Bluefield, Huntington, Hurricane, Milton, Ronceverte, Beckley, Belle and Cross
Lanes, West Virginia, and Marietta, Ohio) (hereinafter referred to as the "Ten
Pizza Hut Properties"). For information regarding the 48 Properties acquired
by the Company prior to April 10, 1996, see the Prospectus dated April 26,
1996.
The Denny's Property in McKinney, Texas, was acquired from an Affiliate
of the Company. The Affiliate had purchased and temporarily held title to the
Property in order to facilitate the acquisition of the Property by the
Company. The Property was acquired by the Company for a purchase price of
$977,256 from an Affiliate of the Company. The Property was acquired at a
cost equal to the cost of the Property to the Affiliate (including carrying
costs) due to the fact that these amounts were less than the Property's
appraised value.
June 21, 1996 Prospectus Dated April 26, 1996
In connection with the purchase of the TGI Friday's and the Wendy's
Properties in Hamden, Connecticut, and Sevierville, Tennessee, respectively,
which are building only, the Company, as lessor, entered into long-term lease
agreements with unaffiliated lessees. The general terms of the lease
agreements are described in the section of the Prospectus entitled "Business -
Description of Property Leases." In connection with the purchase of these
Properties, which are to be constructed, the Company has entered into
development and indemnification and put agreements with the lessees. The
general terms of these agreements are described in the section of the
Prospectus entitled "Business - Site Selection and Acquisition of Properties -
Construction and Renovation." In connection with these acquisitions, the
Company has also entered into tri-party agreements with the lessees and the
owners of the land. The tri-party agreements provide that the ground lessees
are responsible for all obligations under the ground leases and provide
certain rights to the Company relating to the maintenance of its interests in
the buildings in the event of a default by the lessees under the terms of the
ground leases.
In connection with the purchase of the Wendy's Properties in Knoxville,
Tennessee, and Camarillo, California, the Golden Corral Property and the
Denny's Properties, the Company, as lessor entered into long-term lease
agreements with unaffiliated lessees. The general terms of the lease
agreements are described in the section of the Prospectus entitled "Business -
Description of Property Leases." For the Properties that are to be
constructed, the Company has entered into development and indemnification and
put agreements with the lessees. The general terms of these agreements are
described in the section of the Prospectus entitled "Business - Site Selection
and Acquisition of Properties - Construction and Renovation."
In connection with the Ten Pizza Hut Properties, the Company acquired
the land and is leasing these ten parcels to the lessee, Castle Hill Holdings
V, L.L.C. ("Castle Hill"), pursuant to a master lease agreement (the "Master
Lease Agreement"). Castle Hill has subleased the Ten Pizza Hut Properties to
one of its affiliates, Midland Food Services L.L.C., which is the operator of
the restaurants. The general terms of the Master Lease Agreement are similar
to those described in the section of the Prospectus entitled "Business -
Description of Property Leases." If the lessee does not exercise its option
to purchase the Properties upon termination of the Master Lease Agreement, the
sublessee and lessee will surrender possession of the Properties to the
Company, together with any improvements on such Properties. The lessee owns
the buildings located on the Ten Pizza Hut Properties. In connection with the
acquisition of the Ten Pizza Hut Properties, the Company provided mortgage
financing of $3,888,000 to the lessee pursuant to a Mortgage Loan evidenced by
a master mortgage note (the "Master Mortgage Note") which is collateralized by
the building improvements on the Ten Pizza Hut Properties. The Master
Mortgage Note bears interest at a rate of 10.75% per annum and principal and
interest are due in equal monthly installments over 20 years starting July 1,
1996. The Master Mortgage Note equals approximately 85 percent of the
appraised value of the related buildings. Management believes that, due to
the fact that the Company owns the underlying land relating to the Ten Pizza
Hut Properties and due to other underwriting criteria, the Company has
sufficient collateral for the Master Mortgage Note.
As of June 14, 1996, the Company had initial commitments to acquire
eight properties, including one property which consists of building only and
seven properties which consist of land and building. The initial commitments
for the Boston Market properties in Golden Valley, Minnesota, and Ellisville,
Missouri, were entered into on June 14, 1996. The acquisition of each of
these properties is subject to the fulfillment of certain conditions,
including, but not limited to, a satisfactory environmental survey and
property appraisal. There can be no assurance that any or all of the
conditions will be satisfied or, if satisfied, that one or more of these
properties will be acquired by the Company. If acquired, the leases of all
eight of these properties are expected to be entered into on substantially the
same terms described in the Prospectus in the section entitled "Business -
Description of Property Leases," except as described below.
In connection with the Golden Corral property in Brooklyn, Ohio, the
Company anticipates owning only the building and not the underlying land.
However, the Company anticipates entering into a tri-party agreement with the
lessee and the landlord of the land in order to provide the Company with
certain rights with respect to the land on which the building is located.
Set forth below are summarized terms expected to apply to the leases for
each of the properties. More detailed information relating to a property and
its related lease will be provided at such time, if any, as the property is
acquired.
