Rule 424(b)(3)
No. 333-15411
CNL AMERICAN PROPERTIES FUND, INC.
Supplement No. 1, dated July 18, 1997
to Prospectus, dated April 18, 1997
This Supplement is part of, and should be read in conjunction with, the
Prospectus dated April 18, 1997. This Supplement replaces all prior Supplements
to the Prospectus. 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 July 2, 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 July 2, 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 July 2, 1997, the Company had received subscription
proceeds of $74,851,028 (7,485,103 Shares), including $643,293 (64,329 Shares)
issued pursuant to the Reinvestment Plan, from 3,561 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 $67,581,000. As of July 2,
1997, the Company had invested or committed for investment approximately
$191,667,000 of aggregate net proceeds from the Initial Offering and this
offering in 179 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 $9,900,000 in Net Offering Proceeds available for investment in
Properties and Mortgage Loans. As of July 2, 1997, $3,368,296 of the Net
Offering Proceeds from this offering had been incurred as Acquisition Fees to
the Advisor.
BUSINESS
COMPLETED INVESTMENTS
As of July 2, 1997, the Company had invested or committed for
investment approximately $191,667,000 of the aggregate net proceeds from the
Initial Offering and this offering in 179 Properties (127 Properties which
consist of land and building, 44 Properties which consist of land only and eight
Properties which consist of building only), in Mortgage Loans to the tenants of
the 44 Properties consisting of land only and three additional properties and to
pay related Acquisition Fees and Acquisition Expenses. See "Certain
Transactions." All of the Properties are owned directly by the Company, except
for one Property which is owned through a joint venture arrangement. All of the
Properties were acquired since the Company commenced operations on June 1, 1995
and have leases expiring from 15 to 25 years after the date on which each lease
commenced.
<PAGE>
The following tables set forth the number of Properties by Restaurant
Chain and by state owned by the Company as of July 2, 1997:
Restaurant Number of Properties
---------- --------------------
Applebee's 2
Arby's 2
Bennigan's 1
Black-eyed Pea 6
Boston Market 30
Burger King 9
Charley's Place 2
Darryl's 15
Denny's 4
Einstein Bros. Bagels 2
Golden Corral 21
Houlihan's 3
IHOP 2
Jack in the Box 24
Kenny Rogers Roasters 1
KFC 1
Mr. Fable's 1
Pizza Hut 44
Popeyes 1
Ruth's Chris Steakhouse 1
Ryan's Family Steak House 1
Shoney's 2
Wendy's 4
----
Total 179
====
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<PAGE>
State Number of Properties
----- --------------------
Alabama 3
Arizona 2
California 16
Colorado 2
Connecticut 1
Delaware 1
Florida 11
Georgia 1
Idaho 1
Illinois 5
Indiana 5
Iowa 1
Kentucky 3
Maryland 5
Michigan 7
Minnesota 2
Missouri 6
Nebraska 1
Nevada 1
New Mexico 1
North Carolina 3
Ohio 35
Oklahoma 3
Oregon 1
Pennsylvania 4
Tennessee 9
Texas 29
Utah 1
Virginia 7
Washington 2
West Virginia 10
---
Total 179
===
PROPERTY ACQUISITIONS
Between April 3, 1997 and July 2, 1997, the Company acquired 54
Properties, including 52 Properties consisting of land and building, one
Property consisting of building only and one Property consisting of land only,
with the remaining net offering proceeds of the Initial Offering and a portion
of the Net Offering Proceeds of this offering. These Properties are 13 Boston
Market Properties (one in each of Arvada, Colorado; Liberty, Missouri;
Indianapolis, Indiana; Vacaville, California; Lansing Michigan; San Antonio,
Southlake, and Stafford, Texas; and Baltimore, Gambrills, Jessup, Riverdale, and
Waldorf, Maryland), one Black-eyed Pea Property (in Scottsdale, Arizona), six
Jack in the Box Properties (one in each of Enumclaw, Washington; Fresno,
California; and Bacliff, Corinth, Channelview, and Garland, Texas), two Einstein
Bros. Bagels Properties (one in each of Dearborn, Michigan, and Springfield,
Virginia), one Shoney's Property (in Guadalupe, Arizona), one Pizza Hut Property
(in Dover, Ohio), five Golden Corral Properties (one in each of Corpus Christi,
Texas; Enid, Oklahoma; and Liberty, Missouri, and two in Jacksonville, Florida),
two IHOP Properties (one in each of Leesburg and Fairfax, Virginia), one Popeyes
Property (in Starke, Florida), one Ruth's Chris Steak House Property (in Tampa,
Florida), two Charley's Place Properties (one in each of King of Prussia,
Pennsylvania, and McLean, Virginia), 15 Darryl's Properties (one in each of
Evansville, Indiana; Louisville, Kentucky; Hampton, Virginia; Winston-Salem,
North Carolina; Huntsville, Mobile and Montgomery, Alabama; Knoxville and
Nashville, Tennessee; Orlando and Pensacola, Florida; and two in each of
Raleigh, North Carolina, and Richmond, Virginia), three Houlihan's Properties
(one in each of Bethel Park, Langhorne and Plymouth Meeting, Pennsylvania) and
one KFC Property (in Putnam, Connecticut). For information regarding the
Properties acquired by the Company prior to April 3, 1997, see the Prospectus
dated April 18, 1997.
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<PAGE>
In connection with the purchase of the 13 Boston Market Properties, the
two Einstein Bros. Bagels Properties, the six Jack in the Box Properties, the
Shoney's Property, the five Golden Corral Properties, the two IHOP Properties,
the Popeyes Property, the Ruth's Chris Steak House Property, the two Charley's
Place Properties, the 15 Darryl's Properties, the three Houlihan's Properties
and the KFC Property, which are land and building, the Company, as lessor,
entered into long-term lease agreements with unaffiliated lessees. The general
terms of the lease agreements are described in the section of the Prospectus
entitled "Business - Description of Property Leases." For the Properties that
are to be constructed 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."
The purchase price for the Shoney's Property in Guadalupe, Arizona,
includes a development fee of $49,500 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 Black-eyed Pea Property in Scottsdale, Arizona,
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 addition, the Company has entered 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.
In connection with the Pizza Hut Property in Dover, Ohio, which is land
only, the Company acquired the land and is leasing this parcel to the lessee,
Castle Hill Holdings VII, L.L.C. ("Castle Hill"), along with eight Pizza Hut
Properties previously acquired, pursuant to a master lease agreement (the
"Master Lease Agreement"). Castle Hill has subleased the Pizza Hut Property in
Dover, Ohio, along with the eight Pizza Hut Properties previously acquired, to
one of its affiliates, Midland Food Services III, L.L.C., which is the operator
of the restaurants. The general terms of the Master Lease Agreement are similar
to those described in the section of the Prospectus entitled "Business -
Description of Property Leases." If the lessee does not exercise its option to
purchase the Properties upon termination of the Master Lease Agreement, the
sublessee and lessee will surrender possession of the Properties to the Company,
together with any improvements on such Properties. The lessee owns the buildings
located on the Pizza Hut Property in Dover, Ohio, along with the eight Pizza Hut
Properties previously acquired. In addition, the Company provided mortgage
financing of $4,200,000 to the lessee, pursuant to a Mortgage Loan evidenced by
a master mortgage note (the "Master Mortgage Note") which is collateralized by
the building improvements on the Pizza Hut Property in Dover, Ohio, the eight
Pizza Hut Properties previously acquired, and two additional Pizza Hut
Properties in Wintersville, Ohio, and Weirton, West Virginia, which will not be
owned by the Company, as described in the section of the Prospectus entitled
"Business - Property Acquisitions."
The following table sets forth the location of the 54 Properties
acquired by the Company, from April 3, 1997 through July 2, 1997, a description
of the competition, and a summary of the principal terms of the acquisition and
lease of each Property.
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<PAGE>
PROPERTY ACQUISITIONS
From April 3, 1997 through July 2, 1997
<TABLE>
<CAPTION>
Lease
Expira-
tion and
Property Location Purchase Date Renewal Minimum Option
and Competition Price (1) Acquired Options Annual Rent (2) Percentage Rent To Purchase
- ----------------- --------- -------- ------- --------------- --------------- -----------
<S> <C>
BOSTON MARKET $629,435 04/16/97 04/2012; 10.38% of Total for each lease at any time
(the "Arvada Property") (excluding five five- Cost (4); year after the after the
Restaurant to be constructed development year renewal increases by fifth lease fifth lease
costs) (3) options 10% after the year, (i) 4% of year
The Arvada Property is located fifth lease annual gross
on the northwest quadrant of year and after sales minus
West 55th Avenue and the every five (ii) the
Wadsworth Bypass, in Arvada, years minimum annual
Jefferson County, Colorado, in thereafter rent for such
an area of mixed retail, during the lease year
commercial, and residential lease term
development. Other fast-food
and family-style restaurants
located in proximity to the
Arvada Property include an
Applebee's, a Ruby Tuesday, an
IHOP, a Fazoli's, a
McDonald's, and several local
restaurants.
BOSTON MARKET $456,801 04/16/97 04/2012; 10.38% of Total for each lease at any time
(the "Liberty #1 Property") (excluding five five- Cost (4); year after the after the
Restaurant to be constructed development year renewal increases by fifth lease fifth lease
costs) (3) options 10% after the year, (i) 5% of year
The Liberty #1 Property is fifth lease annual gross
located at the southeast year and after sales minus
corner of the intersection of every five (ii) the
North Highway 291 and Landmark years minimum annual
Avenue, in Liberty, Clay thereafter rent for such
County, Missouri, in an area during the lease year
of mixed retail, commercial, lease term
and residential development.
Other fast-food and family-
style restaurants located in
proximity to the Liberty #1
Property include a Ponderosa,
a KFC, a Perkins, and a Pizza
Hut.
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<PAGE>
<CAPTION>
Lease
Expira-
tion and
Property Location Purchase Date Renewal Minimum Option
and Competition Price (1) Acquired Options Annual Rent (2) Percentage Rent To Purchase
- ----------------- --------- -------- ------- --------------- --------------- -----------
<S> <C>
EINSTEIN BROS. BAGELS (11) $422,512 04/16/97 04/2012; 10.38% of Total for each lease at any time
(the "Dearborn Property") (excluding five five- Cost (4); year after the after the
Restaurant to be constructed development year renewal increases by fifth lease fifth lease
costs) (3) options 10% after the year, (i) 4% of year
The Dearborn Property is fifth lease annual gross
located on the southeast year and after sales minus
corner of Telegraph Road and every five (ii) the
Sheridan Road, in Dearborn, years minimum annual
Wayne County, Michigan, in an thereafter rent for such
area of mixed retail, during the lease year
commercial, and residential lease term
development. Other fast-food
and family-style restaurants
located in proximity to the
Dearborn Property include a
Boston Market, a Subway
Sandwich Shop, and several
local restaurants.
JACK IN THE BOX (10) $843,431 04/16/97 04/2015; $86,452 (6); for each lease at any time
(the "Enumclaw Property") (3)(6) four five- increases by 8% year, (i) 5% of after the
Restaurant to be renovated year renewal after the fifth annual gross seventh
options lease year and sales minus lease year
The Enumclaw Property is after every (ii) the
located at the northwest five years minimum annual
corner of the intersection of thereafter rent for such
Griffin Avenue and Cedar during the lease year (5)
Street, in Enumclaw, King lease term
County, Washington, in an area
of mixed retail, commercial,
and residential development.
Other fast-food and family-
style restaurants located in
proximity to the Enumclaw
Property include a Subway
Sandwich Shop, a Burger King,
a McDonald's, a Pizza Hut, and
a local restaurant.
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<PAGE>
<CAPTION>
Lease
Expira-
tion and
Property Location Purchase Date Renewal Minimum Option
and Competition Price (1) Acquired Options Annual Rent (2) Percentage Rent To Purchase
- ----------------- --------- -------- ------- --------------- --------------- -----------
<S> <C>
SHONEY'S $679,095 04/16/97 04/2017; two 11% of Total for each lease at any time
(the "Guadalupe Property") (excluding five-year Cost (4); year, (i) 6% of after the
Restaurant to be constructed development renewal increases by annual gross seventh
costs) (3) options 10% after the sales minus lease year
The Guadalupe Property is fifth lease (ii) the
located within the southeast year and after minimum annual
quadrant of Interstate 10 and every five rent for such
Baseline Road, in Guadalupe, years lease year
Maricopa County, Arizona, in thereafter
an area of mixed retail, during the
commercial, and residential lease term
development. Other fast-food
and family-style restaurants
located in proximity to the
Guadalupe Property include a
Denny's, a Taco Bell, a KFC, a
Jack in the Box, a Waffle
House, and several local
restaurants.
BLACK-EYED PEA (7) $769,863 04/17/97 02/2011 $105,450 (6); None at any time
(the "Scottsdale Property") (3)(6) increases to after the
Restaurant to be renovated $107,511 during fifth lease
the eleventh year
The Scottsdale Property is through
located within the southeast fourteenth
quadrant of Indian Bend Road lease years
and Pima Road, in Scottsdale,
Maricopa County, Arizona, in
an area of mixed retail,
commercial, and residential
development. Other fast-food
and family-style restaurants
located in proximity to the
Scottsdale Property include a
KFC, a Denny's, an Arby's, a
Taco Bell, a McDonald's, and a
local restaurant.
-7-
<PAGE>
<CAPTION>
Lease
Expira-
tion and
Property Location Purchase Date Renewal Minimum Option
and Competition Price (1) Acquired Options Annual Rent (2) Percentage Rent To Purchase
- ----------------- --------- -------- ------- --------------- --------------- -----------
<S> <C>
PIZZA HUT (8)(9) $224,378 04/17/97 03/2017; two $23,560; None at any time
(the "Dover Property") ten-year increases by after the
Land only renewal 10% after the seventh
options fifth and tenth lease year
The Dover Property is located lease years and
on the west side of Boulevard 12% after the
Street, in Dover, Tuscarawas fifteenth lease
County, Ohio, in an area of year
mixed retail, commercial, and
residential development.
Other fast-food and family-
style restaurants located in
proximity to the Dover
Property include a Taco Bell,
a Long John Silver's, a
Friendly's, and several local
restaurants.
JACK IN THE BOX (10) $1,049,420 04/29/97 04/2015; $107,566 (6); for each lease at any time
(the "Bacliff Property") (3)(6) four five- increases by 8% year, (i) 5% of after the
Restaurant to be constructed year renewal after the fifth annual gross seventh
options lease year and sales minus lease year
The Bacliff Property is after every (ii) the
located on the southeast five years minimum annual
corner of Texas State Highway thereafter rent for such
146 and FM 646, in Bacliff, during the lease year (5)
Galveston County, Texas, in an lease term
area of mixed commercial and
residential development.
-8-
<PAGE>
<CAPTION>
Lease
Expira-
tion and
Property Location Purchase Date Renewal Minimum Option
and Competition Price (1) Acquired Options Annual Rent (2) Percentage Rent To Purchase
- ----------------- --------- -------- ------- --------------- --------------- -----------
<S> <C>
BOSTON MARKET (11) $860,790 04/29/97 04/2012; 10.38% of Total for each lease at any time
(the "Indianapolis Property") (excluding five five- Cost (4); year after the after the
Restaurant to be constructed development year renewal increases by fifth lease fifth lease
costs) (3) options 10% after the year, (i) 4% of year
The Indianapolis Property is fifth lease annual gross
located on the west side of year and after sales minus
U.S. 31 South, in every five (ii) the
Indianapolis, Marion County, years minimum annual
Indiana, in an area of mixed thereafter rent for such
retail, commercial, and during the lease year
residential development. lease term
Other fast-food and family-
style restaurants located in
proximity to the Indianapolis
Property include a McDonald's,
a Steak N Shake, a Wendy's,
and several local restaurants.
BOSTON MARKET $469,369 04/30/97 04/2012; 10.38% of Total for each lease at any time
(the "San Antonio Property") (excluding five five- Cost (4); year after the after the
Restaurant to be constructed development year renewal increases by fifth lease fifth lease
costs) (3) options 10% after the year, (i) 4% of year
The San Antonio Property is fifth lease annual gross
located at the northwest year and after sales minus
corner of Tezel Road and every five (ii) the
Camino Rosa, in San Antonio, years minimum annual
Bexar County, Texas, in an thereafter rent for such
area of mixed retail, during the lease year
commercial, and residential lease term
development. Other fast-food
and family-style restaurants
located in proximity to the
San Antonio Property include a
Burger King, a Taco Bell, and
several local restaurants.
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<PAGE>
<CAPTION>
Lease
Expira-
tion and
Property Location Purchase Date Renewal Minimum Option
and Competition Price (1) Acquired Options Annual Rent (2) Percentage Rent To Purchase
- ----------------- --------- -------- ------- --------------- --------------- -----------
<S> <C>
BOSTON MARKET (11) $970,269 05/06/97 05/2012; 10.38% of Total for each lease at any time
(the "Baltimore Property") (excluding five five- Cost (4); year after the after the
Restaurant to be constructed development year renewal increases by fifth lease fifth lease
costs) (3) options 10% after the year, (i) 4% of year
The Baltimore Property is fifth lease annual gross
located on the south side of year and after sales minus
Security Boulevard and the every five (ii) the
north side of Whitehead Court, years minimum annual
in Baltimore, Baltimore thereafter rent for such
County, Maryland, in an area during the lease year
of mixed retail, commercial, lease term
and residential development.
Other fast-food and family-
style restaurants located in
proximity to the Baltimore
Property include a Wendy's, a
Red Lobster, a Burger King,
two McDonald's, an IHOP, a
Bennigan's, and several local
restaurants.
BOSTON MARKET (11) $854,895 05/06/97 05/2012; 10.38% of Total for each lease at any time
(the "Gambrills Property") (excluding five five- Cost (4); year after the after the
Restaurant to be constructed development year renewal increases by fifth lease fifth lease
costs) (3) options 10% after the year, (i) 4% of year
The Gambrills Property is fifth lease annual gross
located on the south side of year and after sales minus
Maryland Route 3, south of its every five (ii) the
intersection with Waugh Chapel years minimum annual
Road, in Gambrills, Anne thereafter rent for such
Arundel County, Maryland, in during the lease year
an area of mixed retail, lease term
commercial, and residential
development. Other fast-food
and family-style restaurants
located in proximity to the
Gambrills Property include a
Wendy's, a Taco Bell, a
Popeyes, a Pizza Hut, a KFC,
and a McDonald's.
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<PAGE>
<CAPTION>
Lease
Expira-
tion and
Property Location Purchase Date Renewal Minimum Option
and Competition Price (1) Acquired Options Annual Rent (2) Percentage Rent To Purchase
- ----------------- --------- -------- ------- --------------- --------------- -----------
<S> <C>
BOSTON MARKET (11) $909,041 05/06/97 05/2012; 10.38% of Total for each lease at any time
(the "Jessup Property") (excluding five five- Cost (4); year after the after the
Restaurant to be constructed development year renewal increases by fifth lease fifth lease
costs) (3) options 10% after the year, (i) 4% of year
The Jessup Property is located fifth lease annual gross
on the southeast quadrant of year and after sales minus
U.S. Route 1 and Assateague every five (ii) the
Drive, in Jessup, Howard years minimum annual
County, Maryland, in an area thereafter rent for such
of mixed retail, commercial, during the lease year
and residential development. lease term
Other fast-food and family-
style restaurants located in
proximity to the Jessup
Property include a Burger
King, a Subway Sandwich Shop,
and several local restaurants.
BOSTON MARKET $451,618 05/06/97 05/2012; 10.38% of Total for each lease at any time
(the "Lansing Property") (excluding five five- Cost (4); year after the after the
Restaurant to be constructed development year renewal increases by fifth lease fifth lease
costs) (3) options 10% after the year, (i) 5% of year
The Lansing Property is fifth lease annual gross
located on the northeast side year and after sales minus
of Cedar Street, north of the every five (ii) the
intersection of American Road years minimum annual
and Cedar Street, in Lansing, thereafter rent for such
Ingham County, Michigan, in an during the lease year
area of mixed retail, lease term
commercial, and residential
development. Other fast-food
and family-style restaurants
located in proximity to the
Lansing Property include a
Denny's, a KFC, a Long John
Silver's, a Wendy's, a Bob
Evans, and several local
restaurants.
