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 and the Prospectus Supplement dated October
18, 1996. This Supplement replaces the Supplements dated October 23, 1996,
November 12, 1996 and November 26, 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 December 5, 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 December 5, 1996, will be reported in a
subsequent Supplement.
THE OFFERING
As of December 5, 1996, the Company had received aggregate subscription
proceeds of $125,266,631 (12,526,663 Shares) from 6,782 stockholders,
including $391,348 (39,135 Shares) issued pursuant to the Reinvestment Plan.
As of December 5, 1996, net proceeds to the Company from its offering of
shares after deduction of Selling Commissions, Marketing Support and Due
Diligence Expense Reimbursement Fees and Organizational and Offering Expenses
totalled $110,690,998. As of December 5, 1996, the Company had invested or
committed for investment approximately $88,500,000 of such net proceeds in 89
Properties (including one Property through a joint venture arrangement which
consists of land and building, seven Properties which consist of building
only, 35 Properties which consist of land only and 46 Properties which consist
of land and building), in providing mortgage financing to the tenants of the
35 Properties consisting of land only and to pay Acquisition Fees and
Acquisition Expenses, leaving approximately $22,200,000 in offering proceeds
available for investment in Properties and Mortgage Loans. As of December 5,
1996, the Company had incurred $5,636,998 in Acquisition Fees to the Advisor.
SUBSEQUENT OFFERING
On November 1, 1996, the Company filed a registration statement with the
Securities and Exchange Commission in connection with the proposed sale by the
Company of up to 27,500,000 shares of common stock in a public offering (the
"Subsequent Offering") expected to commence immediately following the
termination of this offering. Of the 27,500,000 shares of common stock to be
offered, 2,500,000 will be available only to stockholders purchasing through
the Reinvestment Plan. Until such time, if any, as the stockholders approve
an increase in the number of authorized shares of Common Stock of the Company,
the subsequent offering will be limited to 4,800,000 shares. The Board of
Directors expects to submit, for a vote of the stockholders at a meeting
expected to be held in March of 1997, a resolution to increase the number of
authorized shares of Common Stock of the Company from 20,000,000 to
75,000,000. The price per share and the other terms of the Subsequent
Offering, including the percentage of gross proceeds payable to the Managing
Dealer for selling commissions and expenses in connection with the offering,
payable to the Advisor for Acquisition Fees and Acquisition Expenses and
reimbursable to the Advisor for Organizational and Offering Expenses, will be
the same as those for this offering. Net proceeds from the Subsequent
Offering will be invested in additional Properties and Mortgage Loans.
Management believes that the increase in the amount of assets of the Company
that will result from the Subsequent Offering will also increase the
diversification of the Company's assets and the likelihood of Listing,
although there is no assurance that Listing will occur.
REDEMPTION OF SHARES
The Company will not redeem any Shares during any period in which the
Company is making a public offering.
December 10, 1996 Prospectus Dated April 26, 1996
BUSINESS
PROPERTY ACQUISITIONS
Between October 4, 1996 and December 5, 1996, the Company acquired six
Properties, including one Property consisting of building only, two Properties
consisting of land only and three Properties consisting of land and building.
The Properties are a Wendy's Property (in San Diego, California), two Golden
Corral Properties (one in each of Lufkin, Texas, and Columbia, Tennessee), a
Burger King Property (in Chattanooga, Tennessee) and two Pizza Hut Properties
(one in each of Toledo and Bowling Green, Ohio). For information regarding
the 83 Properties acquired by the Company prior to October 4, 1996, see the
Prospectus dated April 26, 1996, and the Prospectus Supplement dated October
18, 1996.
In connection with the purchase of the Wendy's Property in San Diego,
California, which is building only, the Company, as lessor, entered into a
long-term lease agreement with an unaffiliated lessee. The general terms of
the lease agreement are described in the section of the Prospectus entitled
"Business - Description of Property Leases." In connection with the purchase
of this Property, which is to be constructed, the Company has entered into
development and indemnification and put agreements with the lessee. 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 this acquisition, the
Company has also entered into a tri-party agreement with the lessee and the
landlord of the land. The tri-party agreement provides that the ground lessee
is responsible for all obligations under the ground lease and provides certain
rights to the Company relating to the maintenance of its interest in the
building in the event of a default by the lessee under the terms of the ground
lease.