<TABLE>
<CAPTION>
Lease Term and
Property Renewal Options Minimum Annual Rent Percentage Rent Option to Purchase
- -------- --------------- ------------------- --------------- ------------------
<S> <C> <C> <C> <C>
Golden Corral (2) 14 years; no renewal 14.214% of the for each lease year, upon the expiration
Brooklyn, OH options Company's total cost (i) 4% of annual of the lease (4)
Existing restaurant to purchase the gross sales minus
building; increases by (ii) the minimum
10% after the fifth annual rent for such
lease year and after lease year (3)
every five years
thereafter during the
lease term
Jack in the Box (6) 18 years; four five-year 10.75% of Total Cost; for each lease year, at any time after
Humble, TX renewal options increases by 8% after (i) 5% of annual the seventh lease
Restaurant to be the fifth lease year gross sales minus year
constructed and by 10% after every (ii) the minimum
five years thereafter annual rent for such
during the lease term lease year (3)
(1)
Jack in the Box (6) 18 years; four five-year 10.75% of Total Cost; for each lease year, at any time after
Houston, TX renewal options increases by 8% after (i) 5% of annual the seventh lease
Restaurant to be the fifth lease year gross sales minus year
constructed and by 10% after every (ii) the minimum
five years thereafter annual rent for such
during the lease term lease year (3)
(1)
Applebee's 20 years; two five-year 11% of Total Cost; for each lease year, at any time after
Montclair, CA renewal options increases by 10% after (i) 5% of annual the fifth lease
Restaurant to be the fifth lease year gross sales minus year (5)
constructed and after every five (ii) the minimum
years thereafter annual rent for such
during the lease term lease year
(1)
Boston Market 15 years; five five-year 10% of the Company's for each lease year at any time after
Richmond, VA renewal options total cost to purchase after the fifth lease the fifth lease
Existing restaurant the property; year, (i) 5% of year
increases to 10.81% of annual gross sales
total cost during the minus (ii) the
third through fifth minimum annual rent
lease years, 11.55% of for such lease year
total cost during the
sixth through tenth
lease years, and
12.71% of total cost
during the eleventh
through fifteenth
lease years
Ryan's Family Steak 20 years; two five-year 10.875% of Total Cost; for each lease year, at any time after
House renewal options increases by 12% after (i) 5% of annual the tenth lease
Spring Hill, FL the fifth lease year gross sales minus year
Restaurant to be and after every five (ii) the minimum
constructed years thereafter annual rent for such
during the lease term lease year
(1)
Boston Market (7) 15 years; five five-year 10.40% of Total Cost; for each lease year at any time after
Golden Valley, MN renewal options increases by 10% after after the fifth lease the fifth lease
Restaurant to be the fifth lease year year, (i) 5% of year
constructed and after every five annual gross sales
years thereafter minus (ii) the
during the lease term minimum annual rent
(1) for such lease year
Boston Market (7) 15 years; five five-year 10.40% of Total Cost; for each lease year at any time after
Ellisville, MO renewal options increases by 10% after after the fifth lease the fifth lease
Restaurant to be the fifth lease year year, (i) 5% of year
constructed and after every five annual gross sales
years thereafter minus (ii) the
during the lease term minimum annual rent
(1) for such lease year
</TABLE>
- ----------------------------------------------------------------------------
[FN]
FOOTNOTES:
(1) The "Total Cost" is equal to the sum of (i) the purchase price of the
property, (ii) closing costs, and (iii) actual development costs
incurred under the development agreement, and in the case of the Humble
and Houston properties, (iv) "constructing financing costs" during the
development period.
(2) The Company anticipates owning the building only for this property. The
Company will not own the underlying land; although, the Company
anticipates entering into a tri-party agreement with the lessee and the
landlord of the land in order to provide the Company with certain rights
with respect to the land on which the building is located.
(3) Percentage rent shall be calculated on a calendar year basis (January 1
to December 31).
(4) In the event that the aggregate amount of percentage rent paid by the
lessee to the Company over the term of the lease shall equal or exceed
15% of the purchase price paid by the Company, then the option purchase
price shall equal one dollar. In the event that the aggregate
percentage rent paid shall be less than 15% of the purchase price paid
by the Company, then the option purchase price shall equal the
difference of 15% of the purchase price, less the aggregate percentage
rent paid to the landlord by the lessee under the lease.
(5) The lessee also has the option to purchase the property after the
seller/lessee operates at least five Applebee's restaurants.
(6) The lessee of the Humble and Houston properties is the same unaffiliated
lessee.
(7) The lessee of the Golden Valley and Ellisville properties is the same
unaffiliated lessee.
The following table sets forth the location of the 17 Properties
acquired by the Company, including the Ten Pizza Hut Properties in which the
Company acquired the land only, five Properties in which the Company acquired
the land and building and the two Properties in which the Company acquired the
building only, from April 10, 1996 through June 14, 1996, a description of the
competition, and a summary of the principal terms of the acquisition and lease
of each Property.
<TABLE>
PROPERTY ACQUISITIONS
From April 10, 1996 through June 14, 1996
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent To Purchase
- --------------------- ------------ -------- --------------- --------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
TGI FRIDAY'S (3) 04/24/96 09/2008; no 15.043% of Total Cost; None at any time
(the "Hamden Property") (3) renewal options increases by 10% after after the
Restaurant to be the fifth lease year third lease
constructed and after every five year (5)
years thereafter
The Hamden Property is during the lease term
located at the southeast (4)
quadrant of Skiff Street
and Route 10 in Hamden,
New Haven County,
Connecticut, in an area of
mixed retail, commercial,
and residential
development. Other fast-
food and family-style
restaurants located in
proximity to the Hamden
Property include a China
Buffet, a Chili's, a Red
Lobster, a McDonald's, a
Wendy's, and several local
restaurants.
WENDY'S (14) $322,292 05/08/96 05/2016; two 10.25% of Total Cost; for each lease at any time
(the "Knoxville Property") (excluding five-year increases to 10.76% of year, (i) 6% of after the
Restaurant to be closing and renewal options Total Cost during the annual gross seventh
constructed development fourth through sixth sales minus lease year
costs) (3) lease years, increases (ii) the
The Knoxville Property is to 11.95% of Total minimum annual
located on the north side Cost during the rent for such
of Western Avenue in seventh through tenth lease year
Knoxville, Knox County, lease years, increases
Tennessee, in an area of to 12.70% of Total
mixed retail, commercial, Cost during the
and residential eleventh through
development. Other fast- fifteenth lease years
food and family-style and increases to
restaurants located in 13.97% of Total Cost
proximity to the Knoxville during the sixteenth
Property include a KFC, a through twentieth
McDonald's, a Taco Bell, a lease years (4)
Kenny Rogers Roasters, a
Long John Silver's, a
Krystal, a Hardee's, a
Shoney's, and several
local restaurants.
GOLDEN CORRAL $586,687 05/08/96 10/2011; two 11.25% of Total Cost; for each lease during the
(the "Port Richey (excluding five-year increases by 8% after year, eighth and
Property") closing and renewal options the fifth lease year commencing in ninth lease
Restaurant to be development and after every five the second years only
constructed costs) (3) years thereafter lease year (i) (7)
during the lease term 5% of annual
The Port Richey Property (4) gross sales
is located on the minus (ii) the
southeast quadrant of the minimum annual
intersection of U.S. 19 rent for such
and Stone Road, Port lease year (6)
Richey, Pasco County,
Florida, in an area of
mixed retail, commercial,
and residential
development. Other fast-
food and family-style
restaurants located in
proximity to the Port
Richey Property include a
Boston Market, a
Morrison's, a Burger King,
a Checkers, a Bob Evans, a
Wendy's, a KFC, a Chili's,
and several local
restaurants.
TEN PIZZA HUT PROPERTIES - $1,512,000 05/17/96 05/2016; two $166,320; increases by None at any time
Land only - (8)(10) (excluding ten-year 10% after the fifth after the
located in Beaver, West closing costs) renewal options and tenth lease years seventh
Virginia (the "Beaver and 12% after the lease year
Property"), Bluefield, fifteenth lease year
West Virginia (the (9)
"Bluefield Property"),
Huntington, West Virginia
(the"Hunting- ton
Property"), Hurricane,
West Virginia (the
"Hurricane Property"),
Milton, West Virginia (the
"Milton Property"),
Ronceverte, West Virginia
(the "Ronceverte
Property"), Beckley, West
Virginia (the "Beckley
Property"), Belle, West
Virginia (the "Belle
Property"), Cross Lanes,
West Virginia (the "Cross
Lanes Property") and
Marietta, Ohio (the
"Marietta Property").
