SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CNL American Properties Fund, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
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previously. Identify the previous filing by registration statement number, of
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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4) Date Filed:
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CNL AMERICAN PROPERTIES FUND, INC.
400 East South Street, Suite 500
Orlando, Florida 32801
February 25, 1997
To our stockholders:
You are cordially invited to attend the annual meeting of stockholders of
CNL American Properties Fund, Inc., on April 4, 1997 at 10:00 a.m. at the CNL
Management Center at 450 E. South Street, Suite 101, Orlando, Florida. The
directors and officers of the Company look forward to greeting you personally.
Enclosed for your review are the proxy, proxy statements, notice of meeting
for the annual meeting of stockholders and annual report.
The past year has been a year of significant growth for the Company.
During 1996, the Company received over $100 million in capital through its
public offering of shares of common stock, acquired 76 properties and
originated mortgage loans relating to 35 properties. On February 6, 1997, the
Company completed its initial public offering for 15,000,000 shares
($150,000,000) of common stock and commenced a subsequent public offering of
up to 27,500,000 shares ($275,000,000) of common stock (the "Subsequent
Offering"). The net proceeds of these offerings will be invested in
additional triple-net leased properties and mortgage loans. It is anticipated
that if the Company completes its Subsequent Offering, it will own a total
portfolio of approximately 400 to 450 restaurant properties.
Due to the fact that the Subsequent Offering will be limited to 4,800,000
shares ($48,000,000) without an increase in the Company's authorized shares of
common stock, this year's proxy requests your vote on a proposal to increase
the Company's authorized shares, in addition to the usual vote for election of
directors. We believe that expanding the Company, through the Subsequent
Offering and any possible future offerings provides the following benefits:
o Additional diversification: Additional capital received by the
Company will be used to invest in additional properties and mortgage
loans allowing the Company increased diversification by restaurant
concept, tenant and geographic location.
o Cost efficiencies: The expansion of the Company will allow further
economies of scale of general and administrative expenses of the
Company.
o Market capitalization: Additional capital will provide the Company
with a larger market capitalization at the time of listing on a
national securities exchange. It is anticipated that the Company
will list within three to eight years, assuming market conditions are
favorable.
To permit the Company to conduct additional offerings, acquire additional
properties and invest in additional mortgage loans, the Board of Directors
proposes to increase the number of authorized shares of common stock from
20,000,000 to 75,000,000 shares, along with a corresponding increase in the
number of excess shares from 23,000,000 to 78,000,000 shares.
The proposal included in this year's proxy statement reflects changes
consistent with the Company's anticipated future growth and success in the
coming years. Therefore, the Board of Directors unanimously recommends that
you vote to approve the proposal presented in this year's proxy statement.
Your vote counts. Please complete and return the attached ballot today.
Thank you for you attention to this matter.
Sincerely,
/s/James M. Seneff, Jr. /s/ Robert A. Bourne
James M. Seneff, Jr. Robert A. Bourne
Chairman of the Board and President
Chief Executive Officer
CNL AMERICAN PROPERTIES FUND, INC.
400 East South Street, Suite 500
Orlando, Florida 32801
Notice of Annual Meeting of Stockholders
To Be Held April 4, 1997
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of CNL
AMERICAN PROPERTIES FUND, INC. (the "Company") will be held at 10:00 a.m.
local time, on April 4, 1997, at the CNL Management Center at 450 E. South
Street, Suite 101, Orlando, Florida, for the following purposes:
1. To elect five directors.
2. To approve amendments to the Company's Amended and Restated Articles of
Incorporation increasing the number of authorized shares of beneficial
interest from 46,000,000 shares (consisting of 20,000,000 Common Shares,
3,000,000 Preferred Shares and 23,000,000 Excess Shares) to 156,000,000
shares (consisting of 75,000,000 Common Shares, 3,000,000 Preferred
Shares and 78,000,000 Excess Shares).
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Stockholders of record at the close of business on January 31, 1997, will
be entitled to notice of and to vote at the annual meeting or at any
adjournment thereof.
Stockholders are cordially invited to attend the meeting in person.
WHETHER OR NOT YOU NOW PLAN TO ATTEND THE MEETING, YOU ARE ASKED TO
COMPLETE, DATE, SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY CARD FOR WHICH A
POSTAGE PAID RETURN ENVELOPE IS PROVIDED. IT IS IMPORTANT THAT YOUR
SHARES BE VOTED. IF YOU DECIDE TO ATTEND THE MEETING YOU MAY REVOKE
YOUR PROXY AND VOTE YOUR SHARES IN PERSON.