In connection with the purchase of the two Golden Corral Properties and
the Burger King Property, 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 acquisition of the Golden Corral Properties in
Chattanooga and Columbia, Tennessee, the Company incurred
Development/Construction Management Fees of $100,000 and $37,850,
respectively, to an Affiliate of the Company as Acquisition Fees. See the
sections of the Prospectus entitled "Management Compensation" and "Business -
Site Selection and Acquisition of Properties."
In connection with the Two Pizza Hut Properties, which are land only,
the Company acquired the land and is leasing these two parcels to the lessee,
Castle Hill Holdings VII, L.L.C. ("Castle Hill"), pursuant to a master lease
agreement (the "Master Lease Agreement"). Castle Hill has subleased the Two
Pizza Hut Properties to one of its affiliates, Midland Food Services II,
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
Two Pizza Hut Properties. In connection with the acquisition of the Two Pizza
Hut Properties, the Company provided mortgage financing of $484,000 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 Two 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 February 1, 1997. The Master Mortgage
Note equals approximately 76 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 Two Pizza Hut Properties and due to other
underwriting criteria, the Company has sufficient collateral for the Master
Mortgage Note.
As of December 5, 1996, the Company had initial commitments to acquire
ten properties, consisting of land and building. 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
ten of these properties are expected to be entered into on substantially the
same terms described in the section of the Prospectus entitled "Business -
Description of Property Leases," except as described below.
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>
Boston Market 15 years; five five-year 10.38% of Total Cost for each lease year at any time after
Atlanta, GA renewal options (1); increases by 10% after the fifth lease the fifth lease
Restaurant to be after the fifth lease year, (i) 5% of year
constructed year and after every annual gross sales
five years thereafter minus (ii) the
during the lease term minimum annual rent
for such lease year
Burger King 20 years; two five-year 11% of Total Cost (1) for each lease year, None
Chattanooga, TN (#2) renewal options (i) 8.5% of annual
Restaurant to be gross sales minus
renovated (ii) the minimum
annual rent for such
lease year
Golden Corral 20 years; two five-year 11.25% of Total Cost for each lease year, at any time after
East Lake, OH renewal options (1); increases by 10% (i) 5% of annual the seventh lease
Restaurant to be after the fifth lease gross sales minus year
constructed year and after every (ii) the minimum
five years thereafter annual rent for such
during the lease term lease year
Jack in the Box 18 years; four five-year 10.75% of Total Cost for each lease year, at any time after
Humble, TX renewal options (1); increases by 8% (i) 5% of annual the seventh lease
Restaurant to be after the fifth lease gross sales minus year
constructed year and by 10% after (ii) the minimum
every five years annual rent for such
thereafter during the lease year
lease term
Shoney's 20 years; two five-year 11.75% of Total Cost for each lease year, at any time after
Fort Myers, FL renewal options (1); increases by 10% (i) 6% of annual the seventh lease
Restaurant to be after the fifth lease gross sales minus year
constructed year and after every (ii) the minimum
five years thereafter annual rent for such
during the lease term lease year
Boston Market 15 years; five five-year 10.38% of Total Cost for each lease year at any time after
St. Joseph, MO renewal options (1); increases by 10% after the fifth lease the fifth lease
Restaurant to be after the fifth lease year, (i) 5% of year
constructed year and after every annual gross sales
five years thereafter minus (ii) the
during the lease term minimum annual rent
for such lease year
Golden Corral 15 years; four five-year 10.75% of Total Cost for each lease year, during the first
Moberly, MO renewal options (1) 5% of the amount by through seventh
Restaurant to be which annual gross lease years and the
constructed sales exceed a to be tenth through
determined breakpoint fifteenth lease
years only
Jack in the Box 18 years; four five-year 10.25% of Total Cost for each lease year, at any time after
Dallas, TX renewal options (1); increases by 8% (i) 5% of annual the seventh lease
Restaurant to be after the fifth lease gross sales minus year
constructed year and after every (ii) the minimum
five years thereafter annual rent for such
during the lease term lease year
Jack in the Box 18 years; four five-year 10.25% of Total Cost for each lease year, at any time after
Murietta, CA renewal options (1); increases by 8% (i) 5% of annual the seventh lease
Restaurant to be after the fifth lease gross sales minus year
constructed year and after every (ii) the minimum
five years thereafter annual rent for such
during the lease term lease year
Shoney's 20 years; two five-year 11% of Total Cost (1); for each lease year, at any time after
Indian Harbor, FL renewal options increases by 10% after 6% of the amount by the seventh lease
Restaurant to be the fifth lease year which annual gross year
renovated and after every five sales exceed
years thereafter $1,500,000 but are
during the lease term less than $1,750,000,
plus 4% of the amount
by which annual gross
sales exceed
$1,750,000
</TABLE>
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.
