SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 9, 1996
CNL AMERICAN PROPERTIES FUND, INC.
(Exact Name of Registrant as Specified in Charter)
Florida 33-78790 59-3239115
(State or other
jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
400 East South Street, Suite 500 32801
Orlando, Florida (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (407) 422-1574
ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
Not applicable.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
The following information is provided voluntarily prior to the date
on which it is required to be reported under this Item 2.
STATUS OF THE OFFERING
Pursuant to a registration statement on Form S-11 under the
Securities Act of 1933, as amended, effective March 29, 1995, CNL American
Properties Fund, Inc. (the "Company") registered for sale an aggregate of
$165,000,000 of shares of common stock (the "Shares") (16,500,000 Shares at
$10 per Share). As of July 16, 1996, the Company had received aggregate
subscription proceeds of $80,598,079 (8,059,808 Shares) from 4,663
stockholders, including $243,167 (24,317 Shares) issued pursuant to the
Company's reinvestment plan.
As stated in the registration statement of the Company, including the
Prospectus which constitutes a part thereof, as amended, the proceeds of the
offering of Shares are used primarily to acquire properties (the "Properties")
located across the United States to be leased on a long-term, triple-net basis
to creditworthy operators of selected national and regional fast-food, family-
style and casual dining restaurant chains. The Company may also provide
financing (the "Mortgage Loans") for the purchase of buildings, generally by
lessees that lease the underlying land from the Company.
ACQUISITION OF PROPERTIES
During the period June 22, 1996 through July 16, 1996, the Company
acquired four Properties. The Properties are two Boston Market Properties
(one in each of Corvallis, Oregon, and Rockwall, Texas), one Jack in the Box
Property (in Houston, Texas) and one Arby's Property (in Kendallville,
Indiana).
In connection with the purchase of each of these four Properties, the
Company, as lessor, entered into long-term lease agreements with unaffiliated
lessees. The leases are on a triple-net basis, with the lessee responsible
for all repairs and maintenance, property taxes, insurance and utilities. The
lessee also is required to pay for special assessments, sales and use taxes,
and the cost of any renovations permitted under the lease. For the Properties
that are to be constructed, the Company has entered into development and
indemnification and put agreements with the lessees.
The following table sets forth the location of each of the four
Properties acquired by the Company, during the period June 22, 1996 through
July 16, 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 June 22, 1996 through July 16, 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>
BOSTON MARKET $350,358 07/09/96 07/2011; five 10.38% of Total Cost for each lease at any time
(the "Corvallis Property") (excluding five-year (4); increases by 10% year after the after the
Restaurant to be constructed closing and renewal options after the fifth lease fifth lease fifth lease
development year and after every year, (i) 5% of year
costs) (3) five years thereafter annual gross
The Corvallis Property is during the lease term sales minus (ii)
located at the southeast the minimum
quadrant of the intersection annual rent for
of Highway 99 and Northeast such lease year
Circle Boulevard in Corvallis,
Benton County, Oregon, in an
area of mixed retail,
commercial, and residential
development. Other fast-food
and family-style restaurants
located in proximity to the
Corvallis Property include a
KFC, a Wendy's, a Subway
Sandwich Shop, a Sizzler, a
McDonald's, a Burger King, a
Taco Bell, and several local
restaurants.
JACK IN THE BOX $343,160 07/09/96 07/2014; four 10.75% of Total Cost for each lease at any time
(the "Houston #1 Property") (excluding five-year (4); increases by 8% year, (i) 5% of after the
Restaurant to be constructed closing and renewal options after the fifth lease annual gross seventh
development year and by 10% after sales minus (ii) lease year
The Houston #1 Property is costs) (3) every five years the minimum
located on the east side of thereafter during the annual rent for
Veterans Memorial Drive with lease term such lease year
an access easement on Beltway (5)
8 in Houston, Harris County,
Texas, in an area of mixed
retail, commercial, and
residential development.
Other fast-food and family-
style restaurants located in
proximity to the Houston #1
Property include a
Whataburger, an Arby's, a KFC,
a Burger King, and several
local restaurants.
ARBY'S $739,628 07/10/96 07/2016; two $75,812; increases by for each lease during the
(the "Kendallville Property") (excluding five-year 4.14% after the third year, (i) 4% of seventh and
Existing restaurant closing renewal options lease year and after annual gross tenth lease
costs) every three years sales minus (ii) years only
The Kendallville Property is thereafter during the the minimum
located on the north side of lease term annual rent for
West North Street in such lease year
Kendallville, Noble County,
Indiana, in an area of mixed
retail, commercial and
residential development.
Other fast-food and family-
style restaurants located in
proximity to the Kendallville
Property include a KFC, a
McDonald's, a Wendy's, a Pizza
Hut, a Subway Sandwich Shop,
and several local restaurants
BOSTON MARKET $499,820 07/15/96 07/2011; five 10.38% of Total Cost for each lease at any time
(the "Rockwall Property") (excluding five-year (4); increases by 10% year after the after the
Restaurant to be constructed closing and renewal options after the fifth lease fifth lease fifth lease
development year and after every year, (i) 4% of year
The Rockwall Property is costs) (3) five years thereafter annual gross
located on the northeast during the lease term sales minus (ii)
corner of FM 740 and the to be the minimum
constructed Steger Town Drive annual rent for
in Rockwall, Rockwall County, such lease year
Texas, in an area of mixed
retail, commercial, and
residential development.
