Rule 424(b)(3)
No. 333-15411
CNL AMERICAN PROPERTIES FUND, INC.
This Supplement is part of, and should be read in conjunction with, the
Prospectus dated April 18, 1997 and the Prospectus Supplement dated July 18,
1997. This Supplement replaces the Supplements dated July 22, 1997, July 25,
1997, August 8, 1997 and August 26, 1997. 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 September 5, 1997, 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 September 5, 1997, will be reported in a
subsequent Supplement.
THE OFFERING
As of the completion of its Initial Offering, the Company had received
subscription proceeds of $150,591,765 (15,059,177 shares), including $591,765
(59,177 shares) issued pursuant to the Reinvestment Plan and after deduction of
selling commissions, marketing support and due diligence expense reimbursement
fees and offering expenses, net proceeds to the Company from its Initial
Offering totalled approximately $134,000,000. Following the completion of its
Initial Offering on February 6, 1997, the Company commenced this offering of up
to 27,500,000 Shares. As of September 5, 1997, the Company had received
subscription proceeds of $117,989,668 (11,798,967 Shares), including $643,293
(64,329 Shares) issued pursuant to the Reinvestment Plan, from 5,533
stockholders in connection with this offering. Net Offering Proceeds to the
Company after deduction of Selling Commissions, Marketing Support and Due
Diligence Expense Reimbursement Fees and Offering Expenses totalled
approximately $106,033,000. As of September 5, 1997, the Company had invested or
committed for investment approximately $222,247,000 of aggregate net proceeds
from the Initial Offering and this offering in 205 Properties, in providing
mortgage financing to the tenants of the 44 Properties consisting of land only
to purchase the buildings on these Properties and the buildings on three
additional properties through Mortgage Loans, and in paying acquisition fees and
certain acquisition expenses, leaving approximately $17,830,000 in aggregate net
offering proceeds available for investment in Properties and Mortgage Loans. As
of September 5, 1997, $5,309,535 of the Net Offering Proceeds from this offering
had been incurred as Acquisition Fees to the Advisor.
BUSINESS
PROPERTY ACQUISITIONS
Between July 3, 1997 and September 5, 1997, the Company acquired 27
Properties, including 26 Properties consisting of land and building and one
Property consisting of building only. These Properties are six Arby's Properties
(one in each of Lexington, Greensboro, Greenville, Jonesville, Kernersville, and
Kinston, North Carolina), three Boston Market Properties (one in each of Newport
News, Virginia, Edgewater, Colorado, and Hoover, Alabama), six IHOP Properties
(one in each of Houston, Lake Jackson and Victoria, Texas, and Stockbridge,
Georgia, Elk Grove, California, and Loveland, Colorado), two Jack in the Box
Properties (one in each of Woodland and West Sacramento, California), five
Tumbleweed Southwest Mesquite Grill & Bar Properties (one in each of Lawrence,
Kansas, Cookeville, Hendersonville, Nashville, and Murfreesboro, Tennessee), two
Golden Corral Properties (one in each of Duncan, Oklahoma, and Fort Walton
Beach, Florida), one Ruby Tuesday's Property (in London, Kentucky), one Shoney's
Property (in Las Vegas, Nevada) and one T.G.I. Friday's Property (in
Superstition Springs, Arizona). For information regarding the Properties
acquired by the Company prior to July 3, 1997, see the Prospectus dated April
18, 1997 and the Prospectus Supplement dated July 18, 1997.
September 10, 1997 Prospectus Dated April 18, 1997
In connection with the purchase of the six Arby's Properties, the three
Boston Market Properties, the six IHOP Properties, the two Jack in the Box
Properties, the two Golden Corral Properties, the Ruby Tuesday's Property, the
Shoney's Property, the T.G.I. Friday's Property and four of the Tumbleweed
Southwest Mesquite Grill & Bar Properties in Lawrence, Kansas, Cookeville,
Nashville, and Murfreesboro, Tennessee, which are land and building, the
Company, as lessor, entered into long-term lease agreements with unaffiliated
lessees. The general terms of the lease agreements are described in the section
of the Prospectus entitled "Business Description of Property Leases." For the
Properties that are to be constructed or renovated, 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."
<PAGE>
The purchase price for the Shoney's Property in Las Vegas, Nevada,
includes a development fee of $73,191 to an Affiliate of the Advisor for
services provided in connection with the development of the Property. The
Company considers development fees, to the extent that they are paid to
Affiliates, to be Acquisition Fees. Such development fees must be approved by a
majority of the Directors (including a majority of the Independent Directors)
not otherwise interested in such transactions, subject to a determination that
such transactions are fair and reasonable to the Company and on terms and
conditions not less favorable to the Company than those available from
unaffiliated third parties and not less favorable than those available from the
Advisor or its Affiliates in transactions with unaffiliated third parties. See
the sections of the Prospectus entitled "Management Compensation" and "Business
- - Site Selection and Acquisition of Properties."
In connection with the Tumbleweed Southwest Mesquite Grill & Bar
Property in Hendersonville, Tennessee, which is building only, the Company, as
lessor, entered into a long-term lease agreement with an unaffiliated lessee.
The general terms of the lease agreement are described in the section of the
Prospectus entitled "Business - Description of Property Leases." In connection
with the purchase of this Property, which is to be renovated, 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.
The following table sets forth the location of the 27 Properties,
including 26 Properties consisting of land and building and one Property
consisting of building only, acquired by the Company, from July 3, 1997 through
September 5, 1997, a description of the competition, and a summary of the
principal terms of the acquisition and lease of each Property.
<PAGE>
PROPERTY ACQUISITIONS
From July 3, 1997 through September 5, 1997
<TABLE>
<CAPTION>
Lease Expira-
Property Location Purchase Date tion and Minimum Option
and Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent To Purchase
- ------------------ --------- -------- --------------- --------------- --------------- -----------
<S> <C>
Arby's (5) $742,536 07/15/97 07/2017; two $74,254; increases for each lease year, during the
(the "Lexington five-year renewal by 4.14% after the (i) 4% of annual seventh and
Property") Existing options third lease year gross sales minus tenth lease
restaurant and after every (ii) the minimum years only
three years annual rent for
The Lexington Property thereafter during such lease year
is located on the east the lease term
side of Cotton Grove
Road, north of Interstate
85, in Lexington, Davidson
County, North Carolina,
in an area of mixed
retail, commercial, and
residential development.
Other fast-food and family-
style restaurants located
in proximity to the Lexington
Property include a Burger
King, a Taco Bell, and a
Cracker Barrel.
Boston Market (6) $1,011,492 07/16/97 07/2012; five $104,993; increases for each lease year at any time
(the "Newport News five-year renewal by 10% after the after the fifth after the
Property") Existing options fifth lease year lease year, (i) 4% fifth lease
restaurant and after every of annual gross year
five years thereafter sales minus (ii) the
The Newport News during the lease term minimum annual rent
Property is located on for such lease year
the southwest corner of
the intersection of
Warwick Boulevard and
Prince Drew Road, in
Newport News, Virginia,
in an area of mixed
retail, commercial, and
residential development.
other fast-food and
family-style restaurants
located in proximity, to
the Newport News Property
include a Pizza Hut, a
McDonald's, a Hardee's,
and a local restaurant.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location Purchase Date tion and Minimum Option
and Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent To Purchase
- ------------------ --------- -------- --------------- --------------- --------------- -----------
<S> <C>
IHOP (7) $1,424,283 07/16/97 07/2017; three $144,209; increases for each lease year, during the
(the "Houston five-year by 10% after the (i) 4% of annual eleventh lease
Property") renewal options fifth lease year and gross sales minus year and at
Existing after every five (ii) the minimum the end of the
restaurant years thereafter annual rent for initial lease
during the lease such lease year term
The Houston Property term
is located at the
southwest quadrant
of the intersection
of FM 1960 and U.S.
Highway 290, in
Houston, Harris
County, Texas, in an
area of mixed retail,
commercial, and
residential
development. Other
fast-food and
family-style
restaurants located
in proximity to the
Houston Property
include a Kettle's,
a Pizza Inn, a Denny's,
a McDonald's, and a
Burger King.
IHOP (7) $1,397,047 07/16/97 07/2017; three $141,451; increases for each lease year, during the
(the "Stockbridge five-year by 10% after the (i) 4% of annual eleventh lease
Property") Existing renewal options fifth lease year gross sales minus year and at
restaurant and after every (ii) the minimum the end of the
five years annual rent for initial lease
The Stockbridge Property thereafter during such lease year term
is located on the north the lease term
side of Stockbridge Road,
west of Interstate 675,
in Stockbridge, Clayton
County, Georgia, in an
area of mixed retail,
commercial, and
residential development.