The following table sets forth the location of the six Properties,
including one Property consisting of building only, two Properties consisting
of land only and three Properties consisting of land and building, acquired by
the Company, from October 4, 1996 through December 5, 1996, a description of
the competition, and a summary of the principal terms of the acquisition and
lease of the Property.
<TABLE>
PROPERTY ACQUISITIONS
From October 4, 1996 through December 5, 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>
WENDY'S (3) 10/16/96 10/2011; three 13.39% of Total for each lease upon the
(the "San Diego (3) five-year Cost (4); year, (i) 6% of expiration of
Property") renewal options increases by 8% annual gross the initial
Restaurant to be after the fifth sales times the term of the
constructed lease year and Building Overage lease and
after every five Multiplier (5) during any
The San Diego Property years thereafter minus (ii) the renewal period
is located at the during the lease minimum annual thereafter
northeast corner of Gill term rent for such
Village Way and Rio San lease year
Diego Drive, in San
Diego, San Diego County,
California, in an area
of mixed retail,
commercial, and
residential development.
Other fast-food and
family-style restaurants
located in proximity to
the San Diego Property
include a Burger King, a
Jack in the Box, and a
McDonald's.
GOLDEN CORRAL $1,060,031 11/19/96 10/2011; four 10.75% of Total for each lease during the
(the "Lufkin Property") (excluding five-year Cost (4) year, 5% of the fist through
Restaurant to be closing costs) renewal options amount by which seventh lease
constructed (3) annual gross years and the
sales exceed tenth through
The Lufkin Property is $2,543,062 fifteenth
located on the east side lease years
of South First Street only
and the west side of
Brentwood Drive in
Lufkin, Angelica County,
Texas, in an area of
mixed retail,
commercial, and
residential development.
Other fast-food and
family-style restaurants
located in proximity to
the Lufkin Property
include a Burger King, a
Whataburger, an Arby's,
a Long John Silver's, a
Sonic Drive-In, a
McDonald's, and several
local restaurants.
GOLDEN CORRAL $1,306,876 12/03/96 12/2016; two $147,024; for each lease at any time
(the "Columbia (excluding five-year increases by 12% year, (i) 6% of after the
Property") closing costs) renewal options after the fifth annual gross seventh lease
Existing Restaurant lease year and sales minus (ii) year
after every five the minimum
The Columbia Property is years thereafter annual rent for
located on the southeast during the lease such lease year
corner of South James term
Campbell Boulevard and
Hillary Drive, in
Columbia, Maury County,
Tennessee, in an area of
mixed retail,
commercial, and
residential development.
Other fast-food and
family-style restaurants
located in proximity to
the Columbia Property
include an Applebee's, a
Checkers, a Krystal's, a
Ponderosa, a Ruby
Tuesday, a Sonic, a
Subway Sandwich Shop, a
Shoney's, an Arby's, a
Burger King, a Waffle
House, a New Orleans
Famous Fried Chicken,
and a Western Sizzling.
BURGER KING $613,608 12/05/96 12/2016; two 11% of Total Cost for each lease None
(the "Chattanooga (excluding five-year (4) year, (i) 8.5% of
Property") closing and renewal options annual gross
Restaurant to be development sales minus (ii)
constructed costs) (3) the minimum
annual rent for
The Chattanooga Property such lease year
is located on the
southwest corner of
Amnicola Highway and
Riverport Road, in
Chattanooga, Hamilton
County, Tennessee, in an
area of mixed commercial
and manufacturing
development. Other
fast-food and family-
style restaurants
located in proximity to
the Chattanooga Property
include a Bo Jangles.