The Beaver Property is
located on the north side
of U.S. Route 19 in
Beaver, Raleigh County,
West Virginia, in an area
of mixed retail,
commercial, and
residential development.
Other fast-food and
family-style restaurants
located in proximity to
the Beaver Property
include a McDonald's, a
Hardee's, a Wendy's, and a
Long John Silver's.
The Bluefield Property is
located on the north side
of Bluefield Avenue in
Bluefield, Mercer County,
West Virginia, in an area
of mixed retail,
commercial, and
residential development.
Other fast-food and
family-style restaurants
located in proximity to
the Bluefield Property
include a McDonald's, a
Hardee's, a Captain D's,
and a Shoney's. (11)
The Huntington Property is
located on the south side
of Madison Avenue in
Huntington, Cabell County,
West Virginia, in an area
of mixed retail,
commercial, and
residential development.
Other fast-food and
family-style restaurants
located in proximity to
the Huntington Property
include an Arby's, three
Burger Kings, a Chi Chi's,
two Dairy Queens, a
Hardee's, a KFC, a Long
John Silver's, two
McDonald's, a Papa John's,
a Rax, a Red Lobster, a
Steak & Ale, a Taco Bell,
and several local
restaurants.
The Hurricane Property is
located on the southwest
side of Hurricane Creek
Road in Hurricane, Putnam
County, West Virginia, in
an area of mixed retail,
commercial, and
residential development.
Other fast-food and
family-style restaurants
located in proximity to
the Hurricane Property
include a McDonald's, a
Subway Sandwich Shop, and
several local restaurants.
(11)
The Milton Property is located
on the northeast corner of
East Main Street and Brickyard
Avenue in Milton, Cabell
County, West Virginia, in an
area of mixed retail,
commercial, and residential
development. Other fast-food
and family-style restaurants
located in proximity to the
Milton Property include a
McDonald's, a Subway Sandwich
Shop, a Dairy Queen, and
several local restaurants.
The Ronceverte Property is
located on the north side
of Seneca Trail in
Ronceverte, Greenbrier
County, West Virginia, in
an area of mixed retail,
commercial, and
residential development.
Other fast-food and
family-style restaurants
located in proximity to
the Ronceverte Property
include a KFC, a Long John
Silver's, a Subway
Sandwich Shop, and several
local restaurants.
The Beckley Property is
located on the north side
of Harper Road in Beckley,
Raleigh County, West
Virginia, in an area of
mixed retail, commercial,
and residential
development. Other fast-
food and family-style
restaurants located in
proximity to the Beckley
Property include a
McDonald's, a Long John
Silver's, a Wendy's, a
Shoney's, a Bob Evans, a
Subway Sandwich Shop, a
Hardee's, and several
local restaurants.
The Belle Property is located
on the southwest side of
Dupont Avenue in Belle,
Kanawha County, West Virginia,
in an area of mixed retail,
commercial, and residential
development. Other fast-food
and family-style restaurants
located in proximity to the
Belle Property include
several local restaurants.
The Cross Lanes Property
is located on the
northwest side of Goff
Mountain Road in Cross
Lanes, Kanawha County,
West Virginia, in an area
of mixed retail,
commercial, and
residential development.
Other fast-food and
family-style restaurants
located in proximity to
the Cross Lanes Property
include a Hardee's, a Papa
John's, a Captain D's, a
McDonald's, a Taco Bell, a
Bob Evans, a Wendy's, a
Shoney's a KFC, and
several local restaurants.
The Marietta Property is
located on the east side of
Acme Street in Marietta,
Washington County, Ohio, in an
area of mixed retail,
commercial, and residential
development. Other fast-food
and family-style restaurants
located in proximity to the
Marietta Property include a
Burger King, a Captain D's, a
Dairy Queen, an Elby's Big
Boy, a KFC, a Long John
Silver's, a McDonald's, a Papa
John's, a Subway Sandwich
Shop, a Taco Bell, a Wendy's,
and several local restaurants.
(11)
DENNY'S $367,672 06/05/96 06/2016; two 10.625% of Total Cost; for each lease during the
(the "Hillsboro Property") (excluding five-year increases by 11% after year, (i) 5% of eighth,
Restaurant to be closing and renewal options the fifth lease year annual gross tenth, and
constructed development and after every five sales minus twelfth
costs) (3) years thereafter (ii) the lease years
The Hillsboro Property is during the lease term minimum annual only
located on the south side (4) rent for such
of Highway 22 in lease year
Hillsboro, Hill County,
Texas, in an area of mixed
retail, commercial, and
residential development.
Other fast-food and
family-style restaurants
located in proximity to
the Hillsboro Property
include a McDonald's, an
Arby's, a Whataburger, a
KFC, a Golden Corral, and
a Grandy's.
DENNY'S $977,256 06/05/96 12/2015; two $104,013; increases by for each lease during the
(the "McKinney Property") (excluding five-year 11% after the fifth year, (i) 5% of eighth,
Existing restaurant closing costs) renewal options lease year and after annual gross tenth, and
every five years sales minus twelfth
The McKinney Property is thereafter during the (ii) the lease years
located at the southwest lease term minimum annual only
quadrant of the rent for such
intersection of White lease year (6)
Avenue and U.S. 75 in
McKinney, Collin County,
Texas, in an area of mixed
retail, commercial, and
residential development.
Other fast-food and
family-style restaurants
located in proximity to
the McKinney Property
include an Applebee's, an
Arby's, a Boston Market, a
Jack in the Box, a
Chili's, a Dairy Queen, an
IHOP, a Golden Corral, a
Pizza Hut, and several
local restaurants.
WENDY'S (14) $586,143 06/05/96 06/2016; two 10.25% of Total Cost; for each lease at any time
(the "Camarillo Property") (excluding five-year increases to 10.76% of year, (i) 6% of after the
Restaurant to be closing and renewal options Total Cost during the annual gross seventh
constructed development fourth through sixth sales minus lease year
costs) (3) lease years, increases (ii) the
The Camarillo Property is to 11.95% of Total minimum annual
located at the southwest Cost during the rent for such
quadrant of Las Posas Road seventh through tenth lease year
and the Ventura Freeway in lease years, increases
Camarillo, Ventura County, to 12.70% of Total
California, in an area of Cost during the
mixed retail, commercial, eleventh through
and residential fifteenth lease years
development. Other fast- and increases to
food and family-style 13.97% of Total Cost
restaurants located in during the sixteenth
proximity to the Camarillo through twentieth
Property include an lease years (4)
Applebee's, a Del Taco, a
McDonald's, and several
local restaurants.
