SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported): April 24, 1996
CNL AMERICAN PROPERTIES FUND, INC.
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(Exact Name of Registrant as Specified in Charter)
Florida 33-78790 59-3239115
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(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification No.)
incorporation)
400 East South Street, Suite 500
Orlando, Florida 32801
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(Address of principal executive offices) (Zip Code)
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.
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 May 21, 1996, the Company had received aggregate
subscription proceeds of $67,372,033 (6,737,203 Shares) from 3,984
stockholders, including $128,151 (12,815 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 April 10, 1996 through May 21, 1996, the Company
acquired 13 Properties, including one Property consisting of building only,
two Properties consisting of land and building and ten Properties consisting
of land only. The Properties are one TGI Friday's Property (in Hamden,
Connecticut), one Wendy's Property (in Knoxville, Tennessee), one Golden
Corral Property (in Port Richey, Florida) and ten Pizza Hut Properties (one in
each of Beaver, Bluefield, Huntington, Hurricane, Milton, Ronceverte, Beckley,
Belle and Cross Lanes, West Virginia, and Marietta, Ohio) (hereinafter
referred to as the "Ten Pizza Hut Properties").
In connection with the purchase of the TGI Friday's Property, which
is building only, in Hamden, Connecticut, the Company, as lessor, entered into
a long-term lease agreement with an unaffiliated lessee. The lease is 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. The Company has also entered into a tri-party
agreement relating to this Property with the lessee and the owner of the land.
The tri-party agreement provides that the ground lessee is responsible for all
obligations under the ground lease and provides certain rights to the Company
relating to the maintenance of its interest in the building in the event of a
default by the lessee under the terms of the ground lease. In addition, in
connection with this Property, which is to be constructed, the Company has
entered into development and indemnification and put agreements with the
lessee.
In connection with the purchase of the Wendy's Property and the
Golden Corral Property, the Company, as lessor, entered into long-term lease
agreements with unaffiliated lessees. The 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. In connection with the purchase of these two Properties,
which are to be constructed, the Company has entered into development and
indemnification and put agreements with the lessees.
In connection with the Ten Pizza Hut Properties, the Company acquired the
land and is leasing these ten parcels to the lessee, Castle Hill Holdings V,
L.L.C. ("Castle Hill"), pursuant to a master lease agreement (the "Master
Lease Agreement"). Castle Hill has subleased the Ten Pizza Hut Properties to
one of its affiliates, Midland Food Services, L.L.C., which is the operator of
the restaurants. The Master Lease Agreement is 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 and sales and use taxes. If the lessee does not exercise its
option to purchase the Properties upon termination of the Master Lease
Agreement, the sublessee and lessee will surrender possession of the
Properties to the Company, together with any improvements on such Properties.
The lessee owns the buildings located on the Ten Pizza Hut Properties. In
connection with the acquisition of the Ten Pizza Hut Properties, the Company
provided mortgage financing of $3,888,000 to the lessee pursuant to a Mortgage
Loan evidenced by a master mortgage note (the "Master Mortgage Note"), which
is collateralized by the building improvements on the Ten Pizza Hut
Properties. The Master Mortgage Note bears interest at a rate of 10.75% per
annum and principal and interest are due in equal monthly installments over 20
years starting July 1, 1996. The Master Mortgage Note equals approximately 85
percent of the appraised value of the related buildings. Management believes
that, due to the fact that the Company owns the underlying land relating to
the Ten Pizza Hut Properties and due to other underwriting criteria, the
Company has sufficient collateral for the Master Mortgage Note.
The following table sets forth the location of each of the 13
Properties acquired by the Company, including the Ten Pizza Hut Properties in
which the Company acquired the land only, the one TGI Friday's Property in
which the Company acquired the building only and the two Properties in which
the Company acquired the land and building, during the period April 10, 1996
through May 21, 1996, a description of the competition, and a summary of the
principal terms of the acquisition and lease of each Property.