Other fast-food and
family-style restaurants
located in proximity to
the Stockbridge Property
include a Chick- Fil-A,
an Applebee's, a
McDonald's, a Wendy's, a
Long John Silver's, and
several local restaurants.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location Purchase Date tion and Minimum Option
and Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent To Purchase
- ------------------ --------- -------- --------------- --------------- --------------- -----------
<S> <C>
Jack in the Box (8) $963,592 07/16/97 07/2015; four $98,768 (7); for each lease year, at any time
(the "Woodland (3) (9) five-year increases by 8% (i) 5% of annual after the
Property") Restaurant renewal after the fifth gross sales minus seventh lease
to be constructed options lease year and (ii) the minimum year
after every five annual rent for
The Woodland Property years thereafter such lease year
is located on the during the lease (10)
southeast corner of term
East Main Street and
County Road 102, in
Woodland, Yolo County,
California, in an area
of mixed retail,
commercial, and
residential development.
Other fast-food and
family-style restaurants
located in proximity to
the Woodland Property
include a Wendy's, a
Taco Bell, a Burger
King, a Denny's, a
McDonald's, and a local
restaurant.
Jack in the Box (8) $1,073,031 07/21/97 07/2015; four $109,986 (7); for each lease year, at any time
(the "West Sacramento (3) (9) five-year increases by (i) 5% of annual after the
Property") Restaurant renewal 8% after the gross sales minus seventh lease
to be constructed options fifth lease year (ii) the minimum year
and after every annual rent for
The West Sacramento five years such lease year (10)
Property is located thereafter during
on the southeast the lease term
corner of Sheperd
Court and Stillwater
Road, in West
Sacramento, Yolo
County, California,
in an area of mixed
retail, commercial,
and residential
development.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location Purchase Date tion and Minimum Option
and Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent To Purchase
- ------------------ --------- -------- --------------- --------------- --------------- -----------
<S> <C>
Tumbleweed Southwest $1,471,963 08/01/97 07/2017; two $161,916 (10); for each lease year, at any time
Mesquite Grill & Bar (3) (12) five-year increases by (i) 5% of annual after the
(11) (the "Cookeville renewal 10% after the gross sales minus seventh
Property") Restaurant options fifth lease year (ii) the minimum lease
to be renovated and after every annual rent for year
five years such lease year
The Cookeville Property thereafter during
is located on the the lease term
northeast corner of the
intersection of South
Jefferson Avenue and
Neal Lane, in Cookeville,
Putnam County, Tennessee,
in an area of mixed
retail, commercial, and
residential development.
Other fast-food and
family-style restaurants
located in proximity to
the Cookeville Property
include a Pizza Hut, an
Arby's, a Wendy's, a
Captain D's, a Shoney's,
a Burger King, a
McDonald's, a Long John
Silver's, a Ponderosa
Steak House, a Cracker
Barrel, a Taco Bell, a
Schlotzsky's, a Subway
Sandwich Shop, a Quincy's,
a Ryan's Family Steak
House, and a local
restaurant.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location Purchase Date tion and Minimum Option
and Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent To Purchase
- ------------------ --------- -------- --------------- --------------- --------------- -----------
<S> <C>
Tumbleweed Southwest $747,664 08/01/97 07/2017; two $100,935 (10); for each lease year, at any time
Mesquite Grill & Bar (3) (12) five-year increases by 10% (i) 5% of annual after the
(11) (13) renewal options after the fifth gross sales minus seventh lease
(the "Hendersonville lease year and (ii) the minimum year
Property") Restaurant after every annual rent for
to be renovated five years such lease year
thereafter during
The Hendersonville the lease term
Property is located
on the northeast
quadrant of the
intersection of East
Main Street and
Cherokee Road North,
in Hendersonville,
Sumner County,
Tennessee, in an area
of mixed retail,
commercial, and
residential development.
Other fast-food and
family-style restaurants
located in proximity
to the Hendersonville
Property include a
Boston Market, a Wendy's,
a Subway Sandwich Shop,
a Shoney's, an Applebee's,
a Pizza Hut, a Burger
King, and a local
restaurant.
Tumbleweed Southwest $1,448,598 08/01/97 07/2017; two $159,346 (10); for each lease year, at any time
Mesquite Grill & Bar (3) (12) five-year increases by 10% (i) 5% of annual after the
(11) (the "Lawrence renewal after the fifth gross sales minus seventh
Property") Restaurant options lease year and (ii) the minimum lease year
to be renovated after every five annual rent for
years thereafter such lease year
The Lawrence Property is during the lease
located on the east side term
of Iowa Street between
West 24th Street and
West 25th Street, in
Lawrence, Douglas
County, Kansas, in an
area of mixed retail,
commercial, and
residential development.
Other fast-food and
family-style restaurants
located in proximity
to the Lawrence
Property include an
Applebee's, a Chili's,
and several local
restaurants.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location Purchase Date tion and Minimum Option
and Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent To Purchase
- ------------------ --------- -------- --------------- --------------- --------------- -----------
<S> <C>
Tumbleweed Southwest $1,308,411 08/01/97 07/2017; two $143,925 (10); for each lease year, at any time
Mesquite Grill & Bar (3) (12) five-year increases by 10% (i) 5% of annual after the
(11) (the "Nashville renewal after the fifth gross sales minus seventh
Property") Restaurant options lease year and (ii) the minimum lease year
to be renovated after every five annual rent for
years thereafter such lease year
The Nashville Property during the lease
is located on the west term
side of Nolensville
Road, in Nashville,
Davidson County,
Tennessee, in an area
of mixed retail,
commercial, and
residential development.
Other fast-food and
family-style restaurants
located in proximity
to the Nashville
Property include a
McDonald's, a Papa
John's Pizza, a Pizza
Hut, and several local
restaurants.
Arby's (5) $727,273 08/04/97 08/2017; two $72,727; increases for each lease year, at any time
(the "Greensboro five-year renewal by 4.14% after the (i) 4% of annual after the
Property") Existing options third lease year gross sales minus seventh lease
restaurant and after every (ii) the minimum year
three years annual rent for
The Greensboro Property thereafter during such lease year
is located on the the lease term
northeast corner of the
intersection of South
Regional Boulevard and
Boeing Drive, in
Greensboro, Guilford
County, North Carolina,
in an area of mixed
retail, commercial, and
residential development.
Other fast-food and
family-style restaurants
located in proximity to
the Greensboro Property
include a Wendy's, a
Hardee's, a McDonald's, a
Shoney's, a Subway
Sandwich Shop, and a
local restaurant.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location Purchase Date tion and Minimum Option
and Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent To Purchase
- ------------------ --------- -------- --------------- --------------- --------------- -----------
<S> <C>
Arby's (5) $727,273 08/04/97 08/2017; two $72,727; increases for each lease year, at any time
(the "Greenville five-year by 4.14% after the (i) 4% of annual after the
Property") Existing renewal third lease year gross sales minus seventh lease
restaurant options and after every (ii) the minimum year
three years annual rent for
The Greenville thereafter during such lease year
Property is located the lease term
on the north side of
Greenville Boulevard,
south of the Wal-Mart
Super Center, in
Greenville, Pitt County,
North Carolina, in an
area of mixed retail,
commercial, and
residential development.
Other fast-food and
family-style restaurants
located in proximity
to the Greenville Property
include a Perkins, a
McDonald's, an Applebee's,
and a Boston Market.
Arby's (5) $727,273 08/04/97 08/2017; two $72,727; increases for each lease year, at any time
(the "Jonesville five-year renewal by 4.14% after the (i) 4% of annual after the
Property") Existing options third lease year gross sales minus seventh lease
restaurant and after every (ii) the minimum year
three years annual rent for such
The Jonesville Property thereafter during lease year
is located on the south the lease term
side of State Highway 67,
east of Interstate 77,
in Jonesville, Yadkin
County, North Carolina,
in an area of mixed
retail, commercial, and
residential development.
Other fast-food and
family-style restaurants
located in proximity to
the Jonesville Property
include a Cracker Barrel,
a McDonald's, a Wendy's,
a Shoney's, and several
local restaurants.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location Purchase Date tion and Minimum Option
and Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent To Purchase
- ------------------ --------- -------- --------------- --------------- --------------- -----------
<S> <C>
Arby's (5) $650,000 08/04/97 08/2017; two $65,000; increases for each lease year, at any time
(the "Kernersville five-year by 4.14% after the (i) 4% of annual after the
Property") Existing renewal options third lease year gross sales minus seventh lease
restaurant and after every (ii) the minimum year
three years annual rent for
thereafter during such lease year
The Kernersville the lease term
Property is located
on the south side of
South Main Street,
west of Interstate
40, in Kernersville,
Forsyth County, North
Carolina, in an area
of mixed retail,
commercial, and
residential development.
Other fast-food and
family- style restaurants
located in proximity
to the Kernersville
Property include a Taco
Bell, and several local
restaurants.
