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 July 26,
1996. This Supplement replaces the Supplements dated July 31, 1996, August 9,
1996, August 30, 1996, September 13, 1996 and September 24, 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 3, 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 3, 1996, will be reported in a
subsequent Supplement.
THE OFFERING
As of October 3, 1996, the Company had received aggregate subscription
proceeds of $104,484,211 (10,448,421 Shares) from 5,788 stockholders,
including $391,348 (39,135 Shares) issued pursuant to the Reinvestment Plan.
As of October 3, 1996, the Company had invested or committed for investment
approximately $80,000,000 of such proceeds in 83 Properties (including one
Property through a joint venture arrangement which consists of land and
building, six 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 $11,900,000 in offering proceeds available for investment in
Properties and Mortgage Loans. As of October 3, 1996, the Company had
incurred $4,701,789 in Acquisition Fees to the Advisor.
BUSINESS
PROPERTY ACQUISITIONS
Between July 17, 1996 and October 3, 1996, the Company acquired 11
Properties, including one Property consisting of building only and ten
Properties consisting of land and building. The Properties are four Boston
Market Properties (one in each of Upland, La Quinta and Merced, California,
and Florissant, Missouri), a Jack in the Box Property (in Houston, Texas), two
Applebee's Properties (one in each of Montclair and Salinas, California) a
Golden Corral Property (in Brooklyn, Ohio) a Ryan's Family Steak House
Property (in Spring Hill, Florida), an Arby's Property (in Avon, Indiana) and
a Burger King Property (in Chicago, Illinois). For information regarding the
72 Properties acquired by the Company prior to July 17, 1996, see the
Prospectus dated April 26, 1996, and the Prospectus Supplement dated July 26,
1996.
The Boston Market Property in Merced, California, was acquired from an
Affiliate of the Company. The Affiliate had purchased and temporarily held
title to the Property in order to facilitate the acquisition of the Property
by the Company. The Property was acquired by the Company for a purchase price
of $559,682, representing the cost of the Property to the Affiliate (including
carrying costs) due to the fact that this amount was less than the Property's
appraised value.
In connection with the purchase of the Golden Corral Property in
Brooklyn, Ohio, 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 this
acquisition, the Company has also entered into an assignment of an
October 9, 1996 Prospectus Dated April 26, 1996
interest in the ground lease with the lessee and the owner of the land. The
assignment 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 Boston Market Properties, the
Jack in the Box Property, the Applebee's Properties, the Ryan's Family Steak
House Property, the Arby's Property and the Burger King Property, which are
land and building, 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."
As of October 3, 1996, the Company had initial commitments to acquire
seven properties, including four properties which consist of land and
building, one property which consists of building only 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 seven 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 Wendy's property in San Diego, California, 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.
In connection with the two Pizza Hut properties, the Company anticipates
acquiring the land and leasing it to the tenant, Castle Hill Holdings VI,
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.
<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 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
Wendy's (2) 15 years; three five- 13.26% of Total Cost for each lease year, upon the expiration
San Diego, CA year renewal options (1); increases by 8% (i) 6% of annual of the initial term
Restaurant to be after the fifth lease gross sales times the of the lease and
constructed year and after every Building Overage during any renewal
five years thereafter Multiplier (4) minus period thereafter
during the lease term (ii) the minimum (3)
annual rent for such
lease year
Pizza Hut (5)(6) 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
(7)
Pizza Hut (5)(6) 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
(7)
</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 Company anticipates owning the building only for this property. The
Company will not own the underlying land; although, the Company
anticipates entering into a tri-party agreement with the lessee and the
landlord of the land in order to provide the Company with certain rights
with respect to the land on which the building is located.
(3) 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.
(4) 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)]
(5) 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.
(6) The Company anticipates entering into a master lease agreement for the
Bowling Green and Toledo, Ohio properties.
