Rule 424(b)(3)
No. 33-78790
CNL AMERICAN PROPERTIES FUND, INC.
This Supplement is part of, and should be read in conjunction with, the
Prospectus dated April 26, 1996. This Supplement replaces the Supplements
dated April 30, 1996 and May 15, 1996. Capitalized terms used in this
Supplement have the same meaning as in the Prospectus unless otherwise stated
herein.
Information as to proposed properties for which the Company has received
initial commitments and as to the number and types of Properties acquired by
the Company is presented as of May 21, 1996, and all references to commitments
or Property acquisitions should be read in that context. Proposed properties
for which the Company receives initial commitments, as well as property
acquisitions that occur after May 21, 1996, will be reported in a subsequent
Supplement.
THE OFFERING
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 Reinvestment Plan. As of May
21, 1996, the Company had invested or committed for investment approximately
$55,000,000 of such proceeds in 61 Properties (including one Property through
a joint venture arrangement which consists of land and building, four
Properties which consist of building only, 33 Properties which consist of land
only and 23 Properties which consist of land and building), in providing
mortgage financing to the tenant of the 33 Properties consisting of land only
and to pay Acquisition Fees and Acquisition Expenses, leaving approximately
$3,200,000 in offering proceeds available for investment in Properties and
Mortgage Loans. As of May 21, 1996, the Company had incurred $3,031,741 in
Acquisition Fees to the Advisor.
BUSINESS
PROPERTY ACQUISITIONS
Between April 10, 1996 and 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"). For information regarding the 48 Properties acquired
by the Company prior to April 10, 1996, see the Prospectus dated April 26,
1996.
In connection with the purchase of the TGI Friday's Property, which is
building only, in Hamden, Connecticut, the Company, as lessor, entered into a
long-term lease agreement with an unaffiliated lessee. The general terms of
the lease agreement are described in the section of the Prospectus entitled
"Business - Description of Property Leases." In connection with the purchase
of this Property, which is to be constructed, the Company has entered into
development and indemnification and put agreements with the lessee. The
general terms of these agreements are described in the section of the
Prospectus entitled "Business - Site Selection and Acquisition of Properties -
Construction and Renovation." In connection with this acquisition, the
Company has also entered into a tri-party agreement with the lessee and the
owner of the land. The tri-party agreement provides that the ground lessee is
responsible for all obligations under the ground lease and provides certain
rights to the Company relating to the maintenance of its interest in the
building in the event of a default by the lessee under the terms of the ground
lease.
May 24, 1996 Prospectus Dated April 26, 1996
In connection with the purchase of the Wendy's Property and the Golden
Corral Property, the Company, as lessor entered into long-term lease
agreements with unaffiliated lessees. The general terms of the lease
agreements are described in the section of the Prospectus entitled "Business -
Description of Property Leases." In connection with the purchase of these
Properties, which are to be constructed, the Company has entered into
development and indemnification and put agreements with the lessees. The
general terms of these agreements are described in the section of the
Prospectus entitled "Business - Site Selection and Acquisition of Properties -
Construction and Renovation."
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 general terms of the Master Lease Agreement are similar
to those described in the section of the Prospectus entitled "Business -
Description of Property Leases." 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.
As of May 21, 1996, the Company had initial commitments to acquire seven
properties, including two properties which consist of building only and five
properties which consist of land and building. The initial commitments for
the Denny's property in McKinney, Texas, and the Jack in the Box property in
Houston, Texas, were entered into on May 22, 1996. The acquisition of each of
these properties is subject to the fulfillment of certain conditions,
including, but not limited to, a satisfactory environmental survey and
property appraisal. There can be no assurance that any or all of the
conditions will be satisfied or, if satisfied, that one or more of these
properties will be acquired by the Company. If acquired, the leases of all
seven of these properties are expected to be entered into on substantially the
same terms described in the Prospectus in the section entitled "Business -
Description of Property Leases," except as described below.
In connection with the Wendy's property in Knoxville, Tennessee, and the
Golden Corral property in Brooklyn, Ohio, the Company anticipates owning only
the building and not the underlying land. However, the Company anticipates
entering into a tri-party agreement with the lessee and the landlord of the
land in order to provide the Company with certain rights with respect to the
land on which the building is located.
Set forth below are summarized terms expected to apply to the leases for
each of the properties. More detailed information relating to a property and
its related lease will be provided at such time, if any, as the property is
acquired.