By Order of the Board of Directors
/s/ Lynn E. Rose
Lynn E. Rose
Secretary
February 25, 1997
Orlando, Florida
CNL AMERICAN PROPERTIES FUND, INC.
400 East South Street, Suite 500
Orlando, Florida 32801
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PROXY STATEMENT
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This Proxy Statement is furnished by the Board of Directors of CNL American
Properties Fund, Inc. (the "Company") in connection with the solicitation by
management of proxies to be voted at the annual meeting of stockholders to be
held on April 4, 1997, and at any adjournment thereof, for the purposes set
forth in the accompanying notice of such meeting. All stockholders of record
at the close of business on January 31, 1997, will be entitled to vote.
Any proxy, if received in time, properly signed and not revoked, will be
voted at such meeting in accordance with the directions of the stockholder.
If no directions are specified, the proxy will be voted FOR each Proposal set
forth in this Proxy Statement. Any stockholder giving a proxy has the power
to revoke it at any time before it is exercised. A proxy may be revoked (1)
by delivery of a written statement to the Secretary of the Company stating
that the proxy is revoked, (2) by presentation at the annual meeting of a
subsequent proxy executed by the person executing the prior proxy, or (3) by
attendance at the annual meeting and voting in person.
Votes cast in person or by proxy at the annual meeting will be tabulated
and a determination will be made as to whether or not a quorum is present.
The Company will treat abstentions as shares that are present and entitled to
vote for purposes of determining the presence or absence of a quorum, but as
unvoted for purposes of determining the approval of any matter submitted to
the stockholders. If a broker submits a proxy indicating that it does not
have discretionary authority as to certain shares to vote on a particular
matter, those shares will not be considered as present and entitled to vote
with respect to such matter.
Solicitation of proxies will be primarily by mail. However, directors and
officers of the Company also may solicit proxies by telephone or telegram or
in person. All of the expenses of preparing, assembling, printing and mailing
the materials used in the solicitation of proxies will be paid by the Company.
Arrangements may be made with brokerage houses and other custodians, nominees
and fiduciaries to forward soliciting materials, at the expense of the
Company, to the beneficial owners of shares held of record by such persons.
It is anticipated that this Proxy Statement and the enclosed proxy first will
be mailed to stockholders on or about February 25, 1997.
As of January 31, 1997, 14,905,550 shares of Common Stock of the Company
were outstanding. Each share of Common Stock entitles the holder thereof to
one vote on each of the matters to be voted upon at the annual meeting. As of
the record date, officers and directors of the Company had the power to vote
approximately 0.13% of the outstanding shares of Common Stock.
TABLE OF CONTENTS
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PROPOSAL I: Election of Directors . . . . . . . . . . . . . . . . . 3
Executive Compensation . . . . . . . . . . . . . . . . 7
Performance Graph . . . . . . . . . . . . . . . . . . . 7
PROPOSAL II: Amendment to the Company's Amended and Restated
Articles of Incorporation to Increase the Number
of Authorized Shares . . . . . . . . . . . . . . . . . 9
SECURITY OWNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
CERTAIN TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 12
INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . 14
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
PROPOSALS FOR NEXT ANNUAL MEETING . . . . . . . . . . . . . . . . . . . . 14
ANNUAL REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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PROPOSAL I
ELECTION OF DIRECTORS
NOMINEES
The persons named below have been nominated by the Board of Directors for
election as directors to serve until the next annual meeting of stockholders
or until their successors shall have been elected and qualified. Messrs.
Bourne and Seneff have been directors since May 1994. Messrs. Hostetter,
Huseman and Kruse have been directors since March 1995. The table sets forth
each nominee's name, age, principal occupation or employment during at least
the last five years, and directorships in other public corporations.
The Company's officers and directors have advised the Company that they
intend to vote their shares of Common Stock for the election of each of the
nominees. Proxies will be voted FOR the election of the following nominees
unless authority is withheld.