(7) 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 11 Properties
acquired by the Company, including the ten Properties in which the Company
acquired the land and building and the one Property in which the Company
acquired the building only, from July 17, 1996 through October 3, 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 July 17, 1996 through October 3, 1996
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- --------------------- ------------ -------- --------------- --------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
BOSTON MARKET (9) $762,737 07/24/96 07/2011; five 10.38% of Total Cost for each at any time
(the "Upland Property") (excluding five-year (4); increases by 10% lease year after the
Restaurant to be closing and renewal options after the fifth lease after the fifth lease
constructed development year and after every fifth lease year
costs) (3) five years thereafter year, (i) 4%
The Upland Property is during the lease term of annual
located at the northeast gross sales
quadrant of the minus (ii)
intersection of Mountain the minimum
Avenue and Foothill annual rent
Boulevard, Upland, San for such
Bernardino County, lease year
California in an area of
mixed retail, commercial,
and residential
development. Other fast-
food and family-style
restaurants located in
proximity to the Upland
Property include an Burger
King, a Taco Bell, a KFC,
two Del Taco's, a Jack in
the Box, a McDonald's, an
Outback Steakhouse and
several local restaurants.
JACK IN THE BOX $387,621 08/05/96 07/2014; four 10.75% of Total Cost for each at any time
(the "Houston #2 (excluding five-year (4); increases by 8% lease year, after the
Property") closing and renewal options after the fifth lease (i) 5% of seventh lease
Restaurant to be development year and by 10% after annual gross year
constructed costs (3) every five years sales minus
thereafter during the (ii) the
The Houston #2 Property is lease term minimum
located on the south side annual rent
of Interstate 45 and U.S. for such
Highway 90A in Houston, lease year
Harris County, Texas, in (5)
an area of mixed retail,
commercial, and
residential development.
Other fast-food and
family-style restaurants
located in proximity to
the Houston #2 Property
include two Whataburger's,
a Taco Bell, a Wendy's, a
Pizza Hut, a Little
Caesar's, a McDonald's,
and a local restaurant.
APPLEBEE'S $879,753 08/23/96 08/2016; two 11% of Total Cost for each at any time
(the "Montclair Property") (excluding five-year (4); increases by 10% lease year, after the
Restaurant to be closing and renewal options after the fifth lease (i) 5% of fifth lease
constructed development year and after every annual gross year (6)
costs) (3) five years thereafter sales minus
The Montclair Property is during the lease term (ii) the
located on a pad site minimum
within the Montclair Plaza annual rent
Regional Mall, on the east for such
side of Montevista Avenue, lease year
north of I-10, in
Montclair, San Bernardino
County, California, in an
area of mixed retail,
commercial, and
residential development.
Other fast-food and
family-style restaurants
located in proximity to
the Montclair Property
include an Olive Garden, a
Tony Roma's, a Red
Lobster, and a local
restaurant.
GOLDEN CORRAL $997,296 08/23/96 05/2010; three $142,823; increases for each upon the
(the "Brooklyn Property") (excluding (8) five-year by 10% after the lease year, expiration of
Existing restaurant closing renewal options fifth lease year and (i) 4% of the lease (7)
costs) after every five annual gross
The Brooklyn Property is years thereafter sales minus
located at Northcliff during the lease term (ii) the
Avenue and Ridge Road in minimum
Brooklyn, Cuyahoga County, annual rent
Ohio, in an area of mixed for such
retail, commercial, and lease year
residential development.
Other fast-food and
family-style restaurants
located in proximity to
the Brooklyn Property
include an Applebee's, a
McDonald's, a Dunkin
Donuts, a Boston Market,
and several local
restaurants.
BOSTON MARKET (9) $664,898 09/06/96 09/2011; five 10.38% of Total Cost for each at any time
(the "La Quinta Property") (excluding five-year (4); increases by 10% lease year after the
Restaurant to be closing and renewal options after the fifth lease after the fifth lease
constructed development year and after every fifth lease year
costs) (3) five years thereafter year, (i) 4%
The La Quinta Property is during the lease term of annual
located on a pad site gross sales
within the minus (ii)
Albertson's/Walmart the minimum
Shopping Center, at the annual rent
northeast quadrant of for such
State Highway 111 and lease year
Simon Drive, in La Quinta,
Riverside County,
California, in an area of
mixed retail, commercial,
residential, and
recreational development.
Other fast-food and
family-style restaurants
located in proximity to
the La Quinta Property
include a Taco Bell, a
McDonald's, and several
local restaurants.
BOSTON MARKET $559,682 09/17/96 07/2011; five 10.38% of Total Cost for each at any time
(the "Merced Property") (excluding five-year (4); increases by 10% lease year after the
Restaurant to be closing and renewal options after the fifth lease after the fifth lease
constructed development year and after every fifth lease year
costs) (3) five years thereafter year (i) 4%
The Merced Property is during the lease term of annual
located at the northwest gross sales
corner of the intersection minus (ii)
of "M" Street and Olive the minimum
Avenue in Merced, Merced annual rent
County, California, in an for such
area of mixed retail, lease year
commercial, and
residential development.