WENDY'S (14) $66,153 06/05/96 05/2015; two 12.204% of Total Cost; for each lease upon the
(the "Sevierville (excluding (3) five-year increases by 8% after year, (i) 6% of expiration
Property") closing and renewal options the fifth lease year annual gross of the
Restaurant to be development followed by one and after every five sales times the initial
constructed costs) (3) fifteen-year years thereafter Building term of the
renewal option during the lease term Overage lease and
The Sevierville Property (4) Multiplier (12) during any
is located on the west minus (ii) the renewal
side of Highway 441 in minimum annual period
Sevierville, Sevier rent for such thereafter
County, Tennessee, in an lease year (13)
area of mixed retail,
commercial, and
residential development.
Other fast-food and
family-style restaurants
located in proximity to
the Sevierville Property
include a Damon's Ribs, an
IHOP, a Ruby Tuesday's,
and several local
restaurants.
</TABLE>
[FN]
- ----------------------------------------------------------------------------
FOOTNOTES:
(1) The estimated federal income tax basis of the depreciable portion (the
building portion) of each of the Properties acquired, and for
construction Properties, once the buildings are constructed, is set
forth below:
Property Federal Tax Basis
-------- -----------------
Hamden Property $1,195,000
Knoxville Property 510,000
Port Richey Property 1,208,000
Hillsboro Property 742,000
McKinney Property 627,000
Camarillo Property 672,000
Sevierville Property 519,000
(2) Minimum annual rent for each of the Properties became payable on the
effective date of the lease, except as indicated below. For the Hamden
and Port Richey Properties, minimum annual rent will become due and
payable on the earlier of (i) the date the certificate of occupancy for
the restaurant is issued, (ii) the date the restaurant opens for
business to the public or (iii) 150 days after execution of the lease.
For the Knoxville, Camarillo and Sevierville Properties, minimum annual
rent will become due and payable on (i) the date the certificate of
occupancy for the restaurant is issued, (ii) the date the restaurant
opens for business to the public, (iii) 120 days after execution of the
lease or (iv) the date the tenant receives from the landlord its final
funding of the construction costs. For the Hillsboro Property, minimum
annual rent will become due and payable on the earlier of (i) the date
the certificate of occupancy for the restaurant is issued, (ii) the date
the restaurant opens for business to the public or (iii) 180 days after
execution of the lease. During the period commencing with the effective
date of the lease to the date minimum annual rent becomes payable for
the Knoxville, Camarillo and Sevierville Properties, as described above,
the tenant shall pay monthly "interim rent" equal to 10.25% per annum of
the amount funded by the Company in connection with the purchase and
construction of the Property.
(3) The Company accepted an assignment of an interest in the ground lease
relating to the Hamden and Sevierville Properties effective April 24,
1996 and June 5, 1996, respectively, in consideration of its funding of
certain preliminary development costs and its agreement to fund
remaining development costs not in excess of the amounts specified
below. The development agreements for the Properties which are to be
constructed provide that construction must be completed no later than
the dates set forth below. The maximum cost to the Company, (including
the purchase price of the land (if applicable), development costs (if
applicable), and closing and acquisition costs) is not expected to, but
may, exceed the amounts set forth below:
Estimated Estimated
Property Maximum Cost Final Completion Date
-------- ------------ ---------------------
Hamden Property $1,200,972 September 21, 1996
Knoxville Property 830,966 September 5, 1996
Port Richey Property 1,675,000 October 5, 1996
Hillsboro Property 1,119,248 December 2, 1996
Camarillo Property 1,264,789 October 3, 1996
Sevierville Property 517,571 October 3, 1996
(4) The "Total Cost" is equal to the sum of (i) the purchase price of the
Property, (ii) closing costs, and (iii) actual development costs
incurred under the development agreement, and in the case of the Hamden,
Port Richey and Hillsboro Properties, (iv) "construction financing
costs" during the development period.
(5) If the lessee exercises its purchase option after the third lease year
and before the eleventh lease year, the purchase price to be paid by the
lessee shall be equal to the net present value of the monthly lease
rental payments for the remainder of the lease term (including previous
and scheduled rent increases) discounted at the lesser of (i) 11% per
annum, or (ii) the then-current annual yield on 7-year Treasury
securities plus 4.5%, plus the full amount of any late fees, default
interest, enforcement costs or other sums otherwise due or payable by
the lessee under the lease. If the lessee exercises its option after
the tenth lease year, the purchase price to be paid by the lessee shall
be equal to the net present value of the monthly lease payments for the
remainder of the lease term (based, however, for purposes hereof on the
initial monthly installment amount of annual rental and not including
previous and scheduled increases) discounted at 11% per annum, plus the
full amount of any late fees, default interest, enforcement costs or
other sums otherwise due or payable by the lessee under the lease.
(6) Percentage rent shall be calculated on a calendar year basis (January 1
to December 31).
(7) If the Property is not producing percentage rent and the lessee
determines, in good faith, that the restaurant has become uneconomic and
unsuitable the lessee may elect, during the first through seventh and
again during the tenth through 15th lease years:
(i) to purchase the Property for a purchase price, net of closing
costs, equal to the greater of (a) the then fair-market value of the
Property as determined by an independent appraisal, or (b) 100% of the
Company's original cost for the Property if the Company is successful in
effectuating the lessee's purchase through a tax-free ``like-kind''
exchange, or 120% of the Company's original cost for the Property if a
tax-free, ``like-kind'' exchange is not effectuated; or
(ii) to sublet the Property as described in the section of the
Prospectus entitled ``Description of Property Leases - Assignment and
Sublease;'' or
(iii) to substitute the Property for another Golden Corral restaurant
property on terms similar to those described in the section of the
Prospectus entitled ``Description of Property Leases - Substitution of
Properties.''
(8) The lease relating to this Property is a land lease only. The Company
entered into a Mortgage Loan evidenced by a Master Mortgage Note for
$3,888,000 collateralized by building improvements. The Master Mortgage
Note bears interest at a rate of 10.75% per annum and principal and
interest will be collected in equal monthly installments over 20 years
beginning in July 1996.
(9) If the lessee exercises one or both of its renewal options, minimum
annual rent will increase by 12% after the expiration of the original
lease term and after five years thereafter during any subsequent lease
term.
(10) The Company entered into a Master Lease Agreement for the Beaver,
Bluefield, Huntington, Hurricane, Milton, Ronceverte, Beckley, Belle,
Cross Lanes and Marietta Properties.
