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 Supplement
dated April 30, 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 May 9, 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 May 9, 1996, will be reported in a subsequent
Supplement.
THE OFFERING
As of May 9, 1996, the Company had received aggregate subscription
proceeds of $65,019,852 (6,501,985 Shares) from 3,856 stockholders, including
$128,151 (12,815 Shares) issued pursuant to the Reinvestment Plan. As of May
9, 1996, the Company had invested or committed for investment approximately
$49,500,000 of such proceeds in 51 Properties (including one Property through
a joint venture arrangement which consists of land and building, four
Properties which consist of building only, 23 Properties which consist of land
only and 23 Properties which consist of land and building), in providing
mortgage financing to the tenant of the 23 Properties consisting of land only
and to pay Acquisition Fees and Acquisition Expenses, leaving approximately
$6,500,000 in offering proceeds available for investment in Properties and
Mortgage Loans. As of May 9, 1996, the Company had incurred $2,925,893 in
Acquisition Fees to the Advisor.
BUSINESS
PROPERTY ACQUISITIONS
Between April 10, 1996 and May 9, 1996, the Company acquired three
Properties. The Properties are one TGI Friday's Property (in Hamden,
Connecticut), one Wendy's Property (in Knoxville, Tennessee) and one Golden
Corral Property (in Port Richey, Florida). For information regarding the 48
Properties acquired by the Company prior to April 10, 1996, see the Prospectus
dated April 26, 1996.
In connection with the purchase of the TGI Friday's Property, which is
building only, in Hamden, Connecticut, 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
owner 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.
May 15, 1996 Prospectus Dated April 26, 1996
In connection with the purchase of the Wendy's Property and the Golden
Corral 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." 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."
As of May 9, 1996, the Company had initial commitments to acquire 15
properties, including ten Pizza Hut properties which consist of land only, two
properties which consist of building only and three properties which consist
of land and building. The initial commitments for the Denny's property in
Hillsboro, Texas, the Golden Corral property in Brooklyn, Ohio, and the Jack
in the Box property in Humble, Texas, were entered into on May 9, 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 15 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 ten Pizza Hut properties, the Company anticipates
acquiring the land and leasing it to the tenant, Castle Hill, pursuant to a
master lease agreement for these ten properties. The tenant is expected to
own the buildings for these ten Pizza Hut properties. In connection
therewith, the Company anticipates providing mortgage financing to the tenant
which will be collateralized by the building improvements. If the mortgage
note is executed, it is expected to be executed under substantially the same
terms described in "Business - Mortgage Loans."
In connection with the Wendy's property in Knoxville, Tennessee, and 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>
Pizza Hut (1)(3) 20 years; two ten-year 11% of the Company's None at any time after
Beaver, WV renewal options total cost to purchase the seventh year
Land only the land; increases by
10% after the fifth
and tenth lease years
and 12% after the
fifteenth lease year
(2)
Pizza Hut (1)(3) 20 years; two ten-year 11% of the Company's None at any time after
Beckley, WV (#1) renewal options total cost to purchase the seventh year
Land only the land; increases by
10% after the fifth
and tenth lease years
and 12% after the
fifteenth lease year
(2)
Pizza Hut (1)(3) 20 years; two ten-year 11% of the Company's None at any time after
Beckley, WV (#2) renewal options total cost to purchase the seventh year
Land only the land; increases by
10% after the fifth
and tenth lease years
and 12% after the
fifteenth lease year
(2)
Pizza Hut (1)(3) 20 years; two ten-year 11% of the Company's None at any time after
Bluefield, WV renewal options total cost to purchase the seventh year
Land only the land; increases by
10% after the fifth
and tenth lease years
and 12% after the
fifteenth lease year
(2)
Pizza Hut (1)(3) 20 years; two ten-year 11% of the Company's None at any time after