<TABLE>
PROPERTY ACQUISITIONS
From April 10, 1996 through May 21, 1996
<CAPTION>
Lease Expira-
Purchase Date tion and Minimum Option
Property Location and Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent to Purchase
- --------------------------------- ------------ -------- --------------- --------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
TGI FRIDAY'S (3) 04/24/96 09/2008; no 15.043% of Total None at any time
(the "Hamden Property") (3) renewal options Cost; increases by after the
Restaurant to be constructed 10% after the fifth third lease
lease year and after year (5)
every five years
The Hamden Property is located at the thereafter during
southeast quadrant of Skiff Street and the lease term (4)
Route 10 in Hamden, New Haven County,
Connecticut, in an area of mixed
retail, commercial, and residential
development. Other fast-food and
family-style restaurants located in
proximity to the Hamden Property
include a China Buffet, a Chili's, a
Red Lobster, a McDonald's, a Wendy's,
and several local restaurants.
WENDY'S $322,292 05/08/96 05/2016; two 10.25% of Total for each lease at any time
(the "Knoxville #1 Property") (excluding five-year Cost; increases year, (i) 6% of time after
Restaurant to be constructed closing and renewal to 10.76% of Total annual gross seventh
development options Cost during the sales minus lease year
costs (3) fourth through (ii) the minimum
The Knoxville #1 Property is located sixth lease years, annual rent for
increases to 11.95% such lease year
on the north side of Western Avenue in of Total Cost during
the seventh year
Knoxville, Knox County, Tennessee, in through tenth lease
an area of mixed retail, commercial, years, increases to
12.70% of Total
and residential development. Other Cost during the
fast-food and family-style restaurants eleventh through
fifteenth lease years
located in proximity to the Knoxville and increases to 13.97%
#1 Property include a KFC, a of Total Cost during
McDonald's, a Taco Bell, a Kenny Rogers the sixteenth through
Roasters, a Long John Silver's, a twentieth lease years (4)
Krystal, a Hardee's, a Shoney's, and
several local restaurants.
GOLDEN CORRAL $586,687 05/08/96 10/2011; two 11.25% of Total for each lease during
(the "Port Richey Property") (excluding) five-year Cost; increases by year, commencing the eighth
Restaurant to be constructed closing and renewal 8% after the fifth in the second and ninth
development options lease year and lease year (i) lease
costs) after every five 5% of annual years only
(3) years thereafter gross sales (7)
during the lease minus (ii) the
The Port Richey Property is located on term (4) minimum annual
the southeast quadrant of the rent for such
intersection of U.S. 19 and Stone Road, lease year (6)
Port Richey, Pasco County, Florida, in
an area of mixed retail, commercial,
and residential development. Other
fast-food and family-style restaurants
located in proximity to the Port
Richey Property include a Boston
Market, a Morrison's, a Burger King, a
Checkers, a Bob Evans, a Wendy's, a
KFC, a Chili's, and several local
restaurants.
TEN PIZZA HUT PROPERTIES - Land only - $1,512,000 05/17/96 05/2016; two $166,320; increases None at any time
(8)(10) located in Beaver, West (excluding ten-year by 10% after the after the
Virginia (the "Beaver Property"), closing renewal fifth and tenth seventh
Bluefield, West Virginia (the costs) options lease years and lease year
"Bluefield Property"), Huntington, West and 12% after the
Virginia (the"Huntington Property"), fifteenth lease
Hurricane, West Virginia (the year (9)
"Hurricane Property"), Milton, West
Virginia (the "Milton Property"),
Ronceverte, West Virginia (the
"Ronceverte Property"), Beckley, West
Virginia (the "Beckley Property"),
Belle, West Virginia (the "Belle
Property"), Cross Lanes, West Virginia
(the "Cross Lanes Property") and
Marietta, Ohio (the "Marietta
Property").