(11) The Company and the lessee entered into remediation and indemnity
agreements on May 17, 1996, with the seller of the land and an adjacent
site owner/operator (the "Indemnitors") due to Phase I and Phase II
environmental testing results indicating that there were action levels
of environmental contamination on the Bluefield, Hurricane and Marrieta
Properties relating to underground gasoline storage tanks from one
property adjacent to the Hurricane Property and past use of the other
two Properties. Under the remediation and indemnity agreements, the
Indemnitors have agreed to notify all applicable federal, state, or
local government agencies or authorities of the environmental
contamination, to undertake all remediation work on these sites at no
expense to the Company or lessee, and to indemnify, defend and hold
harmless the Company, the lessee and investors from losses arising out
of or related to any claim, action, proceeding, lawsuit, notice of
violation or demand by any (i) governmental authority in connection with
the presence of any environmental contamination, (ii) failure of the
Indemnitors to notify any applicable governmental authorities, (iii)
remediation work, and (iv) claim, action, proceeding, lawsuit, or demand
by third parties who are not the successors in interest of the
indemnified parties and are not affiliated with the indemnified parties.
If as to any of the affected sites, the remediation work is not
satisfactorily completed within two years after the effective date, such
that the Company is willing, in its discretion, to remain the owner of a
particular affected site, the Company may "put" the particular affected
site back to the seller, and the seller will purchase the Company's
ownership interest in the affected site.
(12) The "Building Overage Multiplier" is calculated as follows:
Building Overage Multiplier = (purchase price of the
building)/[purchase price of the building + (annual rent due under
the land lease/land lease cap rate]
(13) In the event that the aggregate amount of percentage rent paid by the
lessee to the Company over the term of the lease shall equal or exceed
15% of the purchase price paid by the Company, then the option purchase
price shall equal one dollar. In the event that the aggregate
percentage rent paid shall be less than 15% of the purchase price paid
by the Company, then the option purchase price shall equal the
difference of 15% of the purchase price, less the aggregate percentage
rent paid to the landlord by the lessee under the lease.
(14) The lessee of the Knoxville, Camarillo, and Sevierville Properties is
the same unaffiliated lessee.
BORROWING AND SECURED EQUIPMENT LEASE
Between April 10, 1996 and June 14, 1996, the Company obtained one
advance of $550,245 under its $15,000,000 Loan. The advance is a fully
amortizing term loan repayable over six years and bears interest at a rate per
annum equal to 215 basis points above the Reserve Adjusted LIBOR Rate (as
defined in the Loan). The proceeds of the advance were used to acquire
Equipment for one restaurant property at a cost of approximately $539,000 and
to pay a Secured Equipment Servicing Fee of $10,776 to the Advisor. In
connection with the acquisition of the Equipment, the Company, as lessor,
entered into a Secured Equipment Lease with an unaffiliated lessee. This
unaffiliated lessee leases the restaurant property from an Affiliate of the
Advisor. The following table sets forth a summary of the principal terms of
the acquisition and lease of the Equipment.<PAGE>
<TABLE>
SECURED EQUIPMENT LEASES
From April 10, 1996 through June 14, 1996
<CAPTION>
Option
Description Purchase Price (1) Date Acquired Lease Expiration Annual Rent (2) To Purchase
- ----------- ------------------ ------------- ----------------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Equipment for Golden $539,469 06/14/96 06/2003 $109,617 (3)
Corral restaurant in (excluding
Middleburg Heights, closing costs
Ohio and Secured
(The "Middleburg Equipment Lease
Heights Secured Servicing Fee)
Equipment Lease")
</TABLE>
[FN]
(1) The Secured Equipment Lease is expected to be treated as a loan
secured by personal property for federal income tax purposes.
(2) Rental payments due under the Secured Equipment Lease are payable
monthly, commencing on the effective date of the lease.
(3) At the end of the lease term, if no event of default has occurred
under the terms of the Secured Equipment Lease, the lessee will have
the option to purchase the Equipment for $1.
<TABLE>
PRO FORMA ESTIMATE OF TAXABLE INCOME BEFORE DIVIDENDS PAID DEDUCTION OF
CNL AMERICAN PROPERTIES FUND, INC.
GENERATED FROM THE OPERATIONS OF PROPERTIES ACQUIRED FROM APRIL 10, 1996
THROUGH JUNE 14, 1996
FOR A 12-MONTH PERIOD (UNAUDITED)
The following schedule represents pro forma unaudited estimates of taxable income before dividends
paid deduction of each Property acquired by the Company from April 10, 1996 through June 14, 1996, for the
12-month period commencing on the date of the inception of the respective lease on such Property. 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. These estimates were prepared on the basis described in the accompanying notes
which should be read in conjunction herewith. No single lessee or group of affiliated lessees lease
Properties or has borrowed funds from the Company with an aggregate purchase price in excess of 20% of the
expected total net offering proceeds of the Company.
<CAPTION>
TGI Friday's Wendy's Golden Corral Ten Pizza
Hamden, CT (7) Knoxville, TN (7)(8) Port Richey, FL (7) Hut Properties
-------------- -------------------- ------------------- --------------
<S> <C> <C> <C> <C>
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction:
Base Rent (1) $ 173,714 $ 81,898 $ 196,972 $ 166,320
Interest Income (2) - - - 415,686
---------- ---------- ---------- ----------
Total Revenues 173,714 81,898 196,972 582,006
---------- ---------- ---------- ----------
Asset Management Fees (3) (6,808) (4,746) (10,233) (8,922)
Mortgage Management Fee (4) - - - (23,167)
General and Administrative
Expenses (5) (10,770) (5,078) (12,212) (36,084)
---------- ---------- ---------- ----------
Total Operating Expenses (17,578) (9,824) (22,445) (68,173)
---------- ---------- ---------- ----------
Estimated Cash Available from
Operations 156,136 72,074 174,527 513,833
Depreciation and Amortization
Expense (6) (30,652) (13,081) (30,970) (10,498)
---------- ---------- ---------- ----------
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction of the Company $ 125,484 $ 58,993 $ 143,557 $ 503,335
========== ========== ========== ==========
See Footnotes
</TABLE>
<TABLE>
<CAPTION>
Denny's Denny's Wendy's Wendy's
Hillsboro, TX (7) McKinney, TX Camarillo, CA (7)(8) Sevierville, TN (7)(8)
----------------- ------------ -------------------- ----------------------
<S> <C> <C> <C> <C>
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction:
Base Rent (1) $ 114,346 $ 104,013 $ 124,655 $ 60,735
Interest Income (2) - - - -
---------- ---------- ---------- ----------
Total Revenues 114,346 104,013 124,655 60,735
---------- ---------- ---------- ----------
Asset Management Fees (3) (6,319) (5,874) (7,224) (2,956)
Mortgage Management Fee (4) - - - -
General and Administrative
Expenses (5) (7,089) (6,449) (7,729) (3,766)
---------- ---------- ---------- ----------
Total Operating Expenses (13,408) (12,323) (14,953) (6,722)
---------- ---------- ---------- ----------
Estimated Cash Available from
Operations 100,938 91,690 109,702 54,013
Depreciation and Amortization
Expense (6) (19,022) (16,066) (17,220) (13,308)
---------- ---------- ---------- ----------
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction of the Company $ 81,916 $ 75,624 $ 92,482 $ 40,705
========== ========== ========== ==========
See Footnotes
</TABLE>
<TABLE>
<CAPTION>
Total
----------
<S> <C>
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction:
Base Rent (1) $1,022,653
Interest Income (2) 415,686
----------
Total Revenues 1,438,339
----------
Asset Management Fees (3) (53,082)
Mortgage Management Fee (4) (23,167)
General and Administrative
Expenses (5) (89,177)
----------
Total Operating Expenses (165,426)
----------
Estimated Cash Available from
Operations 1,272,913
Depreciation and Amortization
Expense (6) (150,817)
----------
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction of the Company $1,122,096
==========
</TABLE>
[FN]
- -------------------------------------------------------------------------
FOOTNOTES:
(1) Base rent does not include percentage rents which become due if
specified levels of gross receipts are achieved.