Huntington, WV renewal options total cost to purchase the seventh year
Land only the land; increases by
10% after the fifth
and tenth lease years
and 12% after the
fifteenth lease year
(2)
Pizza Hut (1)(3) 20 years; two ten-year 11% of the Company's None at any time after
Hurricane, WV renewal options total cost to purchase the seventh year
Land only the land; increases by
10% after the fifth
and tenth lease years
and 12% after the
fifteenth lease year
(2)
Pizza Hut (1)(3) 20 years; two ten-year 11% of the Company's None at any time after
Milton, WV renewal options total cost to purchase the seventh year
Land only the land; increases by
10% after the fifth
and tenth lease years
and 12% after the
fifteenth lease year
(2)
Pizza Hut (1)(3) 20 years; two ten-year 11% of the Company's None at any time after
Parkersburg, WV renewal options total cost to purchase the seventh year
Land only the land; increases by
10% after the fifth
and tenth lease years
and 12% after the
fifteenth lease year
(2)
Pizza Hut (1)(3) 20 years; two ten-year 11% of the Company's None at any time after
Ronceverte, WV renewal options total cost to purchase the seventh year
Land only the land; increases by
10% after the fifth
and tenth lease years
and 12% after the
fifteenth lease year
(2)
Pizza Hut (1)(3) 20 years; two ten-year 11% of the Company's None at any time after
Marietta, OH renewal options total cost to purchase the seventh year
Land only the land; increases by
10% after the fifth
and tenth lease years
and 12% after the
fifteenth lease year
(2)
Wendy's (5) 20 years; two five- 11.98% of Total Cost; for each lease upon the expiration
Knoxville, TN (#2) year renewal options increases by 8% after year, (i) 6% of of the initial term
Restaurant to be the fifth lease year annual gross sales of the lease and
constructed and after every five times the Building during any renewal
years thereafter during Overage Multiplier period thereafter
the lease term (4) (7) minus (ii) the (8)
minimum annual rent
for such lease year
Wendy's 20 years; two five-year 10.25% of Total Cost; for each lease year, at any time after
Camarillo, CA renewal options increases to 10.76% of (i) 6% of annual the seventh lease
Restaurant to be Total Cost during the gross sales minus year
constructed fourth through sixth (ii) the minimum
lease years, increases annual rent for such
to 11.95% of Total lease year
Cost during the
seventh through tenth
lease years, increases
to 12.70% of Total
Cost during the
eleventh through
fifteenth lease years
and increases to
13.97% of Total Cost
during the sixteenth
through twentieth
lease years (4)
Denny's 20 years; two five-year 10.625% of Total Cost; for each lease year, during the eighth,
Hillsboro, TX renewal options increases by 11% after (i) 5% of annual tenth, and twelfth
Restaurant to be the fifth lease year gross sales minus lease years only
constructed and after every five (ii) the minimum
years thereafter annual rent for such
during the lease term lease year
(4)
Golden Corral (5) 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 (8)
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 (6)
every five years
thereafter during the
lease term
Jack in the Box 18 years; four five- 10.75% of Total Cost; for each lease year, at any time after
Humble, TX year 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 (6)
(4)
- ---------------------------------------------------------------------------
FOOTNOTES:
(1) The lease relating to this property is a land lease only. The Company anticipates entering into a
master mortgage note receivable collateralized by the Beaver, Beckley #1, Beckley #2, Bluefield,
Huntington, Hurricane, Milton, Parkersburg and Ronceverte, West Virginia, and Marietta, Ohio building
improvements.
(2) 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.
(3) The Company anticipates entering into a master lease agreement for the Beaver, Beckley #1, Beckley #2,
Bluefield, Huntington, Hurricane, Milton, Parkersburg, and Ronceverte, West Virginia, and the
Marietta, Ohio properties.
(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
Hillsboro and Humble properties, (iv) "constructing financing costs" during the development period.
(5) 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.
(6) Percentage rent shall be calculated on a calendar year basis (January 1 to December 31).
(7) 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]
(8) 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.