Other fast-food and
family-style restaurants
located in proximity to
the Merced Property
include a Burger King, an
IHOP, a Jack in the Box, a
McDonald's, a Pizza Hut, a
Red Lobster, and several
local restaurants.
RYAN'S FAMILY STEAK HOUSE $654,588 09/18/96 09/2016; two 10.875% of Total Cost for each at any time
(the "Spring Hill (excluding five-year (4); increases by 12% lease year, after the
Property") closing and renewal options after the fifth lease (i) 5% of tenth lease
Restaurant to be development year and after every annual gross year
constructed costs) (3) five years thereafter sales minus
during the lease term (ii) the
The Spring Hill Property minimum
is located at the annual rent
northwest corner of Cortez for such
Boulevard and Chambord lease year
Street in Spring Hill,
Hernando County, Florida,
in an area of mixed
retail, commercial, and
residential development.
Other fast-food and
family-style restaurants
located in proximity to
the Spring Hill Property
include an Arby's, a
McDonald's, a Subway
Sandwich Shop, a Wendy's,
and a local restaurant.
ARBY'S $790,676 09/18/96 09/2016; two $81,044; increases by for each during the
(the "Avon Property") (excluding five-year 4.14% after the third lease year, seventh and
Existing restaurant closing renewal options lease year and after (i) 4% of tenth lease
costs) every three years annual gross years only
The Avon Property is thereafter during the sales minus
located on the southwest lease term (ii) the
corner of Avon Crossing minimum
Drive and Merchants Drive annual rent
in the Avon Crossing for such
Shopping Center, in Avon, lease year
Hendricks County, Indiana,
in an area of mixed
retail, commercial, and
residential development.
Other fast-food and
family-style restaurants
located in proximity to
the Avon Property include
a Burger King, a
McDonald's, a Noble
Roman's Pizza, a Taco
Bell, a Wendy's, and
several local restaurants.
BOSTON MARKET $697,652 09/19/96 09/2011; five 10.38% of Total Cost for each at any time
(the "Florissant (excluding five-year (4); increases by 10% lease year after the
Property") closing and renewal options after the fifth lease after the fifth lease
Restaurant to be development year and after every fifth lease year
constructed costs) (3) five years thereafter year (i) 5%
during the lease term of annual
The Florissant Property is gross sales
located on the north side minus (ii)
of U.S. Highway 67 North, the minimum
northeast of the annual rent
intersection of North for such
Waterford Road and U.S. lease year
Highway 67, in Florissant,
St. Louis County,
Missouri, in an area of
mixed retail, commercial,
and residential
development. Other fast-
food and family-style
restaurants located in
proximity to the
Florissant Property
include an Applebee's, a
Burger King, a Church's
Fried Chicken, a Dairy
Queen, a Denny's, a
Domino's, a KFC, a
McDonald's, a Ponderosa, a
Rally's, a Shoney's, a
Subway Sandwich Shop, two
Taco Bell's, a Wendy's, a
White Castle, and several
local restaurants.
APPLEBEE'S $732,477 09/19/96 09/2016; two 10.87% of Total Cost for each at any time
(the "Salinas Property") (excluding five-year (4); increases by 10% lease year, after the
Restaurant to be closing and renewal options after the fifth lease (i) 5% of seventh lease
constructed development year and after every annual gross year
costs) (3) five years thereafter sales minus
The Salinas Property is during the lease term (ii) the
located on the west side minimum
of North Davis Road in the annual rent
Westridge Shopping Center, for such
in Salinas, Monterey lease year
County, California, in an
area of mixed retail,
commercial, and
residential development.
Other fast-food and
family-style restaurants
located in proximity to
the Salinas Property
include an IHOP, and
several local restaurants.
BURGER KING $940,934 10/02/96 12/2016; two 11% of Total for each None
(the "Chicago Property") (excluding five-year Cost (4) lease year,
Restaurant to be closing and renewal options (i) 8.5% of
constructed development annual gross
costs)(3) sales minus
The Chicago Property is (ii) the
located on the southwest minimum
corner of 40th Street and annual rent
Pulaski Road, in Chicago, for such
Cook County, Illinois, in lease year
an area of mixed retail,
commercial, and
residential development.