The Beaver Property is located on the
north side of U.S. Route 19 in Beaver,
Raleigh County, West Virginia, in an
area of mixed retail, commercial, and
residential development. Other fast-
food and family-style restaurants
located in proximity to the Beaver
Property include a McDonald's, a
Hardee's, a Wendy's, and a Long John
Silver's.
The Bluefield Property is located on
the north side of Bluefield Avenue in
Bluefield, Mercer County, West
Virginia, in an area of mixed retail,
commercial, and residential
development. Other fast-food and
family-style restaurants located in
proximity to the Bluefield Property
include a McDonald's, a Hardee's, a
Captain D's, and a Shoney's. (11)
The Huntington Property is located on
the south side of Madison Avenue in
Huntington, Cabell County, West
Virginia, in an area of mixed retail,
commercial, and residential
development. Other fast-food and
family-style restaurants located in
proximity to the Huntington Property
include an Arby's, three Burger Kings,
a Chi Chi's, two Dairy Queens, a
Hardee's, a KFC, a Long John Silver's,
two McDonald's, a Papa John's, a Rax, a
Red Lobster, a Steak & Ale, a Taco
Bell, and several local restaurants.
The Hurricane Property is located on
the southwest side of Hurricane Creek
Road in Hurricane, Putnam County, West
Virginia, in an area of mixed retail,
commercial, and residential
development. Other fast-food and
family-style restaurants located in
proximity to the Hurricane Property
include a McDonald's, a Subway Sandwich
Shop, and several local restaurants.
(11)
The Milton Property is located on the
northeast corner of East Main Street
and Brickyard Avenue in Milton, Cabell
County, West Virginia, in an area of
mixed retail, commercial, and
residential development. Other fast-
food and family-style restaurants
located in proximity to the Milton
Property include a McDonald's, a Subway
Sandwich Shop, a Dairy Queen, and
several local restaurants.
The Ronceverte Property is located on
the north side of Seneca Trail in
Ronceverte, Greenbrier County, West
Virginia, in an area of mixed retail,
commercial, and residential
development. Other fast-food and
family-style restaurants located in
proximity to the Ronceverte Property
include a KFC, a Long John Silver's, a
Subway Sandwich Shop, and several local
restaurants.
The Beckley Property is located on the
north side of Harper Road in Beckley,
Raleigh County, West Virginia, in an
area of mixed retail, commercial, and
residential development. Other fast-
food and family-style restaurants
located in proximity to the Beckley
Property include a McDonald's, a Long
John Silver's, a Wendy's, a Shoney's, a
Bob Evans, a Subway Sandwich Shop, a
Hardee's, and several local
restaurants.
The Belle Property is located on the
southwest side of Dupont Avenue in
Belle, Kanawha County, West Virginia,
in an area of mixed retail, commercial,
and residential development. Other
fast-food and family-style restaurants
located in proximity to the Belle
Property include several local
restaurants.
The Cross Lanes Property is located on
the northwest side of Goff Mountain
Road in Cross Lanes, Kanawha County,
West Virginia, in an area of mixed
retail, commercial, and residential
development. Other fast-food and
family-style restaurants located in
proximity to the Cross Lanes Property
include a Hardee's, a Papa John's, a
Captain D's, a McDonald's, a Taco Bell,
a Bob Evans, a Wendy's, a Shoney's a
KFC, and several local restaurants.
The Marietta Property is located on the
east side of Acme Street in Marietta,
Washington County, Ohio, in an area of
mixed retail, commercial, and
residential development. Other fast-
food and family-style restaurants
located in proximity to the Marietta
Property include a Burger King, a
Captain D's, a Dairy Queen, an Elby's
Big Boy, a KFC, a Long John Silver's, a
McDonald's, a Papa John's, a Subway
Sandwich Shop, a Taco Bell, a Wendy's,
and several local restaurants. (11)
- ----------------------------------------------------
FOOTNOTES:
(1) The estimated federal income tax basis of the depreciable portion (the
building portion) of each of the construction properties, once the
buildings are constructed, is set forth below:
Property Federal Tax Basis
-------- -----------------
Hamden Property $1,195,000
Knoxville #1 Property 510,000
Port Richey Property 1,208,000
(2) Minimum annual rent for each of the Properties became payable on the
effective date of the lease, except as indicated below. For the Hamden
and Port Richey Properties, minimum annual rent will become due and
payable on the earlier of (i) the date the certificate of occupancy
for the restaurant is issued, (ii) the date the restaurant opens for
business to the public or (iii) 150 days after execution of the lease.