-11-
<PAGE>
<CAPTION>
Lease
Expira-
tion and
Property Location Purchase Date Renewal Minimum Option
and Competition Price (1) Acquired Options Annual Rent (2) Percentage Rent To Purchase
- ----------------- --------- -------- ------- --------------- --------------- -----------
<S> <C>
BOSTON MARKET (11) $629,929 05/06/97 05/2012; 10.38% of Total for each lease at any time
(the "Riverdale Property") (excluding five five- Cost (4); year after the after the
Restaurant to be constructed development year renewal increases by fifth lease fifth lease
costs) (3) options 10% after the year, (i) 4% of year
The Riverdale Property is fifth lease annual gross
located within the southeast year and after sales minus
corner of the intersection every five (ii) the
formed by Kenilworth Avenue years minimum annual
and Patterson Road, in thereafter rent for such
Riverdale, Prince George's during the lease year
County, Maryland, in an area lease term
of mixed retail, commercial,
and residential development.
Other fast-food and family-
style restaurants located in
proximity to the Riverdale
Property include a Wendy's, a
McDonald's, and an IHOP.
BOSTON MARKET $711,882 05/06/97 05/2012; 10.38% of Total for each lease at any time
(the "Vacaville Property") (excluding five five- Cost (4); year after the after the
Restaurant to be constructed development year renewal increases by fifth lease fifth lease
costs) (3) options 10% after the year, (i) 4% of year
The Vacaville Property is fifth lease annual gross
located on the southeast year and after sales minus
corner of Nut Tree Parkway and every five (ii) the
Helen Power Drive, in years minimum annual
Vacaville, Solana County, thereafter rent for such
California, in an area of during the lease year
mixed retail, commercial, and lease term
residential development.
Other fast-food and family-
style restaurants located in
proximity to the Vacaville
Property include an Applebee's
and several local restaurants.
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<PAGE>
<CAPTION>
Lease
Expira-
tion and
Property Location Purchase Date Renewal Minimum Option
and Competition Price (1) Acquired Options Annual Rent (2) Percentage Rent To Purchase
- ----------------- --------- -------- ------- --------------- --------------- -----------
<S> <C>
BOSTON MARKET (11) $961,255 05/06/97 05/2012; 10.38% of Total for each lease at any time
(the "Waldorf Property") (excluding five five- Cost (4); year after the after the
Restaurant to be constructed development year renewal increases by fifth lease fifth lease
costs) (3) options 10% after the year, (i) 4% of year
The Waldorf Property is fifth lease annual gross
located on the northwest year and after sales minus
corner of Crain Highway and every five (ii) the
Plaza Drive, in Waldorf, years minimum annual
Charles County, Maryland, in thereafter rent for such
an area of mixed retail, during the lease year
commercial, and residential lease term
development. Other fast-food
and family-style restaurants
located in proximity to the
Waldorf Property include a
Shoney's, a Red Lobster, a
McDonald's, a Pizzeria Uno, an
Olive Garden, a Kenny Rogers
Roasters, a Taco Bell, a
Burger King, a Checkers, and
several local restaurants.
EINSTEIN BROS. BAGELS (11) $601,677 05/06/97 05/2012; 10.38% of Total for each lease at any time
(the "Springfield Property") (excluding five five- Cost (4); year after the after the
Restaurant to be constructed development year renewal increases by fifth lease fifth lease
costs) (3) options 10% after the year, (i) 4% of year
The Springfield Property is fifth lease annual gross
located at the southeast year and after sales minus
quadrant of the intersection every five (ii) the
formed by Old Keene Mill Road years minimum annual
and Rolling Road, in thereafter rent for such
Springfield, Fairfax County, during the lease year
Virginia, in an area of mixed lease term
retail, commercial, and
residential development.
Other fast-food and family-
style restaurants located in
proximity to the Springfield
Property include two
McDonald's and several local
restaurants.
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<PAGE>
<CAPTION>
Lease
Expira-
tion and
Property Location Purchase Date Renewal Minimum Option
and Competition Price (1) Acquired Options Annual Rent (2) Percentage Rent To Purchase
- ----------------- --------- -------- ------- --------------- --------------- -----------
<S> <C>
GOLDEN CORRAL (12) $561,270 05/06/97 05/2012; 10.75% of Total for each lease during the
(the "Jacksonville #1 (excluding four five- Cost (4) year, 5% of the first
Property") development year renewal amount by which through
Restaurant to be constructed costs) (3) options annual gross seventh
sales exceed lease years
The Jacksonville #1 Property $2,893,405 (5) and the
is located on the southwest tenth
corner of Merrill Road and through
Jane Street, in Jacksonville, fifteenth
Duval County, Florida, in an lease years
area of mixed retail, only
commercial, and residential
development. Other fast-food
and family-style restaurants
located in proximity to the
Jacksonville #1 Property
include a Burger King, a
Hardee's, a Ryan's Family
Steak House, and several local
restaurants.
GOLDEN CORRAL (12) $558,820 05/21/97 05/2012; 10.75% of Total for each lease during the
(the "Corpus Christi (excluding four five- Cost (4) year, 5% of the first
Property") closing and year renewal amount by which through
Restaurant to be constructed development options annual gross seventh
costs) (3) sales exceed lease years
The Corpus Christi Property is $2,708,230 (5) and the
located on the southwest tenth
corner of South Padre Island through
Drive and Silverberry Drive, fifteenth
in Corpus Christi, Nueces lease years
County, Texas, in an area of only
mixed retail, commercial, and
residential development.
Other fast-food and family-
style restaurants located in
approximity to the Corpus
Christi Property include a
Dairy Queen, a Popeyes Famous
Fried Chicken, a Church's
Fried Chicken, and several
local restaurants.
-14-
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Lease
Expira-
tion and
Property Location Purchase Date Renewal Minimum Option
and Competition Price (1) Acquired Options Annual Rent (2) Percentage Rent To Purchase
- ----------------- --------- -------- ------- --------------- --------------- -----------
<S> <C>
IHOP (13) $1,181,818 05/21/97 05/2017; $119,659; for each lease during the
(the "Leesburg Property") three five- increases by year, (i) 4% of eleventh
Existing restaurant year renewal 10% after the annual gross lease year
options fifth lease sales minus and at the
The Leesburg Property is year and after (ii) the end of the
located at the northwest every five minimum annual initial
quadrant of the intersection years rent for such lease term
of Highway 15 Bypass and thereafter lease year
Edwards Ferry Road, in during the
Leesburg, Loudon County, lease term
Virginia, in an area of mixed
retail, commercial, and
residential development.
Other fast-food and family-
style restaurants located in
proximity to the Leesburg
Property include a Ponderosa
Steak House, a Burger King, a
Taco Bell, a McDonald's, an
Applebee's, a Ruby Tuesday,
and a Domino's Pizza.
POPEYES $199,354 05/22/97 05/2017; two 11.50% of Total for each lease at any time
(the "Starke Property") (excluding five year Cost (4); year, (i) 6% of after the
Restaurant to be constructed development renewal increases by annual gross seventh
developme options 10% after the sales minus lease year
The Starke Property is located costs) (3) fifth lease (ii) the
on the east side of U.S. year and after minimum annual
Highway 301, just south of every five rent for such
Alligator Creek, in Starke, years lease year
Bradford County, Florida, in thereafter
an area of mixed retail, during the
commercial, and residential lease term
development. Other fast-food
and family-style restaurants
located in proximity to the
Starke Property include a
Shoney's, a Taco Bell, a
McDonald's, a Captain D's, a
KFC, a Western Steer, a
Checkers, a Burger King, a
Wendy's, and a local
restaurant.
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Lease
Expira-
tion and
Property Location Purchase Date Renewal Minimum Option
and Competition Price (1) Acquired Options Annual Rent (2) Percentage Rent To Purchase
- ----------------- --------- -------- ------- --------------- --------------- -----------
<S> <C>
JACK IN THE BOX (10) $839,981 05/30/97 05/2015; $86,098 (6); for each lease at any time
(the "Fresno Property") (3)(6) four five- increases by 8% year, (i) 5% of after the
Restaurant to be constructed year renewal after the fifth annual gross seventh
options lease year and sales minus lease year
The Fresno Property is located after every (ii) the
within the northwest corner of five years minimum annual
the intersection of Golden thereafter rent for such
State Boulevard and Ashlon during the lease year (5)
Avenue, in Fresno, Fresno lease term
County, California, in an area
of mixed retail, commercial,
and residential development.
Other fast-food and family-
style restaurants located in
proximity to the Fresno
Property include a Dairy Queen
and several local restaurants.
JACK IN THE BOX (10) $955,333 06/05/97 06/2015; $97,922 (6); for each lease at any time
(the "Corinth Property") (3)(6) four five- increases by 8% year, (i) 5% of after the
Restaurant to be constructed year renewal after the fifth annual gross seventh
options lease year and sales minus lease year
The Corinth Property is after every (ii) the
located on the northwest five years minimum annual
corner of Interstate Highway thereafter rent for such
35 and FM 2181, in Corinth, during the lease year (5)
Denton County, Texas, in an lease term
area of mixed retail,
commercial, and residential
development.
-16-
<PAGE>
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Lease
Expira-
tion and
Property Location Purchase Date Renewal Minimum Option
and Competition Price (1) Acquired Options Annual Rent (2) Percentage Rent To Purchase
- ----------------- --------- -------- ------- --------------- --------------- -----------
<S> <C>
RUTH'S CHRIS STEAK HOUSE $2,000,000 06/05/97 08/2011; two $175,000; for each lease None
(the "Tampa Property") (excluding five-year increases by year, 6% of
Existing restaurant closing renewal $25,000 after annual gross
costs) options the fifth lease sales in excess
The Tampa Property is located year and after of $3,400,000,
at the southwest corner of every five but less than
Union Street and North West years $4,000,000,
Shore Boulevard in Tampa, thereafter plus 8% of
Hillsborough County, Florida, during the annual gross
in an area of mixed retail, lease term sales in excess
commercial, and residential of $4,000,000
development. Other fast-food
and family-style restaurants
located in proximity to the
Tampa Property include a Steak
and Ale and a local
restaurant.
GOLDEN CORRAL (12) $527,801 06/06/97 06/2012; 10.75% of Total for each lease during the
(the "Jacksonville #2 (excluding four five- Cost (4) year, 5% of the first
Property") closing and year renewal amount by which through
Restaurant to be constructed development options annual gross seventh
costs) (3) sales exceed lease years
The Jacksonville #2 Property $2,920,205 (5) and the
is located at the northwest tenth
quadrant of the intersection through
of Southside Boulevard and fifteenth
Touchton Road, in lease years
Jacksonville, Duval County, only
Florida, in an area of mixed
retail, commercial, and
residential development.
Other fast-food and family-
style restaurants located in
proximity to the Jacksonville
#2 Property include a Burger
King.
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<PAGE>
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Lease
Expira-
tion and
Property Location Purchase Date Renewal Minimum Option
and Competition Price (1) Acquired Options Annual Rent (2) Percentage Rent To Purchase
- ----------------- --------- -------- ------- --------------- --------------- -----------
<S> <C>
CHARLEY'S PLACE (14) $1,435,865 06/11/97 06/2017; two $150,766; for each lease None
(the "King of Prussia five-year increases by year (i) 4.50%
Property") renewal 10% after the of annual gross
Existing restaurant options fifth lease sales minus
year and after (ii) the
The King of Prussia Property every five minimum annual
is located on the northwest years rent for such
corner of the intersection of thereafter lease year
North Gulph Road and Goddard during the
Boulevard in King of Prussia, lease term
Upper Merion Township,
Montgomery County,
Pennsylvania, in an area of
mixed retail, commercial, and
residential development.
Other fast-food and family-
style restaurants located in
proximity to the King of
Prussia Property include a
Bennigan's, a Denny's, a
Chili's, a Pizzeria Uno, a TGI
Friday's, a Houlihan's, a
McDonald's, a Burger King, a
Lone Star Steakhouse & Saloon,
and several local restaurants.
CHARLEY'S PLACE (14) $1,549,822 06/11/97 06/2017; two $162,731; for each lease None
(the "McLean Property") five-year increases by year (i) 4.50%
Existing restaurant renewal 10% after the of annual gross
options fifth lease sales minus
The McLean Property is located year and after (ii) the
within the intersection of every five minimum annual
Dolly Madison Boulevard and years rent for such
Old Dominion Drive, in McLean, thereafter lease year
Fairfax County, Virginia, in during the
an area of mixed retail, lease term
commercial, and residential
development. Other fast-food
and family-style restaurants
located in proximity to the
McLean Property include a Roy
Rogers, a McDonald's, a Pizza
Hut, and several local
restaurants
-18-
<PAGE>
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Lease
Expira-
tion and
Property Location Purchase Date Renewal Minimum Option
and Competition Price (1) Acquired Options Annual Rent (2) Percentage Rent To Purchase
- ----------------- --------- -------- ------- --------------- --------------- -----------
<S> <C>
DARRYL'S (14) $1,458,656 06/11/97 06/2017; two $153,159; for each lease None
(the "Evansville Property") five-year increases by year (i) 4.50%
Existing restaurant renewal 10% after the of annual gross
options fifth lease sales minus
The Evansville Property is year and after (ii) the
located on the east side of every five minimum annual
Green River Road, within the years rent for such
Eastland Place shopping thereafter lease year
center, in Evansville, during the
Vanderburg County, Indiana, in lease term
an area of mixed retail,
commercial, and residential
development. Other fast-food
and family-style restaurants
located in proximity to the
Evansville Property include a
Denny's, a Chili's, a
Grandy's, a Chi Chi's, a
Fazoli's, a Lone Star
Steakhouse & Saloon, an Olive
Garden, a Morrison's
Cafeteria, and several local
restaurants.
-19-
<PAGE>
<CAPTION>
Lease
Expira-
tion and
Property Location Purchase Date Renewal Minimum Option
and Competition Price (1) Acquired Options Annual Rent (2) Percentage Rent To Purchase
- ----------------- --------- -------- ------- --------------- --------------- -----------
<S> <C>
DARRYL'S (14) $1,203,391 06/11/97 06/2017; two $126,356; for each lease None
(the "Hampton Property") five-year increases by year (i) 4.50%
Existing restaurant renewal 10% after the of annual gross
options fifth lease sales minus
The Hampton Property is year and after (ii) the
located on the east side of every five minimum annual
Coliseum Drive, north of years rent for such
Mercury Boulevard, in Hampton, thereafter lease year
York County, Virginia, in an during the
area of mixed retail, lease term
commercial, and residential
development. Other fast-food
and family-style restaurants
located in proximity to the
Hampton Property include a
Boston Market, a Bennigan's, a
Steak and Ale, a Piccadilly
Cafeteria, an Applebee's, a
Burger King, a Pizza Hut, a
KFC, a Chili's, a McDonald's,
a Golden Corral, a Chi Chi's,
a Waffle House, a
Schlotzsky's, a Red Lobster, a
Rally's, an Olive Garden, a
Denny's, and several local
restaurants.
DARRYL'S (14) $1,367,490 06/11/97 06/2017; two $143,586; for each lease None
(the "Huntsville Property") five-year increases by year (i) 4.50%
Existing restaurant renewal 10% after the of annual gross
options fifth lease sales minus
The Huntsville Property is year and after (ii) the
located on the south side of every five minimum annual
University Drive Northwest, years rent for such
east of Route 53, in thereafter lease year
Huntsville, Madison County, during the
Alabama, in an area of mixed lease term
retail, commercial, and
residential development.
Other fast-food and family-
style restaurants located in
proximity to the Huntsville
Property include a Quincy's, a
Steak and Ale, an Olive
Garden, a McDonald's, a
Wendy's, an Arby's, and
several local restaurants.
-20-
<PAGE>
<CAPTION>
Lease
Expira-
tion and
Property Location Purchase Date Renewal Minimum Option
and Competition Price (1) Acquired Options Annual Rent (2) Percentage Rent To Purchase
- ----------------- --------- -------- ------- --------------- --------------- -----------
<S> <C>
DARRYL'S (14) $1,231,653 06/11/97 06/2017; two $129,324; for each lease None
(the "Knoxville Property") five-year increases by year (i) 4.50%
Existing restaurant renewal 10% after the of annual gross
options fifth lease sales minus
The Knoxville Property is year and after (ii) the
located on the northeast side every five minimum annual
of Merchants Center Boulevard, years rent for such
north of Merchants Drive, in thereafter lease year
Knoxville, Knox County, during the
Tennessee, in an area of mixed lease term
retail, commercial, and
residential development.
Other fast-food and family-
style restaurants located in
proximity to the Knoxville
Property include a Red
Lobster, a Bob Evans, a
McDonald's, a Burger King, two
Waffle Houses, a Captain D's,
a Subway Sandwich Shop, a
Cracker Barrel, a Denny's, a
Sonic Drive-In, an Applebee's,
a Ryan's Family Steak House,
and several local restaurants.
DARRYL'S (14) $1,481,448 06/11/97 06/2017; two $155,552; for each lease None
(the "Louisville Property") five-year increases by year (i) 4.50%
Existing restaurant renewal 10% after the of annual gross
options fifth lease sales minus
The Louisville Property is year and after (ii) the
located on the west side of every five minimum annual
Bardstown Road and the years rent for such
southeast side of Gardiner thereafter lease year
Lane, in Louisville, Jefferson during the
County, Kentucky, in an area lease term
of mixed retail, commercial,
and residential development.
Other fast-food and family-
style restaurants located in
proximity to the Louisville
Property include a Boston
Market and a Steak N Shake.
-21-
<PAGE>
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Lease
Expira-
tion and
Property Location Purchase Date Renewal Minimum Option
and Competition Price (1) Acquired Options Annual Rent (2) Percentage Rent To Purchase
- ----------------- --------- -------- ------- --------------- --------------- -----------
<S> <C>
DARRYL'S (14) $1,426,748 06/11/97 06/2017; two $149,809; for each lease None
(the "Mobile Property") five-year increases by year (i) 4.50%
Existing restaurant renewal 10% after the of annual gross
options fifth lease sales minus
The Mobile Property is located year and after (ii) the
on the south side of South every five minimum annual
Beltline Highway, west of years rent for such
Airport Boulevard, in Mobile, thereafter lease year
Mobile County, Alabama, in an during the
area of mixed retail, lease term
commercial, and residential
development. Other fast-food
and family-style restaurants
located in proximity to the
Mobile Property include a
Denny's, a Chili's, an Olive
Garden, an Outback Steakhouse,
and several local restaurants.
DARRYL'S (14) $1,230,741 06/11/97 06/2017; two $129,228; for each lease None
(the "Montgomery Property") five-year increases by year (i) 4.50%
Existing restaurant renewal 10% after the of annual gross
options fifth lease sales minus
The Montgomery Property is year and after (ii) the
located on the east side of every five minimum annual
Eastern Boulevard, north of years rent for such
Vaughn Road, in Montgomery, thereafter lease year
Montgomery County, Alabama, in during the
an area of mixed retail, lease term
commercial, and residential
development. Other fast-food
and family-style restaurants
located in proximity to the
Montgomery Property include an
Olive Garden, a Kenny Rogers
Roasters, a Wendy's, and
several local restaurants.
-22-
<PAGE>
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Lease
Expira-
tion and
Property Location Purchase Date Renewal Minimum Option
and Competition Price (1) Acquired Options Annual Rent (2) Percentage Rent To Purchase
- ----------------- --------- -------- ------- --------------- --------------- -----------
<S> <C>
DARRYL'S (14) $1,185,158 06/11/97 06/2017; two $124,442; for each lease None
(the "Nashville Property") five-year increases by year (i) 4.50%
Existing restaurant renewal 10% after the of annual gross
options fifth lease sales minus
The Nashville Property is year and after (ii) the
located on the west side of every five minimum annual
Sidco Drive, in Nashville, years rent for such
Davidson County, Tennessee, in thereafter lease year
an area of mixed retail, during the
commercial, and residential lease term
development. Other fast-food
and family-style restaurants
located in proximity to the
Nashville Property include a
Cracker Barrel, a Waffle
House, and several local
restaurants.
DARRYL'S (14) $2,142,401 06/11/97 06/2017; two $224,952; for each lease None
(the "Orlando Property") five-year increases by year (i) 4.50%
Existing restaurant renewal 10% after the of annual gross
options fifth lease sales minus
The Orlando Property is year and after (ii) the
located at the southwest every five minimum annual
quadrant of the intersection years rent for such
of International Drive and thereafter lease year
Jamaican Court, in Orlando, during the
Orange County, Florida, in an lease term
area of mixed retail,
commercial, and residential
development. Other fast-food
and family-style restaurants
located in proximity to the
Orlando Property include a
Pizzeria Uno, a Golden Corral,
a McDonald's, a Perkins, a
Denny's, and several local
restaurants.