(2) The Company entered into a Master Mortgage Note agreement for
$3,888,000, collateralized by building improvements located on the Ten
Pizza Hut Properties. The Master Mortgage Note bears interest at a
rate of 10.75% per annum and principal and interest will be collected
in equal monthly installments over 20 years beginning in July 1996.
Amount does not include $19,440 of loan commitment fees and $19,440 in
loan origination fees collected by the Company at closing from the
borrower.
(3) The Properties will be managed pursuant to an advisory agreement
between the Company and CNL Fund Advisors, Inc. (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) For managing the Mortgage Loans, the Advisor will be entitled to
receive a monthly mortgage management fee of one-twelfth of .60% of
the total principal amount of the Mortgage Loans as of the end of the
preceding month. See "Management Compensation."
(5) Estimated at 6.2% of gross rental income and interest income based on
the previous experience of Affiliates of the Advisor with 17 public
limited partnerships which own properties similar to those owned by
the Company. 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 (the
building portion) of the Properties has been depreciated on the
straight-line method over 39 years. In connection with the Ten Pizza
Hut Properties, acquisition fees allocated to the Master Mortgage Note
have been amortized on a straight-line basis over the life of the
agreement (20 years).
(7) The Company accepted an assignment of an interest in the ground lease
relating to the Hamden and Sevierville Properties effective April 24,
1996 and June 5, 1996, respectively, in consideration of its funding
of certain preliminary development costs and its agreement to fund
remaining development. The development agreements for the Properties
which are to be constructed provide that construction must be
completed no later than the dates set forth below:
Property Estimated Final Completion Date
-------- -------------------------------
Hamden Property September 21, 1996
Knoxville Property September 5, 1996
Port Richey Property October 5, 1996
Hillsboro Property December 2, 1996
Camarillo Property October 3, 1996
Sevierville Property October 3, 1996
(8) The lessee of the Knoxville, Camarillo, and Sevierville Properties is
the same unaffiliated lessee.
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
INDEX TO FINANCIAL STATEMENTS
-----------------------------
Page
----
Pro Forma Consolidated Financial Information (unaudited):
Pro Forma Consolidated Balance Sheet as of March 31, 1996 27
Pro Forma Consolidated Statement of Earnings for the
quarter ended March 31, 1996 28
Pro Forma Consolidated Statement of Earnings for the year
ended December 31, 1995 29
Notes to Pro Forma Consolidated Financial Statements for
the quarter ended March 31, 1996 and the year
ended December 31, 1995 30
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following Pro Forma Consolidated Balance Sheet of the Company
gives effect to (i) property acquisition transactions from inception through
March 31, 1996, including the receipt of $55,041,881 in gross offering
proceeds from the sale of 5,504,188 shares of common stock pursuant to a
Form S-11 under the Securities Act of 1933, as amended, effective March 29,
1995, and the application of such proceeds to purchase 43 properties
(including 19 properties which consist of land and building, one property
through a joint venture arrangement which consists of land and building,
three properties which consist of building only and 20 properties consisting
of land only), four of which were under construction at March 31, 1996, to
provide mortgage financing to the lessee of the 20 properties consisting of
land only, and to pay organizational and offering expenses, acquisition fees
and miscellaneous acquisition expenses, (ii) the receipt of $12,330,152 in
gross offering proceeds from the sale of 1,233,015 additional shares of
common stock during the period April 1, 1996 through May 21, 1996, and (iii)
the application of such funds and $5,458,428 of cash and cash equivalents at
March 31, 1996, to purchase 18 additional properties acquired during the
period April 1, 1996 through May 21, 1996 (one of which is under
construction and consists of building only, four of which are under
construction and consist of land and building, and 13 properties which
consist of land only), to pay additional costs for the four properties under
construction at March 31, 1996, to provide mortgage financing to the lessee
of the 13 properties consisting of land only, 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 Pro Forma
Consolidated Balance Sheet as of March 31, 1996, includes the transactions
described in (i) above from its historical consolidated balance sheet,
adjusted to give effect to the transactions in (ii) and (iii) above, as if
they had occurred on March 31, 1996.
The Pro Forma Consolidated Statements of Earnings for the quarter
ended March 31, 1996 and the year ended December 31, 1995, include the
historical operating results of the properties described in (i) above from
the dates of their acquisitions plus operating results for the six of the 61
properties that were owned by the Company as of May 21, 1996, and had a
previous rental history prior to the Company's acquisition of such
properties, from (A) the later of (1) the date the property became
operational as a rental property by the previous owner or (2) June 2, 1995
(the date the Company became operational), to (B) the earlier of (1) the
date the property was acquired by the Company or (2) the end of the pro
forma period presented. No pro forma adjustments have been made to the Pro
Forma Consolidated Statements of Earnings for the remaining 55 properties
owned by the Company as of May 21, 1996, due to the fact that these
properties did not have a previous rental history.
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 predictive of the Company's financial
results or conditions in the future.