Arby's (5) $713,636 08/04/97 08/2017; two $71,364; increases for each lease year, at any time
(the "Kinston five-year by 4.14% after the (i) 4% of annual after the
Property") Existing renewal options third lease year gross sales minus seventh lease
restaurant and after every (ii) the minimum year
three years annual rent for
The Kinston Property thereafter during such lease year
is located on the the lease term
north side of West
New Bern Road, west
of US Highway 258,
in Kinston, Lenoir
County, North
Carolina, in an area
of mixed retail,
commercial, and
residential
development. Other
fast-food and
family-style
restaurants located
in proximity to the
Kinston Property
include a Subway
Sandwich Shop, a
Hardee's, a Golden
Corral, and several
local restaurants.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location Purchase Date tion and Minimum Option
and Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent To Purchase
- ------------------ --------- -------- --------------- --------------- --------------- -----------
<S> <C>
Tumbleweed Southwest $1,425,234 08/05/97 08/2017; two $156,776 (10); for each lease year, at any time
Mesquite Grill & Bar (3) (12) five-year increases by 10% (i) 5% of annual after the
(11) (the "Murfreesboro renewal options after the fifth gross sales minus seventh lease
Property") Restaurant lease year and (ii) the minimum year
to be renovated after every five annual rent for
years thereafter such lease year
The Murfreesboro during the lease
Property is located term
on the southeast
corner of the
intersection of
Northwest Broad Street
and South Front Street,
in Murfreesboro,
Rutherford County,
Tennessee, in an area
of mixed retail,
commercial, and
residential development.
Other fast-food and
family- style restaurants
located in proximity
to the Murfreesboro
Property include a
Shoney's, a Captain D's,
a Burger King, a KFC,
a McDonald's, a Subway
Sandwich Shop, and a
local restaurant.
Boston Market (6) $904,691 08/19/97 08/2012; five $93,907; increases for each lease year at any time
(the "Edgewater five-year by 10% after the after the fifth after the
Property") Existing renewal options fifth lease year lease year, (i) fifth lease
restaurant and after every 4% of annual gross year
five years sales minus (ii)
The Edgewater Property thereafter during the minimum annual
is located within the the lease term rent for such lease
Market Place Shopping year
Center on the west
side of Sheridan
Boulevard, in Edgewater,
Jefferson County,
Colorado, in an area
of mixed retail,
commercial, and
residential development.
Other fast-food and
family-style restaurants
located in proximity
to the Edgewater Property
include a Taco Bell, a
Fazoli's, an A&W, a
McDonald's, and several
local restaurants.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location Purchase Date tion and Minimum Option
and Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent To Purchase
- ------------------ --------- -------- --------------- --------------- --------------- -----------
<S> <C>
Golden Corral $168,813 08/19/97 08/2012; four 10.75% of for each lease year, during the first
(the "Duncan (excluding five-year Total Cost 5% of the amount by through seventh
Property") development renewal options (4) which annual gross lease years and
Restaurant to be costs) (3) sales exceed the tenth through
constructed $1,956,403 (10) fifteenth lease
years only
The Duncan Property
is located on the
west side of U.S.
Highway 81, south
of State Road 7,
in Duncan, Stephens
County, Oklahoma,
in an area of mixed
retail, commercial,
and residential
development. Other
fast-food and
family-style
restaurants located
in proximity to the
Duncan Property
include a McDonald's,
an Arby's, a Pizza
Hut, and several
local restaurants.
Golden Corral $570,497 08/19/97 08/2012; four 10.75% of Total for each lease year, during the first
(the "Fort Walton (excluding five-year Cost (4) 5% of the amount by through seventh
Beach Property") closing and renewal options which annual gross lease years and
Restaurant to be development sales exceed the tenth
constructed costs) (3) $2,764,503 (10) through fifteenth
lease years only
The Fort Walton
Beach Property is
located on the
southeast corner
of Mary Esther
Boulevard south
of Beal Parkway,
in Fort Walton Beach,
Okaloosa County, Florida,
in an area of mixed
retail, commercial, and
residential development.
Other fast-food and
family-style restaurants
located in proximity to
the Fort Walton Beach
Property include an
Applebee's, a Burger
King, a Chili's, a
Blimpie's, a Fazoli's,
a Krystal Burger, a
McDonald's, a Hardee's,
a Wendy's, and a Sonic
Drive-in.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location Purchase Date tion and Minimum Option
and Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent To Purchase
- ------------------ --------- -------- --------------- --------------- --------------- -----------
<S> <C>
Ruby Tuesday's $1,123,720 08/19/97 08/2017; two $123,609 (9); for each lease year, at any time
(the "London (3) (9) five-year increases by 10% (i) 6% of annual after the
Property") Restaurant renewal options after the fifth gross sales minus seventh lease
to be renovated lease year and (ii) the minimum year
after every five annual rent for
The London Property years thereafter such lease year
is located on the east during the lease
side of Interstate 75, term
on the south side of
Highway 192 and Park
South Road, in London,
Laurel County,
Kentucky, in an area
of mixed retail,
commercial, and
residential development.
Other fast-food and
family-style restaurants
located in proximity to
the London Property
include an Arby's, a
Hardee's, a Fazoli's, a
Frisch's Big Boy, a
Krystal Burger, a Burger
King, a Ponderosa Steak
House, a Taco Bell, a
Captain D's, and several
local restaurants.
IHOP (7) $1,540,356 08/20/97 08/2017; three $155,961; increases for each lease year, during the
(the "Elk Grove (excluding five-year renewal by 10% after the (i) 4% of annual eleventh lease
Property") Existing closing options fifth lease year gross sales minus year and at
restaurant costs) and after every (ii) the minimum the end of
five years annual rent for the initial
The Elk Grove Property thereafter during such lease year lease term
is located on the south the lease term
side of East Stockton
Boulevard, just north
of Bond Boulevard and
east of Route 99, in
Elk Grove, Sacramento
County, California,
in an area of mixed
retail, commercial,
and residential
development. Other
fast-food and
family- style restaurants
located in proximity to
the Elk Grove Property
include a Taco Bell, an
Applebee's, a McDonald's,
and several local
restaurants.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location Purchase Date tion and Minimum Option
and Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent To Purchase
- ------------------ --------- -------- --------------- --------------- --------------- -----------
<S> <C>
IHOP (7) $1,196,060 08/20/97 08/2017; three $121,101; increases for each lease year, during the
(the "Lake Jackson (excluding five-year renewal by 10% after the (i) 4% of annual eleventh lease
Property") closing options fifth lease year and gross sales minus year and at
Existing restaurant costs) after every five (ii) the minimum the end of the
years thereafter annual rent for initial lease
The Lake Jackson during the lease such lease year term
Property is located term
on the west side of
State Highway 332,
in Lake Jackson,
Brazoria County,
Texas, in an area of
mixed retail,
commercial, and
residential development.
Other fast-food and
family-style restaurants
located in proximity to
the Lake Jackson
Property include a
Boston Market, a Ryan's
Family Steak House, a
Pizza Hut, a Burger
King, a Red Lobster, a
Whataburger, a McDonald's,
a Taco Bell, a
Chick-Fil-A, and several
local restaurants.
IHOP (7) $1,376,767 08/20/97 08/2017; three $139,398; increases for each lease year, during the
(the "Loveland (excluding five-year renewal by 10% after the (i) 4% of annual eleventh lease
Property") Existing closing options fifth lease year gross sales minus year and at
restaurant costs) and after every five (ii) the minimum the end of the
years thereafter annual rent for initial lease
The Loveland Property during the lease such lease year term
is located on the south term
side of Stone Creek
Circle, with visibility
from Highway 34 and
Interstate 25, in
Loveland, Larimer County,
Colorado, in an area of
mixed retail, commercial,
and residential
development. Other
fast-food and
family-style restaurants
located in proximity to
the Loveland Property
include a Lonestar Steak
House.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location Purchase Date tion and Minimum Option
and Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent To Purchase
- ------------------ --------- -------- --------------- --------------- --------------- -----------
<S> <C>
IHOP (7) $1,073,262 08/20/97 08/2017; three $108,668; increases for each lease year, during the
(the "Victoria (excluding five-year renewal by 10% after the (i) 4% of annual eleventh lease
Property") Existing closing options fifth lease year gross sales minus year and at
restaurant costs) and after every (ii) the minimum the end of
five years annual rent for the initial
The Victoria Property thereafter during such lease year lease term
is located on the the lease term
north side of Lentz
Parkway west of U.S.
Highway 77, in
Victoria, Victoria
County, Texas, in an
area of mixed retail,
commercial, and
residential development.
Other fast-food and
family-style restaurants
located in proximity
to the Victoria Property
include a Denny's, a Red
Lobster, a Taco Bell, a
McDonald's, a Ryan's
Family Steak House, a
Sonic Drive-in, and
several local restaurants.