Other fast-food and
family-style restaurants
located in proximity to
the Chicago Property
include an Arby's, a Long
John Silver's, and a local
restaurant.
</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
-------- -----------------
Upland Property $ 433,000
Houston #2 Property 595,000
Montclair Property 825,000
Brooklyn Property 1,040,000
La Quinta Property 485,000
Merced Property 401,000
Spring Hill Property 1,363,000
Avon Property 484,000
Florissant Property 618,000
Salinas Property 648,000
Chicago Property 753,000
(2) Minimum annual rent for each of the Properties became payable on the
effective date of the lease, except as indicated below. For the Upland,
La Quinta, Merced and Florissant Properties, minimum annual rent will
become due and payable on the date the tenant receives from the landlord
its final funding of the construction costs. For the Houston #2
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 execution of the lease. For the Montclair 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)
180 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 Spring Hill 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) 150 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 Salinas 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) 140 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 Chicago
Property, minimum annual rent will become due and payable on the
Possession Date, which is December 28, 1996. During the period
commencing with the effective date of the lease to the date minimum
annual rent becomes payable for the Upland, La Quinta, Merced and
Florissant 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 #2
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. During
the period commencing with the effective date of the lease to the date
minimum annual rent becomes payable for the Montclair Property, as
described above, the tenant shall pay monthly "interim rent" equal to 11
percent per annum of the amount funded by the Company in connection with
the purchase and construction of the Property. During the period
commencing with the effective date of the lease to the date minimum
annual rent becomes payable for the Spring Hill Property, as described
above, the tenant shall pay monthly "interim rent" equal to 10.875% per
annum of the amount funded by the Company in connection with the
purchase and construction of the Property. During the period commencing
with the effective date of the lease to the date minimum annual rent
becomes payable for the Salinas Property, as described above, the tenant
shall pay monthly "interim rent" equal to 10.87% per annum of the amount
funded by the Company in connection with the purchase and construction
of the Property. For the Chicago Property, "interim rent" equal to 11
percent per annum of the amount funded by the Company in connection with
the purchase and construction of the Property shall accrue prior to the
Possession Date and shall be payable in a single lump sum at the time of
final funding of the construction costs.
(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
-------- ---------------------- ---------------
Upland Property $ 977,643 January 20, 1997
Houston #2 Property 926,235 February 1, 1997
Montclair Property 1,654,545 February 19, 1997
La Quinta Property 951,872 March 5, 1997
Merced Property 930,834 March 16, 1997
Spring Hill Property 1,881,818 February 15, 1997
Florissant Property 1,264,986 March 18, 1997
Salinas Property 1,339,000 February 6, 1997
Chicago Property 1,613,636 December 28, 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.
(5) Percentage rent shall be calculated on a calendar year basis (January 1
to December 31).
(6) The lessee also has the option to purchase the Property after the lessee
operates at least five Applebee's restaurants.
(7) 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.
(8) The Company accepted an assignment of an interest in the ground lease
relating to the Brooklyn Property effective August 23, 1996.
(9) The lessee of the Upland and La Quinta Properties is the same
unaffiliated lessee.
BORROWING AND SECURED EQUIPMENT LEASES
On August 9, 1996, the Company obtained an advance of $574,557 under its
$15,000,000 Loan. The advance is a fully amortizing term loan repayable over
five years and bears interest at a rate per annum equal to 215 basis points
above the Reserve Adjusted LIBOR Rate (as defined in the Loan). The proceeds
of the advance were used to acquire Equipment for a restaurant property in
Marlboro, New Jersey, at a cost of $562,742, to pay a Secured Equipment Lease
Servicing Fee of $11,255 to the Advisor and to pay closing costs of $560.
On August 28, 1996, the Company obtained an advance of $102,570 under
its $15,000,000 Loan for partial funding of the Equipment for a restaurant
property in Winnemucca, Nevada, at a cost of $100,000, to pay a Secured
Equipment Lease Servicing Fee of $2,000 to the Advisor and to pay closing
costs of $570. On September 30, 1996, the Company obtained another advance of
$44,157 under its Loan for additional funding of the Equipment for the
restaurant property in Winnemucca, Nevada, at a cost of $43,075, to pay a
Secured Equipment Lease Servicing Fee of $862 to the Advisor and to pay
closing costs of $220. The Company anticipates obtaining another advance
under its Loan to fund the balance of the acquisition price of the Equipment
within four months of obtaining the initial advance of $102,570 described
above. The aggregate advances of $146,727 are considered to be an interest
only loan for the first three months and upon obtaining the additional advance
prior to the fourth month, the $146,727 plus the additional advance will
become a fully amortizing term loan repayable over the duration of the
Winnemucca Secured Equipment Lease, but in no event, greater than six years.