-23-
<PAGE>
<CAPTION>
Lease
Expira-
tion and
Property Location Purchase Date Renewal Minimum Option
and Competition Price (1) Acquired Options Annual Rent (2) Percentage Rent To Purchase
- ----------------- --------- -------- ------- --------------- --------------- -----------
<S> <C>
DARRYL'S (14) $1,057,526 06/11/97 06/2017; two $111,040; for each lease None
(the "Pensacola Property") five-year increases by year (i) 4.50%
Existing restaurant renewal 10% after the of annual gross
options fifth lease sales minus
The Pensacola Property is year and after (ii) the
located on the north side of every five minimum annual
Plantation Road, west of Davis years rent for such
Highway, in Pensacola, thereafter lease year
Escambia County, Florida, in during the
an area of mixed retail, lease term
commercial, and residential
development. Other fast-food
and family-style restaurants
located in proximity to the
Pensacola Property include a
Bennigan's, a Denny's, a
Shoney's, a Steak and Ale, a
Perkins, and a local
restaurant.
DARRYL'S (14) $1,276,324 06/11/97 06/2017; two $134,014; for each lease None
(the "Raleigh #1 Property") five-year increases by year (i) 4.50%
Existing restaurant renewal 10% after the of annual gross
options fifth lease sales minus
The Raleigh #1 Property is year and after (ii) the
located on the west side of every five minimum annual
Old Wake Forest Road and the years rent for such
north side of Ollie Street, in thereafter lease year
Raleigh, Wake County, North during the
Carolina, in an area of mixed lease term
retail, commercial, and
residential development.
Other fast-food and family-
style restaurants located in
proximity to the Raleigh #1
Property include a Pizza Hut,
a Boston Market, a Cooker Bar
& Grille, a Red Lobster, a
Lone Star Steakhouse & Saloon,
a TGI Friday's, and a local
restaurant.
-24-
<PAGE>
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Lease
Expira-
tion and
Property Location Purchase Date Renewal Minimum Option
and Competition Price (1) Acquired Options Annual Rent (2) Percentage Rent To Purchase
- ----------------- --------- -------- ------- --------------- --------------- -----------
<S> <C>
DARRYL'S (14) $1,754,946 06/11/97 06/2017; two $184,269; for each lease None
(the "Raleigh #2 Property") five-year increases by year (i) 4.50%
Existing restaurant renewal 10% after the of annual gross
options fifth lease sales minus
The Raleigh #2 Property is year and after (ii) the
located on the north side of every five minimum annual
Glenwood Avenue and the west years rent for such
side of Deblyn Avenue, in thereafter lease year
Raleigh, Wake County, North during the
Carolina, in an area of mixed lease term
retail, commercial, and
residential development.
Other fast-food and family-
style restaurants located in
proximity to the Raleigh #2
Property include a Miami Subs,
a Boston Market, a Golden
Corral, a Chili's, a Taco
Bell, and several local
restaurants.
DARRYL'S (14) $1,321,907 06/11/97 06/2017; two $138,800; for each lease None
(the "Richmond #1 Property") five-year increases by year (i) 4.50%
Existing restaurant renewal 10% after the of annual gross
options fifth lease sales minus
The Richmond #1 Property is year and after (ii) the
located on the north side of every five minimum annual
Midlothian Turnpike, east of years rent for such
Fairwood Drive and west thereafter lease year
Providence Road, in Richmond, during the
Chesterfield County, Virginia, lease term
in an area of mixed retail,
commercial, and residential
development. Other fast-food
and family-style restaurants
located in proximity to the
Richmond #1 Property include a
Fuddrucker's, a Morrison's
Cafeteria, a Golden Corral, a
Bob Evans, a Chili's, a
Friendly's, a Steak and Ale, a
Red Lobster, and several local
restaurants.
-25-
<PAGE>
<CAPTION>
Lease
Expira-
tion and
Property Location Purchase Date Renewal Minimum Option
and Competition Price (1) Acquired Options Annual Rent (2) Percentage Rent To Purchase
- ----------------- --------- -------- ------- --------------- --------------- -----------
<S> <C>
DARRYL'S (14) $911,660 06/11/97 06/2017; two $95,724; for each lease None
(the "Richmond #2 Property") five-year increases by year (i) 4.50%
Existing restaurant renewal 10% after the of annual gross
options fifth lease sales minus
The Richmond #2 Property is year and after (ii) the
located on the southwest every five minimum annual
quadrant of Starling Drive and years rent for such
Quioccasin Road, in Richmond, thereafter lease year
Henrico County, Virginia, in during the
an area of mixed retail, lease term
commercial, and residential
development. Other fast-food
and family-style restaurants
located in proximity to the
Richmond #2 Property include
an Arby's, a Boston Market, an
Applebee's, a Hardee's, a
McDonald's, a Subway Sandwich
Shop, a KFC, a Pizza Hut, and
several local restaurants.
DARRYL'S (14) $1,185,158 06/11/97 06/2017; two $124,442; for each lease None
(the "Winston-Salem Property") five-year increases by year (i) 4.50%
Existing restaurant renewal 10% after the of annual gross
options fifth lease sales minus
The Winston-Salem Property is year and after (ii) the
located on the north side of every five minimum annual
Brownsboro Road and the east years rent for such
side of University Parkway, in thereafter lease year
Winston-Salem, Forsyth County, during the
North Carolina, in an area of lease term
mixed retail, commercial, and
residential development.
Other fast-food and family-
style restaurants located in
proximity to the Winston-Salem
Property include a Golden
Corral, a Bennigan's, an IHOP,
and several local restaurants.
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<PAGE>
<CAPTION>
Lease
Expira-
tion and
Property Location Purchase Date Renewal Minimum Option
and Competition Price (1) Acquired Options Annual Rent (2) Percentage Rent To Purchase
- ----------------- --------- -------- ------- --------------- --------------- -----------
<S> <C>
HOULIHAN'S (14) $1,367,490 06/11/97 06/2017; two $143,586; for each lease None
(the "Bethel Park Property") five-year increases by year (i) 4.50%
Existing restaurant renewal 10% after the of annual gross
options fifth lease sales minus
The Bethel Park Property is year and after (ii) the
located at the northeast every five minimum annual
corner of the intersection of years rent for such
Washington Road and Fort Couch thereafter lease year
Road, in Bethel Park, during the
Allegheny County, lease term
Pennsylvania, in an area of
mixed retail, commercial, and
residential development.
Other fast-food and family-
style restaurants located in
proximity to the Bethel Park
Property include a TGI
Friday's, an Olive Garden, a
Burger King, an Einstein Bros.
Bagels, and a Boston Market.
HOULIHAN'S (14) $1,390,282 06/11/97 06/2017; two $145,980; for each lease None
(the "Langhorne Property") five-year increases by year (i) 4.50%
Existing restaurant renewal 10% after the of annual gross
options fifth lease sales minus
The Langhorne Property is year and after (ii) the
located on the north side of every five minimum annual
Old Lincoln Highway, in years rent for such
Langhorne, Middletown thereafter lease year
Township, Burks County, during the
Pennsylvania, in an area of lease term
mixed retail, commercial, and
residential development.
Other fast-food and family-
style restaurants located in
proximity to the Langhorne
Property include a Red
Lobster, an Olive Garden, a
Burger King, a Boston Market,
a Pizzeria Uno, a Taco Bell, a
Chi Chi's, a Macaroni Grill,
and several local restaurants.
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<PAGE>
<CAPTION>
Lease
Expira-
tion and
Property Location Purchase Date Renewal Minimum Option
and Competition Price (1) Acquired Options Annual Rent (2) Percentage Rent To Purchase
- ----------------- --------- -------- ------- --------------- --------------- -----------
<S> <C>
HOULIHAN'S (14) $1,982,861 06/11/97 06/2017; two $208,200; for each lease None
(the "Plymouth Meeting five-year increases by year (i) 4.50%
Property") renewal 10% after the of annual gross
Existing restaurant options fifth lease sales minus
year and after (ii) the
The Plymouth Meeting Property every five minimum annual
is located at the northwest years rent for such
quadrant of the intersection thereafter lease year
of West Germantown Pike and during the
Hickory Road, in Plymouth lease term
Meeting, Montgomery County,
Pennsylvania, in an area of
mixed retail, commercial, and
residential development.
Other fast-food and family-
style restaurants located in
proximity to the Plymouth
Meeting Property include a
Friendly's, and several local
restaurants.
GOLDEN CORRAL (12) $355,340 06/17/97 06/2012; 10.75% of Total for each lease during the
(the "Enid Property") (excluding four five- Cost (4) year, 5% of the first
Restaurant to be constructed development year renewal amount by which through
costs) (3) options annual gross seventh
The Enid Property is located sales exceed lease years
on the southeast corner of $2,034,928 (5) and the
West Garriott Road and West tenth
Brow Road, in Enid, Garfield through
County, Oklahoma, in an area fifteenth
of mixed retail, commercial, lease years
and residential development. only
Other fast-food and family-
style restaurants located in
proximity to the Enid Property
include an Applebee's, a Red
Lobster, a Grandy's, and
several local restaurants.
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<PAGE>
<CAPTION>
Lease
Expira-
tion and
Property Location Purchase Date Renewal Minimum Option
and Competition Price (1) Acquired Options Annual Rent (2) Percentage Rent To Purchase
- ----------------- --------- -------- ------- --------------- --------------- -----------
<S> <C>
IHOP (13) $1,709,091 06/18/97 06/2017; $173,045; for each lease during the
(the "Fairfax Property") three five- increases by year, (i) 4% of eleventh
Existing restaurant year renewal 10% after the annual gross lease year
options fifth lease sales minus and at the
The Fairfax Property is year and after (ii) the end of the
located at the southeast every five minimum annual initial
corner of the intersection of years rent for such lease term
Lee Highway and Blake Lane, in thereafter lease year
Fairfax, Fairfax County, during the
Virginia, in an area of mixed lease term
retail, commercial, and
residential development.
Other fast-food and family-
style restaurants located in
proximity to the Fairfax
Property include a McDonald's,
a Ruby Tuesday, a Subway
Sandwich Shop, and several
local restaurants.
GOLDEN CORRAL (12) $397,339 06/19/97 06/2012; 10.75% of Total for each lease during the
(the "Liberty #2 Property") (excluding four five- Cost (4) year, 5% of the first
Restaurant to be constructed development year renewal amount by which through
costs) (3) options annual gross seventh
The Liberty #2 Property is sales exceed lease years
located within the southwest $2,349,786 (5) and the
quadrant of North Church Road tenth
and State Route 152, in through
Liberty, Clay County, fifteenth
Missouri, in an area of mixed lease years
retail, commercial, and only
residential development.
Other fast-food and family-
style restaurants located in
proximity to the Liberty #2
Property include an
Applebee's, a Cracker Barrel,
a McDonald's, and a local
restaurant.
-29-
<PAGE>
<CAPTION>
Lease
Expira-
tion and
Property Location Purchase Date Renewal Minimum Option
and Competition Price (1) Acquired Options Annual Rent (2) Percentage Rent To Purchase
- ----------------- --------- -------- ------- --------------- --------------- -----------
<S> <C>
BOSTON MARKET (11) $1,035,153 07/02/97 07/2012; $107,449; for each lease at any time
(the "Southlake Property") five five- increases by year after the after the
Existing restaurant year renewal 10% after the fifth lease fifth lease
options fifth lease year; (i) 4% of year
The Southlake Property is year and after annual gross
located on the east side of every five sales minus
Davis Boulevard, just south of years (ii) the
Southlake Boulevard, in thereafter minimum annual
Southlake, Tarrant County, during the rent for such
Texas, in an area of mixed lease term lease year
retail, commercial, and
residential development.
Other fast-food and family-
style restaurants located in
proximity to the Southlake
Property include a Taco Bell,
a McDonald's, a Wendy's, and a
Schlotzsky's Deli.
BOSTON MARKET (11) $1,077,979 07/02/97 07/2012; $111,894; for each lease at any time
(the "Stafford Property") five five- increases by year after the after the
Existing restaurant year renewal 10% after the fifth lease fifth lease
options fifth lease year, (i) 4% of year
The Stafford Property is year and after annual gross
located at the southwest every five sales minus
quadrant of the intersection years (ii) the
of Southwest Freeway and thereafter minimum annual
Airport Boulevard, in during the rent for such
Stafford, Fort Bend County, lease term lease year
Texas, in an area of mixed
retail, commercial, and
residential development.
Other fast-food and family-
style restaurants located in
proximity to the Stafford
Property include a Captain
D's, a Jack in the Box, a Taco
Bell, a Macaroni Grill, a
Chuck E. Cheese, and several
local restaurants.
-30-
<PAGE>
<CAPTION>
Lease
Expira-
tion and
Property Location Purchase Date Renewal Minimum Option
and Competition Price (1) Acquired Options Annual Rent (2) Percentage Rent To Purchase
- ----------------- --------- -------- ------- --------------- --------------- -----------
<S> <C>
JACK IN THE BOX (10) $1,008,970 07/02/97 07/2015; $103,419 (6); for each lease at any time
(the "Channelview Property") (3)(6) four five- increases by 8% year, (i) 5% of after the
Restaurant to be constructed year renewal after the fifth annual gross seventh
options lease year and sales minus lease year
The Channelview Property is after every (ii) the
located on the northeast five years minimum annual
corner of Interstate Highway thereafter rent for such
10 and Magnolia Avenue, in during the lease year (5)
Channelview, Harris County, lease term
Texas, in an area of mixed
retail, commercial, and
residential development.
JACK IN THE BOX (10) $936,119 07/02/97 07/2015; $95,952 (6); for each lease at any time
(the "Garland Property") (3)(6) four five- increases by 8% year, (i) 5% of after the
Restaurant to be constructed year renewal after the fifth annual gross seventh
options lease year and sales minus lease year
The Garland Property is after every (ii) the
located on the northeast five years minimum annual
quadrant of the intersection thereafter rent for such
of Interstate 30 and Roan during the lease year (5)
Road, in Garland, Dallas lease term
County, Texas, in an area of
mixed retail, commercial, and
residential development.
KFC $794,700 07/02/97 05/2022; $89,960; None None
(the "Putnam Property") four five- increases by
Existing restaurant year renewal 10% after the
options fifth lease
The Putnam Property is located year and after
on the east side of the every five
entrance drive to the Putnam years
Parkade shopping center, in thereafter
Putnam, Windham County, during the
Connecticut, in an area of lease term
mixed retail, commercial, and
residential development.
Other fast-food and family-
style restaurants located in
proximity to the Putnam
Property include a McDonald's,
a Wendy's, a Dunkin Donuts,
and a Subway Sandwich Shop.
-31-
<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
-------- -----------------
Arvada Property $ 667,000
Liberty #1 Property 357,000
Dearborn Property 266,000
Enumclaw Property 764,000
Guadalupe Property 905,000
Scottsdale Property 810,000
Bacliff Property 691,000
Indianapolis Property 883,000
San Antonio Property 336,000
Baltimore Property 471,000
Gambrills Property 471,000
Jessup Property 435,000
Lansing Property 651,000
Riverdale Property 474,000
Vacaville Property 805,000
Waldorf Property 455,000
Springfield Property 34,000
Jacksonville #1 Property 1,105,000
Corpus Christi Property 984,000
Leesburg Property 579,000
Starke Property 405,000
Fresno Property 601,000
Corinth Property 615,000
Tampa Property 1,056,000
Jacksonville #2 Property 1,124,000
King of Prussia Property 547,000
McLean Property 687,000
Property Federal Tax Basis
-------- -----------------
Evansville Property $ 971,000
Hampton Property 536,000
Huntsville Property 661,000
Knoxville Property 706,000
Louisville Property 912,000
Mobile Property 1,005,000
Montgomery Property 949,000
Nashville Property 734,000
Orlando Property 770,000
Pensacola Property 723,000
Raleigh #1 Property 503,000
Raleigh #2 Property 717,000
Richmond #1 Property 773,000
Richmond #2 Property 648,000
Winston-Salem Property 810,000
Bethel Park Property 593,000
Langhorne Property 646,000
Plymouth Meeting Property 905,000
Enid Property 776,000
Fairfax Property 703,000
Liberty #2 Property 925,000
Southlake Property 620,000
Stafford Property 679,000
Channelview Property 708,000
Garland Property 608,000
Putnam Property 534,000
</TABLE>
(2) Minimum annual rent for each of the Properties became payable on the
effective date of the lease, except as indicated below. For the Liberty #1,
Dearborn, San Antonio, Indianapolis, Baltimore, Gambrills, Jessup, Lansing,
Riverdale, Vacaville, Waldorf and Springfield Properties, minimum annual
rent will become due and payable on the date the tenant receives from the
landlord its final funding of the construction costs. For the Arvada,
Indianapolis, Lansing and Vacaville Properties, minimum annual rent for the
remainder of 1997 and 1998 shall be prepaid on the date the tenant receives
from the landlord its final funding of the construction costs. For the
Guadalupe Property, minimum annual rent will become due and payable on the
earlier of (i) 210 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 construction costs. For
the Jacksonville #1, Corpus Christi, Jacksonville #2, Enid and Liberty #2
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
-32-
<PAGE>
the restaurant is issued, or (iii) the date the restaurant opens for
business to the public. For the Starke Property, minimum annual rent will
become due and payable on the earlier of (i) 120 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 construction costs. During the period commencing with the effective
date of the lease to the date minimum annual rent becomes payable for the
Arvada, Liberty #1, Dearborn, San Antonio, Indianapolis, Baltimore,
Gambrills, Jessup, Lansing, Riverdale, Vacaville, Waldorf, Springfield,
Jacksonville #1, Corpus Christi, Jacksonville #2, Enid and Liberty #2
Properties, as described above, interim rent equal to a specified rate per
annum (ranging from 10% to 10.38%) 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
Guadalupe and Starke Properties, as described above, the tenant shall pay
monthly "interim rent" equal to a specified rate per annum (ranging from
11% to 11.50%) 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, provide 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 amounts set
forth below:
<TABLE>
<CAPTION>
Property Estimated Maximum Cost Estimated Final Completion Date
-------- ---------------------- -------------------------------
<S> <C>
Arvada Property $1,152,262 October 13, 1997
Liberty #1 Property 764,164 October 13, 1997
Dearborn Property 667,305 October 13, 1997
Enumclaw Property 843,431 October 13, 1997
Guadalupe Property 1,452,517 November 12, 1997
Scottsdale Property 769,863 September 14, 1997
Bacliff Property 1,049,420 October 26, 1997
Indianapolis Property 1,663,194 October 26, 1997
San Antonio Property 757,069 October 27, 1997
Baltimore Property 1,378,051 November 2, 1997
Gambrills Property 1,264,241 November 2, 1997
Jessup Property 1,285,243 November 2, 1997
Lansing Property 1,033,941 November 2, 1997
Riverdale Property 1,041,107 November 2, 1997
Vacaville Property 1,437,474 November 2, 1997
Waldorf Property 1,357,356 November 2, 1997
Springfield Property 633,101 November 2, 1997
Jacksonville #1 Property 1,681,435 November 2, 1997
Corpus Christi Property 1,577,372 November 17, 1997
Starke Property 599,800 September 19, 1997
Fresno Property 839,981 November 26, 1997
Corinth Property 955,333 December 2, 1997
</TABLE>
-33-
<PAGE>
<TABLE>
<CAPTION>
Property Estimated Maximum Cost Estimated Final Completion Date
-------- ---------------------- -------------------------------
<S> <C>
Jacksonville #2 Property $1,696,394 December 3, 1997
Enid Property 1,202,286 December 14, 1997
Liberty #2 Property 1,378,020 December 16, 1997
Channelview Property 1,008,970 December 29, 1997
Garland Property 936,119 December 29, 1997
</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) Percentage rent shall be calculated on a calendar year basis (January 1 to
December 31).
(6) 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.
(7) The Company owns the building only for this Property. The Company does not
own the underlying land; although, the Company entered 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.
(8) The lease relating to this Property is a land lease only.