Shoney's $799,047 08/20/97 08/2017; two 11% of Total Cost for each lease year, at any time
(the "Las Vegas (excluding five-year (4); increases by (i) 6% of annual after the
Property") Restaurant development renewal options 10% after the fifth gross sales minus seventh lease
to be constructed costs) (3) lease year and (ii) the minimum year
after every five annual rent for such
The Las Vegas Property years thereafter lease year
is located on the west during the lease
side of Rock Springs term
Drive, north of Lake
Mead Drive, in Las
Vegas, Clark County,
Nevada, in an area of
mixed retail, commercial,
and residential
development. Other
fast-food and
family-style restaurants
located in proximity to
the Las Vegas Property
include a Boston Market,
a Wendy's, an Arby's, a
Chili's, a Macaroni
Grill, a Tony Roma's,
a McDonald's, and an
In and Out Burgers.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location Purchase Date tion and Minimum Option
and Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent To Purchase
- ------------------ --------- -------- --------------- --------------- --------------- -----------
<S> <C>
Boston Market (6) $1,062,327 09/05/97 09/2012; five $110,270; increases for each lease year at any time
(the "Hoover five-year renewal by 10% after the after the fifth after the
Property") Existing options fifth lease year and lease year, (i) 4% fifth lease
restaurant after every five of annual gross year
years thereafter sales minus (ii) the
The Hoover Property during the lease minimum annual
is located on the term rent for such lease
southeast quadrant of year
U.S. Highway 31 and
Lorna Road, in Hoover,
Jefferson County, Alabama,
in an area of mixed
retail, commercial, and
residential development.
Other fast-food and
family-style restaurants
located in proximity to
the Hoover Property
include a Taco Bell, a
McDonald's, a Wendy's,
and a Pizza Hut.
T.G.I. Friday's $872,422 09/05/97 09/2017; four 10.75% of Total Cost for each lease year, at any time
(the "Superstition (3) five-year (4); increases by (i) 6% of annual after the
Springs Property") renewal 10% after the fifth gross sales minus seventh lease
Restaurant to be options lease year and after (ii) the minimum year
constructed every five years annual rent for
thereafter during such lease year
The Superstition the lease term
Springs Property is
located on the
northwest corner of
the intersection of
Superstition Springs
Boulevard and South
Power Road, in
Superstition Springs,
Mericopa County,
Arizona, in an area
of mixed retail,
commercial, and
residential development.
Other fast-food and
family-style restaurants
located in proximity to
the Superstition Springs
Property include a Burger
King, an Outback
Steakhouse, a Jack in the
Box, a Denny's, a
McDonald's, a Wendy's, a
Chili's, and several
local restaurants.
</TABLE>
<PAGE>
FOOTNOTES:
(1) The estimated federal income tax basis of the depreciable portion (the
building portion) of each of the Properties acquired, and for construction
Properties, once the buildings are constructed, is set forth below:
Property Federal Tax Basis
-------- -----------------
Lexington Property $ 462,000
Newport News Property 584,000
Houston Property 888,000
Stockbridge Property 705,000
Woodland Property 661,000
West Sacramento Property 612,000
Cookeville Property 1,026,000
Hendersonville Property 779,000
Lawrence Property 1,019,000
Nashville Property 946,000
Greensboro Property 403,000
Greenville Property 488,000
Jonesville Property 538,000
Kernersville Property 411,000
Kinston Property 483,000
Murfreesboro Property 973,000
Edgewater Property 625,000
Duncan Property 931,000
Fort Walton Beach Property 983,000
London Property 828,000
Elk Grove Property 1,036,000
Lake Jackson Property 799,000
Loveland Property 960,000
Victoria Property 810,000
Las Vegas Property 939,000
Hoover Property 618,000
Superstition Springs Property 1,269,000
(2) Minimum annual rent for each of the Properties became payable on the
effective date of the lease, except as indicated below. For the Duncan and
Fort Walton Beach Properties, minimum annual rent will become due and
payable on the earlier of (i) 180 days after execution of the lease, (ii)
the date the certificate of occupancy for the restaurant is issued, or
(iii) the date the restaurant opens for business to the public. For the
Las Vegas and Superstition Springs Properties minimum annual rent will
become due and payable on the earlier of (i) 180 days after execution of
the lease, (ii) the date the certificate of occupancy for the restaurant
is issued, (iii) the date the restaurant opens for business to the public,
or (iv) the date the tenant receives from the landlord its final funding
of the
<PAGE>
construction costs. During the period commencing with the effective date
of the lease to the date minimum annual rent becomes payable for the
Duncan and Fort Walton Beach Properties, as described above, interim rent
equal to ten percent per annum of the amount funded by the Company in
connection with the purchase and construction of the Properties shall
accrue and be payable in a single lump sum at the time of 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
Las Vegas and Superstition Springs Properties, as described above, the
tenant shall pay monthly "interim rent" equal to a specified rate per
annum (ranging from 10.75% to 11%) of the amount funded by the Company in
connection with the purchase and construction of the Properties.
(3) The development agreements for the Properties which are to be constructed
or renovated, provides that construction or renovation must be completed
no later than the dates set forth below. The maximum cost to the Company,
(including the purchase price of the land, development costs, and closing
and acquisition costs) is not expected to, but may, exceed the amount set
forth below:
<TABLE>
<CAPTION>
Property Estimated Maximum Cost Estimated Final Completion Date
-------- ---------------------- -------------------------------
<S> <C>
Woodland Property $ 963,592 January 12, 1998
West Sacramento Property 1,073,031 January 17, 1998
Cookeville Property 1,471,963 July 31, 1998
Hendersonville Property 747,664 July 31, 1998
Lawrence Property 1,448,598 July 31, 1998
Nashville Property 1,308,411 July 31, 1998
Murfreesboro Property 1,425,234 August 4, 1998
Duncan Property 1,158,457 February 15, 1998
Fort Walton Beach Property 1,609,490 February 15, 1998
London Property 1,123,720 November 17, 1997
Las Vegas Property 1,577,243 February 16, 1998
Superstition Springs Property 2,044,922 March 4, 1998
</TABLE>
(4) The "Total Cost" is equal to the sum of (i) the purchase price of the
property, (ii) closing costs, and (iii) actual development costs incurred
under the development agreement.
(5) The lessee of the Lexington, Greensboro, Greenville, Jonesville,
Kernersville and Kinston Properties is the same unaffiliated lessee.
(6) The lessee of the Newport News, Edgewater and Hoover Properties is the
same unaffiliated lessee.
(7) The lessee of the Houston, Stockbridge, Elk Grove, Lake Jackson, Loveland
and Victoria Properties is the same unaffiliated lessee.
(8) The lessee of the Woodland and West Sacramento Properties is the same
unaffiliated lessee.
(9) The Company paid for all construction or renovation costs in advance at
closing; therefore, minimum annual rent was determined on the date
acquired and is not expected to change.
<PAGE>
(10) Percentage rent shall be calculated on a calendar year basis (January 1 to
December 31).
(11) The lessee of the Cookeville, Hendersonville, Lawrence, Nashville and
Murfreesboro Properties is the same unaffiliated lessee.
(12) The Company paid for all construction or renovation costs in advance at
closing; therefore, minimum annual rent was determined on the date
acquired and is not expected to change. In accordance with the lease
agreement, these Properties are being converted from Barb Wires Steakhouse
& Saloon restaurants to Tumbleweed Southwest Mesquite Grill & Bar
restaurants. Renovation of the Properties is expected to be completed
within 365 days of the effective date of the lease. The Properties are
expected to remain operational during renovations.
(13) The Company owns the building only for this Property. The Company does not
own the underlying land; although, the Company entered 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.
<PAGE>
PENDING INVESTMENTS
As of September 5, 1997, the Company had initial commitments to acquire
24 properties, including 11 properties consisting of land and building and 13
properties consisting of building only. The acquisition of each of these
properties is subject to the fulfillment of certain conditions, including, but
not limited to, a satisfactory environmental survey and property appraisal.
There can be no assurance that any or all of the conditions will be satisfied
or, if satisfied, that one or more of these properties will be acquired by the
Company. If acquired, the leases of all 24 of these properties are expected to
be entered into on substantially the same terms described in the section of the
Prospectus entitled "Business-Description of Property Leases."
In connection with the three Black-eyed Pea properties in Phoenix,
Arizona, the one in Tucson, Arizona, and the IHOP property in Saugus,
Massachusetts, the Company anticipates owning only the buildings and not the
underlying land. However, the Company anticipates entering into landlord
estoppel agreements with the landlords of the land and collateral assignments of
the ground leases with the lessees in order to provide the Company with certain
rights with respect to the land on which the buildings are located.
In connection with the On The Border property in San Antonio, Texas,
and the Black-eyed Pea properties, two of which are located in Albuquerque, New
Mexico, and one of which is located in each of Dallas, Houston, and Waco, Texas,
Forestville, Maryland, and Wichita, Kansas, 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.