Name and Age Background
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Robert A. Bourne, 49 Mr. Bourne has served as President and a
director of the Company since May 1994, and
as President and a director of CNL Fund
Advisors, Inc. ("Fund Advisors") since its
inception in 1994. Fund Advisors is
responsible for the day-to-day operation of
the Company and performs certain other
administrative services for the Company. See
"Certain Transactions." Mr. Bourne also
serves as President and Treasurer of CNL
Group, Inc. In addition, Mr. Bourne is
President, a director and a registered
principal of CNL Securities Corp., President
and a director of CNL Investment Company,
Vice Chairman of the Board of Directors,
Secretary and Treasurer of Commercial Net
Lease Realty, Inc., director and Treasurer of
CNL Realty Advisors, Inc., President of CNL
Realty Corp. and President, Chief Investment
Officer and a director of CNL Institutional
Advisors, Inc., a registered investment
advisor. In addition, Mr. Bourne serves as
President and a director of CNL American
Realty Fund, Inc. and CNL Real Estate
Advisors, Inc. All of such entities are
affiliates of CNL Group, Inc., a privately
held, diversified real estate company of
which Fund Advisors is a wholly owned
subsidiary. Since joining CNL Securities
Corp. in 1979, Mr. Bourne has been active in
the acquisition, development, and management
of real estate projects throughout the United
States. Mr. Bourne formerly was a certified
public accountant with Coopers & Lybrand and
a partner in the firm of Bourne & Rose, P.A.
G. Richard Hostetter, Esq., 57 Mr. Hostetter was associated with the law
firm of Miller and Martin from 1966 through
1989, the last ten years of such association
as a senior partner. As a lawyer, he served
for more than 20 years as counsel for various
corporate real estate groups, fast-food
companies and public companies, including The
Krystal Company, resulting in his extensive
participation in transactions involving the
sale, lease, and sale/leaseback of
approximately 250 restaurant units. He is
licensed to practice law in Tennessee and
Georgia. From 1989 to date, Mr. Hostetter
has served as President and General Counsel
of Mills, Ragland & Hostetter, Inc., the
corporate general partner of MRH, L.P., a
holding company involved in corporate
acquisitions, in which he also is a general
and limited partner.
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Richard C. Huseman, 58 Dr. Huseman is presently a professor in the
College of Business Administration, and from
1990 through 1995, served as the Dean of the
College of Business Administration of the
University of Central Florida. He has served
as a consultant in the area of managerial
strategies to a number of Fortune 500
corporations, including IBM, AT&T, and 3M, as
well as to several branches of the U.S.
government, including the U.S. Department of
Health and Human Services, the U.S.
Department of Justice, and the Internal
Revenue Service.
J. Joseph Kruse, 64 From 1993 to the present, Mr. Kruse has been
President and Chief Executive Officer of
Kruse & Co., Inc., a merchant banking company
engaged in real estate. Formerly, Mr. Kruse
was a Senior Vice President with Textron,
Inc. for twenty years, and then served as
Senior Vice President at G. William Miller &
Co., a firm founded by the former Chairman of
the Federal Reserve Board and the Treasury
Secretary. Mr. Kruse was responsible for
evaluations of commercial real estate and
retail shopping mall projects and continues
to serve of counsel to the firm.
James M. Seneff, Jr., 50 Mr. Seneff has been Chief Executive Officer
and a director of the Company since May 1994
and Chairman of the Board of the Company
since December 1994, as well as Chief
Executive Officer and Chairman of the Board
of Fund Advisors since its inception in 1994.
Mr. Seneff has served as Chief Executive
Officer, Chairman of the Board of Directors,
and a principal stockholder of CNL Group,
Inc. since its formation in 1980. In
addition, Mr. Seneff is Chief Executive
Officer, a director and a registered
principal of CNL Securities Corp., Chief
Executive Officer and Chairman of the Board
of CNL Investment Company, Chief Executive
Officer and Chairman of the Board of
Commercial Net Lease Realty, Inc., Chief
Executive Officer and Chairman of the Board
of CNL Realty Advisors, Inc., Chief Executive
Officer and Chairman of the Board of CNL
Realty Corp. and Chief Executive Officer and
a director of CNL Institutional Advisors,
Inc., a registered investment advisor. In
addition, Mr. Seneff serves as Chief
Executive Officer and Chairman of the Board
of CNL American Realty Fund, Inc. and CNL
Real Estate Advisors, Inc. From April until
December 1986, Mr. Seneff served on the
Florida State Commission on Ethics. Mr.
Seneff served on the Florida Investment
Advisory Council, which oversees the $40
billion Florida state retirement plan, from
1986 to 1994, and was Chairman of the Council
from 1991 to 1992. Since 1971, Mr. Seneff
has been active in the acquisition,
development and management of real estate
projects throughout the United States.
In the event that any nominee(s) should be unable to accept the office of
director, which is not anticipated, it is intended that the persons named in
the proxy will vote FOR the election of such other person in the place of such
nominee(s) for the office of director as the Board of Directors may recommend.
The affirmative vote of a plurality of the shares of Common Stock present in
person or represented by proxy and entitled to vote is required for the
election of directors.
A majority of the Company's directors are required to be independent, as
that term is defined in the Company's Articles of Incorporation. Messrs.