(9) The Company entered into a Master Lease Agreement for the Dover Property
and eight Pizza Hut Properties previously acquired. The amounts presented
in the table above represent additional amounts due under the Master Lease
Agreement, as described in the section of the Prospectus entitled "Business
- Property Acquisitions," as a result of the acquisition of the Dover
Property.
(10) The lessee of the Enumclaw, Bacliff, Fresno, Corinth, Channelview and
Garland Properties is the same unaffiliated lessee or group of unaffiliated
lessees.
(11) The lessee of the Dearborn, Indianapolis, Baltimore, Gambrills, Jessup,
Riverdale, Waldorf, Springfield, Southlake and Stafford Properties is the
same unaffiliated lessee.
(12) The lessee of the Jacksonville #1, Corpus Christi, Jacksonville #2, Enid
and Liberty #2 Properties is the same unaffiliated lessee.
(13) The lessee of the Leesburg and Fairfax Properties is the same unaffiliated
lessee.
(14) The lessee of the King of Prussia, McLean, Evansville, Hampton, Huntsville,
Knoxville, Louisville, Mobile, Montgomery, Nashville, Orlando, Pensacola,
Raleigh #1, Raleigh #2, Richmond #1, Richmond #2, Winston-Salem, Bethel
Park, Langhorne and Plymouth Meeting Properties is the same unaffiliated
lessee.
-34-
<PAGE>
BORROWING AND SECURED EQUIPMENT LEASES
Between April 3, 1997 and July 2, 1997, the Company obtained three
advances totalling $680,864 under its $15,000,000 Loan. Two advances were used
to acquire Equipment for two restaurant properties in El Cajon and Suisun City,
California, and the other advance was the final advance relating to the
acquisition of Equipment for the restaurant property in Indian Harbour Beach,
Florida.
PENDING INVESTMENTS
As of July 2, 1997, the Company had initial commitments to acquire 23
properties, including 22 properties consisting of land and building and one
property 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 23 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 On The Border property in San Antonio, Texas,
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.
-35-
<PAGE>
<TABLE>
<CAPTION>
Lease Term and
Property Renewal Options Minimum Annual Rent Percentage Rent Option to Purchase
- -------- --------------- ------------------- --------------- ------------------
<S> <C>
Arby's 20 years; two 10.25% of the Company's for each lease year, (i) 4% during the
Greensboro, NC five-year renewal total cost to purchase the of annual gross sales minus seventh and
Existing restaurant options property; increases by (ii) the minimum annual tenth lease
4.14% after the third lease rent for such lease year years only
year and after every three
years thereafter during the
lease term
Arby's 20 years; two 10.25% of the Company's for each lease year, (i) 4% during the
Greenville, NC five-year renewal total cost to purchase the of annual gross sales minus seventh and
Existing restaurant options property; increases by (ii) the minimum annual tenth lease
4.14% after the third lease rent for such lease year years only
year and after every three
years thereafter during the
lease term
Arby's 20 years; two 10.25% of the Company's for each lease year, (i) 4% during the
Jonesville, NC five-year renewal total cost to purchase the of annual gross sales minus seventh and
Existing restaurant options property; increases by (ii) the minimum annual tenth lease
4.14% after the third lease rent for such lease year years only
year and after every three
years thereafter during the
lease term
Arby's 20 years; two 10.25% of the Company's for each lease year, (i) 4% during the
Kernersville, NC five-year renewal total cost to purchase the of annual gross sales minus seventh and
Existing restaurant options property; increases by (ii) the minimum annual tenth lease
4.14% after the third lease rent for such lease year years only
year and after every three
years thereafter during the
lease term
Arby's 20 years; two 10.25% of the Company's for each lease year, (i) 4% during the
Kinston, NC five-year renewal total cost to purchase the of annual gross sales minus seventh and
Existing restaurant options property; increases by (ii) the minimum annual tenth lease
4.14% after the third lease rent for such lease year years only
year and after every three
years thereafter during the
lease term
Arby's 20 years; two 10.25% of the Company's for each lease year, (i) 4% during the
Lexington, NC five-year renewal total cost to purchase the of annual gross sales minus seventh and
Existing restaurant options property; increases by (ii) the minimum annual tenth lease
4.14% after the third lease rent for such lease year years only
year and after every three
years thereafter during the
lease term
-36-
<PAGE>
<CAPTION>
Lease Term and
Property Renewal Options Minimum Annual Rent Percentage Rent Option to Purchase
- -------- --------------- ------------------- --------------- ------------------
<S> <C>
Boston Market 15 years; five 10.38% of the Company's for each lease year after at any time
Newport News, VA five-year renewal total cost to purchase the the fifth lease year, (i) after the
Existing restaurant options property; increases by 10% 4% of annual gross sales fifth lease
after the fifth lease year minus (ii) the minimum year
and after every five years annual rent for such lease
thereafter during the lease year
term
Boston Market 15 years; five 10.38% of the Company's for each lease year after at any time
Visalia, CA five-year renewal total cost to purchase the the fifth lease year, (i) after the
Existing restaurant options property; increases by 10% 4% of annual gross sales fifth lease
after the fifth lease year minus (ii) the minimum year
and after every five years annual rent for such lease
thereafter during the lease year
term
Golden Corral 15 years; four 10.75% of Total Cost (1) for each lease year, 5% of during the
Olathe, KS five-year renewal the amount by which annual first through
Restaurant to be options gross sales exceed a to be seventh lease
constructed determined breakpoint years and the
tenth through
fifteenth
lease years
only
IHOP 20 years; three 10.125% of the Company's for each lease year, (i) 4% during the
Houston, TX five-year renewal total cost to purchase the of annual gross sales minus eleventh lease
Existing restaurant options property; increases by 10% (ii) the minimum annual year and at
after the fifth lease year rent for such lease year the end of the
and after every five years initial lease
thereafter during the lease term
term
IHOP 20 years; three 10.125% of the Company's for each lease year, (i) 4% during the
Stockbridge, GA five-year renewal total cost to purchase the of annual gross sales minus eleventh lease
Existing restaurant options property; increases by 10% (ii) the minimum annual year and at
after the fifth lease year rent for such lease year the end of the
and after every five years initial lease
thereafter during the lease term
term
Jack in the Box 18 years; four 10.25% of Total Cost (1); for each lease year, (i) 5% at any time
Florissant, MO five-year renewal increases by 8% after the of annual gross sales minus after the
Restaurant to be options fifth lease year and after (ii) the minimum annual seventh lease
constructed every five years thereafter rent for such lease year year (2)
during the lease term
Jack in the Box 18 years; four 10.25% of Total Cost (1); for each lease year, (i) 5% at any time
Los Angeles, CA five-year renewal increases by 8% after the of annual gross sales minus after the
Restaurant to be options fifth lease year and after (ii) the minimum annual seventh lease
constructed every five years thereafter rent for such lease year year (2)
during the lease term
-37-
<PAGE>
<CAPTION>
Lease Term and
Property Renewal Options Minimum Annual Rent Percentage Rent Option to Purchase
- -------- --------------- ------------------- --------------- ------------------
<S> <C>
Jack in the Box 18 years; four 10.25% of Total Cost (1); for each lease year, (i) 5% at any time
West Sacramento, CA five-year renewal increases by 8% after the of annual gross sales minus after the
Restaurant to be options fifth lease year and after (ii) the minimum annual seventh lease
constructed every five years thereafter rent for such lease year year (2)
during the lease term
Jack in the Box 18 years; four 10.25% of Total Cost (1); for each lease year, (i) 5% at any time
Woodland, CA five-year renewal increases by 8% after the of annual gross sales minus after the
Restaurant to be options fifth lease year and after (ii) the minimum annual seventh lease
constructed every five years thereafter rent for such lease year year (2)
during the lease term
On The Border (3) (4); three five- 13.64% of Total Cost (1); for each lease year, (i) 4% at any time
San Antonio, TX year renewal (5) of annual gross sales minus after the
Restaurant to be options (ii) the minimum annual tenth lease
constructed rent for such lease year year
Shoney's 20 years; two 11% of Total Cost (1); for each lease year, (i) 6% at any time
Las Vegas, NV five-year renewal increases by 10% after the of annual gross sales minus after the
Restaurant to be options fifth lease year and after (ii) the minimum annual seventh lease
constructed every five years thereafter rent for such lease year year
during the lease term
Tumbleweed Southwest 20 years; two 11% of Total Cost (1); for each lease year, (i) 5% at any time
Mesquite five-year renewal increases by 10% after the of annual gross sales minus after the
Grill & Bar options fifth lease year and after (ii) the minimum annual seventh lease
Cookeville, TN every five years thereafter rent for such lease year year
Restaurant to be during the lease term
renovated
Tumbleweed Southwest 20 years; two 11% of Total Cost (1); for each lease year, (i) 5% at any time
Mesquite five-year renewal increases by 10% after the of annual gross sales minus after the
Grill & Bar options fifth lease year and after (ii) the minimum annual seventh lease
Hendersonville, TN every five years thereafter rent for such lease year year
Restaurant to be during the lease term
renovated
Tumbleweed Southwest 20 years; two 11% of Total Cost (1); for each lease year, (i) 5% at any time
Mesquite five-year renewal increases by 10% after the of annual gross sales minus after the
Grill & Bar options fifth lease year and after (ii) the minimum annual seventh lease
Lawrence, KS every five years thereafter rent for such lease year year
Restaurant to be during the lease term
renovated
-38-
<PAGE>
<CAPTION>
Lease Term and
Property Renewal Options Minimum Annual Rent Percentage Rent Option to Purchase
- -------- --------------- ------------------- --------------- ------------------
<S> <C>
Tumbleweed Southwest 20 years; two 11% of Total Cost (1); for each lease year, (i) 5% at any time
Mesquite five-year renewal increases by 10% after the of annual gross sales minus after the
Grill & Bar options fifth lease year and after (ii) the minimum annual seventh lease
Murfreesboro, TN every five years thereafter rent for such lease year year
Restaurant to be during the lease term
renovated
Tumbleweed Southwest 20 years; two 11% of Total Cost (1); for each lease year, (i) 5% at any time
Mesquite five-year renewal increases by 10% after the of annual gross sales minus after the
Grill & Bar options fifth lease year and after (ii) the minimum annual seventh lease
Nashville, TN every five years thereafter rent for such lease year year
Restaurant to be during the lease term
renovated
TGI Friday's 20 years; four 10.75% of Total Cost (1); for each lease year, (i) 6% at any time
Superstition Springs, five-year renewal increases by 10% after the of annual gross sales minus after the
AZ options fifth lease year and after (ii) the minimum annual seventh lease
Restaurant to be every five years thereafter rent for such lease year year
constructed during the lease term
</TABLE>
-39-
<PAGE>
- -------------------------------
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.
-40-
<PAGE>
SALE OF PROPERTIES AND SECURED EQUIPMENT LEASES
In May 1997, the Company sold its Properties in Orange and Hamden,
Connecticut, and Marlboro and Hazlet, New Jersey, to the tenant for a total of
$5,266,327. The Company intends to reinvest the net sales proceeds from the sale
of Properties in additional Properties.
In February 1997 and April 1997, the Company sold the Equipment
relating to two Secured Equipment Leases for the Properties in Spring Hill,
Florida, and High Ridge, Missouri, respectively, to the tenant and used the
proceeds therefrom to repay amounts previously advanced under its Loan. In
addition, in May 1997, the Company sold the Equipment relating to two Secured
Equipment Leases for the Properties in Marlboro and Hazlet, New Jersey, to the
tenant and used the proceeds therefrom to repay amounts previously advanced
under its Loan.
SELECTED FINANCIAL DATA
The following table sets forth certain financial information for the
Company, and should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Financial
Statements included in Exhibit B to this Prospectus.
<TABLE>
<CAPTION>
May 2,
1994 (Date
of Inception)
Quarter Ended Year Ended through
March 31, 1997 December 31, December 31,
(Unaudited) 1996 1995 1994
---------------- ------------ ------------ ------------
<S> <C>
Revenues $ 2,939,558 $6,206,684 $ 659,131 $ -
Net earnings 2,251,842 4,745,962 368,779 -
Cash distributions declared (1) 2,693,357 5,436,072 638,618 -
Funds from operations (2) 2,489,181 5,257,040 469,097 -
Earnings per Share 0.14 0.59 0.19 -
Cash distributions declared per Share 0.18 0.71 0.31 -
Weighted average number of Shares
outstanding (3) 15,630,532 8,071,670 1,898,350 -
<CAPTION>
March 31,
1997 December 31, December 31, December 31,
(Unaudited) 1996 1995 1994
------------ ----------- ------------ ------------
<S> <C>
Total assets $167,722,361 $134,825,048 $ 33,603,084 $ 929,585
Total equity 155,890,787 122,867,427 31,980,648 200,000
</TABLE>
(1) Approximately 25 percent, 13 percent and 42 percent of cash distributions
($0.05, $0.06 and $0.14 per Share) for the quarter ended March 31, 1997,
and the years ended December 31, 1996 and 1995, respectively, represents a
return of capital in accordance with generally accepted accounting
principles ( "GAAP "). Cash distributions treated as a return of capital
on a GAAP basis represent the amount of cash distributions in excess of
accumulated net earnings on a GAAP basis. The Company has not treated such
amount as a return of capital for purposes of calculating the stockholders'
Invested Capital and the Stockholders' 8% Return, as described in the
Prospectus.
(2) Funds from operations ("FFO"), based on the revised definition adopted by
the Board of Governors of NAREIT and as used herein, means net earnings
determined in accordance with generally accepted accounting principles
("GAAP"), excluding gains or losses from debt restructuring and sales of
property, plus depreciation and amortization of real estate assets, and
after adjustments for unconsolidated partnerships and joint ventures. FFO
was developed by NAREIT as a relative measure of performance and liquidity
of an equity REIT in order to recognize that income-producing real estate
historically has not depreciated on the basis determined under GAAP.
However, FFO (i) does not represent cash generated from operating
activities determined in accordance with GAAP (which, unlike FFO, generally
reflects all cash effects of transactions and other events that enter into
the determination of net earnings), (ii) is not necessarily indicative of
cash flow available to fund cash needs and (iii)
-41-
<PAGE>
should not be considered as an alternative to net earnings determined in
accordance with GAAP as an indication of the Company's operating
performance, or to cash flow from operating activities determined in
accordance with GAAP as a measure of either liquidity or the Company's
ability to make distributions. Accordingly, the Company believes that in
order to facilitate a clear understanding of the consolidated historical
operating results of the Company, FFO should be considered in conjunction
with the Company's net earnings and cash flows as reported in the
accompanying consolidated financial statements and notes thereto. See
Exhibit B - Financial Information.
(3) The weighted average number of Shares outstanding is based upon the period
the Company was operational.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION OF THE COMPANY
INTRODUCTION
The Company is a Maryland corporation that was organized on May 2,
1994, to acquire Properties, directly or indirectly through Joint Venture or
co-tenancy arrangements, to be leased on a long-term, "triple-net" basis to
operators of certain national and regional fast-food, family-style and casual
dining Restaurant Chains. In addition, the Company may provide financing
generally for the purchase of buildings by borrowers that lease the underlying
land from the Company. To a lesser extent, the Company may offer Secured
Equipment Leases to operators of Restaurant Chains.
LIQUIDITY AND CAPITAL RESOURCES
In April 1995, the Company commenced an offering of its shares of
common stock (the "Initial Offering"). During the period January 1, 1997 through
February 6, 1997, the Company received subscription proceeds of $11,344,616
(1,134,462 shares) from its Initial Offering, thereby completing such 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) pursuant to the reinvestment plan. Following the completion of
its Initial Offering on February 6, 1997, the Company commenced this offering of
up to 27,500,000 Shares of Common Stock. As of March 31, 1997, the Company had
received subscription proceeds of $26,423,820 (2,642,382 Shares) from this
offering, including $269,388 (26,939 shares) pursuant to the Reinvestment Plan.
As a result of these transactions, net proceeds to the Company from its offering
of Shares, after deduction of Offering Expenses, totalled $33,464,875 for the
quarter ended March 31, 1997.
During the quarter ended March 31, 1997, approximately $27,000,000 was
used to invest, or committed for investment, in 29 Properties (17 on which a
restaurant was being constructed), in providing mortgage financing of $4,200,000
and to pay Acquisition Fees to the Advisor totalling $1,699,580 and certain
Acquisition Expenses. The Company acquired two of the 29 Properties from
Affiliates for purchase prices totalling approximately $1,773,300. 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 17 Properties under construction at March 31,
1997, the Company has entered into various development agreements with tenants
which provide terms and specifications for the construction of buildings the
tenants have agreed to lease. The agreements provide a maximum amount of
development costs (including the purchase price of the land and closing costs)
to be paid by the Company. The aggregate maximum development costs the Company
has agreed to pay is approximately $19,027,300, of which approximately
$15,888,300 in land and other costs had been incurred as of March 31, 1997. The
buildings under construction as of March 31, 1997, are expected to be
operational by September 1997. In connection with the purchase of each Property,
the Company, as lessor, entered into a long-term lease agreement.
During the quarter ended March 31, 1997, the Company also received
advances totalling $2,207,299 under its Loan. Such amounts were used to fund
Secured Equipment Leases. The Company expects to obtain additional advances
under the Loan to fund the remaining amounts due for two Secured Equipment
Leases and any Secured Equipment Leases entered into in the future.
During the period April 1, 1997 through July 2, 1997, the Company
acquired 60 additional Properties (30 on which restaurants are being constructed
and two on which restaurants are being renovated) for cash at a total cost of
approximately $60,297,000, excluding development and closing costs. The
development costs (including the purchase of the land and
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closing costs) to be paid by the Company relating to the 30 Properties under
construction and the two Properties to be renovated are estimated to be
approximately $35,858,000. The buildings under construction are expected to be
operational by December 1997.
The Company presently is negotiating to acquire additional Properties,
but as of July 2, 1997, had not acquired any such Properties.
As of July 2, 1997, the Company had received aggregate subscription
proceeds of $225,442,793 (22,544,279 shares) from its Initial Offering and this
offering, including $1,235,058 (123,506 shares) through the Reinvestment Plan.
As of July 2, 1997, the Company had invested or committed for investment
approximately $191,667,000 of aggregate net proceeds from the Initial Offering
and this offering in 179 Properties, in providing mortgage financing to the
tenants of 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 $9,900,000 in aggregate Net Offering Proceeds available
for investment in Properties and Mortgage Loans.
The Company expects to use uninvested Net Offering Proceeds, plus any
Net Offering Proceeds from the sale of additional Shares, to purchase additional
Properties, to fund construction costs relating to the Properties under
construction and to make Mortgage Loans. The Company expects to use the proceeds
of the Loan to fund the Secured Equipment Lease program. The number of
Properties to be acquired and Mortgage Loans to be entered into will depend upon
the amount of Net Offering Proceeds available to the Company, although the
Company is expected to have a total portfolio of 400 to 450 Properties if the
maximum number of Shares are sold in this offering. The Company intends to limit
the amount of Secured Equipment Leases it enters into to ten percent of gross
offering proceeds from its offerings.
At the Company's annual meeting of stockholders held on April 4, 1997,
the stockholders approved amendments to the Company's Amended and Restated
Articles of Incorporation increasing the number of authorized shares of capital
stock from 46,000,000 shares to 156,000,000 shares (consisting of 75,000,000
common shares, 3,000,000 preferred shares and 78,000,000 excess shares). As of
July 2, 1997, the Company had 22,564,279 shares of common stock outstanding
(including 20,000 shares issued to the Advisor prior to the commencement of the
Initial Offering and 123,506 shares issued pursuant to the Company's
Reinvestment Plan) and no preferred stock or excess shares outstanding.
The Company plans to obtain short-term financing (the "Line of Credit")
in an amount up to $20,000,000, the proceeds of which will be used to acquire
Properties. Management believes that, during the offering period, the Line of
Credit will allow the Company to take advantage of investment opportunities that
might otherwise be lost if the Company was forced to delay making the
investments until it had raised a sufficient amount of offering proceeds. In
addition, management believes that the use of the Line of Credit will enable the
Company to reduce or eliminate the instances in which the Company will be
required to pay duplicate closing costs as a result of an Affiliate of the
Advisor purchasing Properties, pending receipt by the Company of sufficient
offering proceeds, in order to preserve the investment opportunity for the
Company, and the Company subsequently purchasing the Properties from the
Affiliate. The Line of Credit will be repaid from the proceeds of the offering.