TWO PIZZA HUT PROPERTIES $316,000 12/05/96 12/2016; two $34,760; increases None at any time
- - Land only - (6)(7) (excluding ten-year by 10% after the after the
located in closing costs) renewal options fifth and tenth seventh lease
Toledo, Ohio (the lease years and year
"Toledo Property") and 12% after the
Bowling Green, Ohio (the fifteenth lease
"Bowling Green year
Property")
The Toledo Property is
located on the northwest
corner of the
intersection of Broadway
Avenue and South Avenue,
in Toledo, Lucas County,
Ohio, in an area of
mixed retail,
commercial, and
residential development.
Other fast-food and
family-style restaurants
located in proximity to
the Toledo Property
include a Taco Bell, a
McDonald's, a Rally's, a
Subway Sandwich Shop,
and a local restaurant.
The Bowling Green
Property is located on
the southeast corner of
the intersection of East
Wooster Avenue and
Mercer Road in Bowling
Green, Wood County,
Ohio, in an area of
mixed retail,
commercial, and
residential development.
Other fast-food and
family-style restaurants
located in proximity to
the Bowling Green
Property include a Big
Boy, a McDonald's, a
Wendy's, a Taco Bell, a
Chi Chi's, a Burger
King, and a Little
Caesar's.
</TABLE>
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
-------- -----------------
San Diego Property $641,000
Lufkin Property 977,000
Columbia Property 879,500
Chattanooga Property 706,200
(2) Minimum annual rent for each of the Properties became payable on the
effective date of the lease, except as indicated below. For the San
Diego 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, (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 Lufkin 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.
For the Chattanooga Property, minimum annual rent will become due and
payable on the possession date, which is April 4, 1997 (the "Possession
Date"). During the period commencing with the effective date of the
lease to the date minimum annual rent becomes payable for the San Diego
and Lufkin Properties, as described above, the tenant shall pay monthly
"interim rent" equal to 10.25% and 10.75% per annum, respectively, of
the amount funded by the Company in connection with the purchase and
construction of the Properties.
(3) The Company accepted an assignment of an interest in the ground lease
relating to the San Diego Property effective October 16, 1996, in
consideration of its funding of certain preliminary development costs
and its agreement to fund remaining development costs not in excess of
the amount specified below. The development agreements for the San
Diego, Lufkin and Chattanooga 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 amount set forth below:
Estimated Final
Property Estimated Maximum Cost Completion Date
-------- ---------------------- ---------------
San Diego Property $ 638,966 February 13, 1997
Lufkin Property 1,454,545 May 18, 1997
Chattanooga Property 1,181,818 April 4, 1997
(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.
(5) The "Building Overage Multiplier" is calculated as follows:
Building Overage Multiplier = (purchase price of the
building)/(purchase price of the building + $685,714)
(6) 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
$484,000 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 February 1997.
(7) The Company entered into a Master Lease Agreement for the Toledo and
Bowling Green Properties.
BORROWING AND SECURED EQUIPMENT LEASE
Between October 4, 1996 and December 5, 1996, the Company obtained two
advances totalling $629,578 under its $15,000,000 Loan. The proceeds of the
advances were used to acquire Equipment for two restaurant properties in
Hopkinsville, Kentucky (the "Hopkinsville Secured Equipment Lease") and
Columbia, Tennessee (the "Columbia Secured Equipment Lease"), at a cost of
$629,578, including Secured Equipment Lease Servicing Fees of $11,684 to the
Advisor. The Hopkinsville Secured Equipment Lease is considered to be an
interest only loan for the first two months and upon obtaining an additional
advance prior to the third month (February 1997) will become a fully
amortizing term loan repayable over six years. The Columbia Secured Equipment
Lease is a fully amortizing term loan repayable over six years. The advances
bear interest at a rate per annum equal to 215 basis points above the Reserve
Adjusted LIBOR Rate (as defined in the Loan).
The following table sets forth a summary of the principal terms of the
acquisition and lease of the Equipment.