Hostetter, Kruse and Huseman are independent directors.
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COMPENSATION OF DIRECTORS
During the year ended December 31, 1996, each independent director earned
$6,000 for serving on the Board of Directors. Each independent director also
received $750 per Board meeting attended ($375 for each telephonic meeting in
which the director participated), including committee meetings. The Company
has not, and in the future will not, pay any compensation to the directors of
the Company who also serve as officers and directors of the Company's advisor,
CNL Fund Advisors, Inc.
The Board of Directors met seven times during the year ended December 31,
1996, and the average attendance by directors at Board meetings was
approximately 97 percent. Each current member attended at least 89 percent of
the total meetings of the Board and of any committee on which he served.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has a standing Audit Committee, the members of which are
selected by the Board of Directors each year. The current members of the
Audit Committee, who have served since 1995, are Messrs. Hostetter, Kruse and
Huseman. The Audit Committee makes recommendations to the Board of Directors
as to the independent accountants of the Company and reviews with such
accounting firm the scope of the audit and the results of the audit upon its
completion. The Audit Committee met twice during the year ended December 31,
1996.
At such time, if any, as the Company's shares of Common Stock are listed on
a national securities exchange or over-the-counter market, the Company will
form a compensation committee, the members of which will be selected by the
full Board of Directors each year. Currently, the Company does not have a
compensation committee.
The Company does not have a nominating committee.
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
Name Position
---- --------
James M. Seneff, Jr. Chief Executive Officer and Chairman of the
Board
Robert A. Bourne President
John T. Walker Chief Operating Officer and Executive Vice
President
Jeanne A. Wall Executive Vice President
Steven D. Shackelford Chief Financial Officer
Lynn E. Rose Secretary and Treasurer
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Mr. Walker, age 38, has served as Executive Vice President of the Company
since January 1996 and Chief Operating Officer of the Company since March
1995, and previously served as Senior Vice President since December 1994. In
addition, Mr. Walker has served as Executive Vice President of Fund Advisors
since January 1996 and Chief Operating Officer of Fund Advisors since April
1995, and previously served as Senior Vice President of Fund Advisors since
November 1994. In addition, Mr. Walker serves as Executive Vice President of
CNL American Realty Fund, Inc. and CNL Real Estate Advisors, Inc. Mr. Walker,
a certified public accountant, joined CNL Group, Inc. in September 1994, as
Senior Vice President, responsible for Research and Development. From May
1992 to May 1994, he was Executive Vice President for Finance and
Administration and Chief Financial Officer of Z Music, Inc., a cable
television network (subsequently acquired by Gaylord Entertainment), where he
was responsible for overall financial and administrative management and
planning. From January 1990 through April 1992, Mr. Walker was Chief
Financial Officer of the First Baptist Church in Orlando, Florida. From April
1984 through December 1989, he was a partner in the accounting firm of
Chastang, Ferrell & Walker, P.A., where he was the partner in charge of audit
and consulting services, and from 1981 to 1984, Mr. Walker was a Senior
Consultant/Audit Senior at Price Waterhouse.
Ms. Wall, age 38, has served as Executive Vice President of the Company
since December 1994 and as Executive Vice President of Fund Advisors since
November 1994, and previously served as Vice President of Fund Advisors since
March 1994. Ms. Wall has served as Chief Operating Officer of CNL Investment
Company and of CNL Securities Corp. since November 1994 and previously served
as Executive Vice President of CNL Investment Company since January 1991. In
1984, Ms. Wall joined CNL Securities Corp. as its Partnership Administrator.
In 1985, Ms. Wall became Vice President of CNL Securities Corp. and, in 1987,
she became a Senior Vice President of CNL Securities Corp. In this capacity,
Ms. Wall serves as national marketing sales director and oversees the national
marketing plan for the CNL investment programs. In addition, Ms. Wall
oversees partnership administration and investor services for programs offered
through participating brokers. Ms. Wall also has served as Senior Vice
President of CNL Institutional Advisors, Inc., a registered investment
advisor, from 1990 to 1993, as Vice President of CNL Realty Advisors, Inc.
since its inception in 1991, and as Vice President of Commercial Net Lease
Realty, Inc. since 1992. In addition, Ms. Wall serves as Executive Vice
President of CNL American Realty Fund, Inc. and CNL Real Estate Advisors, Inc.
Ms. Wall currently serves as a trustee on the Board of the Investment Program
Association and on the Direct Participation Program committee for the National
Association of Securities Dealers.