No Properties will be encumbered in connection with the Line of Credit. The
Company is engaged in preliminary discussions with potential lenders but has not
yet obtained a commitment letter for the Line of Credit and may not be able to
obtain the Line of Credit on satisfactory terms.
Properties are and will be leased on a triple-net basis, meaning that
tenants are generally required to pay all repairs and maintenance, property
taxes, insurance and utilities. Rental payments under the leases are expected to
exceed the Company's operating expenses. For these reasons, no short-term or
long-term liquidity problems currently are anticipated by management.
Until Properties are acquired, or Mortgage Loans are entered into, Net
Offering Proceeds are held in short-term, highly liquid investments which
management believes to have appropriate safety of principal. This investment
strategy provides high liquidity in order to facilitate the Company's use of
these funds to acquire Properties at such time as Properties suitable for
acquisition are located or to fund Mortgage Loans. At March 31, 1997, the
Company had $44,132,920 invested in such short-term investments, as compared to
$42,450,088 at December 31, 1996. These funds will be used primarily to purchase
and develop or renovate Properties (directly or indirectly through joint venture
arrangements), to make Mortgage Loans, to pay offering and acquisition costs, to
pay Distributions to stockholders, to meet Company expenses and, in management's
discretion, to create cash reserves.
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During the quarters ended March 31, 1997 and 1996, Affiliates of the
Company incurred on behalf of the Company $593,489 and $264,484, respectively,
for certain offering expenses, $220,259 and $51,860, respectively, for certain
acquisition expenses, and $170,039 and $69,442, respectively, for certain
operating expenses. As of March 31, 1997, the Company owed the Advisor $483,746
for such amounts, unpaid fees and accounting and administrative expenses. As of
April 30, 1997, the Company had reimbursed all such amounts. The Advisor has
agreed to pay or reimburse to the Company all offering expenses in excess of
three percent of gross offering proceeds.
During the quarters ended March 31, 1997 and 1996, the Company
generated cash from operations (which includes cash received from tenants and
interest and other income received, less cash paid for operating expenses) of
$2,717,456 and $710,678, respectively. Based on current and anticipated future
cash from operations the Company declared Distributions to the stockholders of
$2,693,357 and $768,133, respectively, during the quarters ended March 31, 1997
and 1996. On April 1, 1997, May 1, 1997, and June 1, 1997, the Company declared
Distributions to its stockholders totalling $1,091,142, $1,202,718 and
$1,295,253, respectively, payable in June 1997. In addition, on July 1, 1997,
the Company declared Distributions to its stockholders totalling $1,394,275
payable in September 1997. For the quarters ended March 31, 1997 and 1996,
approximately 75 and 90 percent, respectively, of the distributions received by
stockholders were considered to be ordinary income and 25 and ten percent,
respectively, were considered a return of capital for federal income tax
purposes. However, no amounts distributed or to be distributed to the
stockholders as of July 2, 1997, are required to be or have been treated by the
Company as a return of capital for purposes of calculating the stockholders'
return on their Invested Capital.
Management believes that the Properties are adequately covered by
insurance. In addition, the Advisor obtained contingent liability and property
coverage for the Company. This insurance policy is intended to reduce the
Company's exposure in the unlikely event a tenant's insurance policy lapses or
is insufficient to cover a claim relating to the Property. The Company's
investment strategy of acquiring Properties for cash and leasing them under
triple-net leases to operators who meet specified financial standards is
expected to minimize the Company's operating expenses.
Due to the fact that the Properties are leased on a long-term,
triple-net basis, management does not believe that working capital reserves are
necessary at this time. Management has the right to cause the Company to
maintain reserves if, in their discretion, they determine such reserves are
required to meet the Company's working capital needs.
Management expects that the cash generated from operations will be
adequate to pay operating expenses.
RESULTS OF OPERATIONS
As of March 31, 1997, the Company and its consolidated joint venture,
CNL/Corral South Joint Venture (hereinafter, collectively referred to as the
Company) had purchased and entered into long-term, triple-net leases for 123
Properties. The leases provide for minimum base annual rental payments (payable
in monthly installments) ranging from approximately $34,700 to $467,500. In
addition, certain leases provide for percentage rent based on sales in excess of
a specified amount. The majority of the leases also provide that, commencing in
generally the sixth lease year, the annual base rent required under the terms of
the leases will increase. In connection therewith, during the quarters ended
March 31, 1997 and 1996, the Company earned $2,089,785 and $799,081,
respectively, in rental income from operating leases and earned income from
direct financing lease from 105 Properties and 11 Secured Equipment Leases in
1997 and from 41 Properties in 1996. Because the Company has not yet acquired
all of its Properties, revenues for the quarters ended March 31, 1997 and 1996,
represent only a portion of revenues which the Company is expected to earn
during a full quarter in which the Company's Properties are operational.
As of March 31, 1997, the Company had also entered into Mortgage Loans
in the principal sum of $17,047,000, collateralized by mortgages on the
buildings relating to 43 Pizza Hut Properties and three additional Pizza Hut
buildings. The Mortgage Loans bear interest at rates ranging from 10.5% to
10.75% per annum and are being collected in 240 equal monthly installments in
the aggregate amount of $167,455. In connection therewith, the Company earned
$375,357 and $184,949 in interest income relating to such Mortgage Loans during
the quarters ended March 31, 1997 and 1996, respectively.
During the quarter ended March 31, 1997, one affiliated group of
lessees and borrowers, Castle Hill, represented more than ten percent of the
Company's total rental, earned and interest income from its Properties, Mortgage
Loans and Secured Equipment Leases. Castle Hill is the lessee under leases
relating to 43 restaurants and is the borrower on Mortgage Loans relating to the
buildings on such Properties. In addition, during the quarter ended March 31,
1997, three Restaurant
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Chains, Golden Corral Family Steakhouse, Pizza Hut and Boston Market, each
accounted for more than ten percent of the Company's total rental, earned and
interest income relating to its Properties, Mortgage Loans and Secured Equipment
Leases. Because the Company has not completed its investment in Properties and
Mortgage Loans, it is not possible to determine which lessees, borrowers or
Restaurant Chains will contribute more than ten percent of the Company's rental,
earned and interest income during the remainder of 1997 and subsequent years. In
the event that certain lessees, borrowers or Restaurant Chains contribute more
than ten percent of the Company's rental and interest income in the current and
future years, any failure of such lessees, borrowers or restaurants chains could
materially affect the Company's income.
The Company also earned $474,416 and $75,849, respectively, in interest
income from investments in money market accounts or other short-term, highly
liquid investments and other income. As Net Offering Proceeds are invested in
Properties and used to make Mortgage Loans, interest income from investments in
money market accounts or other short-term, highly liquid investments is expected
to decrease.
Operating expenses, including depreciation and amortization expense,
were $679,823 and $300,539 for the quarters ended March 31, 1997 and 1996,
respectively. Operating expenses increased primarily as a result of the Company
being invested in additional Properties and Mortgage Loans during the quarter
ended March 31, 1997, as compared to the quarter ended March 31, 1996. General
and administrative expenses as a percentage of total revenues is expected to
decrease as the Company acquires additional Properties, invests in Mortgage
Loans and the Properties under construction become operational. However, asset
and mortgage management fees and depreciation and amortization expense are
expected to increase as the Company invests in additional Properties and
Mortgage Loans.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 128, "Earnings Per Share." The
Statement, which is effective for fiscal years ending after December 15, 1997,
provides for a revised computation of earnings per share. The Company will adopt
this Standard in 1997 and does not expect compliance with such Standard to have
a material effect, if any, on the Company's earnings per share.
This information contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Although the Company believes that the expectations
reflected in such forward-looking statements are based upon reasonable
assumptions, the Company's actual results could differ materially from those set
forth in the forward-looking statements. Certain factors that might cause such a
difference include the following: changes in general economic conditions,
changes in local real estate conditions, continued availability of proceeds from
the Company's offering, the ability of the Company to locate suitable tenants
for its Properties and borrowers for its Mortgage Loans, and the ability of
tenants and borrowers to make payments under their respective leases or Mortgage
Loans.
MANAGEMENT COMPENSATION
FEES AND EXPENSES PAID TO THE
ADVISOR AND ITS AFFILIATES
The following presents information regarding this offering from
commencement on February 7, 1997 through July 2, 1997, unless otherwise noted.
For information regarding the Initial Offering for the years ended December 31,
1995 and 1996, and the period January 1, 1997 through February 6, 1997, see the
section of the Prospectus entitled "Certain Transactions."
Selling Commissions and Marketing Support and Due Diligence Expense
Reimbursement Fee. In connection with the formation of the Company and the
offering of the Shares, the Managing Dealer will receive Selling Commissions of
7.5% (a maximum of $20,625,000 if 27,500,000 Shares are sold), and a marketing
support and due diligence expense reimbursement fee of 0.5% (a maximum of
$1,375,000 if 27,500,000 Shares are sold), of the total amount raised from the
sale of Shares, computed at $10.00 per Share sold ("Gross Proceeds"). The
Managing Dealer in turn may reallow Selling Commissions of up to 7% on Shares
sold, and all or a portion of the 0.5% marketing support and due diligence
expense reimbursement fee to certain Soliciting Dealers, who are not Affiliates
of the Company. As of July 2, 1997, the Company had incurred $5,613,827 for
Selling Commissions due to the Managing Dealer, a substantial portion of which
has been paid as commissions to other Soliciting Dealers. In addition, as of
July 2, 1997, the Company had incurred $374,255 in marketing support and due
diligence expense reimbursement fees due
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to the Managing Dealer. A portion of these fees has been reallowed to other
Soliciting Dealers, and all due diligence expenses will be paid from such fees.
Soliciting Dealer Servicing Fee. The Company will incur a Soliciting
Dealer Servicing Fee in the amount of .20% of Invested Capital (a maximum of
$550,000 if 27,500,000 Shares are sold). The Soliciting Dealer Servicing Fee
will be payable on December 31 of each year, commencing on December 31 of the
year following the year in which the related offering terminates, and generally
will be payable to the Managing Dealer, which in turn may reallow all or a
portion of such fee to Soliciting Dealers whose clients held Shares on such
date. As of July 2, 1997, no such fees had been incurred by the Company.
Acquisition Fees. The Advisor is entitled to receive acquisition fees
for services in identifying the Properties and structuring the terms of the
acquisition and leases of the Properties equal to 4.5% of Gross Proceeds,
payable by the Company as Acquisition Fees. As of July 2, 1997, the Company had
incurred $3,368,296 in such acquisition fees payable to the Advisor.
Other Acquisition Fees to Affiliates of the Advisor. In connection with
the financing, development, construction or renovation of a Property by
Affiliates, the Company will incur other acquisition fees, payable to Affiliates
of the Advisor as Acquisition Fees. Such fees are in addition to 4.5% of Gross
Proceeds payable to the Advisor as Acquisition Fees, and payment of such fees
will be subject to approval by the Board of Directors, including a majority of
the Independent Directors, not otherwise interested in the transaction. As of
July 2, 1997, the Company had incurred $49,500 of such fees in connection with
Net Offering Proceeds of this offering.
Asset Management Fee. For managing the Properties, the Advisor will be
entitled to receive a monthly Asset Management Fee of one-twelfth of .60% of the
Company's Real Estate Asset Value (generally, the total amount invested in the
Properties, exclusive of Acquisition Fees and Acquisition Expenses) and the
outstanding principal amount of the Mortgage Loans as of the end of the
preceding month. For the quarter ended March 31, 1997, the Company had incurred
$127,458 of such fees, $16,942 of which has been capitalized as part of the cost
of building for Properties under construction, including amounts incurred
relating to Properties acquired with Net Offering Proceeds from the Company's
Initial Offering.
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Secured Equipment Lease Servicing Fee. For negotiating Secured
Equipment Leases and supervising the Secured Equipment Lease program, the
Advisor will be entitled to receive from the Company a one-time Secured
Equipment Lease Servicing Fee of 2% of the purchase price of the Equipment that
is the subject of a Secured Equipment Lease. During the quarter ended March 31,
1997, the Company had incurred $41,281 of such fees.
Real Estate Disposition Fee. Prior to Listing, the Advisor may receive
a real estate disposition fee of 3% of the gross sales price of one or more
Properties for providing substantial services in connection with the Sale, which
will be deferred and subordinated until the stockholders have received
Distributions equal to the sum of 100% of the stockholders' aggregate Invested
Capital plus an aggregate, annual, cumulative, noncompounded 8% return on their
Invested Capital (the "Stockholders' 8% Return"). Upon Listing, if the Advisor
has accrued but not been paid such real estate disposition fee, then for
purposes of determining whether the subordination conditions have been
satisfied, stockholders will be deemed to have received a Distribution in an
amount equal to the product of the total number of Shares outstanding and the
average closing prices of the Shares over a period, beginning 180 days after
Listing, of 30 days during which the Shares are traded. As of March 31, 1997, no
such fees had been incurred by the Company.
Subordinated Share of Net Sales Proceeds. A subordinated share of Net
Sales Proceeds will be paid to the Advisor upon the Sale of one or more
Properties or Secured Equipment Leases in an amount equal to 10% of Net Sales
Proceeds. This amount will be subordinated and paid only after the stockholders
have received Distributions equal to the sum of 100% of the stockholders'
aggregate Invested Capital, plus the Stockholders' 8% Return. As of March 31,
1997, no such amounts had been incurred by the Company.
Administrative and Other Expenses. The Advisor provides accounting and
administrative services (including accounting and administrative services in
connection with the Offering of Shares) to the Company on a day-to-day basis.
During the quarter ended March 31, 1997, the Company had incurred $288,747 of
such costs that are included in stock issuance costs and $108,003 of such costs
that are included in general and administrative expenses, including amounts
incurred in connection with activities of the Company's Initial Offering.
Reimbursement of Out-of-Pocket Expenses. The Advisor and its Affiliates
are entitled to receive reimbursement, at cost, for expenses they incur for
Organizational and Offering Expenses, Acquisition Expenses and Operating
Expenses. During the quarter ended March 31, 1997, the Advisor and its
Affiliates incurred $593,489, $220,259, and $170,039 on behalf of the Company
for Offering Expenses, Acquisition Expenses, and Operating Expenses,
respectively, including amounts incurred in connection with activities of the
Company's Initial Offering.
MANAGEMENT
Robert A. Bourne. Director and President. Mr. Bourne currently holds
the position of Vice Chairman, director and Treasurer of CNL Fund Advisors,
Inc., the advisor to the Company. Mr. Bourne served as President of CNL Fund
Advisors, Inc. from the date of its inception through June 30, 1997. Mr. Bourne
also has served as President and a director of CNL American Realty Fund, Inc.
since 1996 and of CNL Real Estate Advisors, Inc. since January 1997. Mr. Bourne
is President and Treasurer of CNL Group, Inc., President, a director, and a
registered principal of CNL Securities Corp. (the Managing Dealer of this
offering), President and a director of CNL Investment Company, and Chief
Investment Officer, Vice Chairman, a director and Treasurer of CNL Institutional
Advisors, Inc., a registered investment advisor. Mr. Bourne served as President
of CNL Institutional Advisors, Inc. from the date of its inception through June
30, 1997. Mr. Bourne also has served as President and a director from July 1992
to February 1996, and has served as Vice Chairman of the Board of Directors,
Secretary and Treasurer since February 1996, of Commercial Net Lease Realty,
Inc. In addition, Mr. Bourne served as President of CNL Realty Advisors, Inc.
from 1991 to February 1996, and has served as a director of CNL Realty Advisors,
Inc. since 1991, and as Treasurer and Vice Chairman since February 1996. Upon
graduation from Florida State University in 1970, where he received a B.A. in
Accounting, with honors, Mr. Bourne worked as a certified public accountant and,
from September 1971 through December 1978 was employed by Coopers & Lybrand,
Certified Public Accountants, where he held the position of tax manager
beginning in 1975. From January 1979 until June 1982, Mr. Bourne was a partner
in the accounting firm of Cross & Bourne and from July 1982 through January 1987
he was a partner in the accounting firm of Bourne & Rose, P.A., Certified Public
Accountants. Mr. Bourne, who joined CNL Securities Corp. in 1979, has
participated as a general partner or joint venturer in over 100 real estate
ventures involved in the financing,
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acquisition, construction, and rental of restaurants, office buildings,
apartment complexes, hotels, and other real estate. Included in these real
estate ventures are approximately 64 privately offered real estate limited
partnerships with investment objectives similar to one or more of those of the
Company's investment objectives, in which Mr. Bourne, directly or through an
affiliated entity, serves or has served as a general partner.
Lynn E. Rose. Secretary and Treasurer. Ms. Rose is also Secretary and
Treasurer of CNL American Realty Fund, Inc. Ms. Rose serves as Secretary and a
director of CNL Fund Advisors, Inc., the advisor to the Company, and CNL Real
Estate Advisors, Inc. Ms. Rose served as Treasurer of CNL Fund Advisors, Inc.
from the date of its inception through June 30, 1997. 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 a Treasurer of CNL
Realty Advisors, Inc. from 1991 to February 1996. In addition, Ms. Rose served
as Secretary and Treasurer of Commercial Net Lease Realty, Inc. from 1992 to
February 1996. 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. Ms. Rose holds a B.A. in
Sociology from the University of Central Florida. She was licensed as a
certified public accountant in 1979.
THE ADVISOR AND THE ADVISORY AGREEMENT
THE ADVISOR
The directors and officers of the Advisor are as follows:
James M. Seneff, Jr. ............................. Chairman of the Board,
Chief Executive Officer,
and Director
Robert A. Bourne ................................. Vice Chairman, Treasurer
and Director
Curtis B. McWilliams ............................. President
John T. Walker ................................... Chief Operating Officer and
Executive Vice President
Steven D. Shackelford............................. Chief Financial Officer
Lynn E. Rose ..................................... Secretary and Director
Jeanne A. Wall ................................... Executive Vice President
Curtis B. McWilliams. Mr. McWilliams joined CNL Group, Inc. in April 1997 and
currently serves as President of the Advisor. In addition, Mr. McWilliams
serves as Executive Vice President of CNL Group, Inc. and as President of CNL
Institutional Advisors, Inc. and certain other subsidiaries of CNL Group, Inc.
From January 1991 through August 1996, Mr. McWilliams was a managing director in
the corporate banking group of Merrill Lynch's investment banking division.
During this time, he was a senior relationship manager with Merrill Lynch and as
such was responsible for a number of the firm's relationships with companies
such as AT&T, AT&T Capital, AMR Corporation, J.C. Penney and the Robert M. Bass
Group. In addition, from February 1990 to February 1993, he served as co-head of
New York #1 Industrial Banking Group and had administrative responsibility for
25 bankers overseeing 150 client relationships, including the firm's
transportation group. In addition, from September 1996 to March 1997, Mr.
McWilliams served as Chairman of Private Advisory Services, Merrill Lynch's high
net worth brokerage business. Mr. McWilliams received a B.S.E. in Chemical
Engineering from Princeton University in 1977 and a Masters of Business
Administration with a concentration in finance from the University of Chicago in
1983.
CERTAIN TRANSACTIONS
The Managing Dealer 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. During the period February 7, 1997 (the date this offering
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commenced) through July 2, 1997, the Company incurred $5,613,827 in such fees in
connection with this offering, the majority of which has been or will be paid as
commissions to other broker-dealers.
In addition, the Managing Dealer 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. During the period February 7, 1997 (the date this offering
commenced) through July 2, 1997, the Company incurred $374,255 in such fees in
connection with this offering, substantially all of which were reallowed to
other broker-dealers and from which all bona fide due diligence expenses were
paid.
The Advisor 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 period
February 7, 1997 (the date this offering commenced) through July 2, 1997, the
Company incurred $3,368,296 in such fees in connection with this offering.
For negotiating Secured Equipment Leases and supervising the Secured
Equipment Lease program, the Advisor is 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. During
the period January 1, 1997 through July 2, 1997, the Company incurred $54,598 in
such fees.
The Company and the Advisor have entered into an Advisory Agreement
pursuant to which the Advisor will receive a monthly asset management fee of
one-twelfth of 0.60% of the Company's Real Estate Asset Value, plus one-twelfth
of 0.60% of the total principal amount of the Company's Mortgage Loans as of the
end of the preceding month. The management fee, which will not exceed fees which
are competitive for similar 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 the
Advisor. 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 the Advisor shall determine. During the quarter ended March 31, 1997,
the Company incurred $127,458 of such fees, $16,942 of which has been
capitalized as part of the cost of the buildings for Properties that have been
or are being constructed.