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
Pro Forma
ASSETS Historical Adjustments Pro Forma
------------ --------------- -----------
Land and buildings on operating
leases, less accumulated
depreciation $28,313,474$ 7,398,888 (a) $35,712,362
Net investment in direct financing
leases (c) 1,360,414 4,377,508 (a) 5,737,922
Cash and cash equivalents 8,775,306 (5,269,016)(a)
(189,412)(b) 3,316,878
Receivables 462,110 462,110
Mortgage note receivable 8,540,712 3,888,000 (a) 12,428,712
Prepaid expenses 37,275 37,275
Organization costs, less accumulated
amortization 16,682 16,682
Loan costs, less accumulated
amortization 51,559 51,559
Accrued rental income 152,047 152,047
Other assets 1,199,916 (43,945)(a) 1,155,971
---------------------- -----------
$48,909,495$10,162,023 $59,071,518
====================== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Note payable $ 53,659 $ 53,659
Accrued construction costs
payable 1,197,682$(1,005,913)(a)
(191,769)(b) $ -
Accounts payable and accrued
expenses 106,333 106,333
Escrowed real estate taxes payable 9,696 9,696
Due to related parties 415,418 415,418
Deferred financing income 29,366 13,608 (a) 42,974
Rents paid in advance 58,268 58,268
---------------------- -----------
Total liabilities 1,870,422 (1,184,074) 686,348
---------------------- -----------
Minority interest 293,329 2,357 (b) 295,686
---------------------- -----------
Stockholders' equity:
Preferred stock, without par value.
Authorized and unissued 3,000,000
shares - -
Excess shares, $.01 par value per
share. Authorized and unissued
23,000,000 shares - -
Common stock, $.01 par value per
share. Authorized 20,000,000
shares; issued and outstanding
5,524,188 shares; issued and
outstanding, as adjusted,
6,757,203 shares 55,242 12,330 (a) 67,572
Capital in excess of par value 46,983,886 11,331,410 (a) 58,315,296
Accumulated distributions in excess
of net earnings (293,384) (293,384)
---------------------- -----------
46,745,744 11,343,740 58,089,484
---------------------- -----------
$48,909,495$10,162,023 $59,071,518
====================== ===========
See accompanying notes to unaudited pro forma consolidated
financial statements.
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
QUARTER ENDED MARCH 31, 1996
Pro Forma
Historical Adjustments Pro Forma
---------- -------------- ----------
Revenues:
Rental income from operating
leases $ 763,155 $ 26,417 (1) $ 789,572
Earned income from direct
financing lease (2) 35,926 35,926
Interest and other income 260,798 (6,925)(3) 253,873
---------- ---------- ----------
1,059,879 19,492 1,079,371
---------- ---------- ----------
Expenses:
General operating and
administrative 128,948 128,948
Professional services 29,692 29,692
Asset and mortgage management
fees to related party 40,370 1,246 (4) 41,616
State and other taxes 2,898 410 (5) 3,308
Interest expense 159 159
Depreciation and amortization 98,472 3,966 (6) 102,438
---------- ---------- ----------
300,539 5,622 306,161
---------- ---------- ----------
Earnings Before Minority
Interest in Earnings of
Consolidated Joint Venture 759,340 13,870 773,210
Minority Interest in Earnings
of Consolidated Joint Venture (14,752) (14,752)
---------- ---------- ----------
Net Earnings $ 744,588 $ 13,870 $ 758,458
========== ========== ==========
Earnings Per Share of Common
Stock $ .16 $ .16
========== ==========
Weighted Average Number of
Shares of Common Stock
Outstanding 4,649,040 4,649,040
========== ==========
See accompanying notes to unaudited pro forma consolidated
financial statements.
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
YEAR ENDED DECEMBER 31, 1995
Pro Forma
Historical Adjustments Pro Forma
---------- -------------- ----------
Revenues:
Rental income from operating
leases $ 498,817 $ 94,792 (1) $ 593,609
Earned income from direct
financing leases (2) 28,935 28,935
Contingent rental income 12,024 12,024
Interest income 119,355 (28,853)(3) 90,502
--------- --------- ---------
659,131 65,939 725,070
--------- --------- ---------
Expenses:
General operating and
administrative 134,759 134,759
Professional services 8,119 8,119
Asset management fee to
related party 23,078 4,368 (4) 27,446
State taxes 20,189 1,672 (5) 21,861
Depreciation and amortization 104,131 14,700 (6) 118,831
--------- --------- ---------
290,276 20,740 311,016
--------- --------- ---------
Earnings Before Minority
Interest in Earnings of
Consolidated Joint Venture 368,855 45,199 414,054
Minority Interest in Earnings
of Consolidated Joint Venture (76) (76)
--------- --------- ---------
Net Earnings $ 368,779 $ 45,199 $ 413,978
========= ========= =========
Earnings Per Share of Common
Stock (7) $ .19 $ .22
========= =========
Weighted Average Number of
Shares of Common Stock
Outstanding (7) 1,898,350 1,905,970
========= =========
See accompanying notes to unaudited pro forma consolidated
financial statements.
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED MARCH 31, 1996
AND THE YEAR ENDED DECEMBER 31, 1995
Pro Forma Consolidated Balance Sheet:
- ------------------------------------
(a) Represents gross proceeds of $12,330,152 from the issuance of
1,233,015 shares of common stock during the period April 1, 1996
through May 21, 1996, and proceeds of $13,608 of deferred financing
income (loan origination and commitment fees, net of legal fees) from
the $3,888,000 mortgage financing described below, used (i) to acquire
18 properties for $8,092,460 (of which 13 properties consist of land
only, one property consists of building only and four properties
consist of land and building), (ii) to fund estimated construction
costs of $4,091,047 ($1,005,913 of which was accrued as construction
costs payable at March 31, 1996) relating to four wholly-owned
properties under construction at March 31, 1996, (iii) to pay
acquisition fees of $554,857 and reclassify from other assets $43,945
of acquisition fees previously incurred relating to the acquired
properties, (iv) to pay selling commissions and offering expenses
(stock issuance costs) of $986,412, which have been netted against
capital in excess of par value and (v) to provide mortgage financing
in the amount of $3,888,000 to the lessee of the 13 properties
consisting of land only.
The pro forma adjustments to land and buildings on operating leases
and net investment in direct financing leases as a result of the above
transactions were as follows:
Estimated
purchase price
(including con-
struction and Acquisition
closing costs) fees
and additional allocated
construction costs to property Total
------------------ ----------- -----------
Three Pizza Huts
(land only)
in Ohio $ 489,117 $ 26,203 $ 515,320
Burger King in
Indian Head
Park, IL 1,272,725 68,182 1,340,907
Burger King in
Highland, IN 1,212,558 64,958 1,277,516
TGI Friday's in
Hamden, CT 1,134,628 60,784 1,195,412
Wendy's in
Knoxville, TN 790,984 42,375 833,359
Golden Corral in
Port Richey, FL 1,705,448 91,364 1,796,812
Ten Pizza Huts
(land only)
in West Virginia
and Ohio 1,487,000 79,661 1,566,661
Four wholly owned
properties under
construction at
March 31, 1996 3,085,134 165,275 3,250,409
----------- ----------- -----------
$11,177,594 $ 598,802 $11,776,396
=========== =========== ===========
Adjustment classified
as follows:
Land and buildings on
operating leases $ 7,398,888
Net investment in
direct financing
leases 4,377,508
-----------
$11,776,396
===========
(b) Represents the use of $189,412 of the Company's net offering proceeds
and the assumed receipt of $2,357 in capital contributions from the
Company's co-venture partner in accordance with the joint venture
agreement of CNL/Corral South Joint Venture, to fund estimated
construction costs of $191,769 accrued as construction costs payable
at March 31, 1996, relating to the one property of the joint venture.