Mr. Shackelford, age 33, has served as Chief Financial Officer of the
Company since January 1997 and as Chief Financial Officer of Fund Advisors
since September 1996. From March 1995 to July 1996, Mr. Shackelford was a
senior manager in the national office of Price Waterhouse where he was
responsible for advising foreign clients seeking to raise capital and a public
listing in the United States. From August 1992 to March 1995, he served as a
manager in the Price Waterhouse, Paris, France office serving several
multinational clients. Mr. Shackelford was an audit staff and audit senior
from 1986 to 1992 in the Orlando, Florida office of Price Waterhouse. Mr
Shackelford is a certified public accountant.
Ms. Rose, age 48, has served as Secretary and Treasurer of the Company
since December 1994, and as a director, Secretary and Treasurer of Fund
Advisors since March 1994. Ms. Rose, a certified public accountant, has
served as Secretary of CNL Group, Inc. since 1987, as Chief Financial Officer
of CNL Group, Inc. since December 1993, and served as Controller of CNL Group,
Inc. from 1987 until December 1993. In addition, Ms. Rose has served as Chief
Financial Officer and Secretary of CNL Securities Corp. since July 1994. She
has served as Chief Operating Officer, Vice President and Secretary of CNL
Corporate Services, Inc. since November 1994. Ms. Rose also has served as
Chief Financial Officer and Secretary of CNL Institutional Advisors, Inc.
since its inception in 1990, as Secretary and a director of CNL Realty
Advisors, Inc. since its inception in 1991, and as Treasurer of CNL Realty
Advisors, Inc. from 1991 to February 1996. In addition, Ms. Rose served as
Secretary and Treasurer of
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Commercial Net Lease Realty, Inc. from 1992 to February 1996. In addition,
Ms. Rose serves as Secretary and Treasurer of CNL American Realty Fund, Inc.
and CNL Real Estate Advisors, Inc. Ms. Rose also currently serves as
Secretary for approximately 50 additional corporations. Ms. Rose oversees the
management information services, administration, legal compliance, accounting,
tenant compliance, and reporting for over 250 corporations, partnerships and
joint ventures. Prior to joining CNL, Ms. Rose was a partner with Robert A.
Bourne in the accounting firm of Bourne & Rose, P.A., Certified Public
Accountants. She was licensed as a certified public accountant in 1979.
The backgrounds of Messrs. Seneff and Bourne are described at "ELECTION OF
DIRECTORS."
EXECUTIVE COMPENSATION
ANNUAL COMPENSATION
No annual or long-term compensation was paid by the Company to the Chief
Executive Officer for services rendered in all capacities to the Company
during the fiscal years ended December 31, 1994, 1995 and 1996. In addition,
no executive officer of the Company received an annual salary or bonus from
the Company during the fiscal year ended December 31, 1996. The Company's
executive officers also are employees and executive officers of Fund Advisors
and receive compensation from CNL Group, Inc. in part for services in such
capacities. See "Certain Transactions" for a description of the fees payable
and expenses reimbursed to Fund Advisors.
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total stockholder
return on the Company's Common Stock, based on the offering price of the
Common Stock and assuming the reinvestment of distributions ("APF"), with the
S&P 500 Index ("S&P 500") and with the income rate of return from The National
Council of Real Estate Investment Fiduciaries ("NCREIF") from the month the
Company commenced operations through December 31, 1996. The graph assumes the
investment of $100 on June 30, 1995.
QUARTERLY TOTAL RETURN INDEXES
DATE S&P 500 NCREIF APF
---- ------- ------ ---
06/30/95 100.00 100.00 100.00
09/30/95 104.19 102.23 101.15
12/31/95 110.40 104.55 102.84
03/31/96 116.32 106.90 104.63
06/30/96 121.55 109.37 106.46
09/30/96 125.30 111.78 108.36
12/31/96 135.75 (1) 110.29
(1) Not yet available.
The S&P 500 index contains both a capital and income component to its total
return. For companies included in the S&P 500 index, their total return is
measured by dividing the sum of (a) the cumulative
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amount of dividends for the measurement period, assuming dividend reinvestment,
and (b) the difference between the registrant's share price at the end and the
beginning of the measurement period; by the share price at the beginning of
the measurement period. There is currently no public trading market for the
Company's shares, therefore, the Company's return is composed of only the
cumulative amount of distributions for the measurement period, assuming
reinvestment of distributions, divided by the fixed price of $10 per share.
The NCREIF income index measures net operating income as a percentage of
average daily investment. In order to display a more comparative return,
the component of the NCREIF total return attributable to increases in share
price has not been included in the cumulative return. NCREIF has not
finalized their 1996 fourth quarter returns as of the preliminary filing
date of this proxy. If that information is not available before the definitive
filing, then a replacement index will be inserted.