The Advisor 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 quarter
ended March 31, 1997, the Company incurred a total of $396,750 for these
services, $288,747 of such costs representing stock issuance costs and $108,003
representing general operating and administrative expenses, including costs
related to preparing and distributing reports required by the Securities and
Exchange Commission and costs associated with activities from the Initial
Offering.
In connection with the acquisition of four Properties during the period
January 1, 1997 through July 2, 1997, that were constructed or renovated by
Affiliates, the Company incurred development/construction management fees
totalling $278,879. Such fees were included in the purchase price of Properties.
All of these fees were paid in accordance with the provisions of the
Company's Articles of Incorporation.
SUMMARY OF THE
ARTICLES OF INCORPORATION AND BYLAWS
DESCRIPTION OF CAPITAL STOCK
At the Company's annual meeting of stockholders held on April 4, 1997,
the stockholders approved amendments to the Company's Amended and Restated
Articles of Incorporation, and effective May 8, 1997, the Company filed with the
State of Maryland an amendment, increasing the number of authorized shares of
capital stock from 46,000,000 shares to 156,000,000 shares (consisting of
75,000,000 Common Shares, 3,000,000 Preferred Shares and 78,000,000 Excess
Shares). The Board of Directors may determine to engage in future offerings of
Common Stock of up to the number of unissued authorized shares of Common Stock
available following the termination of this offering. As of July 2, 1997, the
Company had 22,564,280 shares of Common Stock outstanding (including 20,000
issued to the Advisor prior to the commencement of this offering and 123,506
Shares issued pursuant to the Reinvestment Plan) and no Preferred Stock or
Excess Shares outstanding.
-49-
<PAGE>
ADDENDUM TO
EXHIBIT B
FINANCIAL INFORMATION
THE UPDATED PRO FORMA FINANCIAL STATEMENTS AND THE UNAUDITED FINANCIAL
STATEMENTS OF CNL AMERICAN PROPERTIES FUND, INC. AND SUBSIDIARY CONTAINED IN
THIS ADDENDUM SHOULD BE READ IN CONJUNCTION WITH EXHIBIT B TO THE ATTACHED
PROSPECTUS, DATED APRIL 18, 1997.
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
INDEX TO UPDATED FINANCIAL STATEMENTS
-------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Pro Forma Consolidated Financial Information (unaudited):
Pro Forma Consolidated Balance Sheet as of March 31, 1997 B-2
Pro Forma Consolidated Statement of Earnings for the quarter ended March 31, 1997 B-3
Pro Forma Consolidated Statement of Earnings for the year ended December 31, 1996 B-4
Notes to Pro Forma Consolidated Financial Statements for the quarter ended
March 31, 1997 and the year ended December 31, 1996 B-5
Updated Condensed Consolidated Financial Statements (unaudited):
Condensed Consolidated Balance Sheets as of March 31, 1997 and December 31, 1996 B-9
Condensed Consolidated Statements of Earnings for the quarters ended March 31, 1997
and 1996 B-10
Condensed Consolidated Statements of Stockholders' Equity for the quarter ended
March 31, 1997 and the year ended December 31, 1996 B-11
Condensed Consolidated Statements of Cash Flows for the quarters ended March 31,
1997 and 1996 B-12
Notes to Condensed Consolidated Financial Statements for the quarters ended March 31,
1997 and 1996 B-14
</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 March 31,
1997, including the receipt of $177,015,590 in gross offering proceeds from the
sale of 17,701,559 shares of common stock and the application of such proceeds
to purchase 123 properties (including 68 properties which consist of land and
building, one property through a joint venture arrangement which consists of
land and building, 11 properties which consist of building only and 43
properties which consist of land only), 17 of which were under construction at
March 31, 1997, to provide mortgage financing to the lessees of the 43
properties consisting of land only, and to pay organizational and offering
expenses, acquisition fees and miscellaneous acquisition expenses, (ii) the
receipt of net sales proceeds in the amount of $5,266,327 relating to the sale
of four properties consisting of building only which had been acquired as of
March 31, 1997, (iii) the receipt of $48,427,203 in gross offering proceeds from
the sale of 4,842,721 additional shares of common stock during the period April
1, 1997 through July 2, 1997, and (iv) the application of such funds and
$38,583,057 of cash and cash equivalents at March 31, 1997, to purchase 60
additional properties acquired during the period April 1, 1997 through July 2,
1997 (32 of which are under construction and consist of land and building, 26
properties which consist of land and building, one property which consists of
land only and one property which consists of building only), to pay additional
costs for the 17 properties under construction at March 31, 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 March 31, 1997, includes the
transactions described in (i) above from the historical consolidated balance
sheet, adjusted to give effect to the transactions in (ii), (iii) and (iv)
above, as if they had occurred on March 31, 1997.
The Pro Forma Consolidated Statements of Earnings for the quarter ended
March 31, 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 July 2, 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 July 2, 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.
B-1
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1997
<TABLE>
<CAPTION>
Pro Forma
ASSETS Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C>
Land and buildings on operating
leases, less accumulated
depreciation $ 82,040,349 $ 64,250,680 (a) $146,291,029
Net investment in direct
financing leases (c) 19,816,023 15,369,932 (a)
(5,266,327)(b) 29,919,628
Cash and cash equivalents 44,132,920 (38,583,057)(a)
5,266,327 (b) 10,816,190
Restricted cash 231,787 231,787
Receivables 334,698 334,698
Mortgage notes receivable 17,803,151 17,803,151
Organization costs, less
accumulated amortization 12,682 12,682
Loan costs, less accumulated
amortization 25,599 25,599
Accrued rental income 606,879 606,879
Other assets 2,718,273 (1,869,129)(a) 849,144
------------ ------------ ------------
$167,722,361 $ 39,168,426 $206,890,787
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Note payable $ 5,469,649 $ 5,469,649
Accrued interest payable 13,936 13,936
Accrued construction costs payable 4,409,764 $ (4,409,764)(a) -
Accounts payable and other accrued
expenses 83,986 83,986
Due to related parties 733,581 733,581
Rents paid in advance 227,391 227,391
Deferred rental income 592,125 26,353 (a) 618,478
Other payables 13,495 13,495
------------ ------------ ------------
Total liabilities 11,543,927 (4,383,411) 7,160,516
------------ ------------ ------------
Minority interest 287,647 287,647
------------ ------------ ------------
Stockholders' equity:
Preferred stock, without par
value. Authorized and unissued
3,000,000 shares (d) - -
Excess shares, $.01 par value per
share. Authorized and unissued
23,000,000 shares (d) - -
Common stock, $.01 par value per
share. Authorized 20,000,000
shares; issued and outstanding
17,721,559 shares; issued and
outstanding, as adjusted,
22,564,280 shares (d) 177,215 48,427 (a) 225,642
Capital in excess of par value 157,115,036 43,503,410 (a) 200,618,446
Accumulated distributions in
excess of net earnings (1,401,464) (1,401,464)
------------ ------------ ------------
155,890,787 43,551,837 199,442,624
------------ ------------ ------------
$167,722,361 $ 39,168,426 $206,890,787
============ ============ ============
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements.
B-2
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
QUARTER ENDED MARCH 31, 1997
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
Revenues:
Rental income from
operating leases $1,643,074 $ 8,188 (1) $1,651,262
Earned income from
direct financing leases (2) 446,711 446,711
Interest income from
mortgage notes receivable 375,357 375,357
Other interest and income 474,416 (8,185)(3) 466,231
---------- ---------- ----------
2,939,558 3 2,939,561
---------- ---------- ----------
Expenses:
General operating and
administrative 255,456 255,456
Professional services 38,463 38,463
Asset and mortgage management
fees to related party 110,516 2,126 (4) 112,642
State and other taxes 35,350 35,350
Depreciation and amortization 240,038 2,142 (6) 242,180
---------- ---------- ---------
679,823 4,268 684,091
---------- ---------- ----------
Earnings Before Minority
Interest in Income of
Consolidated Joint Venture 2,259,735 (4,265) 2,255,470
Minority Interest in Income of
Consolidated Joint Venture (7,893) (7,893)
---------- ---------- ----------
Net Earnings $2,251,842 $ (4,265) $2,247,577
========== ========== ==========
Earnings Per Share of
Common Stock (7) $ 0.14 $ 0.14
========== ==========
Weighted Average Number of
Shares of Common Stock
Outstanding (7) 15,630,532 15,630,532
========== ==========
See accompanying notes to unaudited pro forma consolidated financial statements.
B-3
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
YEAR ENDED DECEMBER 31, 1996
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
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 (33,667)(3) 746,370
---------- ---------- ----------
6,206,684 62,782 6,269,466
---------- ---------- ----------
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 7,945 (4) 259,145
State and other taxes 56,184 1,218 (5) 57,402
Depreciation and amortization 521,871 6,852 (6) 528,723
---------- ---------- ---------
1,430,795 16,015 1,446,810
---------- ---------- ---------
Earnings Before Minority
Interest in Income of
Consolidated Joint Venture 4,775,889 46,767 4,822,656
Minority Interest in Income of
Consolidated Joint Venture (29,927) (29,927)
---------- ---------- ----------
Net Earnings $4,745,962 $ 46,767 $4,792,729
========== ========== ==========
Earnings Per Share of
Common Stock (7) $ 0.59 $ 0.59
========== ==========
Weighted Average Number of
Shares of Common Stock
Outstanding (7) 8,071,670 8,071,670
========== =========
See accompanying notes to unaudited pro forma consolidated financial statements.
B-4
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED MARCH 31, 1997 AND THE YEAR ENDED DECEMBER 31, 1996
Pro Forma Consolidated Balance Sheet:
- ------------------------------------
(a) Represents gross proceeds of $48,427,203 from the issuance of 4,842,721
shares of common stock during the period April 1, 1997 through July 2,
1997, the receipt of $26,353 of rental income during construction
(capitalized as deferred rental income), and $38,583,057 of cash and
cash equivalents used (i) to acquire 60 properties for $72,840,464 of
which one property consists of building only, one property consists of
land only and 58 properties consist of land and building, (ii) to fund
estimated construction costs of $7,141,559 ($4,409,764 of which was
accrued as construction costs payable at March 31, 1997) relating to 17
wholly- owned properties under construction at March 31, 1997, (iii) to
pay acquisition fees of $2,179,224 and reclassify from other assets
$1,869,129 of acquisition fees previously incurred relating to the
acquired properties and (iv) to pay selling commissions and offering
expenses (stock issuance costs) of $4,875,366, which have been netted
against capital in excess of par value.
B-5
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED
FOR THE QUARTER ENDED MARCH 31, 1997 AND THE YEAR ENDED DECEMBER 31, 1996
Pro Forma Consolidated Balance Sheet - Continued:
- ------------------------------------------------
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>
Jack in the Box in Oxnard, CA $ 1,244,340 $ 66,661 $ 1,311,001
Bennigan's in Arvada, CO 1,907,025 102,162 2,009,187
Boston Market in Cedar Park, TX 820,389 43,949 864,338
Boston Market in Collinsville, IL 786,924 42,157 829,081
Boston Market in Taylorsville, UT 1,296,749 69,469 1,366,218
Burger King in Ooltewah, TN 1,200,786 64,328 1,265,114
Boston Market in Arvada, CO 1,140,718 61,110 1,201,828
Boston Market in Liberty, MO 755,854 40,492 796,346
Einstein Bros. Bagels in Dearborn, MI 659,867 35,350 695,217
Jack in the Box in Enumclaw, WA 842,431 45,130 887,561
Shoney's in Guadalupe, AZ 1,445,517 77,438 1,522,955
Black-eyed Pea in Scottsdale, AZ 768,363 41,162 809,525
Pizza Hut in Dover, OH 224,378 12,020 236,398
Jack in the Box in Bacliff, TX 1,048,420 56,165 1,104,585
Boston Market in Indianapolis, IN 1,648,988 88,339 1,737,327
Boston Market in San Antonio, TX 749,581 40,156 789,737
Boston Market in Baltimore, MD 1,366,123 73,185 1,439,308
Boston Market in Gambrills, MD 1,253,116 67,131 1,320,247
Boston Market in Jessup, MD 1,273,959 68,248 1,342,207
Boston Market in Lansing, MI 1,024,386 54,878 1,079,264
Boston Market in Riverdale, MD 1,031,598 55,264 1,086,862
Boston Market in Vacaville, CA 1,424,970 76,338 1,501,308
Boston Market in Waldorf, MD 1,345,516 72,081 1,417,597
Einstein Bros. Bagels in Springfield, VA 626,546 33,565 660,111
Golden Corral in Jacksonville, FL 1,581,435 84,721 1,666,156
Golden Corral in Corpus Christi, TX 1,478,274 79,192 1,557,466
IHOP in Leesburg, VA 1,177,929 63,103 1,241,032
Popeyes in Starke, FL 572,263 30,657 602,920
Jack in the Box in Fresno, CA 838,981 44,945 883,926
Jack in the Box in Corinth, TX 954,333 51,125 1,005,458
Ruth's Chris Steak House in Tampa, FL 2,021,130 108,275 2,129,405
Golden Corral in Jacksonville, FL 1,578,529 84,564 1,663,093
Charley's Place in King of Prussia, PA 1,432,248 76,728 1,508,976
Charley's Place in McLean, VA 1,544,915 82,763 1,627,678
Darryl's in Evansville, IN 1,454,068 77,897 1,531,965
Darryl's in Hampton, VA 1,199,696 64,269 1,263,965
Darryl's in Huntsville, AL 1,363,221 73,030 1,436,251
Darryl's in Knoxville, TN 1,227,859 65,778 1,293,637
Darryl's in Louisville, KY 1,477,432 79,148 1,556,580
Darryl's in Mobile, AL 1,422,271 76,193 1,498,464
Darryl's in Montgomery, AL 1,227,992 65,785 1,293,777
Darryl's in Nashville, TN 1,181,527 63,296 1,244,823
Darryl's in Orlando, FL 2,135,420 114,398 2,249,818
Darryl's in Pensacola, FL 1,054,342 56,483 1,110,825
Darryl's in Raleigh #1, NC 1,272,374 68,163 1,340,537
Darryl's in Raleigh #2, NC 1,749,321 93,714 1,843,035
Darryl's in Richmond #1, VA 1,317,797 70,596 1,388,393
Darryl's in Richmond #2, VA 908,986 48,696 957,682
Darryl's in Winston-Salem, NC 1,181,527 63,296 1,244,823
Houlihan's in Bethel Park, PA 1,363,221 73,030 1,436,251
Houlihan's in Langhorne, PA 1,385,933 74,246 1,460,179
Houlihan's in Plymouth Meeting, PA 1,976,438 105,881 2,082,319
Golden Corral in Enid, OK 1,080,802 57,900 1,138,702
IHOP in Fairfax, VA 1,703,912 91,281 1,795,193
Golden Corral in Liberty, MO 1,258,020 67,394 1,325,414
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
17 wholly owned properties under
construction at March 31, 1997 2,731,795 146,186 2,877,981
----------- ----------- -----------
$75,572,259 $ 4,048,353 $79,620,612
=========== =========== ===========
</TABLE>
B-6
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED
FOR THE QUARTER ENDED MARCH 31, 1997 AND THE YEAR ENDED DECEMBER 31, 1996
Pro Forma Consolidated Balance Sheet - Continued:
- ------------------------------------------------
Adjustment classified as follows:
Land and buildings on operating leases $64,250,680
Net investment in direct financing leases 15,369,932
-----------
$79,620,612
===========
(b) Represents net sales proceeds in the amount of $5,266,327 received in
conjunction with the sale of four properties consisting of building
only, which were sold at net carrying value.
(c) In accordance with generally accepted accounting principles, leases in
which the present value of future minimum lease payments equals or
exceeds 90 percent of the value of the related properties are treated
as direct financing leases rather than as land and buildings. The
categorization of the leases has no effect on rental revenues received.
(d) At the Company's annual meeting of stockholders held on April 4, 1997,
the stockholders approved amendments to the Company's Amended and
Restated Articles of Incorporation, and effective May 8, 1997, the
Company filed an amendment with the State of Maryland, increasing the
number of authorized shares of capital stock from 46,000,000 shares to
156,000,000 shares (consisting of 75,000,000 common shares, 3,000,000
preferred shares and 78,000,000 excess shares).
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 July 2, 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 1997 October 1996
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
B-7
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED
FOR THE QUARTER ENDED MARCH 31, 1997 AND THE YEAR ENDED DECEMBER 31, 1996
Pro Forma Consolidated Statement of Earnings - Continued:
- --------------------------------------------------------
leases accounted for as direct financing leases, future minimum lease
payments are recorded as a receivable. The difference between the
receivable and the estimated residual values less the cost of the
properties is recorded as unearned income. The unearned income is
amortized over the lease terms to provide a constant rate of return.
Accordingly, pro forma rental income from operating leases and earned
income from direct financing leases does not necessarily represent
rental payments that would have been received if the properties had
been operational for the full pro forma period.
Generally, the leases provide for the payment of percentage rent in
addition to base rental income. However, due to the fact that no
percentage rent was due under the leases for the Pro Forma Properties
during the portion of 1996 and 1997 that the previous owners held the
properties, no pro forma adjustment was made for percentage rental
income for the quarter ended March 31, 1997 and the year ended December
31, 1996.
(2) See Note (c) under "Pro Forma Consolidated Balance Sheet" above for a
description of direct financing leases.
(3) Represents adjustment to interest income due to the decrease in the
amount of cash available for investment in interest bearing accounts
during the periods commencing (A) on the later of (i) the dates the Pro
Forma Properties became operational as rental properties by the
previous owners or (ii) 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 quarter ended March 31,
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
$2,126,000 and $4,762,000 for the Pro Forma Properties for the quarter
ended March 31, 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 quarter
ended March 31, 1997 and the year ended December 31, 1996.
B-8
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
ASSETS 1997 1996
------------ ------------
Land and buildings on operating leases,
less accumulated depreciation $ 82,040,349 $ 60,243,146
Net investment in direct financing leases 19,816,023 15,186,686
Cash and cash equivalents 44,132,920 42,450,088
Restricted cash 231,787 -
Receivables 334,698 160,675
Mortgage notes receivable 17,803,151 13,389,607
Organization costs, less accumulated
amortization of $7,318 and $6,318 12,682 13,682
Loan costs, less accumulated amortization
of $28,934 and $22,034 25,599 32,499
Accrued rental income 606,879 422,076
Other assets 2,718,273 2,926,589
------------ ------------
$167,722,361 $134,825,048
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Note payable $ 5,469,649 $ 3,521,816
Accrued interest payable 13,936 13,164
Accrued construction costs payable 4,409,764 6,587,573
Accounts payable and accrued expenses 83,986 79,817
Due to related parties 733,581 997,084
Rents paid in advance 227,391 118,900
Deferred rental income 592,125 335,849
Other payables 13,495 15,117
------------ ------------
Total liabilities 11,543,927 11,669,320
------------ ------------
Minority interest 287,647 288,301
------------ ------------
Commitments (Note 12)
Stockholders' equity:
Preferred stock, without par value.
Authorized and unissued 3,000,000
shares - -
Excess shares, $.01 par value per share.
Authorized and unissued 23,000,000
shares - -
Common stock, $.01 par value per share.
Authorized 20,000,000 shares, issued
and outstanding 17,721,559 and
13,944,715, respectively 177,215 139,447
Capital in excess of par value 157,115,036 123,687,929
Accumulated distributions in excess of
net earnings (1,401,464) (959,949)
------------ ------------
Total stockholders' equity 155,890,787 122,867,427
------------ ------------
$167,722,361 $134,825,048
============ ============
See accompanying notes to condensed consolidated financial statements.
B-9
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
Quarter Ended
March 31,
1997 1996
---------- ----------
Revenues:
Rental income from operating leases $1,643,074 $ 763,155
Earned income from direct financing
leases 446,711 35,926
Interest income from mortgage notes
receivable 375,357 184,949
Other interest and income 474,416 75,849
---------- ----------
2,939,558 1,059,879
---------- ----------
Expenses:
General operating and administrative 255,456 129,107
Professional services 38,463 29,692
Asset and mortgage management fees
to related party 110,516 40,370
State taxes 35,350 2,898
Depreciation and amortization 240,038 98,472
---------- ----------
679,823 300,539
---------- ----------
Earnings Before Minority Interest in
Income of Consolidated Joint Venture 2,259,735 759,340
Minority Interest in Income of
Consolidated Joint Venture (7,893) (14,752)
---------- ----------
Net Earnings $2,251,842 $ 744,588
========== ==========
Earnings Per Share of Common Stock $ 0.14 $ 0.16
========== ==========
Weighted Average Number of Shares of
Common Stock Outstanding 15,630,532 4,649,040
========== ==========
See accompanying notes to condensed consolidated financial statements.