The Company accounts for its 84.69% interest in the accounts of
CNL/Corral South Joint Venture under the full consolidation method.
All significant intercompany accounts and transactions have been
eliminated.
(c) In accordance with generally accepted accounting principles, leases in
which the present value of future minimum lease payments equals or
exceeds 90 percent of the value of the related properties are treated
as direct financing leases rather than as land and buildings. The
categorization of the leases has no effect on rental revenues
received. The building portions of five of the properties have been
classified as direct financing leases.
Pro Forma Consolidated Statements of Earnings:
- ---------------------------------------------
(1) Represents rental income from operating leases and earned income from
direct financing leases for the six of the 61 properties acquired
during the period June 2, 1995 (the date the Company began operations)
through May 21, 1996 which had a previous rental history prior to the
acquisition of the property by the Company (the "Pro Forma
Properties"), for the period commencing (A) the later of (i) the date
the property became operational as a rental property by the previous
owner or (ii) June 2, 1995 (the date the Company became operational),
to (B) the earlier of (i) the date the Pro Forma Property was acquired
by the Company or (ii) the end of the pro forma period presented.
Each of the six Pro Forma Properties was acquired from an affiliate
who had purchased and temporarily held title to the property. The
noncancellable leases for the Pro Forma Properties in place during the
period the affiliate owned the properties were assigned to the Company
at the time the Company acquired the properties. The following
presents the actual date the Pro Forma Properties were acquired by the
Company as compared to the date the Pro Forma Properties were treated
as placed in service for purposes of the Pro Forma Consolidated
Statements of Earnings.
Date Placed Pro Forma
in Service Date Placed
By the Company In Service
-------------- ------------
Jack in the Box in
Los Angeles, CA June 1995 June 1995
Kenny Rogers Roasters in
Grand Rapids, MI August 1995 June 1995
Kenny Rogers Roasters in
Franklin, TN August 1995 June 1995
Denny's in Pasadena, TX September 1995 August 1995
Denny's in Shawnee, OK September 1995 August 1995
Denny's in Grand Rapids, MI March 1996 September 1995
In accordance with generally accepted accounting principles, lease
revenue from leases accounted for under the operating method is
recognized over the terms of the leases. For operating leases
providing escalating guaranteed minimum rents, income is reported on a
straight-line basis over the terms of the leases. For leases
accounted for as direct financing leases, future minimum lease
payments are recorded as a receivable. The difference between the
receivable and the estimated residual values less the cost of the
properties is recorded as unearned income. The unearned income is
amortized over the lease terms to provide a constant rate of return.
Accordingly, pro forma rental income from operating leases and earned
income from direct financing leases does not necessarily represent
rental payments that would have been received if the properties had
been operational for the full pro forma period.
Generally, the leases provide for the payment of percentage rent in
addition to base rental income. However, due to the fact that no
percentage rent was due under the leases for the Pro Forma Properties
during the portion of 1996 and 1995 that the previous owners held the
properties, no pro forma adjustment was made for percentage rental
income for the quarter ended March 31, 1996 and the year ended
December 31, 1995.
(2) See Note (c) under "Pro Forma Consolidated Balance Sheet" above for a
description of direct financing leases.
(3) Represents adjustment to interest income due to the decrease in the
amount of cash available for investment in interest bearing accounts
during the periods commencing (A) on the later of (i) the dates the
Pro Forma Properties became operational as rental properties by the
previous owners or (ii) June 2, 1995 (the date the Company became
operational), through (B) the earlier of (i) the actual dates of
acquisition by the Company or the end of the pro forma period
presented, as described in Note (1) above. The estimated pro forma
adjustment is based upon the fact that interest income on interest
bearing accounts was earned at a rate of approximately four percent
per annum by the Company during the quarter ended March 31, 1996 and
the year ended December 31, 1995.
(4) Represents incremental increase in asset management fees relating to
the Pro Forma Properties for the period commencing (A) on the later of
(i) the date the Pro Forma Properties became operational as rental
properties by the previous owners or (ii) June 2, 1995 (the date the
Company became operational), through (B) the earlier of (i) the date
the Pro Forma Properties were acquired by the Company or (ii) the end
of the pro forma period presented, as described in Note (1) above.
Asset management fees are equal to 0.60% of the Company's Real Estate
Asset Value (estimated to be approximately $5,241,000 for the Pro
Forma Properties for the quarter ended March 31, 1996 and the year
ended December 31, 1995), as defined in the Company's prospectus.
(5) Represents adjustment to state tax expense due to the incremental
increase in rental revenues of Pro Forma Properties. Estimated pro
forma state tax expense was calculated based on an analysis of state
laws of the various states in which the Company has acquired the Pro
Forma Properties. The estimated pro forma state taxes consist
primarily of income and franchise taxes ranging from zero to
approximately three percent of the Company's pro forma rental income
of each Pro Forma Property. Due to the fact that the Company's leases
are triple net, the Company has not included any amounts for real
estate taxes in the pro forma statement of earnings.
(6) Represents incremental increase in depreciation expense of the
building portions of the Pro Forma Properties accounted for as
operating leases using the straight-line method over an estimated
useful life of 30 years.
(7) Historical earnings per share were calculated based upon the weighted
average number of shares of common stock outstanding during the
quarter ended March 31, 1996, and during the period the Company was
operational, June 2, 1995 (the date following when the Company
received the minimum offering proceeds and funds were released from
escrow) through December 31, 1995.
As a result of three of the six Pro Forma Properties being treated in
the Pro Forma Consolidated Statement of Earnings for the year ended
December 31, 1995, as placed in service on June 2, 1995 (the date the
Company became operational), the Company assumed approximately 347,100
shares of common stock were sold, and the net offering proceeds were
available for investment, on June 2, 1996. Due to the fact that
approximately 184,800 of these shares of common stock were actually
sold subsequently, during the period June 3, 1995 through June 20,
1995, the weighted average number of shares outstanding for the pro
forma period was adjusted. Pro forma earnings per share were
calculated based upon the weighted average number of shares of common
stock outstanding, as adjusted, during the period the Company was
operational, June 2, 1995 through December 31, 1995.