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PROPOSAL II
APPROVAL OF AN AMENDMENT TO THE COMPANY'S AMENDED
AND RESTATED ARTICLES OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES
The Board of Directors of the Company has unanimously approved and
directed that there be submitted to stockholders for their approval an
amendment to Article VII of the Company's Amended and Restated Articles of
Incorporation, as amended (the "Restated Articles of Incorporation") which
would increase the number of shares that the Company is authorized to issue
from 46,000,000 to 156,000,000 (the "Share Increase Amendment"). At January
31, 1997, the Company had 14,905,550 shares of Common Stock outstanding.
The text of the proposed amendments are set forth below:
RESOLVED, that the definition of "Shares" in Section 1.5 of Article I of
the Company's Restated Articles of Incorporation be amended to read as
follows:
"Shares" means the Common Shares of the Company.
RESOLVED, that Section 7.1 of Article VII of the Company's Restated
Articles of Incorporation be amended to read as follows:
SECTION 7.1 Authorized Shares. The beneficial interest in the
Company shall be divided into Equity Shares. The total number of Equity
Shares which the Company is authorized to issue is one hundred fifty-six
million (156,000,000) shares of beneficial interest, consisting of seventy-
five million (75,000,000) Common Shares (as defined and described in Section
7.2(ii) hereof), three million (3,000,000) Preferred Shares (as defined in
Section 7.3 hereof) and seventy-eight million (78,000,000) Excess Shares (as
defined in Section 7.7 hereof). All Shares shall be fully paid and
nonassessable when issued. Shares may be issued for such consideration as the
Directors determine or, if issued as a result of a Share dividend or Share
split, without any consideration.
The Board has determined that the approximately 4,800,000 shares of
presently authorized, but unissued and unreserved Common Stock would be
insufficient to permit the Company to take advantage of certain business and
investment opportunities, if and as they become available, that require the
issuance of additional shares of Common Stock. In order to permit the Company
greater flexibility to issue additional shares of Common Stock from time to
time in order to raise capital in stock offerings, including a subsequent
public offering which has already commenced of up to 27,500,000 shares of
Common Stock at $10 per share, and consummate future acquisitions of
properties, as well as for other similar purposes, the Board of Directors
considers it advisable that the Company be in a position to issue up to
approximately 55,000,000 additional shares without the requirement of
stockholder approval. In addition, additional capital will provide the
Company with larger market capitalization at the time of listing on a national
securities exchange.
The Share Increase Amendment will not change any other aspect of Article
VII. Holders of the capital stock of the Company, however, will not have the
right to approve the issuance of additional shares of Common Stock. In
addition, holders of the capital stock of the Company do not have any
preemptive rights to subscribe for or purchase any shares of capital stock of
the Company, which means that current stockholders do not have a prior right
to purchase any new issue of Common Stock of the Company in order to maintain
their proportionate ownership. Consequently, the issuance of additional
shares of capital stock may dilute the interest of a current stockholder if
additional shares are issued at
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less than fair market value and the stockholder does not purchase or is not
offered the opportunity to purchase additional shares.
The existence of a large number of authorized but unissued shares could
have the effect of hindering or frustrating a takeover of the Company. The
availability for issuance of additional shares of Common Stock would provide
the Board of Directors with flexibility in responding to a merger or
acquisition bid by placing blocks of shares with persons friendly to the
Company, or by taking other steps to prevent an acquisition of the Company
under circumstances which the Board does not believe to be in the Company's
best interest. The Company is not aware of any entity which intends to
propose a merger with, or seek to gain control of, the Company.
Approval of the Share Increase Amendment requires the affirmative vote
of a majority of the outstanding shares of the Company's Common Stock entitled
to vote thereon. The Company's officers and directors have advised the
Company that they intend to vote their shares of Common Stock for the Share
Increase Amendment.
The Share Increase Amendment, if approved by stockholders, will become
effective on the date the Company's Maryland Articles of Incorporation are
filed with the Maryland Department of Assessments and Taxation. It is
anticipated that the appropriate filing to effect the Share Increase Amendment
will be made soon after the annual meeting as practicable.
The Board of Directors unanimously recommends that stockholders vote FOR
the Share Increase Amendment. Proxies will be voted for the Share Increase
Amendment unless stockholders designate otherwise.