For the Knoxville #1 Property, minimum annual rent will become due and
payable on (i) the date the certificate of occupancy for the restaurant
is issued, (ii) the date the restaurant opens for business to the
public, (iii) 120 days after execution of the lease or (iv) the date
the tenant receives from the landlord its final funding of the
construction costs. During the period commencing with the effective
date of the lease to the date minimum annual rent becomes payable for
the Knoxville #1 Property, as described above, the tenant shall pay
monthly "interim rent" equal to 10.25% per annum of the amount funded
by the Company in connection with the purchase and construction of the
Property.
(3) The Company accepted an assignment of an interest in the ground lease
relating to the Hamden Property effective April 24, 1996, in
consideration of its funding of certain preliminary development costs
and its agreement to fund remaining development costs not in excess of
the amount specified below. The development agreements for the
Properties which are to be constructed provide that construction must
be completed no later than the dates set forth below. The maximum
cost to the Company, (including the purchase price of the land (if
applicable), development costs (if applicable), and closing and
acquisition costs) is not expected to, but may, exceed the amounts
set forth below:
Property Estimated Maximum Cost Estimated Final Completion Date
-------- ---------------------- -------------------------------
<S> <C> <C>
Hamden Property $1,200,972 September 21, 1996
Knoxville #1 Property 830,966 September 5, 1996
Port Richey Property 1,675,000 October 5, 1996
(4) The "Total Cost" is equal to the sum of (i) the purchase price of
the Property, (ii) closing costs, and (iii) actual development costs
incurred under the development agreement, and in the case of the
Hamden and Port Richey Properties, (iv) "construction financing
costs" during the development period.
(5) If the lessee exercises its purchase option after the third lease year
and before the eleventh lease year, the purchase price to be paid by
the lessee shall be equal to the net present value of the monthly
lease rental payments for the remainder of the lease term (including
previous and scheduled rent increases) discounted at the lesser of
(i) 11% per annum, or (ii) the then-current annual yield on 7-year
Treasury securities plus 4.5%, plus the full amount of any late fees,
default interest, enforcement costs or other sums otherwise due or
payable by the lessee under the lease. If the lessee exercises its
option after the tenth lease year, the purchase price to be paid by
the lessee shall be equal to the net present value of the monthly
lease payments for the remainder of the lease term (based, however,
for purposes hereof on the initial monthly installment amount of
annual rental and not including previous and scheduled increases)
discounted at 11% per annum, plus the full amount of any late fees,
default interest, enforcement costs or other sums otherwise due or
payable by the lessee under the lease.
(6) Percentage rent shall be calculated on a calendar year basis
(January 1 to December 31).
(7) If the Property is not producing percentage rent and the lessee
determines, in good faith, that the restaurant has become uneconomic
and unsuitable the lessee may elect, during the first through seventh
and again during the tenth through 15th lease years:
(i) to purchase the Property for a purchase price, net of closing
costs, equal to the greater of (a) the then fair-market value of the
Property as determined by an independent appraisal, or (b) 100% of
the Company's original cost for the Property if the Company is
successful in effectuating the lessee's purchase through a tax-free
``like-kind'' exchange, or 120% of the Company's original cost for
the Property if a tax-free, ``like-kind'' exchange is not effectuated;
or
(ii) to sublet the Property as described in the section of the
Prospectus entitled ``Description of Property Leases - Assignment
and Sublease;'' or
(iii) to substitute the Property for another Golden Corral restaurant
property on terms similar to those described in the section of the
Prospectus entitled ``Description of Property Leases - Substitution
of Properties.''