<TABLE>
<CAPTION>
Lease Term and
Property Renewal Options Minimum Annual Rent Percentage Rent Option to Purchase
- -------- --------------- ------------------- --------------- ------------------
<S> <C> <C> <C> <C>
Wendy's (2) 20 years; two five-year 11.98% of Total Cost; for each leaseyear, upon the expiration
Knoxville, TN (#2) renewal options increases by 8% after (i) 6% of annual of the initial term
Restaurant to be the fifth lease year gross sales times the of the lease and
constructed and after every five Building Overage during any renewal
years thereafter Multiplier (4) minus period thereafter
during the lease term (ii) the minimum (5)
(1) annual rent for such
lease year
Wendy's 20 years; two five-year 10.25% of Total Cost; for each lease at any time after the
Camarillo, CA renewal options increases to 10.76% of year, (i) 6% of seventh lease year
Restaurant to be Total Cost during the annual gross sales
constructed fourth through sixth minus (ii) the
lease years, increases minimum annual rent
to 11.95% of Total for such lease year
Cost during the
seventh through tenth
lease years, increases
to 12.70% of Total
Cost during the
eleventh through
fifteenth lease years
and increases to 13.97%
of Total Cost during
the sixteenth through
twentieth lease years
(1)
Denny's 20 years; two five-year 10.625% of Total Cost; for each lease year, during the eighth,
Hillsboro, TX renewal options increases by 11% after (i) 5% of annual tenth, and twelfth
Restaurant to be the fifth lease year gross sales minus lease years only
constructed and after every five (ii) the minimum
years thereafter annual rent for such
during the lease term lease year
(1)
Golden Corral (2) 14 years; no renewal 14.214% of the for each lease year, upon the expiration
Brooklyn, OH options Company's total cost (i) 4% of annual of the lease (5)
Existing restaurant to purchase the gross sales minus
building; increases by (ii) the minimum
10% after the fifth annual rent for such
lease year and after lease year (3)
every five years
thereafter during the
lease term
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 increases by 8% after (i) 5% of annual the seventh lease
Restaurant to be the fifth lease year gross sales minus year
constructed and by 10% after every (ii) the minimum
five years thereafter annual rent for such
during the lease term lease year (3)
(1)
Denny's 20 years; two five-year 10.625% of the for each lease during the eighth,
McKinney, TX renewal options Company's total cost year, (i) 5% of tenth, and twelfth
Existing restaurant to purchase the annual gross sales lease years only
property; increases by minus (ii) the
11% after the fifth minimum annual rent
lease year and after for such lease term
every five years (3)
thereafter during the
lease term
Jack in the Box 18 years; four five-year 10.75% of Total Cost; for each lease year, at any time after
Houston, TX renewal options increases by 8% after (i) 5% of annual the seventh lease
Restaurant to be the fifth lease year gross sales minus year
constructed and by 10% after every (ii) the minimum
five years thereafter annual rent for such
during the lease term lease year (3)
(1)
- ----------------------------------------------------
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, and in the case of the
Hillsboro, Humble and Houston properties, (iv) "constructing financing costs" during the development
period.
(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) Percentage rent shall be calculated on a calendar year basis (January 1 to December 31).
(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) In the event that the aggregate amount of percentage rent paid by the lessee to the Company over the
term of the lease shall equal or exceed 15% of the purchase price paid by the Company, then the option
purchase price shall equal one dollar. In the event that the aggregate percentage rent paid shall be
less than 15% of the purchase price paid by the Company, then the option purchase price shall equal
the difference of 15% of the purchase price, less the aggregate percentage rent paid to the landlord
by the lessee under the lease.
</TABLE>
The following table sets forth the location of the 13 Properties
acquired by the Company, including the Ten Pizza Hut Properties in which the
Company acquired the land only and the one TGI Friday's Property in which the
Company acquired the building only, from 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
Expiration Option
Property Location and Purchase Date and Renewal Minimum Percentage To
Competition Price (1) Acquired Options Annual Rent (2) Rent Purchase
- --------------------- --------- -------- ----------- --------------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
TGI FRIDAY'S (3) 04/24/96 09/2008; no 15.043% of Total Cost; None at any time
(the "Hamden Property") (3) renewal increases by 10% after after the
Restaurant to be constructed options the fifth lease year and third lease
after every five years year (5)
The Hamden Property is located thereafter during the
at the southeast quadrant of lease term (4)
Skiff Street and 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 Cost; for each at any time
(the "Knoxville #1 Property") (excluding five-year increases to 10.76% of lease after the
Restaurant to be constructed closing and renewal Total Cost during the year, (i) seventh
development options fourth through sixth 6% of lease year
The Knoxville #1 Property is costs) (3) lease years, increases annual
located on the north side of to 11.95% of Total Cost gross
Western Avenue in Knoxville, during the seventh sales
Knox County, Tennessee, in an through tenth lease minus (ii)
area of mixed retail, years, increases to the
commercial, and residential 12.70% of Total Cost minimum
development. Other fast-food during the eleventh annual
and family-style restaurants through fifteenth lease rent for
located in proximity to the years and increases to such lease
Knoxville #1 Property include 13.97% of Total Cost year
a KFC, a McDonald's, a Taco during the sixteenth
Bell, a Kenny Rogers Roasters, through twentieth lease
a Long John Silver's, a 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 Cost; for each during the
(the "Port Richey Property") (excluding five-year increases by 8% after lease eighth and
Restaurant to be constructed closing and renewal the fifth lease year and year, ninth lease
development options after every five years commencing years only
The Port Richey Property is costs) (3) thereafter during the in the (7)
located on the southeast lease term (4) second
quadrant of the intersection lease year
of U.S. 19 and Stone Road, (i) 5% of
Port Richey, Pasco County, annual
Florida, in an area of mixed gross
retail, commercial, and sales
residential development. minus (ii)
Other fast-food and family- the
style restaurants located in minimum
proximity to the Port Richey annual
Property include a Boston rent for
Market, a Morrison's, a Burger such lease
King, a Checkers, a Bob Evans, year (6)
a Wendy's, a KFC, a Chili's,
and several local restaurants.
TEN PIZZA HUT PROPERTIES - $1,512,000 05/17/96 05/2016; two $166,320; increases by None at any time
Land only - (8)(10) located in (excluding ten-year 10% after the fifth and after the
Beaver, West Virginia (the closing renewal tenth lease years and seventh
"Beaver Property"), Bluefield, costs) options 12% after the fifteenth lease year
West Virginia (the "Bluefield lease year (9)
Property"), Huntington, West
Virginia (the"Huntington
Property"), Hurricane, West
Virginia (the "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
-------- ---------------------- -------------------------------
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. See "Management Compensation."
(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. See "Management Compensation."
(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 development agreements for the Properties which are
to be constructed provide that construction must be completed no later than the dates set forth below:
Property Estimated Final Completion Date
-------- -------------------------------
Hamden Property September 21, 1996
Knoxville #1 Property September 5, 1996
Port Richey Property October 5, 1996
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