The advances will 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 LEASES
From July 17, 1996 through October 3, 1996
<CAPTION>
Lease Option
Description Purchase Price (1) Date Acquired Expiration Annual Rent To Purchase
- ----------- ------------------ ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
EQUIPMENT FOR TGI $562,742 08/09/96 08/2001 $146,484 (2) (3)
FRIDAY'S RESTAURANT IN (excluding closing
MARLBORO, NEW JERSEY costs and Secured
(The "Marlboro Secured Equipment Lease
Equipment Lease") Servicing Fee)
EQUIPMENT FOR DENNY'S $143,075 (4) (4) (5) (5) (6)
RESTAURANT IN (excluding closing
WINNEMUCCA, NEVADA (The costs and Secured
"Winnemucca Secured Equipment Lease
Equipment Lease") Servicing Fee)
</TABLE>
[FN]
- --------------------------------------------------------------------
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) Lessee may purchase the Equipment prior to the expiration of the Secured
Equipment Lease, at the then present value of the remaining rental
payments, discounted at a rate of ten percent per annum.
(4) Represents partial funding of the purchase price of the Equipment in the
form of two advances of $100,000 on August 28, 1996, and $43,075 on
September 30, 1996. The Company anticipates funding the remaining
balance of the Equipment purchase price within four months of the
initial acquisition date.
(5) The temporary Secured Equipment Lease entered into on August 28, 1996,
had a term of four months and required the payment of monthly rent of
$913. On September 30, 1996, the temporary Secured Equipment Lease was
amended to have a term of three months and requires the payment of
monthly rent of $1,306. Upon funding the balance of the Equipment
purchase price, which is expected to occur in the fourth 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 10.68% per annum.
(6) 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 10.68% 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 JULY 17, 1996
THROUGH OCTOBER 3, 1996
FOR A 12-MONTH PERIOD (UNAUDITED)
<CAPTION>
The following schedule represents pro forma unaudited estimates of taxable income before dividends
paid deduction of each Property acquired by the Company from July 17, 1996 through October 3, 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.
Boston Market Jack in the Box Applebee's Golden Corral
Upland, CA (5)(7) Houston, TX (5) Montclair, CA (5) Brooklyn, OH (6)
----------------- --------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction:
Base Rent (1) $ 101,479 $ 97,618 $176,084 $142,823
Asset Management Fees (2) (5,819) (5,467) (9,563) (5,921)
General and Administrative
Expenses (3) (6,292) (6,052) (10,917) (8,855)
-------- ------- -------- --------
Estimated Cash Available from
Operations 89,368 86,099 155,604 128,047
Depreciation and Amortization
Expense (4) (11,115) (15,257) (21,142) (26,658)
-------- ------- -------- --------
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction of the Company $ 78,253 $ 70,842 $134,462 $ 101,389
========== ======= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Ryan's Family
Boston Market Boston Market Steak House Arby's
La Quinta, CA (5)(7) Merced, CA (5) Spring Hill, FL (5) Avon, IN
-------------------- -------------- ------------------- ---------
<S> <C> <C> <C> <C>
Pro Forma Estimate of
Taxable Income Before
Dividends Paid
Deduction:
Base Rent (1) $ 98,804 $96,704 $204,392 $81,044
Asset Management Fees (2) (5,660) (5,540) (11,112) (4,738)
General and Administrative
Expenses (3) (6,126) (5,996) (12,672) (5,025)
-------- -------- -------- --------
Estimated Cash Available from
Operations 87,018 85,168 180,608 71,281
Depreciation and Amortization
Expense (4) (12,439) (10,283 (34,952) (12,415)
-------- -------- --------- --------
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction of the Company $ 74,579 $ 74,885 $145,656 $ 58,866
======== ======== ========= ========
</TABLE>
<TABLE>
<CAPTION>
Boston Market Applebee's Burger King
Florissant, MO (5) Salinas, CA (5) Chicago, IL (5) Total
------------------ --------------- --------------- -----
<S> <C> <C> <C> <C>
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction:
Base Rent (1) $131,306 $145,549 $173,489 $1,449,292
Asset Management Fees (2) (7,523) (7,950) (9,463) (78,756)
General and Administrative
Expenses (3) (8,141) (9,024) (10,756) (89,856)
-------- -------- -------- ----------
Estimated Cash Available from
Operations 115,642 128,575 153,270 1,280,680
Depreciation and Amortization
Expense (4) (15,852) (16,617) (19,317) (196,047)
-------- -------- -------- ----------
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction of the Company $ 99,790 $111,958 $133,953 $1,084,633
======== ======== ======== ==========
</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.