(8) The lease relating to this Property is a land lease only. The Company
entered into a Mortgage Loan evidenced by a Master Mortgage Note for
$3,888,000 collateralized by building improvements. The Master
Mortgage Note bears interest at a rate of 10.75% per annum and
principal and interest will be collected in equal monthly installments
over 20 years beginning in July 1996.
(9) 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.
(10) The Company entered into a Master Lease Agreement for the Beaver,
Bluefield, Huntington, Hurricane, Milton, Ronceverte, Beckley,
Belle, Cross Lanes and Marietta Properties.
(11) The Company and the lessee entered into remediation and indemnity
agreements on May 17, 1996, with the seller of the land and an
adjacent site owner/operator (the "Indemnitors") due to Phase I
and Phase II environmental testing results indicating that there
were action levels of environmental contamination on the Bluefield,
Hurricane and Marrieta Properties relating to underground gasoline
storage tanks from one adjacent Property and past use of the other
two Properties. Under the remediation and indemnity agreements,
the Indemnitors have agreed to notify all applicable federal, state,
or local government agencies or authorities of the environmental
contamination, to undertake all remediation work on these sites at
no expense to the Company or lessee, and to indemnify, defend and
hold harmless the Company, the lessee and investors from losses
arising out of or related to any claim, action, proceeding, lawsuit,
notice of violation or demand by any (i) governmental authority in
connection with the presence of any environmental contamination,
(ii) failure of the Indemnitors to notify any applicable governmental
authorities, (iii) remediation work, and (iv) claim, action,
proceeding, lawsuit, or demand by third parties who are not the
successors in interest of the indemnified parties and are not
affiliated with the indemnified parties. If as to any of the
affected sites, the remediation work is not satisfactorily completed
within two years after the effective date, such that the Company is
willing, in its discretion, to remain the owner of a particular
affected site, the Company may "put" the particular affected site
back to the seller, and the seller will purchase the Company's
ownership interest in the affected site.
</TABLE>
<TABLE>
PRO FORMA ESTIMATE OF TAXABLE INCOME BEFORE DIVIDENDS PAID DEDUCTION OF
CNL AMERICAN PROPERTIES FUND, INC.
GENERATED FROM THE OPERATIONS OF PROPERTIES ACQUIRED FROM APRIL 10, 1996
THROUGH MAY 21, 1996
FOR A 12-MONTH PERIOD (UNAUDITED)
The following schedule represents pro forma unaudited estimates of
taxable income before dividends paid deduction of each Property acquired by
the Company from April 10, 1996 through May 21, 1996, for the 12-month period
commencing on the date of the inception of the respective lease on such
Property. The schedule should be read in light of the accompanying footnotes.
These estimates do not purport to present actual or expected
operations of the Company for any period in the future. These estimates were
prepared on the basis described in the accompanying notes which should be read
in conjunction herewith. No single lessee or group of affiliated lessees
lease Properties or has borrowed funds from the Company with an aggregate
purchase price in excess of 20% of the expected total net offering proceeds of
the Company.
<CAPTION>
TGI Friday's Wendy's Golden Corral Ten Pizza
Hamden, CT (7) Knoxville, TN (#1)(7) Port Richey, FL (7) Hut Properties Total
-------------- --------------------- ------------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction:
Base Rent (1) $ 173,714 $ 81,898 $ 196,972 $ 166,320 $ 618,904
Interest Income (2) - - - 415,686 415,686
---------- ---------- ---------- ---------- ----------
Total Revenues 173,714 81,898 196,972 582,006 1,034,590
---------- ---------- ---------- ---------- ----------
Asset Management
Fees (3) (6,808) (4,746) (10,233) (8,922) (30,709)
Mortgage Management Fee (4) - - - (23,167) (23,167)
General and Administrative
Expenses (5) (10,770) (5,078) (12,212) (36,084) (64,144)
---------- ---------- ---------- ---------- ----------
Total Operating Expenses (17,578) (9,824) (22,445) (68,173) (118,020)
---------- ---------- ---------- ---------- ----------
Estimated Cash Available from
Operations 156,136 72,074 174,527 513,833 916,570
Depreciation and Amortization
Expense (6) (30,652) (13,081) (30,970) (10,498) (85,201)
---------- ---------- ---------- ---------- ----------
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction of the Company $ 125,484 $ 58,993 $ 143,557 $ 503,335 $ 831,369
========== ========== ========== ========== ==========
See Footnotes
- --------------------------------------------------------
FOOTNOTES:
(1) Base rent does not include percentage rents which become due if
specified levels of gross receipts are achieved.