<PAGE>
<TABLE>
<CAPTION>
Lease Term and
Property Renewal Options Minimum Annual Rent Percentage Rent Option to Purchase
- -------- --------------- ------------------- --------------- ------------------
<S> <C>
Black-eyed Pea (3) 16 years; two 12.90% of the Company's None during the fourth,
Albuquerque, NM five-year total cost to purchase sixth, and eighth
(#1) Existing renewal options the building; increases lease years only
restaurant to 13.28% after the sixth
lease year
Black-eyed Pea (3) 14 years; two 13.70% of the Company's None during the second,
Albuquerque, NM five-year renewal total cost to purchase fourth, and sixth
(#2) Existing options the building; increases lease years only
restaurant to 13.97% after the fourth
lease year
Black-eyed Pea (3) 14 years 13.66% of the Company's None during the second,
Dallas, TX total cost to purchase fourth, and sixth
Existing the building; increases lease years only
restaurant to 13.93% after the fourth
lease year
Black-eyed Pea (3) 7 years; two 20.57% of the Company's None None
Forestville, MD five-year total cost to purchase
Existing restaurant renewal options the building
Black-eyed Pea (3) 11 years 15.37% of the Company's None during the first
Houston, TX total cost to purchase and third
Existing restaurant the building; increases lease years only
to 15.45% after the first
lease year
Black-eyed Pea 20 years; two 10.50% of the Company's for each lease during the eighth,
Mesa, AZ five-year total cost to purchase year, (i) 5% tenth, and twelfth
Existing restaurant renewal options the property; increases of annual gross lease years only
by 10% after the tenth sales minus (ii)
lease year and after the minimum
every five years annual rent
thereafter during the for such lease
lease term year
Black-eyed Pea (6) 9 years 16.85% of the Company's None (7)
Phoenix, AZ (#1) total cost to purchase
Existing restaurant the building
Black-eyed Pea (6) 11 years 15.49% of the Company's None (7)
Phoenix, AZ (#2) total cost to purchase
Existing restaurant the building
Black-eyed Pea (6) 12 years 14.69% of the Company's None (7)
Phoenix, AZ (#3) total cost to purchase
Existing restaurant the building
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Lease Term and
Property Renewal Options Minimum Annual Rent Percentage Rent Option to Purchase
- -------- --------------- ------------------- --------------- ------------------
<S> <C>
Black-eyed Pea (6) 13 years 14.13% of the Company's None during the eighth,
Tucson, AZ total cost to purchase tenth, and twelfth
Existing restaurant the building lease years only
Black-eyed Pea (3) 14 years; two 13.42% of the Company's None during the second,
Waco, TX five-year renewal total cost to purchase fourth, and sixth
Existing restaurant options the building; increases lease years only
to 13.73% after the fourth
lease year
Black-eyed Pea (3) 14 years 13.56% of the Company's None during the second,
Wichita, KS total cost to purchase fourth, and sixth
Existing restaurant the building; increases lease years only
to 13.84% after the fourth
lease year
Boston Market 15 years; five 10.38% of the Company's for each lease at any time
Colorado Springs, CO five-year total cost to purchase year after the after the fifth
Existing restaurant renewal options the property; increases fifth lease year, lease year
by 10% after the fifth (i) 4% of annual
lease year and after gross sales minus
every five years (ii) the minimum
thereafter during the annual rent for
lease term such lease year
Golden Corral 15 years; four 10.75% of Total for each lease year, during the
Mobile, AL five-year Cost (1) 5% of the amount by first through
Restaurant to renewal options which annual gross seventh lease
be constructed sales exceed a to years and the
be determined tenth through
breakpoint fifteenth lease
years only
Golden Corral 15 years; four 10.75% of Total for each lease year, during the first
Muskogee, OK five-year Cost (1) 5% of the amount by through seventh
Restaurant to renewal options which annual gross lease years and
be constructed sales exceed a to the tenth through
be determined fifteenth lease
breakpoint years only
Golden Corral 15 years; four 10.75% of Total for each lease during the first
Olathe, KS five-year Cost (1) year, 5% of the through seventh
Restaurant to renewal options amount by which lease years and
be constructed annual gross sales the tenth through
exceed a to be fifteenth lease
determined years only
breakpoint
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Lease Term and
Property Renewal Options Minimum Annual Rent Percentage Rent Option to Purchase
- -------- --------------- ------------------- --------------- ------------------
<S> <C>
Golden Corral 15 years; four 10.75% of Total for each lease year, during the first
Palatka, FL five-year Cost (1) 5% of the amount by through seventh
Restaurant to renewal options which annual gross lease years and
be constructed sales exceed a to the tenth through
be determined fifteenth lease
breakpoint years only
IHOP (6) (8) 11.78% of the Company's for each lease year, at any time after
Saugus, MA total cost to purchase (i) 3% of annual the fifth
Existing restaurant the building; increases gross sales minus lease year
by 5.81% after the fifth (ii) the minimum
lease year, 4.66% after annual rent for
the tenth lease year, and such lease year
2.83% after the fifteenth
lease year
Jack in the Box 18 years; four 10.25% of Total Cost (1); for each lease year, at any time after
Florissant, MO five-year increases by 8% after (i) 5% of annual the seventh lease
Restaurant to renewal options the fifth lease year gross sales minus year (2)
be constructed and after every five (ii) the minimum
years thereafter annual rent for
during the lease term such lease year
Jack in the Box 18 years; four 10.25% of Total Cost (1); for each lease year, at any time after
Folsum, CA five-year increases by 8% after (i) 5% of annual the seventh lease
Restaurant to renewal options the fifth lease year gross sales minus year (2)
be constructed and after every five (ii) the minimum
years thereafter annual rent for
during the lease term such lease year
Jack in the Box 18 years; four 10.25% of Total Cost (1); for each lease year, at any time after
Los Angeles, CA five-year increases by 8% after (i) 5% of annual the seventh lease
Restaurant to renewal options the fifth lease year gross sales minus year (2)
be constructed and after every five (ii) the minimum
years thereafter annual rent for
during the lease term such lease year
On The Border (3) (4); three 13.64% of Total for each lease year, at any time after
San Antonio, TX five-year Cost (1); (5) (1) 4% of annual the tenth lease year
Restaurant to renewal options gross sales minus
be constructed (ii) the minimum annual
annual rent for such
lease year
Ruby Tuesday's 20 years; two 11% of Total Cost (1); for each lease year, at any time after
Georgetown, KY five-year increases by 10% after (i) 6% of annual the seventh lease year
Restaurant to renewal options the fifth lease year gross sales minus
be constructed and after every five (ii) the minimum
years thereafter annual rent for
during the lease term such lease year
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Lease Term and
Property Renewal Options Minimum Annual Rent Percentage Rent Option to Purchase
- -------- --------------- ------------------- --------------- ------------------
<S> <C>
Wendy's 20 years; two 10.25% of Total Cost (1) for each lease year, at any time after
Westlake five-year (i) 7% of annual the seventh lease year
Village, CA renewal options gross sales minus
Restaurant to (ii) the minimum
be constructed annual rent for
such lease year
</TABLE>
FOOTNOTES:
(1) The "Total Cost" is equal to the sum of (i) the purchase price of the
property, (ii) closing costs, and (iii) actual development costs incurred
under the development agreement.
(2) In the event the Company purchases the property directly from the lessee,
the lessee will have no option to purchase the property.
(3) 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.
(4) The lease term shall expire upon the earlier of (i) the date 15 years from
the date of closing, (ii) the expiration of the original term of the
ground lease, or (iii) the earlier termination of the ground lease.
(5) Base rent shall increase after every five years during the lease term by
the lesser of (i) 10% of the minimum base rent during the preceding year
or (ii) 150% of the percentage change in the Consumer Price Index.
(6) 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 landlord estoppel agreement with the landlord
of the land and a collateral assignment of the ground lease with the
lessee in order to provide the Company with certain rights with respect to
the land on which the building is located.
(7) The Company anticipates conveying the building to the tenant at the end of
the lease term for $1.
(8) The lease term shall expire upon the earlier of (i) the date 20 years from
the date of closing, (ii) the expiration of the original term of the
ground lease, or (iii) the earlier termination of the ground lease.
<PAGE>
BORROWING
On August 20, 1997, the Company's $15 million Loan was amended and
restated to enable the Company to receive advances on a revolving $35,000,000
unsecured line of credit (the "Line of Credit") to purchase and develop
Properties and to fund Mortgage Loans and Secured Equipment Leases. The advances
will bear interest at a rate of LIBOR plus 1.65% or the bank's prime rate,
whichever the Company selects at the time of borrowing. Interest only will be
repayable monthly until July 31, 1999, at which time all remaining interest and
principal shall be due. The Line of Credit will provide for two one-year renewal
options.
The Company intends to use up to $15 million of the $35 million
available under the Line of Credit, including the approximately $4,724,120
advanced as of September 5, 1997, to fund Secured Equipment Leases. The Company
intends to use up to $20 million of the $35 million available under the Line of
Credit to purchase Properties. Advances used to fund Secured Equipment Leases
will be repaid using payments received from Secured Equipment Leases and will be
refinanced in regard to any Secured Equipment Lease not fully repaid at the end
of the term of the Line of Credit. Advances used to purchase and develop
Properties will be repaid using additional offering proceeds or refinanced on a
long-term basis.