Other fast-food and family-
style restaurants located in
proximity to the Rockwall
Property include an Arby's, a
Jack in the Box, a Dairy
Queen, a KFC, a McDonald's, a
Pizza Hut, a Sonic Drive-In, a
Whataburger, a Wendy's, a
Chili's, a Taco Bell, 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
-------- -----------------
Corvallis Property $624,000
Houston #1 Property 620,000
Kendallville Property 304,000
Rockwall Property 422,000
(2) Minimum annual rent for each of the Properties became payable on the
effective date of the lease, except as indicated below. For the
Corvallis and Rockwall Properties, minimum annual rent will become due
and payable on the earlier of (i) 180 days after execution of the lease
or (ii) the date the tenant receives from the landlord its final funding
of the construction costs. For the Houston #1 Property, minimum annual
rent will become due and payable on the earlier of (i) the date the
restaurant opens for business to the public or (ii) 180 days after the
execution of the lease. During the period commencing with the effective
date of the lease to the date minimum rent becomes payable for the
Corvallis and Rockwall Properties, as described above, the tenant shall
pay monthly "interim rent" equal to 10.38% per annum of the amount
funded by the Company in connection with the purchase and construction
of the Properties. During the period commencing with the effective date
of the lease to the date minimum annual rent becomes payable for the
Houston #1 Property, as described above, the tenant shall pay monthly
"interim rent" equal to 10.75% per annum of the amount funded by the
Company in connection with the purchase and construction of the
Property.
(3) 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 Final
Property Estimated Maximum Cost Completion Date
-------- ---------------------- ---------------
Corvallis Property $952,684 January 5, 1997
Houston #1 Property 926,397 January 5 , 1997
Rockwall Property 795,087 January 11, 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) Percentage rent shall be calculated on a calendar year basis (January 1
to December 31).
<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 JUNE 22, 1996
THROUGH JULY 16, 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 June 22, 1996 through July 16, 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>
Boston Market Jack in the Box Arby's Boston Market
Corvallis, OR (5) Houston #1, TX (5) Kendallville, IN Rockwall, TX (5) Total
----------------- ------------------ ---------------- ---------------- ---------
<S> <C> <C> <C> <C> <C>
Pro Forma Estimate
of Taxable
Income Before Dividends
Paid Deduction:
Base Rent (1) $ 95,085 $ 95,757 $ 75,812 $ 79,356 $ 346,010
Asset Management
Fees (2) (5,440) (5,362) (4,430) (4,551) (19,783)
General and
Administrative
Expenses (3) (5,895) (5,937) (4,700) (4,920) (21,452)
----------- ---------- --------- ---------- ---------
Estimated Cash
Available from
Operations 83,750 84,458 66,682 69,885 304,775
Depreciation
Expense (4) (16,006) (15,890) (7,794) (10,813) (50,503)
----------- ---------- --------- ---------- ---------
Pro Forma Estimate
of Taxable
Income Before
Dividends Paid
Deduction of the
Company $ 67,744 $ 68,568 $ 58,888 $ 59,072 $ 254,272
========== ========== ========= ========= =========
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 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.
(3) 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.
(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 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
-------- -------------------------------
Corvallis Property January 5, 1997
Houston #1 Property January 5, 1997
Rockwall Propery January 11, 1997
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
Not applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
Not applicable.
ITEM 5. OTHER EVENTS.
Not applicable.
ITEM 6. RESIGNATION OF REGISTRANT'S DIRECTORS.
Not applicable.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
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 10
Pro Forma Consolidated Statement of Earnings for the
quarter ended March 31, 1996 11
Pro Forma Consolidated Statement of Earnings for the
year ended December 31, 1995 12
Notes to Pro Forma Consolidated Financial Statements
for the quarter ended March 31, 1996 and the year
ended December 31, 1995 13
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 $25,556,198 in gross offering
proceeds from the sale of 2,555,620 additional shares of common stock during
the period April 1, 1996 through July 16, 1996, and (iii) the application of
such funds and $3,897,309 of cash and cash equivalents at March 31, 1996, to
purchase 29 additional properties acquired during the period April 1, 1996
through July 16, 1996 (two of which are under construction and consist of
building only, 12 of which are under construction and consist of land and
building, 13 properties which consist of land only and two properties which
consists of land and building), to pay additional costs for the four
properties under construction at March 31, 1996, to provide mortgage financing
to the lessee of ten 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 seven of the 72 properties
that were owned by the Company as of July 16, 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 65 properties owned by the Company as of July 16,
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 $16,059,451 (a) $44,372,925
Net investment in direct
financing leases (c) 1,360,414 6,264,957 (a) 7,625,371
Cash and cash equivalents 8,775,306 (3,707,897)(a)
(189,412)(b) 4,877,997
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 14,886(a) 1,214,802
----------- ------------ -----------
$48,909,495 $22,329,985 $71,239,480
=========== ============ ===========
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,
8,079,808 shares 55,242 25,556 (a) 80,798
Capital in excess of
par value 46,983,886 23,486,146 (a) 70,470,032
Accumulated distributions
in excess of net earnings (293,384) (293,384)
----------- ----------- -----------
46,745,744 23,511,702 70,257,446
----------- ----------- -----------
$48,909,495 $22,329,985 $71,239,480
=========== =========== ===========
See accompanying notes to unaudited pro forma
consolidated financial statements.