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SECURITY OWNERSHIP
The following table sets forth, as of January 31, 1997, the number and
percentage of outstanding shares beneficially owned by all persons known by
the Company to own beneficially more than five percent of the Company's Common
Stock, by each director and nominee, and by all officers and directors as a
group, based upon information furnished to the Company by such stockholders,
officers and directors.
Name and Address Number of Shares Percent
of Beneficial Owner Beneficially Owned of Shares
- ------------------- ------------------ ---------
Robert A. Bourne 20,000 (1) (2)
400 East South Street, Suite 500
Orlando, Florida 32801
Lynn E. Rose 20,000 (1) (2)
400 East South Street, Suite 500
Orlando, Florida 32801
James M. Seneff, Jr. 20,000 (1) (2)
400 East South Street, Suite 500
Orlando, Florida 32801
All directors and executive 20,000 (1) (2)
officers as a group (3 persons)
- -------------------------------------
(1) Represents shares held by Fund Advisors, of which Messrs. Bourne and
Seneff and Ms. Rose are directors.
(2) Less than one percent.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership on Forms 3, 4 and 5 with the Securities and
Exchange Commission (the "SEC"). Officers, directors and greater than ten
percent stockholders are required by SEC regulation to furnish the Company
with copies of all Forms 3, 4 and 5 they file.
Based solely upon a review of Section 16(a) reports furnished to the
Company for fiscal year 1996 or written representations that no other reports
were required, the Company believes that the foregoing persons complies with
all filing requirements for fiscal year 1996, except that each of the officers
and directors of the Company, did not timely file his or her initial ownership
report under Section 16(a).
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CERTAIN TRANSACTIONS
All of the executive officers of the Company are executive officers of Fund
Advisors, a wholly owned subsidiary of CNL Group, Inc., of which Messrs.
Seneff and Bourne are affiliates. In addition, Messrs. Seneff and Bourne and
Ms. Rose and Ms. Wall are executive officers of CNL Securities Corp., the
managing dealer of the Company's offering of shares of common stock, and a
wholly owned subsidiary of CNL Group, Inc. Messrs. Seneff and Bourne are
directors of the Company, Fund Advisors and CNL Securities Corp., and Ms. Rose
is a director of Fund Advisors. Administration of the day-to-day operations
of the Company is provided by Fund Advisors, pursuant to the terms of an
advisory agreement (the "Advisory Agreement"). Fund Advisors also serves as
the Company's consultant in connection with policy decisions to be made by the
Company's Board of Directors, manages the Company's properties and renders
such other services as the Board of Directors deems appropriate. Fund
Advisors also bears the expense of providing the executive personnel and
office space to the Company. Fund Advisors is at all times subject to the
supervision of the Board of Directors of the Company and has only such
functions and authority as the Company may delegate to it as the Company's
agent.
CNL Securities Corp. is entitled to receive selling commissions amounting
to 7.5% of the total amount raised from the sale of shares of common stock for
services in connection with the offering of shares, a substantial portion of
which has been or will be paid as commissions to other broker-dealers. For
the year ended December 31, 1996, the Company had incurred $7,559,474 of such
fees, of which approximately $7,059,000 was paid by CNL Securities Corp. as
commissions to other broker-dealers.
In addition, CNL Securities Corp. is entitled to receive a marketing
support and due diligence expense reimbursement fee equal to 0.5% of the total
amount raised from the sale of shares, a portion of which may be reallowed to
other broker-dealers. For the year ended December 31, 1996, the Company had
incurred $503,965 of such fees, substantially all of which were reallowed to
other broker-dealers and from which all bona fide due diligence expenses were
paid.
CNL Securities Corp. will also receive a soliciting dealer servicing fee
payable annually by the Company beginning on December 31 of the year following
the year in which the offering terminates in the amount of 0.20% of the
stockholders' investment in the Company. CNL Securities Corp. in turn may
reallow all or a portion of such fee to soliciting dealers whose clients held
shares on such date. As of December 31, 1996, no such fees had been incurred.
Fund Advisors is entitled to receive acquisition fees for services in
identifying the properties and structuring the terms of the acquisition and
leases of the properties and structuring the terms of the mortgage loans equal
to 4.5% of the total amount raised from the sale of shares. For the year
ended December 31, 1996, the Company had incurred $4,535,685 of such fees.
For negotiating secured equipment leases and supervising the secured
equipment lease program, Fund Advisors will be entitled to receive from the
Company a one-time secured equipment lease servicing fee of two percent of the
purchase price of the equipment that is the subject of a secured equipment
lease. For the year ended December 31, 1996, the Company incurred $70,070 in
such fees.