</TABLE>
The following table sets forth the location of the three Properties
acquired by the Company from April 10, 1996 through May 9, 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 May 9, 1996
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Option To
Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent Purchase
--------------------- --------- -------- --------------- --------------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C>
TGI FRIDAY'S (3) 04/24/96 09/2008; no 15.043% of Total None at any
(the "Hamden Property") (3) renewal options Cost; increases by time after
Restaurant to be constructed 10% after the fifth the third
lease year and after lease year
The Hamden Property is located every five years (5)
at the southeast quadrant of thereafter during the
Skiff Street and Route 10 in lease term (4)
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 $322,292 05/08/96 05/2016; two 10.25% of Total Cost; for each lease at any
(the "Knoxville #1 Property") (excluding five-year increases to 10.76% year, (i) 6% of time after
Restaurant to be constructed closing and renewal options of Total Cost during annual gross the
development the fourth through sales minus seventh
The Knoxville #1 Property is costs) (3) sixth lease years, (ii) the lease year
located on the north side of increases to 11.95% minimum annual
Western Avenue in Knoxville, of Total Cost during rent for such
Knox County, Tennessee, in an the seventh through lease year
area of mixed retail, tenth lease years,
commercial, and residential increases to 12.70%
development. Other fast-food of Total Cost during
and family-style restaurants the eleventh through
located in proximity to the fifteenth lease years
Knoxville #1 Property include and increases to
a KFC, a McDonald's, a Taco 13.97% of Total Cost
Bell, a Kenny Rogers Roasters, during the sixteenth
a Long John Silver's, a through twentieth
Krystal, a Hardee's, a lease years (4)
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 Property") (excluding five-year increases by 8% after year, eighth and
Restaurant to be constructed closing and renewal options the fifth lease year commencing in ninth
development and after every five the second lease
The Port Richey Property is costs) (3) years thereafter lease year (i) years only
located on the southeast during the lease term 5% of annual (7)
quadrant of the intersection (4) gross sales
of U.S. 19 and Stone Road, minus (ii) the
Port Richey, Pasco County, minimum annual
Florida, in an area of mixed rent for such
retail, commercial, and lease year (6)
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.
- -------------------------------------------------------------------------
FOOTNOTES:
(1) The estimated federal income tax basis of the depreciable portion (the building portion) of each of
the construction properties, once the buildings are constructed, is set forth below:
Property Federal Tax Basis
-------- -----------------
Hamden Property $1,195,000
Knoxville #1 Property 510,000
Port Richey Property 1,208,000
(2) Minimum annual rent for the Hamden and Port Richey Properties 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 #1 Property, 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. During the period commencing with the effective
date of the lease to the date minimum annual rent becomes payable for the Knoxville #1 Property, 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 Property
effective April 24, 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 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:
Property Estimated Maximum Cost Estimated Final Completion Date
-------- ---------------------- -------------------------------
Hamden Property $1,200,972 September 21, 1996
Knoxville #1 Property 830,966 September 5, 1996
Port Richey Property 1,675,000 October 5, 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 and Port Richey 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'' for Golden Corral restaurant properties.
</TABLE>
<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 MAY 9, 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 May 9, 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
Hamden, CT (5) Knoxville, TN (#1)(5) Port Richey, FL (5) Total
-------------- --------------------- ------------------- --------
<S> <C> <C> <C> <C>
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction:
Base Rent (1) $173,714 $ 81,898 $196,972 $452,584
Asset Management Fees (2) (6,808) (4,746) (10,233) (21,787)
General and Administrative
Expenses (3) (10,770) (5,078) (12,212) (28,060)
-------- -------- -------- --------
Estimated Cash Available from
Operations 156,136 72,074 174,527 402,737
Depreciation Expense (4) (30,652) (13,081) (30,970) (74,703)
-------- -------- -------- --------
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction of the Company $125,484 $ 58,993 $143,557 $328,034
======== ======== ======== ========
See Footnotes
- ------------------------------------------------------------------------
FOOTNOTES:
(1) Base rent does not include percentage rents which become due if specified levels of gross receipts are
achieved.
(2) 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."
(3) Estimated at 6.2% of gross rental 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.
(4) 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.
(5) The Company accepted an assignment of an interest in the ground lease relating to the Hamden Property
effective April 24, 1996, 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 #1 Property September 5, 1996
Port Richey Property October 5, 1996
</TABLE>