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
Pro Forma
Historical Adjustments Pro Forma
---------- -------------- ----------
Revenues:
Rental income from
operating leases $ 763,155 $ 41,157 (1) $ 804,312
Earned income from
direct financing lease (2) 35,926 35,926
Interest and other income 260,798 (12,544)(3) 248,254
---------- ---------- ----------
1,059,879 28,613 1,088,492
---------- ---------- ----------
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 2,714 (4) 43,084
State and other taxes 2,898 1,129 (5) 4,027
Interest expense 159 159
Depreciation and amortization 98,472 3,300 (6) 101,772
---------- ---------- ----------
300,539 7,143 307,682
---------- ---------- ----------
Earnings Before Minority
Interest in Earnings of
Consolidated Joint Venture 759,340 21,470 780,810
Minority Interest in Earnings of
Consolidated Joint Venture (14,752) (14,752)
---------- ---------- ----------
Net Earnings $ 744,588 $ 21,470 $ 766,058
========== ========== ==========
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 $ 96,945 (1) $ 595,762
Earned income from direct
financing leases (2) 28,935 28,935
Contingent rental income 12,024 12,024
Interest income 119,355 (29,664)(3) 89,691
--------- --------- ---------
659,131 67,281 726,412
--------- --------- ---------
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 1,769 (5) 21,958
Depreciation and amortization 104,131 14,700 (6) 118,831
--------- --------- ---------
290,276 20,837 311,113
--------- --------- ---------
Earnings Before Minority
Interest in Earnings of
Consolidated Joint Venture 368,855 46,444 415,299
Minority Interest in Earnings
of Consolidated Joint Venture (76) (76)
--------- --------- ---------
Net Earnings $ 368,779 $ 46,444 $ 415,223
========= ========= =========<PAGE>
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 $25,556,198 from the issuance of 2,555,620
shares of common stock during the period April 1, 1996 through July 16,
1996, 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, and $3,707,897 of cash and cash equivalents
at March 31, 1996, used (i) to acquire 29 properties for $18,104,131 (of
which 13 properties consist of land only, two properties consist of
building only and 14 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 $1,150,029 ($1,135,143 of which was allocated
to properties and $14,886 of which was classified as other assets and
will be allocated to future properties), (iv) to pay selling commissions
and offering expenses (stock issuance costs) of $2,044,496, 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 ten
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
Denny's in
Hillsboro, TX 1,053,088 56,416 1,109,504
Denny's in
McKinney, TX 978,944 52,443 1,031,387
Wendy's in
Camarillo, CA 1,204,026 64,502 1,268,528
Wendy's in
Sevierville, TN 492,636 26,391 519,027
Boston Market
in Ellisville, MO 977,279 52,354 1,029,633
Boston Market in
Golden Valley, MN 1,074,707 57,574 1,132,281
Jack in the Box
in Humble, TX 933,868 50,029 983,897
Boston Market
in Corvallis, OR 906,684 48,573 955,257
Jack in the Box
in Houston, TX 893,681 47,876 941,557
Arby's in
Kendallville, IN 738,326 39,553 777,879
Boston Market
in Rockwall, TX 758,432 40,630 799,062
Four wholly owned
properties under
construction at
March 31, 1996 3,085,134 165,275 3,250,409
----------- ----------- -----------
$21,189,265 $ 1,135,143 $22,324,408
=========== =========== ===========
Adjustment classified
as follows:
Land and buildings on
operating leases $16,059,451
Net investment in
direct financing
leases 6,264,957
----------
$22,324,408
===========
(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 eight 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 seven of the 72 properties acquired
during the period June 2, 1995 (the date the Company began operations)
through July 16, 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 Pro Forma
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
seven 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 becoming
operational as a rental property for purposes of the Pro Forma
Consolidated Statements of Earnings.
Date Pro Forma
Date Placed Property Became
in Service Operational as
By the Company Rental Property
-------------- ---------------
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
Denny's in McKinney, TX June 1996 December 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 $6,219,000 and $5,241,000 for the
Pro Forma Properties for the quarter ended March 31, 1996 and the year
ended December 31, 1995, respectively), 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 five
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.
ITEM 8. CHANGE IN FISCAL YEAR.
Not applicable.
EXHIBITS
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be filed on its behalf
by the undersigned thereunto duly authorized.
CNL AMERICAN PROPERTIES FUND, INC.
Dated: July 24, 1996 By: /s/ Robert A. Bourne
ROBERT A. BOURNE, President