<TABLE>
SECURED EQUIPMENT LEASE
From October 4, 1996 through December 5, 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 $150,000 (3) (4) (4) (5)
CORRAL RESTAURANT IN (excluding closing
HOPKINSVILLE, KENTUCKY costs and Secured
(The "Hopkinsville Equipment Lease
Secured Equipment Servicing Fee)
Lease")
EQUIPMENT FOR GOLDEN $466,573 12/04/96 12/2003 $7,901 (5)
CORRAL RESTAURANT IN (excluding closing
COLUMBIA, costs and Secured
TENNESSEE Equipment Lease
(The "Columbia Secured Servicing Fee)
Equipment Lease")
</TABLE>
FOOTNOTES:
(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) On November 20, 1996, the Company obtained an advance of $153,676 for
partial funding of the Equipment for a restaurant property in
Hopkinsville, Kentucky. The Company anticipates obtaining another
advance of $261,916 to fund the balance of the acquisition price of the
Equipment within three months of obtaining the initial advance of
$153,676 described above.
(4) The temporary Secured Equipment Lease entered into on November 20, 1996,
has a term of three months and requires the payment of monthly rent of
$1,281. Upon funding the balance of the Equipment purchase price, which
is expected to occur in the third month following the initial Equipment
funding, the Company will enter into a final Secured Equipment Lease.
The final Secured Equipment Lease is expected to have a term of
approximately seven years and provide for the payment of rent (payable
monthly) in an amount equal to the total purchase price of the Equipment
plus interest at a rate of ten percent per annum.
(5) Lessee may purchase the Equipment prior to the expiration of the final
Secured Equipment Lease, at the then present value of the remaining
rental payments, discounted at a rate of ten percent per annum.
<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 OCTOBER 4, 1996
THROUGH DECEMBER 5, 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 October 4, 1996 through December 5, 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>
Wendy's Golden Corral Golden Corral Burger King
San Diego, CA (5) Lufkin, TX (5) Columbia, TN Chattanooga, TN
----------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C>
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction:
Base Rent (1) $ 82,267 $148,984 $147,024 $127,536
Interest Income (2) - - - -
-------- -------- -------- --------
Total Revenues 82,267 148,984 147,024 127,536
-------- -------- -------- --------
Asset Management Fees (3) (3,649) (8,191) (7,765) (6,933)
Mortgage Management Fee (4) - - - -
General and Administrative
Expenses (5) (5,101) (9,237) (9,115) (7,907)
-------- -------- -------- --------
Total Operating Expenses (8,750) (17,428) (16,880) (14,840)
-------- -------- -------- --------
Estimated Cash Available from
Operations 73,517 131,556 130,144 112,696
Depreciation and Amortization
Expense (6) (16,430) (25,044) (22,551) (18,107)
-------- -------- -------- --------
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction of the Company $ 57,087 $106,512 $107,593 $ 94,589
======== ======== ======== ========
See Footnotes
</TABLE>
<TABLE>
<CAPTION>
Two Pizza Hut
Properties Total
------------- --------
<S> <C> <C>
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction:
Base Rent (1) $ 34,760 $540,571
Interest Income (2) 51,678 51,678
-------- --------
Total Revenues 86,438 592,249
-------- --------
Asset Management Fees (3) (1,896) (28,434)
Mortgage Management Fee (4) (2,904) (2,904)
General and Administrative
Expenses (5) (5,359) (36,719)
-------- --------
Total Operating Expenses (10,159) (68,057)
-------- --------
Estimated Cash Available from
Operations 76,279 524,192
Depreciation and Amortization
Expense (6) (1,307) (83,439)
-------- --------
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction of the Company $ 74,972 $440,753
======== ========
</TABLE>
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 $484,000,
collateralized by building improvements located on the Two 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 February 1997. Amount does not
include $2,420 of loan commitment fees and $2,420 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 Two 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 development agreements for the Properties which are to be
constructed, provide that construction must be completed no later than
the date set forth below:
Property Estimated Final Completion Date
-------- -------------------------------
San Diego Property February 13, 1997
Lufkin Property May 18, 1997
Chattanooga Property April 4, 1997
