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. 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 October 18, 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 October 18, 1996, will be reported in a
subsequent Supplement.
THE OFFERING
As of October 18, 1996, the Company had received aggregate subscription
proceeds of $110,064,566 (11,006,457 Shares) from 6,048 stockholders,
including $391,348 (39,135 Shares) issued pursuant to the Reinvestment Plan.
As of October 18, 1996, the Company had invested or committed for investment
approximately $80,900,000 of such proceeds in 84 Properties (including one
Property through a joint venture arrangement which consists of land and
building, seven Properties which consist of building only, 33 Properties which
consist of land only and 43 Properties which consist of land and building), in
providing mortgage financing to the tenants of the 33 Properties consisting of
land only and to pay Acquisition Fees and Acquisition Expenses, leaving
approximately $16,200,000 in offering proceeds available for investment in
Properties and Mortgage Loans. As of October 18, 1996, the Company had
incurred $4,952,905 in Acquisition Fees to the Advisor.
The Board of Directors has approved the sale of the remaining unsold
authorized shares of common stock of the Company in a public offering (the
"Subsequent Offering") to commence upon the termination of this offering. The
number of authorized shares expected to remain unsold upon the termination of
this offering is approximately 4,900,000, including approximately 1,400,000
designated for sale pursuant to the reinvestment plan. The Board of Directors
has also approved an increase in the number of shares to be offered in the
Subsequent Offering, subject to approval by the stockholders of the Company of
a resolution to increase the number of authorized shares of common stock of
the Company from 20,000,000 shares to 75,000,000 shares (and a corresponding
increase in the number of authorized Excess Shares), so that a total of up to
27,500,000 shares ($275,000,000) would be available for sale in the Subsequent
Offering, including up to 2,500,000 shares ($25,000,000) available for sale
under the reinvestment plan. Management anticipates that 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.
October 23, 1996 Prospectus Dated April 26, 1996
BUSINESS
PROPERTY ACQUISITIONS
Between October 4, 1996 and October 18, 1996, the Company acquired one
Property, consisting of building only. The Property is a Wendy's Property (in
San Diego, California). 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.
As of October 18, 1996, the Company had initial commitments to acquire
eight properties, including six properties which consist of land and building,
and two properties which consist of land only. 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 section of the Prospectus entitled "Business -
Description of Property Leases," except as described below.
In connection with the two Pizza Hut properties, the Company anticipates
acquiring the land and leasing it to the tenant, Castle Hill Holdings VII,
L.L.C. ("Castle Hill"), pursuant to a master lease agreement for these two
properties. The tenant is expected to own the buildings for these two 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 the section of the Prospectus
entitled "Business - Mortgage Loans."
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.
REDEMPTION OF SHARES
The Company will not redeem any Shares prior to the completion of the
Subsequent Offering.
<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 (#1) renewal options (i) 8.5% of annual
Restaurant to be gross sales minus
constructed (ii) the minimum
annual rent for such
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
Pizza Hut (2)(3) 20 years; two ten-year 11% of the Company's None at any time after
Bowling Green, 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
(4)
Pizza Hut (2)(3) 20 years; two ten-year 11% of the Company's None at any time after
Toledo, 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
(4)
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
converted (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 (i); 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
</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.
(2) The lease relating to this property is a land lease only. The Company
anticipates entering into a master mortgage note receivable
collateralized by the Bowling Green and Toledo, Ohio building
improvements.
(3) The Company anticipates entering into a master lease agreement for the
Bowling Green and Toledo, Ohio properties.
(4) 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.
The following table sets forth the location of the one Property acquired
by the Company, which is building only, from October 4, 1996 through October
18, 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 October 18, 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 Cost for each lease upon the
(the "San Diego Property") (3) five-year (4); increases by 8% year, (i) 6% of expiration
Restaurant to be renewal options after the fifth annual gross of the
constructed lease year and after sales times the initial term
every five years Building of the lease
The San Diego Property is thereafter during Overage and during
located at the northeast the lease term Multiplier (6) any renewal
corner of Gill Village Way minus (ii) the period
and Rio San Diego Drive, minimum annual thereafter
San Diego County, rent for such (5)
California, in an area of lease year
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.
</TABLE>
[FN]
FOOTNOTES:
(1) The estimated federal income tax basis of the depreciable portion (the
building portion) of the San Diego Property once the building is
constructed, is set forth below:
Property Federal Tax Basis
-------- -----------------
San Diego Property $641,000
(2) Minimum annual rent for the San Diego Property, 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. During the period commencing with the effective
date of the lease to the date minimum annual rent becomes payable for
the San Diego 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 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 agreement for the San Diego
Property which is to be constructed, provides that construction must be
completed no later than the date 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
(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) 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.
(6) The "Building Overage Multiplier" is calculated as follows:
Building Overage Multiplier = (purchase price of the
building)/(purchase price of the building + $685,714)
<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 OCTOBER 18, 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 October 18, 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
San Diego, CA (5)(6)
--------------------
<S> <C>
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction:
Base Rent (1) $ 82,267
Asset Management Fees (2) (3,649)
General and Administrative
Expenses (3) (5,101)
--------
Estimated Cash Available from
Operations 73,517
Depreciation and Amortization
Expense (4) (16,430)
--------
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction of the Company $ 57,087
========
See Footnotes
</TABLE>
[FN]
FOOTNOTES:
(1) Base rent does not include percentage rents which become due if
specified levels of gross receipts are achieved.
(2) The Property 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 Property has been depreciated on the straight-line
method over 39 years.
(5) The development agreement for the Property which is to be constructed,
provides that construction must be completed no later than the date set
forth below:
Estimated Final
Property Completion Date
-------- ---------------
San Diego Property February 13, 1997