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 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
-------- -------------------------------
Upland Property January 20, 1997
Houston #2 Property February 1, 1997
Montclair Property February 19, 1997
La Quinta Property March 5, 1997
Merced Property March 16, 1997
Spring Hill Property February 15, 1997
Florissant Property March 18, 1997
Salinas Property February 6, 1997
Chicago Property December 28, 1996
(6) The Company accepted an assignment of an interest in a ground lease
relating to the Brooklyn Property effective August 23, 1996.
(7) The lessee of the Upland and La Quinta Properties is the same
unaffiliated lessee.
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
INDEX TO FINANCIAL STATEMENTS
-----------------------------
Page
----
Pro Forma Consolidated Financial Information (unaudited):
Pro Forma Consolidated Balance Sheet as of June 30, 1996 22
Pro Forma Consolidated Statement of Earnings for the
six months ended June 30, 1996 23
Pro Forma Consolidated Statement of Earnings for the
year ended December 31, 1995 24
Notes to Pro Forma Consolidated Financial Statements
for the six months ended June 30, 1996 and the
year ended December 31, 1995 25
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 June
30, 1996, including the receipt of $76,816,648 in gross offering proceeds from
the sale of 7,681,665 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 68 properties (including 29
properties which consist of land and building, one property through a joint
venture arrangement which consists of land and building, five properties which
consist of building only and 33 properties consisting of land only), 14 of
which were under construction at June 30, 1996, to provide mortgage financing
to the lessees of the 33 properties consisting of land only, and to pay
organizational and offering expenses, acquisition fees and miscellaneous
acquisition expenses, (ii) the receipt of $22,934,468 in gross offering
proceeds from the sale of 2,293,447 additional shares of common stock during
the period July 1, 1996 through September 19, 1996, and (iii) the application
of such funds and $3,689,194 of cash and cash equivalents at June 30, 1996, to
purchase 14 additional properties acquired during the period July 1, 1996
through September 19, 1996 (11 of which are under construction and consist of
land and building, two properties which consist of land and building and one
property which consists of building only), to pay additional costs for the 14
properties under construction at June 30, 1996, 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 June 30, 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 June 30, 1996.
The Pro Forma Consolidated Statements of Earnings for the six months
ended June 30, 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 82
properties that were owned by the Company as of September 19, 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 75 properties owned by the Company as of
September 19, 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
JUNE 30, 1996
Pro Forma
ASSETS Historical Adjustments Pro Forma
----------- --------------- -----------
Land and buildings on operating
leases, less accumulated
depreciation $39,754,572 $14,281,144 (a) $54,035,716
Net investment in direct
financing leases (b) 3,071,035 7,484,840 (a) 10,555,875
Cash and cash equivalents 13,369,577 (3,689,194)(a) 9,680,383
Receivables 114,842 114,842
Mortgage notes receivable 12,432,362 12,432,362
Prepaid expenses 31,396 31,396
Organization costs, less
accumulated amortization 15,682 15,682
Loan costs, less accumulated
amortization 44,871 44,871
Accrued rental income 215,222 215,222
Other assets 1,548,050 (74,694)(a) 1,473,356
----------- ----------- -----------
$70,597,609 $18,002,096 $88,599,705
=========== ============ ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities:
Note payable $ 603,745 $ 603,745
Accrued interest payable 2,462 2,462
Accrued construction costs
payable 3,097,615 $(3,097,615)(a) -
Accounts payable and accrued
expenses 74,460 74,460
Escrowed real estate taxes payable 9,696 9,696
Due to related parties 206,702 206,702
Deferred financing income 42,518 42,518
Rents paid in advance 22,277 22,277
----------- ----------- -----------
Total liabilities 4,059,475 (3,097,615) 961,860
----------- ----------- -----------
Minority interest 297,808 - 297,808
----------- ----------- -----------
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 7,701,665
shares; issued and outstanding,
as adjusted, 9,995,112 shares 77,017 22,934 (a) 99,951