The Company will not encumber Properties in connection with the Line of
Credit. Management believes that during the offering period the Line of Credit
will allow the Company to make investments in Properties that the Company
otherwise would be forced to delay until it raised a sufficient amount of
proceeds from the sale of Shares to allow the Company to make the investments.
By eliminating this delay the Company will also eliminate the risk that these
investments will no longer be available, or the terms of the investment will be
less favorable, when the Company has raised sufficient offering proceeds.
Alternatively, Affiliates of the Advisor could make such investments, pending
receipt by the Company of sufficient offering proceeds, in order to preserve the
investment opportunities for the Company. However, Properties acquired by the
Company in this manner would be subject to closing costs both on the original
purchase by the Affiliate and on the subsequent purchase by the Company, which
would increase the amount of expenses associated with the acquisition of
Properties and reduce the amount of offering proceeds available for investment
in income-producing assets. Management believes that the use of Line of Credit
by the Company will enable the Company to reduce or eliminate the instances in
which the Company will be required to pay duplicate closing costs.
The Board of Directors does not anticipate that the Company will borrow
funds, other than the Line of Credit and any additional financing the Board of
Directors may determine to obtain to fund Secured Equipment Leases or to
purchase and development properties. The Company may also borrow funds for the
purpose of preserving its status as a REIT. For example, the Company may borrow
to the extent necessary to permit the Company to make Distributions required in
order to enable the Company to qualify as a REIT for federal income tax
purposes; however, the Company will not borrow for the purpose of returning
capital to the stockholders unless necessary to eliminate corporate-level tax to
the Company. Until Listing occurs, the Company will not encumber Properties in
connection with any borrowing. If Listing occurs, however, the Board of
Directors may elect to cause the Company to borrow funds in connection with the
purchase of additional Properties or for other Company purposes and to encumber
any or all of the Company's Properties in connection with any such borrowing.
The aggregate borrowing of the Company, secured and unsecured, shall be
reasonable in relation to Net Assets of the Company and shall be reviewed by the
Board of Directors at least quarterly. The Board of Directors anticipates that
the aggregate amount of any borrowing will not exceed 50% of Real Estate Asset
Value, although the maximum amount of borrowing in relation to Net Assets, in
the absence of a satisfactory showing that a higher level of borrowing is
appropriate, shall not exceed 300% of Net Assets (an amount which the Company
anticipates will correspond to approximately 75% of Real Estate Asset Value).
Any excess in borrowing over such 300% level shall occur only with approval by a
majority of the Independent Directors and will be disclosed and explained to
stockholders in the first quarterly report of the Company prepared after such
approval occurs. Any additional financing obtained to fund Secured Equipment
Leases may not exceed 10% of aggregate gross proceeds of the Company's initial
offering, this offering and any subsequent offering.
<PAGE>
STATEMENT OF ESTIMATED TAXABLE OPERATING RESULTS
CNL AMERICAN PROPERTIES FUND, INC.
PROPERTIES ACQUIRED FROM JULY 3, 1997
THROUGH SEPTEMBER 5, 1997
For a 12-Month Period (Unaudited)
The following schedule presents unaudited estimated taxable operating
results of each Property acquired by the Company from July 3, 1997 through
September 5, 1997, 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.
<TABLE>
<CAPTION>
Arby's Boston Market IHOP IHOP
Lexington, NC (6) Newport News, VA (7) Houston, TX (8) Stockbridge, GA (8)
----------------- --------------------- --------------- -------------------
<S> <C>
Estimated Taxable Operating
Results
Base Rent (1) $74,254 $104,993 $144,209 $141,451
Asset Management Fees (2) (4,449) (6,013) (8,519) (8,356)
General and Administrative
Expenses (3) (4,604) (6,510) (8,941) (8,770)
-------- -------- -------- --------
Estimated Cash Available from
Operations 65,201 92,470 126,749 124,325
Depreciation and Amortization
Expense (4) (11,835) (14,977) (22,764) (18,066)
-------- -------- -------- --------
Estimated Taxable Operating
Results $ 53,366 $ 77,493 $103,985 $106,259
======== ======== ======== ========
</TABLE>
See Footnotes
<PAGE>
<TABLE>
<CAPTION>
Tumbleweed Southwest Tumbleweed Southwest
Jack in the Box Jack in the Box Mesquite Grill & Bar Mesquite Grill & Bar
Woodland, CA (9) West Sacramento, CA (9) Cookeville, TN (10) Hendersonville, TN(10)
----------------- ----------------------- -------------------- ----------------------
<S> <C>
Estimated Taxable Operating
Results
Base Rent (1) (5) (5) (5) (5)
Asset Management Fees (2) (5) (5) (5) (5)
General and Administrative
Expenses (3) (5) (5) (5) (5)
Estimated Cash Available from
Operations (5) (5) (5) (5)
Depreciation and Amortization
Expense (4) (5) (5) (5) (5)
Estimated Taxable Operating
Results (5) (5) (5) (5)
</TABLE>
See Footnotes
<PAGE>
<TABLE>
<CAPTION>
Tumbleweed Southwest Tumbleweed Southwest
Mesquite Grill & Bar Mesquite Grill & Bar Arby's Arby's
Lawrence, KS (10) Nashville, TN (10) Greensboro, NC(6) Greenville, NC(6)
-------------------- -------------------- ----------------- -----------------
<S> <C>
Estimated Taxable Operating
Results
Base Rent (1) (5) (5) $72,727 $72,727
Asset Management Fees (2) (5) (5) (4,358) (4,358)
General and Administrative
Expenses (3) (5) (5) (4,509) (4,509)
------- -------
Estimated Cash Available from
Operations (5) (5) 63,860 63,860
Depreciation and Amortization
Expense (4) (5) (5) (10,335) (12,519)
------- -------
Estimated Taxable Operating
Results (5) (5) $53,525 $51,341
======= =======
</TABLE>
See Footnotes
<PAGE>
<TABLE>
<CAPTION>
Tumbleweed Southwest
Arby's Arby's Arby's Mesquite Grill & Bar
Jonesville, NC (6) Kernersville, NC(6) Kinston, NC (6) Murfreesboro, TN (10)
------------------ ------------------- --------------- ---------------------
<S> <C>
Estimated Taxable Operating
Results
Base Rent (1) $72,727 $65,000 $71,364 (5)
Asset Management Fees (2) (4,358) (3,894) (4,276) (5)
General and Administrative
Expenses (3) (4,509) (4,030) (4,425) (5)
------- ------- -------
Estimated Cash Available from
Operations 63,860 57,076 62,663 (5)
Depreciation and Amortization
Expense (4) (13,786) (10,550) (12,393) (5)
------- ------- -------
Estimated Taxable Operating
Results $50,074 $46,526 $50,270 (5)
======= ======= =======
</TABLE>
See Footnotes
<PAGE>
<TABLE>
<CAPTION>
Boston Market Golden Corral Golden Corral Ruby Tuesday's
Edgewater, CO (7) Duncan, OK (11) Fort Walton Beach, FL (11) London, KY
----------------- --------------- -------------------------- ------------
<S> <C>
Estimated Taxable Operating
Results
Base Rent (1) $93,907 (5) (5) (5)
Asset Management Fees (2) (5,377) (5) (5) (5)
General and Administrative
Expenses (3) (5,822) (5) (5) (5)
-------
Estimated Cash Available from
Operations 82,708 (5) (5) (5)
Depreciation and Amortization
Expense (4) (16,024) (5) (5) (5)
-------
Estimated Taxable Operating
Results $66,684 (5) (5) (5)
=======
</TABLE>
See Footnotes
<PAGE>
<TABLE>
<CAPTION>
IHOP IHOP IHOP IHOP
Elk Grove, CA (8) Lake Jackson, TX (8) Loveland, CO (8) Victoria, TX (8)
----------------- -------------------- ---------------- ----------------
<S> <C>
Estimated Taxable Operating
Results
Base Rent (1) $155,961 $121,101 $139,398 $108,668
Asset Management Fees (2) (9,215) (7,155) (8,236) (6,420)
General and Administrative
Expenses (3) (9,670) (7,508) (8,643) (6,737)
------- ------- ------- -------
Estimated Cash Available from
Operations 137,076 106,438 122,519 95,511
Depreciation and Amortization
Expense (4) (26,552) (20,476) (24,613) (20,763)
------- ------- ------- -------
Estimated Taxable Operating
Results $110,524 $85,962 $97,906 $74,748
======== ======= ======= =======
</TABLE>
See Footnotes
<PAGE>
<TABLE>
<CAPTION>
Shoney's Boston Market T.G.I. Friday's
Las Vegas, NV Hoover, AL (7) Superstition Springs, AZ Total
------------- -------------- ------------------------ -----
<S> <C>
Estimated Taxable Operating
Results
Base Rent (1) (5) $110,270 (5) $1,548,757
Asset Management Fees (2) (5) (6,316) (5) (91,300)
General and Administrative
Expenses (3) (5) (6,837) (5) (96,024)
------- ---------
Estimated Cash Available from
Operations (5) 97,117 (5) 1,361,433
Depreciation and Amortization
Expense (4) (5) (15,840) (5) (251,493)
------- ---------
Estimated Taxable Operating
Results (5) $ 81,277 (5) $1,109,940
======== ==========
</TABLE>
FOOTNOTES:
(1) Base rent does not include percentage rents which become due if specified
levels of gross receipts are achieved.