(2) The Company entered into a Master Mortgage Note agreement for
$3,888,000, collateralized by building improvements located on the
Ten Pizza Hut Properties. The Master Mortgage Note bears interest
at a rate of 10.75% per annum and principal and interest will be
collected in equal monthly installments over 20 years beginning in
July 1996. Amount does not include $19,440 of loan commitment fees
and $19,440 in loan origination fees collected by the Company at
closing from the borrower.
(3) The Properties will be managed pursuant to an advisory agreement
between the Company and CNL Fund Advisors, Inc. (the "Advisor"),
pursuant to which the Advisor will receive monthly asset management
fees in an amount equal to one-twelfth of .60% of the Company's Real
Estate Asset Value as of the end of the preceding month as defined
in such agreement.
(4) For managing the Mortgage Loans, the Advisor will be entitled to
receive a monthly mortgage management fee of one-twelfth of .60% of
the total principal amount of the Mortgage Loans as of the end of
the preceding month.
(5) Estimated at 6.2% of gross rental income and interest income based on
the previous experience of Affiliates of the Advisor with 17 public
limited partnerships which own properties similar to those owned by
the Company. Amount does not include soliciting dealer servicing
fee due to the fact that such fee will not be incurred until
December 31 of the year following the year in which the offering
terminates.
(6) The estimated federal tax basis of the depreciable portion (the
building portion) of the Properties has been depreciated on the
straight-line method over 39 years. In connection with the Ten
Pizza Hut Properties, acquisition fees allocated to the Master
Mortgage Note have been amortized on a straight-line basis over
the life of the agreement (20 years).
(7) The Company accepted an assignment of an interest in the ground lease
relating to the Hamden Property effective April 24, 1996, in
consideration of its funding of certain preliminary development
costs and its agreement to fund remaining development. The develop-
ment agreements for the Properties which are to be constructed provide
that construction must be completed no later than the dates set forth
below:
Property Estimated Final Completion Date
-------- -------------------------------
Hamden Property September 21, 1996
Knoxville #1 Property September 5, 1996
Port Richey Property October 5, 1996
</TABLE>
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 16
Pro Forma Consolidated Statement of Earnings for the
quarter ended March 31, 1996 17
Pro Forma Consolidated Statement of Earnings for the
year ended December 31, 1995 18
Notes to Pro Forma Consolidated Financial Statements
for the quarter ended March 31, 1996 and the year
ended December 31, 1995 19
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 $12,330,152 in gross offering
proceeds from the sale of 1,233,015 additional shares of common stock during
the period April 1, 1996 through May 21, 1996, and (iii) the application of
such funds and $5,458,428 of cash and cash equivalents at March 31, 1996, to
purchase 18 additional properties acquired during the period April 1, 1996
through May 21, 1996 (one of which is under construction and consists of
building only, four of which are under construction and consist of land and
building, and 13 properties which consist of land only), to pay additional
costs for the four properties under construction at March 31, 1996, to provide
mortgage financing to the lessee of the 13 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 six of the 61 properties
that were owned by the Company as of May 21, 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 55 properties owned by the Company as of May 21,
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 $ 7,398,888 (a) $35,712,362
Net investment in direct
financing leases (c) 1,360,414 4,377,508 (a) 5,737,922
Cash and cash equivalents 8,775,306 (5,269,016)(a)
(189,412)(b) 3,316,878
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 (43,945)(a) 1,155,971
----------- ----------- -----------
$48,909,495 $10,162,023 $59,071,518
=========== =========== ===========
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,
6,757,203 shares 55,242 12,330 (a) 67,572
Capital in excess of par value 46,983,886 11,331,410 (a) 58,315,296
Accumulated distributions in
excess of net earnings (293,384) (293,384)
----------- ----------- -----------
46,745,744 11,343,740 58,089,484
----------- ----------- -----------
$48,909,495 $10,162,023 $59,071,518
=========== =========== ============
See accompanying notes to unaudited pro forma consolidated
financial statements.