Capital in excess of par value 66,612,593 21,076,777 (a) 87,689,370
Accumulated distributions in
excess of net earnings (449,284) (449,284)
----------- ----------- -----------
66,240,326 21,099,711 87,340,037
----------- ----------- -----------
$70,597,609 $18,002,096 $88,599,705
=========== ============ ===========
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
SIX MONTHS ENDED JUNE 30, 1996
Pro Forma
Historical Adjustments Pro Forma
---------- -------------- ----------
Revenues:
Rental income from
operating leases $1,618,001 $ 43,538 (1) $1,661,539
Earned income from
direct financing leases (2) 86,184 34,282 (1) 120,466
Interest income from
mortgage notes receivable 465,498 465,498
Other interest and income 211,789 (16,508)(3) 195,281
---------- ---------- ----------
2,381,472 61,312 2,442,784
---------- ---------- ----------
Expenses:
General operating and
administrative 269,319 269,319
Professional services 48,391 48,391
Asset and mortgage management
fees to related party 97,673 4,352 (4) 102,025
State and other taxes 12,384 1,129 (5) 13,513
Interest expense 3,578 3,578
Depreciation and amortization 238,762 3,300 (6) 242,062
---------- ---------- ----------
670,107 8,781 678,888
---------- ---------- ----------
Earnings Before Minority
Interest in Earnings of
Consolidated Joint Venture 1,711,365 52,531 1,763,896
Minority Interest in Earnings of
Consolidated Joint Venture (22,323) (22,323)
---------- ---------- ----------
Net Earnings $1,689,042 $ 52,531 $1,741,573
========== ========== ==========
Earnings Per Share of
Common Stock $ .30 $ .31
========== ==========
Weighted Average Number of
Shares of Common Stock
Outstanding 5,649,041 5,649,041
========== ==========
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
========= ========= =========
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 SIX MONTHS ENDED JUNE 30, 1996
AND THE YEAR ENDED DECEMBER 31, 1995
Pro Forma Consolidated Balance Sheet:
- ------------------------------------
(a) Represents gross proceeds of $22,934,468 from the issuance of 2,293,447
shares of common stock during the period July 1, 1996 through September
19, 1996 and $3,689,194 of cash and cash equivalents at June 30, 1996,
used (i) to acquire 14 properties for $14,846,047 (of which one property
consists of building only and 13 properties consist of land and
building), (ii) to fund estimated construction costs of $8,910,807
($3,097,615 of which was accrued as construction costs payable at June
30, 1996) relating to 14 wholly-owned properties under construction at
June 30, 1996, (iii) to pay acquisition fees of $1,032,051 and
reclassify from other assets $74,694 of acquisition fees previously
incurred relating to the acquired properties and to pay selling
commissions and offering expenses (stock issuance costs) of $1,834,757,
which have been netted against capital in excess of par value.
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
------------------ ----------- -------
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
Boston Market in
Upland, CA 969,780 51,953 1,021,733
Jack in the Box in
Houston, TX 911,104 48,809 959,913
Applebee's in
Montclair, CA 1,593,906 85,388 1,679,294
Golden Corral in
Brooklyn, OH 986,780 52,863 1,039,643
Boston Market in
La Quinta, CA 943,388 50,539 993,927
Boston Market in
Merced, CA 923,356 49,465 972,821
Arby's in
Avon, IN 789,676 42,304 831,980
Ryan's in
Spring Hill, FL 1,852,027 99,215 1,951,242
Applebee's in
Salinas, CA 1,325,026 70,983 1,396,009
Boston Market in
Florissant, MO 1,253,881 67,172 1,321,053
Fourteen wholly owned
properties
under construction at
June 30, 1996 5,813,192 311,422 6,124,614
----------- ----------- -----------
$20,659,239 $ 1,106,745 $21,765,984
=========== =========== ===========
Adjustment classified
as follows:
Land and buildings on
operating leases $14,281,144
Net investment in
direct financing
leases 7,484,840
-----------
$21,765,984
===========
(b) 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 ten 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 82 properties acquired
during the period June 2, 1995 (the date the Company began operations)
through September 19, 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 six months ended June 30, 1996 and the year ended
December 31, 1995.
(2) See Note (b) 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
six months ended June 30, 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 six months ended June 30, 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 six
months ended June 30, 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.