B-10
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Quarter Ended March 31, 1997 and
Year Ended December 31, 1996
<TABLE>
<CAPTION>
Accumulated
Common stock distributions
------------ Capital in in excess
Number Par excess of of net
of shares value par value earnings Total
--------- -------- ------------ ------------- ------------
<S> <C>
Balance at
December 31, 1995 3,865,416 $ 38,654 $ 32,211,833 $ (269,839) $ 31,980,648
Subscriptions
received for
common stock
through public
offering and
distribution
reinvestment
plan 10,079,299 100,793 100,692,198 - 100,792,991
Stock issuance
costs - - (9,216,102) - (9,216,102)
Net earnings - - - 4,745,962 4,745,962
Distributions
declared and
paid ($.71
per share) - - - (5,436,072) (5,436,072)
---------- -------- ------------ ----------- ------------
Balance at
December 31, 1996 13,944,715 139,447 123,687,929 (959,949) 122,867,427
Subscriptions
received for
common stock
through public
offering and
distribution
reinvestment
plan 3,776,844 37,768 37,730,677 - 37,768,445
Stock issuance
costs - - (4,303,570) - (4,303,570)
Net earnings - - - 2,251,842 2,251,842
Distributions
declared and
paid ($.18
per share) - - - (2,693,357) (2,693,357)
---------- -------- ------------ ----------- ------------
Balance at
March 31, 1997 17,721,559 $177,215 $157,115,036 $(1,401,464) $155,890,787
========== ======== ============ =========== ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
B-11
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Quarter Ended
March 31,
1997 1996
------------ ------------
Increase (Decrease) in Cash and Cash
Equivalents:
Net Cash Provided by Operating
Activities $ 2,717,456 $ 710,678
------------ ------------
Cash Flows From Investing Activities:
Additions to land and buildings
on operating leases (23,400,414) (8,886,922)
Investment in direct financing
leases (5,206,508) (10,000)
Increase in restricted cash (231,787) -
Investment in mortgage notes
receivable (4,443,982) (8,445,337)
Collection on mortgage notes
receivable 49,471 10,119
Increase in other assets (95,969) (230,181)
------------ ------------
Net cash used in investing
activities (33,329,189) (17,562,321)
------------ ------------
Cash Flows From Financing Activities:
Reimbursement of acquisition and
stock issuance costs paid by
related parties on behalf of the
Company (768,733) (265,491)
Proceeds of borrowing on line
of credit 2,207,299 53,500
Payment on line of credit (259,466) -
Payment of loan costs - (53,500)
Contribution from minority
interest of consolidated
joint venture - 92,519
Subscriptions received from
stockholders 37,768,445 16,587,723
Distribution to minority interest (8,547) (14,018)
Distributions to stockholders (2,693,357) (771,465)
Payment of stock issuance costs (4,003,576) (1,515,764)
Other 52,500 5,000
------------ ------------
Net cash provided by
financing activities 32,294,565 14,118,504
------------ ------------
Net Increase (Decrease) in Cash and Cash
Equivalents 1,682,832 (2,733,139)
Cash and Cash Equivalents at Beginning
of Quarter 42,450,088 11,508,445
------------ ------------
Cash and Cash Equivalents at End
of Quarter $ 44,132,920 $ 8,775,306
============ ============
See accompanying notes to condensed consolidated financial statements.
B-12
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Quarter Ended
March 31,
1997 1996
------------ ------------
Supplemental Schedule of Non-Cash
Investing and Financing Activities:
Related parties paid certain
acquisition and stock issuance
costs on behalf of the Company
as follows:
Acquisition costs $ 220,259 $ 51,860
Stock issuance costs 593,489 264,484
------------ ------------
$ 813,748 $ 316,344
============ ============
See accompanying notes to condensed consolidated financial statements.
B-13
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Quarters Ended March 31, 1997 and 1996
1. Organization and Nature of Business:
-----------------------------------
CNL American Properties Fund, Inc. (the "Company") was organized in
Maryland on May 2, 1994, primarily for the purpose of acquiring,
directly or indirectly through joint venture or co-tenancy
arrangements, restaurant properties (the "Properties") to be leased on
a long-term, triple-net basis to operators of certain national and
regional fast-food, familystyle and casual dining restaurant chains.
The Company may provide financing ("Mortgage Loans") for the purchase
of buildings, generally by tenants that lease the underlying land from
the Company. To a lesser extent, the Company may offer furniture,
fixtures and equipment financing ("Secured Equipment Leases") to
operators of restaurant chains.
2. Basis of Presentation:
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with the instructions to Form 10-Q and
do not include all of the information and note disclosures required by
generally accepted accounting principles. The financial statements
reflect all adjustments, consisting of normal recurring adjustments,
which are, in the opinion of management, necessary to a fair statement
of the results for the interim periods presented. Operating results for
the quarter ended March 31, 1997, may not be indicative of the results
that may be expected for the year ending December 31, 1997. Amounts as
of December 31, 1996, included in the financial statements, have been
derived from audited financial statements as of that date.
These unaudited financial statements should be read in conjunction with
the financial statements and notes thereto included in the Company's
Form 10-K for the year ended December 31, 1996.
The Company accounts for its 85.47% interest in CNL/Corral South Joint
Venture using the consolidation method. Minority interest represents
the minority joint venture partner's proportionate share of the equity
in the Company's consolidated joint venture. All significant
intercompany accounts and transactions have been eliminated.
Certain items in the prior year's financial statements have been
reclassified to conform to 1997 presentation. These reclassifications
had no effect on stockholders' equity or net earnings.
B-14
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Quarters Ended March 31, 1997 and 1996
2. Basis of Presentation - Continued:
---------------------------------
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 128, "Earnings Per
Share." The Statement, which is effective for fiscal years ending after
December 15, 1997, provides for a revised computation of earnings per
share. The Company will adopt this Standard in 1997 and does not expect
compliance with such Standard to have a material effect, if any, on the
Company's earnings per share.
3. Leases:
------
The Company leases its land, buildings and equipment subject to Secured
Equipment Leases to operators or franchisees of national and regional
fast-food, family-style and casual dining restaurants. The leases are
accounted for under the provisions of Statement of Financial Accounting
Standards No. 13, "Accounting for Leases." The leases relating to 108
of the Company's Properties have been classified as operating leases
(including the leases relating to 18 properties under construction as
of March 31, 1997) and the leases relating to 15 Properties and 13
Secured Equipment Leases have been classified as direct financing
leases. For the leases classified as direct financing leases, the
building portions of the leases are accounted for as direct financing
leases while the land portions of four of these leases are accounted
for as operating leases.
4. Land and Buildings on Operating Leases:
--------------------------------------
Land and buildings on operating leases consisted of the following at:
March 31, December 31,
1997 1996
----------- -----------
Land $43,544,239 $33,850,436
Buildings 30,887,399 24,152,610
----------- -----------
74,431,638 58,003,046
Less accumulated
depreciation (848,735) (611,396)
----------- -----------
73,582,903 57,391,650
Construction in
progress 8,457,446 2,851,496
----------- -----------
$82,040,349 $60,243,146
=========== ===========
B-15
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Quarters Ended March 31, 1997 and 1996
4. Land and Buildings on Operating Leases - Continued:
--------------------------------------------------
Some leases provide for scheduled rent increases throughout the lease
term and/or rental payments during the construction of a Property prior
to the date it is placed in service. Such amounts are recognized on a
straight-line basis over the terms of the leases commencing on the date
the Property is placed in service. For the quarters ended March 31,
1997 and 1996, the Company recognized $269,740 and $112,905,
respectively, of such rental income.
The following is a schedule of future minimum lease payments to be
received on the noncancellable operating leases at March 31, 1997:
1997 $ 4,771,109
1998 6,383,324
1999 6,397,734
2000 6,421,406
2001 6,600,851
Thereafter 91,381,537
------------
$121,955,961
============
Since leases are renewable at the option of the tenant, the above table
only presents future minimum lease payments due during the initial
lease terms. In addition, this table does not include any amounts for
future contingent rents which may be received on the leases based on
the percentage of the tenant's gross sales. These amounts do not
include minimum lease payments that will become due when Properties
under development are completed (See Note 12).
5. Net Investment in Direct Financing Leases:
-----------------------------------------
The following lists the components of the net investment in direct
financing leases at:
March 31, December 31,
1997 1996
------------ ------------
Minimum lease payments
receivable $ 37,029,377 $ 30,162,465
Estimated residual
values 1,362,487 1,346,332
Less unearned income (19,042,589) (16,322,111)
------------ ------------
Net investment in
direct financing
leases $ 19,349,275 $ 15,186,686
============ ============
B-16
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Quarters Ended March 31, 1997 and 1996
5. Net Investment in Direct Financing Leases - Continued:
------------------------------------------------------
The following is a schedule of future minimum lease payments to be
received on the direct financing leases at March 31, 1997:
1997 $ 2,302,249
1998 3,075,579
1999 3,075,579
2000 3,078,897
2001 2,786,198
Thereafter 22,710,875
-----------
$37,029,377
===========
The above table does not include future minimum lease payments for
renewal periods or for contingent rental payments that may become due
in future periods (see Note 4).
6. Mortgage Notes Receivable:
-------------------------
In March 1997, in connection with the acquisition of land for eight
Pizza Hut restaurants, the Company accepted a promissory note in the
principal sum of $4,200,000, collateralized by a mortgage on the
buildings on eight Pizza Hut Properties and three additional Pizza Hut
buildings. The promissory note bears interest at a rate of 10.5% per
annum and is being collected in 240 equal monthly installments of
$41,943.
Mortgage notes receivable consisted of the following at:
March 31, December 31,
1997 1996
----------- -------------
Outstanding principal $16,863,680 $12,713,151
Accrued interest income 67,789 35,285
Deferred financing income (88,441) (46,268)
Unamortized loan costs 960,123 687,439
----------- -----------
$17,803,151 $13,389,607
=========== ===========
Management believes that the estimated fair value of mortgage notes
receivable at March 31, 1997, approximates the outstanding principal
amount based on estimated current rates at which similar loans would be
made to borrowers with similar credit and for similar maturities.
B-17
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Quarters Ended March 31, 1997 and 1996
7. Note Payable:
------------
On March 5, 1996, the Company entered into a line of credit and
security agreement (the "Loan") with a bank to be used by the Company
to offer Secured Equipment Leases. The Loan provides that the Company
will be able to receive advances of up to $15,000,000 until March 4,
1998. As of March 31, 1997, $5,469,649 of principal was outstanding
relating to the Loan, plus $13,936 of accrued interest. In general,
advances under the Loan are fully amortizing term loans repayable over
six years and bear interest at a rate per annum equal to 215 basis
points above the Reserve Adjusted LIBOR Rate (ranging from 7.52% to
7.65% as of March 31, 1997). The Company believes, based on current
terms, that the carrying value of its note payable at March 31, 1997,
approximates fair value.
Interest costs (including amortization of loan costs) incurred for the
quarter ended March 31, 1997, were $97,557, all of which were
capitalized as part of the cost of buildings under construction.
8. Stock Issuance Costs:
--------------------
The Company has incurred certain expenses of its offerings of shares,
including commissions, marketing support and due diligence expense
reimbursement fees, filing fees, legal, accounting, printing and escrow
fees, which have been deducted from the gross proceeds of the offering.
Preliminary costs incurred prior to raising capital were advanced by an
affiliate of the Company, CNL Fund Advisors, Inc. (the "Advisor"). The
Advisor has agreed to pay all offering expenses (excluding commissions
and marketing support and due diligence expense reimbursement fees)
which exceed three percent of the gross offering proceeds received from
the sale of shares of the Company.
During the quarter ended March 31, 1997 and the year ended December 31,
1996, the Company incurred $4,303,570 and $9,216,102, respectively, in
stock issuance costs, including $3,021,476 and $8,063,439,
respectively, in commissions and marketing support and due diligence
expense reimbursement fees (see Note 10). The stock issuance costs have
been charged to stockholders' equity subject to the three percent cap
described above.
B-18
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Quarters Ended March 31, 1997 and 1996
9. Distributions:
-------------
For the quarters ended March 31, 1997 and 1996, approximately 75 and 90
percent, respectively, of the distributions paid to stockholders were
considered ordinary income and approximately 25 and ten percent,
respectively, were considered a return of capital to stockholders for
federal income tax purposes. No amounts distributed to the stockholders
for the quarters ended March 31, 1997 and 1996, are required to be or
have been treated by the Company as a return of capital for purposes of
calculating the stockholders' return on their invested capital. The
characterization for tax purposes of distributions declared for the
quarter ended March 31, 1997, may not be indicative of the results that
may be expected for the year ending December 31, 1997.
10. Related Party Transactions:
--------------------------
During the quarter ended March 31, 1997, the Company incurred
$2,832,633 in selling commissions due to CNL Securities Corp. for
services in connection with the offering of shares. A substantial
portion of this amount ($2,570,708) was or will be 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. During the quarter ended March
31, 1997, the Company incurred $188,842 of such fees, the majority of
which were reallowed to other broker-dealers and from which all bona
fide due diligence expenses were paid.
The Advisor 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.
During the quarter ended March 31, 1997, the Company incurred
$1,699,580 of such fees. Such fees are included in land and buildings
on operating leases, net investment in direct financing leases,
mortgage notes receivable and other assets.
In connection with the acquisition of Properties that are being or have
been constructed or renovated by affiliates, subject to approval by the
Company's Board of Directors, the Company may incur
development/construction management fees payable to affiliates of the
Company. Such fees are included
B-19
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Quarters Ended March 31, 1997 and 1996
10. Related Party Transactions - Continued
--------------------------------------
in the purchase price of the Properties and are therefore included in
the basis on which the Company charges rent on the Properties. During
the quarter ended March 31, 1997, the Company incurred $129,379 of such
amounts relating to two Properties. No such amounts were incurred for
the quarter ended March 31, 1996.
For negotiating Secured Equipment Leases and supervising the Secured
Equipment Lease program, the Advisor is entitled to receive 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. During the quarter ended March 31, 1997, the Company incurred
$41,281 in secured equipment lease servicing fees. No secured equipment
lease servicing fees were incurred for the quarter ended March 31,
1996.
The Company and the Advisor have entered into an advisory agreement
pursuant to which the Advisor will receive a monthly asset and mortgage
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 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 the Advisor. 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 the Advisor shall determine.
During the quarters ended March 31, 1997 and 1996, the Company incurred
$127,458 and $41,764, respectively, of such fees, $16,942 and $1,394,
respectively, of which was capitalized as part of the cost of building
for Properties under construction.
B-20
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Quarters Ended March 31, 1997 and 1996
10. Related Party Transactions - Continued
--------------------------------------
The Advisor and its affiliates provide accounting and administrative
services to the Company (including accounting and administrative
services in connection with the offerings of shares) on a day-to-day
basis. For the quarters ended March 31, 1997 and 1996, the expenses
incurred for these services were classified as follows:
1997 1996
-------- --------
Stock issuance costs $288,747 $185,113
General operating and
administrative expenses 108,003 74,032
-------- --------
$396,750 $259,145
======== ========
During the quarter ended March 31, 1997, the Company acquired two
Properties for approximately $1,773,300 from affiliates of the Company.
The affiliates had purchased and temporarily held title to the
Properties in order to facilitate the acquisition of the Properties by
the Company. The Properties were acquired at a cost no greater than the
lesser of the cost of each Property to the affiliate (including
carrying costs) or the Property's appraised value.
The due to related parties consisted of the following at:
March 31, December 31,
1997 1996
--------- ------------
Due to the Advisor:
Expenditures incurred
on behalf of the
Company and accounting
and administrative
services $194,140 $199,068
Acquisition fees 289,606 383,210
-------- --------
483,746 582,278
-------- --------
Due to CNL Securities Corp:
Commissions 232,385 372,227
Marketing support and due
diligence expense reim-
bursement fees 17,450 42,579
-------- --------
249,835 414,806
-------- --------
$733,581 $997,084
======== ========
B-21
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Quarters Ended March 31, 1997 and 1996
11. Concentration of Credit Risk:
----------------------------
During the quarter ended March 31, 1997, one affiliated group of
lessees and borrowers represented more than ten percent of the
Company's total rental, earned and interest income from its Properties,
Mortgage Loans and Secured Equipment Leases. The following schedule
presents rental, earned and interest income earned from this affiliated
group for the quarters ended March 31:
1997 1996
-------- --------
Castle Hill Holdings V,
L.L.C., Castle Hill
Holdings VI, L.L.C.,
and Castle Hill Holdings
VII, L.L.C. ("Castle Hill") $573,398 $282,525
In addition, during the quarter ended March 31, 1997, three restaurant
chains each contributed more than ten percent of the Company's total
rental, earned and interest income. The following schedule presents
rental, earned and interest income from each of these restaurants
chains for the quarters ended March 31:
1997 1996
-------- ------
Golden Corral Family
Steakhouse Restaurants $584,647 $371,290
Pizza Hut 573,398 282,525
Boston Market 328,515 82,341
Although the Company's Properties are geographically diverse and the
Company's lessees and borrowers operate a variety of restaurant
concepts, failure of any one of these restaurant chains or any lessee
or borrower that contributes more than ten percent of the Company's
rental, earned and interest income could significantly impact the
results of operations of the Company. However, management believes that
the risk of such a default is reduced due to the essential or important
nature of these Properties for the on-going operations of the lessees
and borrowers.
12. Commitments:
-----------
The Company has entered into various development agreements with
tenants which provide terms and specifications for the construction of
buildings the tenants have agreed to lease. The agreements provide a
maximum amount of development costs (including the purchase price of
the land and closing costs)
B-22
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Quarters Ended March 31, 1997 and 1996
12. Commitments - Continued:
-----------------------
to be paid by the Company. The aggregate maximum development costs the
Company has agreed to pay is approximately $19,027,300, of which
approximately $15,888,300 in land and other costs had been incurred as
of March 31, 1997. The buildings currently under construction are
expected to be operational by September 1997. In connection with the
purchase of each Property, the Company, as lessor, entered into a
long-term lease agreement.
During the quarter ended March 31, 1997, the Company entered into a
commitment to sell four of its Properties and the equipment relating to
two Secured Equipment Leases to the tenant. Management anticipates that
the proceeds received from the sale will be sufficient to cover the
carrying value of the Properties and the equipment.
13. Subsequent Events:
-----------------
During the period April 1, 1997 through April 30, 1997, the Company
received subscription proceeds for an additional 1,405,024 shares
($14,050,240) of common stock.
On April 1, 1997, the Company declared distributions of $1,091,133 or
$.0615 per share of common stock, payable in June 1997 to stockholders
of record on April 1, 1997.
During the period April 1, 1997 through April 30, 1997, the Company
acquired 16 Properties (13 on which restaurants are being constructed
and one on which a restaurant is being renovated) for cash at a total
cost of approximately $10,523,000, excluding closing and development
costs. In connection with the purchase of each Property, the Company,
as lessor, entered into a long-term lease agreement. The development
costs (including the purchase of the land and closing costs) to be paid
by the Company relating to the 13 Properties under construction and the
one Property to be renovated are estimated to be approximately
$14,503,700. The buildings under construction are expected to be
operational by November 1997.
At the Company's annual meeting of stockholders held on April 4, 1997,
the stockholders approved amendments to the Company's Amended and
Restated Articles of Incorporation increasing the number of authorized
shares of capital stock from 46,000,000 shares to 156,000,000 shares
(consisting of 75,000,000 common shares, 3,000,000 preferred shares and
78,000,000 excess shares).
B-23
<PAGE>
ADDENDUM TO
EXHIBIT E
STATEMENT OF ESTIMATED
TAXABLE OPERATING RESULTS
THE STATEMENT OF ESTIMATED
TAXABLE OPERATING RESULTS IN THIS
ADDENDUM UPDATES AND REPLACES
EXHIBIT E TO THE ATTACHED
PROSPECTUS, DATED APRIL 18, 1997.