(2) The Properties will be managed pursuant to an advisory agreement between
the Company and CNL Fund Advisors, Inc. (the "Advisor"), pursuant to which
the Advisor will receive monthly asset management fees in an amount equal
to one-twelfth of .60% of the Company's Real Estate Asset Value as of the
end of the preceding month as defined in such agreement. See "Management
Compensation."
(3) Estimated at 6.2% of gross rental income based on the previous experience
of Affiliates of the Advisor with 17 public limited partnerships which own
properties similar to those owned by the Company. Amount does not include
soliciting dealer servicing fee due to the fact that such fee will not be
incurred until December 31 of the year following the year in which the
offering terminates.
(4) The estimated federal tax basis of the depreciable portion (the building
portion) of each Property has been depreciated on the straight-line method
over 39 years.
<PAGE>
(5) The Property is under construction or renovation for the period presented.
The development agreements for the Properties which are to be constructed
or renovated, provide that construction or renovation must be completed no
later than the dates set forth below:
Property Estimated Final Completion Date
-------- -------------------------------
Woodland Property January 12, 1998
West Sacramento Property January 17, 1998
Cookeville Property July 31, 1998
Hendersonville Property July 31, 1998
Lawrence Property July 31, 1998
Nashville Property July 31, 1998
Murfreesboro Property August 4, 1998
Duncan Property February 15, 1998
Fort Walton Beach Property February 15, 1998
London Property November 17, 1997
Las Vegas Property February 16, 1998
Superstition Springs Property March 4, 1998
(6) The lessee of the Lexington, Greensboro, Greenville, Jonesville,
Kernersville and Kinston Properties is the same unaffiliated lessee.
(7) The lessee of the Newport News, Edgewater and Hoover Properties is the
same unaffiliated lessee.
(8) The lessee of the Houston, Stockbridge, Elk Grove, Lake Jackson, Loveland
and Victoria Properties is the same unaffiliated lessee.
(9) The lessee of the Woodland and West Sacramento Properties is the same
unaffiliated lessee.
(10) The lessee of the Cookeville, Hendersonville, Lawrence, Nashville and
Murfreesboro Properties is the same unaffiliated lessee.
(11) The lessee of the Duncan and Fort Walton Beach Properties is the same
unaffiliated lessee.
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Pro Forma Consolidated Financial Information (unaudited):
Pro Forma Consolidated Balance Sheet as of June 30, 1997 36
Pro Forma Consolidated Statement of Earnings for the six months ended June 30, 1997 37
Pro Forma Consolidated Statement of Earnings for the year ended December 31, 1996 38
Notes to Pro Forma Consolidated Financial Statements for the six months ended
June 30, 1997 and the year ended December 31, 1996 39
</TABLE>
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following Pro Forma Consolidated Balance Sheet of the Company gives
effect to (i) property acquisition transactions from inception through June 30,
1997, including the receipt of $223,843,177 in gross offering proceeds from the
sale of 22,384,318 shares of common stock and the application of such proceeds
to purchase 174 properties (including 121 properties which consist of land and
building, one property through a joint venture arrangement which consists of
land and building, eight properties which consist of building only and 44
properties which consist of land only), 33 of which were under construction at
June 30, 1997, to provide mortgage financing to the lessees of the 44 properties
consisting of land only, and to pay organizational and offering expenses,
acquisition fees and miscellaneous acquisition expenses, (ii) the receipt of
$32,064,182 in gross offering proceeds from the sale of 3,206,418 additional
shares of common stock during the period July 1, 1997 through August 21, 1997,
and (iii) the application of such funds and $22,386,051 of cash and cash
equivalents at June 30, 1997, to purchase 30 additional properties acquired
during the period July 1, 1997 through August 21, 1997 (12 of which are under
construction and consist of land and building, one property which is under
construction and consists of building only and 17 properties which consist of
land and building), to pay additional costs for the 33 properties under
construction at June 30, 1997, and to pay offering expenses, acquisition fees
and miscellaneous acquisition expenses, all as reflected in the pro forma
adjustments described in the related notes. The Pro Forma Consolidated Balance
Sheet as of June 30, 1997, includes the transactions described in (i) above from
the historical consolidated balance sheet, adjusted to give effect to the
transactions in (ii) and (iii) above, as if they had occurred on June 30, 1997.
The Pro Forma Consolidated Statements of Earnings for the six months
ended June 30, 1997 and the year ended December 31, 1996, include the historical
operating results of the properties described in (i) above from the dates of
their acquisitions plus operating results for six of the properties that were
acquired by the Company during the period January 1, 1996 through August 21,
1997, 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) January 1, 1996,
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 Statement of Earnings for the remaining
properties acquired by the Company during the period January 1, 1996 through
August 21, 1997, 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.
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
<TABLE>
<CAPTION>
Pro Forma
ASSETS Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C>
Land and buildings on operating
leases, less accumulated
depreciation $ 140,983,397 $ 26,717,450 (a) $167,700,847
Net investment in direct
financing leases (b) 22,703,193 14,650,854 (a) 37,354,047
Cash and cash equivalents 31,097,346 (22,386,051)(a) 8,711,295
Receivables 497,307 497,307
Mortgage notes receivable 17,737,107 17,737,107
Organization costs, less
accumulated amortization 11,682 11,682
Loan costs, less accumulated
amortization 23,954 23,954
Accrued rental income 861,703 861,703
Other assets 1,026,053 (660,586)(a) 365,467
------------ ------------ -----------
$214,941,742 $ 18,321,667 $233,263,409
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Note payable $ 4,756,658 $ 4,756,658
Accrued interest payable 26,751 26,751
Accrued construction costs payable 10,524,476 $ (10,524,476)(a) -
Accounts payable and other accrued
expenses 113,317 113,317
Due to related parties 790,223 790,223
Rents paid in advance 305,524 305,524
Deferred rental income 1,005,050 26,353 (a) 1,031,403
Other payables 10,315 10,315
------------ ------------ ------------
Total liabilities 17,532,314 (10,498,123) 7,034,191
------------ ------------ ------------
Minority interest 286,992 286,992
------------ ------------ ------------
Stockholders' equity:
Preferred stock, without par
value. Authorized and unissued
3,000,000 shares - -
Excess shares, $.01 par value per
share. Authorized and unissued
78,000,000 shares - -
Common stock, $.01 par value per
share. Authorized 75,000,000
shares; issued and outstanding
22,404,318 shares; issued and
outstanding, as adjusted,
25,610,736 shares 224,043 32,064 (a) 256,107
Capital in excess of par value 198,913,717 28,787,726 (a) 227,701,443
Accumulated distributions in
excess of net earnings (2,015,324) (2,015,324)
------------ ------------ ------------
197,122,436 28,819,790 225,942,226
------------ ------------ ------------
$214,941,742 $ 18,321,667 $233,263,409
============ ============ ============
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements.
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C>
Revenues:
Rental income from
operating leases $4,006,805 $ 8,188 (1) $4,014,993
Earned income from
direct financing leases (2) 958,492 958,492
Interest income from
mortgage notes receivable 815,192 815,192
Other interest and income 934,745 (3,359)(3) 931,386
---------- ---------- ----------
6,715,234 4,829 6,720,063
---------- ---------- ---------
Expenses:
General operating and
administrative 481,211 481,211
Professional services 44,679 44,679
Asset and mortgage management
fees to related party 259,256 873 (4) 260,129
State and other taxes 107,863 107,863
Depreciation and amortization 579,404 2,142 (6) 581,546
---------- ---------- ----------
1,472,413 3,015 1,475,428
---------- ---------- ----------
Earnings Before Minority
Interest in Income of
Consolidated Joint Venture 5,242,821 (1,814) 5,244,635
Minority Interest in Income of
Consolidated Joint Venture (15,726) (15,726)
--------- ---------- ----------
Net Earnings $5,227,095 $ (1,814) $5,228,909
========== ========== ==========
Earnings Per Share of
Common Stock (7) $ 0.29 $ 0.29
========== ==========
Weighted Average Number of
Shares of Common Stock
Outstanding (7) 17,826,025 17,826,025
========== ==========
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements.