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
QUARTER ENDED MARCH 31, 1996
Pro Forma
Historical Adjustments Pro Forma
---------- -------------- ----------
Revenues:
Rental income from operating
leases $ 763,155 $ 26,417 (1) $ 789,572
Earned income from direct
financing lease (2) 35,926 35,926
Interest and other income 260,798 (6,925)(3) 253,873
---------- ---------- ----------
1,059,879 19,492 1,079,371
---------- ---------- ----------
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 1,246 (4) 41,616
State and other taxes 2,898 410 (5) 3,308
Interest expense 159 159
Depreciation and amortization 98,472 3,966 (6) 102,438
---------- ---------- ----------
300,539 5,622 306,161
---------- ---------- ----------
Earnings Before Minority Interest
in Earnings of Consolidated Joint
Venture 759,340 13,870 773,210
Minority Interest in Earnings of
Consolidated Joint Venture (14,752) (14,752)
---------- ---------- ----------
Net Earnings $ 744,588 $ 13,870 $ 758,458
========== ========== ==========
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 $ 94,792 (1) $ 593,609
Earned income from direct
financing leases (2) 28,935 28,935
Contingent rental income 12,024 12,024
Interest income 119,355 (28,853)(3) 90,502
--------- --------- ---------
659,131 65,939 725,070
--------- --------- ---------
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 1,672 (5) 21,861
Depreciation and amortization 104,131 14,700 (6) 118,831
--------- --------- ---------
290,276 20,740 311,016
--------- --------- ---------
Earnings Before Minority Interest
in Earnings of Consolidated Joint
Venture 368,855 45,199 414,054
Minority Interest in Earnings of
Consolidated Joint Venture (76) (76)
--------- --------- ---------
Net Earnings $ 368,779 $ 45,199 $ 413,978
========= ========= =========
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 $12,330,152 from the issuance of 1,233,015
shares of common stock during the period April 1, 1996 through May 21,
1996, and 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, used (i) to acquire 18 properties
for $8,092,460 (of which 13 properties consist of land only, one
property consists of building only and four 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
$554,857 and reclassify from other assets $43,945 of acquisition fees
previously incurred relating to the acquired properties, (iv) to pay
selling commissions and offering expenses (stock issuance costs) of
$986,412, 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 the 13 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
Four wholly owned properties
under construction at
March 31, 1996 3,085,134 165,275 3,250,409
----------- ----------- -----------
$11,177,594 $ 598,802 $11,776,396
=========== =========== ===========
Adjustment classified
as follows:
Land and buildings on
operating leases $ 7,398,888
Net investment in
direct financing
leases 4,377,508
-----------
$11,776,396
===========
(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 five 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 six of the 61 properties acquired during
the period June 2, 1995 (the date the Company began operations) through
May 21, 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 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
six 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 placed in
service for purposes of the Pro Forma Consolidated Statements of
Earnings.
Date Placed Pro Forma
in Service Date Placed
By the Company In Service
-------------- -----------
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
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 $5,241,000 for the Pro Forma
Properties for the quarter ended March 31, 1996 and the year ended
December 31, 1995), 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 three
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: May 31, 1996 By: /s/ Robert A. Bourne
---------------------------
ROBERT A. BOURNE, President