The Company and Fund Advisors have entered into an advisory agreement (the
"Advisory Agreement") pursuant to which Fund Advisors will receive a monthly
asset management fee of one-twelfth of 0.60% of the Company's real estate
asset value (generally, the total amount invested in the properties as of the
end of the preceding month, exclusive of acquisition fees and acquisition
expenses), plus one-twelfth of 0.60% of the Company's total principal amount
of the mortgage loans as of the end of the preceding month. The management
fee, which will not exceed fees which are competitive for similar
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services in the same geographic area, may or may not be taken, in whole or in
part as to any year, in the sole discretion of Fund Advisors. All or any
portion of the management fee not taken as to any fiscal year shall be
deferred without interest and may be taken in such other fiscal year as Fund
Advisors shall determine. For the year ended December 31, 1996, the Company
had incurred $278,902 of such fees, $27,702 of which has been capitalized as
part of the cost of the buildings for properties under construction.
The term of the Advisory Agreement expires April 19, 1997, subject to
successive one-year renewals upon mutual consent of the parties. The Advisory
Agreement may be terminated for cause by either party thereto, or by the
mutual consent of the parties (by a majority of the independent directors of
the Company or a majority of the Board of Directors of Fund Advisors, as the
case may be), upon 90 days written notice.
Prior to such time, if any, as shares of the Company's common stock are
listed on a national securities exchange or over-the-counter market, Fund
Advisors is entitled to receive a deferred, subordinated real estate
disposition fee, payable upon the sale of one or more properties based on the
lesser of one-half of a competitive real estate commission or three percent of
the sales price if Fund Advisors provides a substantial amount of services in
connection with the sale. The real estate disposition fee is payable only
after the stockholders receive distributions equal to the sum of an annual,
aggregate, cumulative, noncompounded eight percent return on their invested
capital ("Stockholders' 8% Return"), plus their aggregate invested capital.
No deferred, subordinated real estate disposition fees have been incurred to
date.
A subordinated share of net sales proceeds will be paid to Fund Advisors
upon the sale of assets in an amount equal to ten percent of net sales
proceeds. This amount will be paid only after the stockholders receive
distributions equal to the sum of the stockholders' aggregate invested capital
and the Stockholders 8% Return. As of December 31, 1996, no such payments
have been made to Fund Advisors.
Fund Advisors and its affiliates provide accounting and administrative
services to the Company (including accounting and administrative services in
connection with the offering of shares) on a day-to-day basis. For the year
ended December 31, 1996, the Company incurred a total of $1,103,828 for these
services, $769,225 of such costs representing stock issuance costs and
$334,603 representing general operating and administrative expenses, including
costs related to preparing and distributing reports required by the Securities
and Exchange Commission.
During the year ended December 31, 1996, the Company acquired four
properties for an aggregate purchase price of approximately $2,609,800 from
affiliates of the Company. The affiliates had purchased and temporarily held
title to these properties in order to facilitate the acquisition of the
properties by the Company. Each property was acquired at a cost no greater
than the lesser of the cost of the property to the affiliate (including
carrying costs) or the property's appraised value.
In connection with the acquisition of three properties during the year
ended December 31, 1996, the Company incurred $159,350 in
development/construction management fees to affiliates of Fund Advisors that
were constructed by such affiliates. Such fees were included in the purchase
price of the properties and are therefore included in the basis on which the
Company charges rent on the properties.
- 13 -
INDEPENDENT AUDITORS
Upon recommendation of and approval by the Board of Directors, including
the independent directors, Coopers & Lybrand LLP has been selected to act as
independent certified public accountants for the Company during the current
fiscal year.
A representative of Coopers & Lybrand LLP will be present at the annual
meeting and will be provided with the opportunity to make a statement if
desired. Such representative will also be available to respond to appropriate
questions.
OTHER MATTERS
The Board of Directors does not know of any matters to be presented at the
annual meeting other than those stated above. If any other business should
come before the annual meeting, the person(s) named in the enclosed proxy will
vote thereon as he or they determine to be in the best interests of the
Company.
PROPOSALS FOR NEXT ANNUAL MEETING
Any stockholder proposal to be considered for inclusion in the Company's
proxy statement and form of proxy for the annual meeting of stockholders to be
held in 1998 must be received at the Company's office at 400 East South
Street, Suite 500, Orlando, Florida 32801, no later than January 1, 1998.
ANNUAL REPORT
A copy of the Company's Annual Report to Stockholders for the year ended
December 31, 1996, accompanies this Proxy Statement.
By Order of the Board of Directors
/s/ Lynn E. Rose
Lynn E. Rose
Secretary
February 25, 1997
Orlando, Florida
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