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C>
Revenues:
Rental income from
operating leases $3,717,886 $ 62,167 (1) $3,780,053
Earned income from
direct financing leases (2) 625,492 34,282 (1) 659,774
Contingent rental income 13,920 13,920
Interest income from
mortgage notes receivable 1,069,349 1,069,349
Other interest and income 780,037 (24,826)(3) 755,211
---------- ---------- ----------
6,206,684 71,623 6,278,307
---------- ---------- ----------
Expenses:
General operating and
administrative 542,564 542,564
Professional services 58,976 58,976
Asset and mortgage management
fees to related party 251,200 5,435 (4) 256,635
State and other taxes 56,184 1,218 (5) 57,402
Depreciation and amortization 521,871 6,852 (6) 528,723
---------- ---------- ----------
1,430,795 13,505 1,444,300
---------- ---------- ----------
Earnings Before Minority
Interest in Income of
Consolidated Joint Venture 4,775,889 58,118 4,834,007
Minority Interest in Income of
Consolidated Joint Venture (29,927) (29,927)
---------- ---------- ----------
Net Earnings $4,745,962 $ 58,118 $4,804,080
========== ========== ==========
Earnings Per Share of
Common Stock (7) $ 0.59 $ 0.60
========== ==========
Weighted Average Number of
Shares of Common Stock
Outstanding (7) 8,071,670 8,071,670
========== ==========
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements.
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND THE YEAR ENDED DECEMBER 31, 1996
Pro Forma Consolidated Balance Sheet:
(a) Represents gross proceeds of $32,064,182 from the issuance of 3,206,418
shares of common stock during the period July 1, 1997 through August 21,
1997, the receipt of $26,353 of rental income during construction
(capitalized as deferred rental income), and $22,386,051 of cash and cash
equivalents used (i) to acquire 30 properties for $32,532,688 of which one
property consists of building only and 29 properties consist of land and
building, (ii) to fund estimated construction costs of $17,256,618
($10,524,476 of which was accrued as construction costs payable at June 30,
1997) relating to 33 wholly-owned properties under construction at June 30,
1997, (iii) to pay acquisition fees of $1,442,888 and reclassify from other
assets $660,586 of acquisition fees previously incurred relating to the
acquired properties and (iv) to pay selling commissions and offering
expenses (stock issuance costs) of $3,244,392, which have been netted
against capital in excess of par value.
The pro forma adjustments to land and buildings on operating leases and net
investment in direct financing leases as a result of the above transactions
were as follows:
<TABLE>
<CAPTION>
Estimated purchase
price (including
construction and
closing costs) Acquisition fees
and additional allocated to
construction costs property Total
------------------ ---------------- -----
<S> <C>
Boston Market in Southlake, TX 1,025,712 54,949 1,080,661
Boston Market in Stafford, TX 1,068,222 57,226 1,125,448
Jack in the Box in Channelview, TX 1,007,970 53,998 1,061,968
Jack in the Box in Garland, TX 935,120 50,096 985,216
KFC in Putnam, CT 794,700 42,573 837,273
Arby's in Lexington, NC 741,536 39,725 781,261
Boston Market in Newport News, VA 1,002,216 53,690 1,055,906
IHOP in Houston, TX 1,419,809 76,061 1,495,870
IHOP in Stockbridge, GA 1,392,627 74,605 1,467,232
Jack in the Box in Woodland, CA 962,592 51,568 1,014,160
Jack in the Box in West Sacramento, CA 1,072,031 57,430 1,129,461
Tumbleweed Southwest Mesquite
Grill & Bar in Cookeville, TN 1,456,843 78,045 1,534,888
Tumbleweed Southwest Mesquite
Grill & Bar in Hendersonville, TN 739,655 39,624 779,279
Tumbleweed Southwest Mesquite
Grill & Bar in Lawrence, KS 1,433,474 76,794 1,510,268
Tumbleweed Southwest Mesquite
Grill & Bar in Nashville, TN 1,294,917 69,371 1,364,288
Arby's in Greensboro, NC 726,273 38,908 765,181
Arby's in Greenville, NC 726,273 38,907 765,180
Arby's in Jonesville, NC 726,273 38,907 765,180
Arby's in Kernersville, NC 649,000 34,768 683,768
Arby's in Kinston, NC 712,636 38,177 750,813
Tumbleweed Southwest Mesquite
Grill & Bar in Murfreesboro, TN 1,410,322 75,553 1,485,875
Boston Market in Edgewater, CO 896,187 48,010 944,197
Golden Corral in Fort Walton Beach, FL 1,490,657 79,857 1,570,514
Golden Corral in Duncan, OK 1,036,607 55,532 1,092,139
Ruby Tuesday's in London, KY 1,119,970 59,999 1,179,969
IHOP in Elk Grove, CA 1,535,840 82,278 1,618,118
IHOP in Lake Jackson, TX 1,192,497 63,884 1,256,381
IHOP in Loveland, CO 1,372,745 73,540 1,446,285
IHOP in Victoria, TX 1,070,000 57,321 1,127,321
Shoney's in Las Vegas, NV 1,519,984 81,428 1,601,412
33 wholly owned properties under
construction at June 30, 1997 6,732,142 360,650 7,092,792
----------- ----------- -----------
$39,264,830 $ 2,103,474 $41,368,304
=========== =========== ===========
</TABLE>
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND THE YEAR ENDED DECEMBER 31, 1996
Pro Forma Consolidated Balance Sheet - Continued:
Adjustment classified as follows:
Land and buildings on operating leases $26,717,450
Net investment in direct financing leases 14,650,854
-----------
$41,368,304
===========
(b) In accordance with generally accepted accounting principles, leases in
which the present value of future minimum lease payments equals or exceeds
90 percent of the value of the related properties are treated as direct
financing leases rather than as land and buildings. The categorization of
the leases has no effect on rental revenues received.
Pro Forma Consolidated Statement of Earnings:
(1) Represents rental income from operating leases and earned income from
direct financing leases for six of the properties acquired during the
period January 1, 1996 through August 21, 1997, which had a previous rental
history prior to the acquisition of the property by the Company (the "Pro
Forma Properties"), for the period commencing (A) the later of (i) the date
the Pro Forma Property became operational as a rental property by the
previous owner or (ii) January 1, 1996, 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 or placed
in service by the Company as compared to the date the Pro Forma Properties
were treated as becoming operational as a rental property for purposes of
the Pro Forma Consolidated Statement of Earnings.
Date Pro Forma
Date Placed Property Became
in Service Operational as
By the Company Rental Property
-------------- ---------------
Mr. Fable's in Grand
Rapids, MI March 1996 January 1996
Denny's in McKinney, TX June 1996 January 1996
Boston Market in Merced, CA October 1996 July 1996
Boston Market in
St. Joseph, MO December 1996 June 1996
Burger King in Kent, OH February 1997 December 1996
Golden Corral in
Hopkinsville, KY February 19, 1997 February 18, 1997
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.
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND THE YEAR ENDED DECEMBER 31, 1996
Pro Forma Consolidated Statement of Earnings - Continued:
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 1997 that the previous owners held the properties, no
pro forma adjustment was made for percentage rental income for the six
months ended June 30, 1997 and the year ended December 31, 1996.
(2) See Note (b) under "Pro Forma Consolidated Balance Sheet" above for a
description of direct financing leases.
(3) Represents adjustment to interest income due to the decrease in the amount
of cash available for investment in interest bearing accounts during the
periods commencing (A) on the later of (i) the dates the Pro Forma
Properties became operational as rental properties by the previous owners
or (ii) January 1, 1996, through (B) the earlier of (i) the actual dates of
acquisition by the Company or the end of the pro forma period presented, as
described in Note (1) above. The estimated pro forma adjustment is based
upon the fact that interest income on interest bearing accounts was earned
at a rate of approximately four percent per annum by the Company during the
six months ended June 30, 1997 and the year ended December 31, 1996.
(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) January 1, 1996 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 $873,000 and $3,509,000 for the Pro
Forma Properties for the six months ended June 30, 1997 and the year ended
December 31, 1996, respectively), as defined in the Company's prospectus.
(5) Represents adjustment to state tax expense due to the incremental increase
in rental revenues of Pro Forma Properties. Estimated pro forma state tax
expense was calculated based on an analysis of state laws of the various
states in which the Company has acquired the Pro Forma Properties. The
estimated pro forma state taxes consist primarily of income and franchise
taxes ranging from zero to approximately two percent of the Company's pro
forma rental income of each Pro Forma Property. Due to the fact that the
Company's leases are triple net, the Company has not included any amounts
for real estate taxes in the pro forma statement of earnings.
(6) Represents incremental increase in depreciation expense of the building
portions of the Pro Forma Properties accounted for as operating leases
using the straight-line method over an estimated useful life of 30 years.
(7) Historical earnings per share were calculated based upon the weighted
average number of shares of common stock outstanding during the six months
ended June 30, 1997 and the year ended December 31, 1996.