<PAGE>
STATEMENT OF ESTIMATED TAXABLE OPERATING RESULTS
CNL AMERICAN PROPERTIES FUND, INC.
PROPERTIES ACQUIRED FROM JANUARY 1, 1997
THROUGH JULY 2, 1997
For a 12-Month Period (Unaudited)
The following schedule presents unaudited estimated taxable operating
results of each Property acquired by the Company from January 1, 1997 through
July 2, 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>
Jack in the Box Jack in the Box Jack in the Box Jack in the Box
Los Angeles, CA (8) Las Vegas, NV (8) Moscow, ID (8) Kent #1, WA (8)
------------------- ----------------- -------------- ---------------
<S> <C>
Estimated Taxable Operating
Results:
Base Rent (1) (7) (7) (7) (7)
Interest Income (2) - - - -
Total Revenues (7) (7) (7) (7)
Asset Management Fees (3) (7) (7) (7) (7)
Mortgage Management Fee (4) - - - -
General and Administrative
Expenses (5) (7) (7) (7) (7)
Total Operating Expenses (7) (7) (7) (7)
Estimated Cash Available from
Operations (7) (7) (7) (7)
Depreciation and Amortization
Expense (6) (7) (7) (7) (7)
Estimated Taxable Operating
Results (7) (7) (7) (7)
</TABLE>
See Footnotes
E-1
<PAGE>
<TABLE>
<CAPTION>
Jack in the Box Jack in the Box Shoney's
Hollister, CA (8) Kingsburg, CA (8) Indian Harbour Beach, FL
----------------- ----------------- ------------------------
<S> <C>
Estimated Taxable Operating
Results:
Base Rent (1) (7) (7) (7)
Interest Income (2) - - -
Total Revenues (7) (7) (7)
Asset Management Fees (3) (7) (7) (7)
Mortgage Management Fee (4) - - -
General and Administrative
Expenses (5) (7) (7) (7)
Total Operating Expenses (7) (7) (7)
Estimated Cash Available from
Operations (7) (7) (7)
Depreciation and Amortization
Expense (6) (7) (7) (7)
Estimated Taxable Operating
Results (7) (7) (7)
</TABLE>
See Footnotes
E-2
<PAGE>
<TABLE>
<CAPTION>
Jack in the Box Jack in the Box Golden Corral Burger King
Murrieta, CA (8) Humble, TX (8) Winchester, KY (9) Kent #2, OH
---------------- --------------- ------------------ -----------
<S> <C>
Estimated Taxable Operating
Results:
Base Rent (1) (7) (7) (7) $89,688
Interest Income (2) - - - -
------
Total Revenues
(7) (7) (7) 89,688
-------
Asset Management Fees (3) (7) (7) (7) (5,237)
Mortgage Management Fee (4) - - - -
General and Administrative
Expenses (5) (7) (7) (7) (5,561)
-------
Total Operating Expenses (7) (7) (7) (10,798)
-------
Estimated Cash Available from
Operations (7) (7) (7) 78,790
Depreciation and Amortization
Expense (6) (7) (7) (7) (17,602)
-------
Estimated Taxable Operating
Results (7) (7) (7) $61,288
=======
</TABLE>
See Footnotes
E-3
<PAGE>
<TABLE>
<CAPTION>
Burger King Denny's Jack in the Box Jack in the Box
Chattanooga, TN (10) Tampa, FL (11) Palmdale, CA (8) Houston #3, TX (8)
-------------------- -------------- ---------------- ------------------
<S> <C>
Estimated Taxable Operating
Results:
Base Rent (1) (7) (7) (7) (7)
Interest Income (2) - - - -
Total Revenues (7) (7) (7) (7)
Asset Management Fees (3) (7) (7) (7) (7)
Mortgage Management Fee (4) - - - -
General and Administrative
Expenses (5) (7) (7) (7) (7)
Total Operating Expenses (7) (7) (7) (7)
Estimated Cash Available from
Operations (7) (7) (7) (7)
Depreciation and Amortization
Expense (6) (7) (7) (7) (7)
Estimated Taxable Operating
Results (7) (7) (7) (7)
</TABLE>
See Footnotes
E-4
<PAGE>
<TABLE>
<CAPTION>
Golden Corral Jack in the Box Black-eyed Pea Black-eyed Pea
Hopkinsville, KY Houston #4, TX (8) Bedford, TX (12) Dallas, TX (12)
---------------- ------------------ ---------------- ---------------
<S> <C>
Estimated Taxable Operating
Results:
Base Rent (1) $ 141,912 (7) $ 79,560 $ 75,182
Interest Income (2) - - - -
---------- --------- ---------
Total Revenues 141,912 (7) 79,560 75,182
---------- --------- ---------
Asset Management Fees (3) (7,518) (7) (3,716) (3,716)
Mortgage Management Fee (4) - - - -
General and Administrative
Expenses (5) (8,799) (7) (4,933) (4,661)
---------- --------- ---------
Total Operating Expenses (16,317) (7) (8,649) (8,377)
---------- --------- ---------
Estimated Cash Available from
Operations 125,595 (7) 70,911 66,805
Depreciation and Amortization
Expense (6) (22,573) (7) (16,731) (16,731)
---------- --------- ---------
Estimated Taxable Operating
Results $ 103,022 (7) $ 54,180 $ 50,074
========== ========= =========
</TABLE>
See Footnotes
E-5
<PAGE>
<TABLE>
<CAPTION>
Black-eyed Pea Black-eyed Pea Eight Pizza Hut Jack in the Box
Fort Worth, TX (12) Oklahoma City, OK Properties Oxnard, CA (8)
<S> <C> ------------------- ----------------- --------------- ---------------
Estimated Taxable Operating
Results:
Base Rent (1) $ 84,305 $ 81,660 $ 165,440 (7)
Interest Income (2) - - 437,918 -
--------- --------- ---------
Total Revenues 84,305 81,660 603,358 (7)
--------- --------- ---------
Asset Management Fees (3) (3,716) (3,696) (9,454) (7)
Mortgage Management Fee (4) - - (25,200) -
General and Administrative
Expenses (5) (5,227) (5,063) (37,408) (7)
--------- --------- --------
Total Operating Expenses (8,943) (8,759) (72,062) (7)
--------- --------- --------
Estimated Cash Available from
Operations 75,362 72,901 531,296 (7)
Depreciation and Amortization
Expense (6) (16,731) (16,642) (11,340) (7)
--------- --------- --------
Estimated Taxable Operating
Results $ 58,631 $ 56,259 $519,956 (7)
========= ========= ========
</TABLE>
See Footnotes
E-6
<PAGE>
<TABLE>
<CAPTION>
Bennigan's Boston Market Boston Market Boston Market
Arvada #1, CO Cedar Park, TX (14) Collinsville, IL (15) Taylorsville, UT (13)
------------- ------------------- --------------------- ---------------------
<S> <C>
Estimated Taxable Operating
Results:
Base Rent (1) $ 198,076 (7) (7) (7)
Interest Income (2) - - - -
----------
Total Revenues 198,076 (7) (7) (7)
----------
Asset Management Fees (3) (11,442) (7) (7) (7)
Mortgage Management Fee (4) - - - -
General and Administrative
Expenses (5) (12,281) (7) (7) (7)
----------
Total Operating Expenses (23,723) (7) (7) (7)
----------
Estimated Cash Available from
Operations 174,353 (7) (7) (7)
Depreciation and Amortization
Expense (6) (33,275) (7) (7) (7)
----------
Estimated Taxable Operating
Results $ 141,078 (7) (7) (7)
==========
</TABLE>
See Footnotes
E-7
<PAGE>
<TABLE>
<CAPTION>
Burger King Boston Market Boston Market Einstein Bros. Bagels
Ooltewah, TN (10) Arvada #2, CO (13) Liberty #1, MO (15) Dearborn, MI (16)
----------------- ------------------ ------------------- -----------------
<S> <C>
Estimated Taxable Operating
Results:
Base Rent (1) (7) (7) (7) (7)
Interest Income (2) - - - -
Total Revenues (7) (7) (7) (7)
Asset Management Fees (3) (7) (7) (7) (7)
Mortgage Management Fee (4) - - - -
General and Administrative
Expenses (5) (7) (7) (7) (7)
Total Operating Expenses (7) (7) (7) (7)
Estimated Cash Available from
Operations (7) (7) (7) (7)
Depreciation and Amortization
Expense (6) (7) (7) (7) (7)
Estimated Taxable Operating
Results (7) (7) (7) (7)
</TABLE>
See Footnotes
E-8
<PAGE>
<TABLE>
<CAPTION>
Jack in the Box Shoney's Black-eyed Pea Pizza Hut
Enumclaw, WA (8) Guadalupe, AZ Scottsdale, AZ (11) Dover, OH
---------------- ------------- ------------------- ---------
<S> <C>
Estimated Taxable Operating
Results:
Base Rent (1) (7) (7) (7) $23,560
Interest Income (2) - - - -
-------
Total Revenues (7) (7) (7) 23,560
-------
Asset Management Fees (3) (7) (7) (7) (1,346)
Mortgage Management Fee (4) - - - -
General and Administrative
Expenses (5) (7) (7) (7) (1,461)
-------
Total Operating Expenses (7) (7) (7) (2,807)
Estimated Cash Available from
Operations (7) (7) (7) 20,753
Depreciation and Amortization
Expense (6) (7) (7) (7) -
------
Estimated Taxable Operating
Results (7) (7) (7) $20,753
=======
</TABLE>
See Footnotes
E-9
<PAGE>
<TABLE>
<CAPTION>
Jack in the Box Boston Market Boston Market Boston Market
Bacliff, TX (8) Indianapolis, IN (16) San Antonio, TX (14) Baltimore, MD (16)
--------------- --------------------- -------------------- -------------------
<S> <C>
Estimated Taxable Operating
Results:
Base Rent (1) (7) (7) (7) (7)
Interest Income (2) - - - -
Total Revenues (7) (7) (7) (7)
Asset Management Fees (3) (7) (7) (7) (7)
Mortgage Management Fee (4) - - - -
General and Administrative
Expenses (5) (7) (7) (7) (7)
Total Operating Expenses (7) (7) (7) (7)
Estimated Cash Available from
Operations (7) (7) (7) (7)
Depreciation and Amortization
Expense (6) (7) (7) (7) (7)
Estimated Taxable Operating
Results (7) (7) (7) (7)
</TABLE>
See Footnotes
E-10
<PAGE>
<TABLE>
<CAPTION>
Boston Market Boston Market Boston Market Boston Market
Gambrills, MD (16) Jessup, MD (16) Lansing, MI Riverdale, MD (16)
------------------ --------------- ------------- ------------------
<S> <C>
Estimated Taxable Operating
Results:
Base Rent (1) (7) (7) (7) (7)
Interest Income (2) - - - -
Total Revenues (7) (7) (7) (7)
Asset Management Fees (3) (7) (7) (7) (7)
Mortgage Management Fee (4) - - - -
General and Administrative
Expenses (5) (7) (7) (7) (7)
Total Operating Expenses (7) (7) (7) (7)
Estimated Cash Available from
Operations (7) (7) (7) (7)
Depreciation and Amortization
Expense (6) (7) (7) (7) (7)
Estimated Taxable Operating
Results (7) (7) (7) (7)
</TABLE>
See Footnotes
E-11
<PAGE>
<TABLE>
<CAPTION>
Boston Market Boston Market Einstein Bros. Bagels Golden Corral
Vacaville, CA Waldorf, MD (16) Springfield, VA (16) Jacksonville #1, FL (9)
------------- ---------------- ----------------------- -----------------------
<S> <C>
Estimated Taxable Operating
Results:
Base Rent (1) (7) (7) (7) (7)
Interest Income (2) - - - -
Total Revenues (7) (7) (7) (7)
Asset Management Fees (3) (7) (7) (7) (7)
Mortgage Management Fee (4) - - - -
General and Administrative
Expenses (5) (7) (7) (7) (7)
Total Operating Expenses (7) (7) (7) (7)
Estimated Cash Available from
Operations (7) (7) (7) (7)
Depreciation and Amortization
Expense (6) (7) (7) (7) (7)
Estimated Taxable Operating
Results (7) (7) (7) (7)
</TABLE>
See Footnotes
E-12
<PAGE>
<TABLE>
<CAPTION>
Golden Corral IHOP Popeyes Jack in the Box
Corpus Christi, TX (9) Leesburg, VA (17) Starke, FL Fresno, CA (8)
---------------------- ----------------- ---------- ----------------
<S> <C>
Estimated Taxable Operating
Results:
Base Rent (1) (7) $119,659 (7) (7)
Interest Income (2) - - - -
--------
Total Revenues (7) 119,659
--------
Asset Managemen (7) (7,068) (7) (7)
Mortgage Management Fee (4) - - - -
General and Administrative
Expenses (5) (7) (7,419) (7) (7)
--------
Total Operating Expenses (7) (14,487) (7) (7)
--------
Estimated Cash Available from
Operations (7) 105,172 (7) (7)
Depreciation and Amortization
Expense (6) (7) (14,835) (7) (7)
--------
Estimated Taxable Operating
Results (7) $ 90,337 (7) (7)
</TABLE> ========
See Footnotes
E-13
<PAGE>
<TABLE>
<CAPTION>
Jack in the Box Ruth's Chris Steak House Golden Corral
Corinth, TX (8) Tampa, FL Jacksonville #2, FL (9)
----------------- ------------------------ ---------------------
<S> <C>
Estimated Taxable Operating
Results:
Base Rent (1) (7) $175,000 (7)
Interest Income (2) - - -
--------
Total Revenues (7) 175,000 (7)
--------
Asset Management Fees (3) (7) (12,127) (7)
Mortgage Management Fee (4) - - -
General and Administrative
Expenses (5) (7) (10,850) (7)
--------
Total Operating Expenses (7) (22,977) (7)
--------
Estimated Cash Available from
Operations (7) 152,023 (7)
Depreciation and Amortization
Expense (6) (7) (27,123) (7)
--------
Estimated Taxable Operating
Results (7) $124,900 (7)
========
</TABLE>
See Footnotes
E-14
<PAGE>
<TABLE>
<CAPTION>
Charley's Place Charley's Place Darryl's Darryl's
King of Prussia, PA (18) McLean, VA (18) Evansville, IN (18) Hampton, VA (18)
------------------------ --------------- ------------------- ----------------
<S> <C>
Estimated Taxable Operating
Results:
Base Rent (1) $150,766 $162,731 $153,159 $126,356
Interest Income (2) - - - -
-------- -------- -------- -------
Total Revenues 150,766 162,731 153,159 126,356
-------- -------- -------- -------
Asset Management Fees (3) (8,593) (9,269) (8,724) (7,198)
Mortgage Management Fee (4) - - - -
General and Administrative
Expenses (5) (9,347) (10,089) (9,496) (7,834)
-------- -------- ------- -------
Total Operating Expenses (17,940) (19,358) (18,220) (15,032)
-------- -------- ------- -------
Estimated Cash Available from
Operations 132,826 143,373 134,939 111,324
Depreciation and Amortization
Expense (6) (14,036) (17,608) (24,887) (13,745)
-------- -------- ------- -------
Estimated Taxable Operating
Results $118,790 $125,765 $110,052 $ 97,579
======== ======== ======== ========
</TABLE>
See Footnotes
E-15
<PAGE>
<TABLE>
<CAPTION>
Darryl's Darryl's Darryl's Darryl's
Huntsville, AL (18) Knoxville, TN (18) Louisville, KY (18) Mobile, AL (18)
------------------- ------------------ ------------------- ---------------
<S> <C>
Estimated Taxable Operating
Results:
Base Rent (1) $143,586 $129,324 $155,552 $149,809
Interest Income (2) - - - -
-------- -------- -------- -------
Total Revenues 143,586 129,324 155,552 149,809
-------- -------- -------- -------
Asset Management Fees (3) (8,179) (7,367) (8,865) (8,534)
Mortgage Management Fee (4) - - - -
General and Administrative
Expenses (5) (8,902) (8,018) (9,644) (9,288)
-------- -------- -------- -------
Total Operating Expenses (17,081) (15,385) (18,509) (17,822)
-------- ------- --------- ---------
Estimated Cash Available from
Operations 126,505 113,939 137,043 131,987
Depreciation and Amortization
Expense (6) (16,960) (18,112) (23,376) (25,774)
-------- -------- -------- -------
Estimated Taxable Operating
Results $109,545 $ 95,827 $113,667 $106,213
======== ======== ======== ========
</TABLE>
See Footnotes
E-16
<PAGE>
<TABLE>
<CAPTION>
Darryl's Darryl's Darryl's Darryl's
Montgomery, AL (18) Nashville, TN (18) Orlando, FL (18) Pensacola, FL (18)
------------------- ------------------ ---------------- ------------------
<S> <C>
Estimated Taxable Operating
Results:
Base Rent (1) $129,228 $124,442 $224,952 $111,040
Interest Income (2) - - - -
-------- -------- -------- -------
Total Revenues 129,228 124,442 224,952 111,040
-------- -------- -------- -------
Asset Management Fees (3) (7,368) (7,089) (12,813) (6,326)
Mortgage Management Fee (4) - - - -
General and Administrative
Expenses (5) (8,012) (7,715) (13,947) (6,884)
-------- -------- -------- -------
Total Operating Expenses (15,380) (14,804) (26,760) (13,210)
-------- -------- -------- -------
Estimated Cash Available from
Operations 113,848 109,638 198,192 97,830
Depreciation and Amortization
Expense (6) (24,326) (18,809) (19,739) (18,536)
-------- -------- -------- -------
Estimated Taxable Operating
Results $ 89,522 $ 90,829 $178,453 $ 79,294
======== ======== ======== ========
</TABLE>
See Footnotes
E-17
<PAGE>
<TABLE>
<CAPTION>
Darryl's Darryl's Darryl's Darryl's
Raleigh #1, NC (18) Raleigh #2, NC (18) Richmond #1, VA (18) Richmond #2, VA (18)
------------------- ------------------- -------------------- --------------------
<S> <C>
Estimated Taxable Operating
Results:
Base Rent (1) $134,014 $184,269 $138,800 $ 95,724
Interest Income (2) - - - -
-------- -------- -------- --------
Total Revenues 134,014 184,269 138,800 95,724
-------- -------- -------- --------
Asset Management Fees (3) (7,634) (10,496) (7,907) (5,454)
Mortgage Management Fee (4) - - - -
General and Administrative
Expenses (5) (8,309) (11,425) (8,606) (5,935)
-------- -------- -------- --------
Toteal Operating Expenses (15,943) (21,921) (16,513) (11,389)
-------- -------- -------- --------
Estimated Cash Available from
Operations 118,071 162,348 122,287 84,335
Depreciation and Amortization
Expense (6) (12,905) (18,379) (19,813) (16,607)
-------- -------- -------- --------
Estimated Taxable Operating
Results $105,166 $143,969 $102,474 $ 67,728
======== ======== ======== ========
</TABLE>
See Footnotes
E-18
<PAGE>
<TABLE>
<CAPTION>
Darryl's Houlihan's Houlihan's Houlihan's
Winston-Salem, NC (18) Bethel Park, PA (18) Langhorne, PA (18) Plymouth Meeting, PA (18)
---------------------- -------------------- ------------------ -------------------------
<S> <C>
Estimated Taxable Operating
Results:
Base Rent (1) $124,442 $143,586 $145,980 $208,200
Interest Income (2) - - - -
-------- -------- -------- -------
Total Revenues 124,442 143,586 145,980 208,200
-------- -------- -------- --------
Asset Management Fees (3) (7,089) (8,179) (8,316) (11,859)
Mortgage Management Fee (4) - - - -
General and Administrative
Expenses (5) (7,715) (8,902) (9,051) (12,908)
-------- --------- -------- -------
Total Operating Expenses (14,804) (17,081) (17,367) (24,767)
-------- --------- -------- -------
Estimated Cash Available from
Operations 109,638 126,505 128,613 183,433
Depreciation and Amortization
Expense (6) (20,758) (15,213) (16,572) (23,213)
-------- --------- -------- -------
Estimated Taxable Operating
Results $ 88,880 $111,292 $112,041 $160,220
======== ======== ======== ========
</TABLE>
See Footnotes
E-19
<PAGE>
<TABLE>
<CAPTION>
Golden Corral IHOP Golden Corral Boston Market
Enid, OK (9) Fairfax, VA (17) Liberty #2, MO (9) Southlake, TX (16)
------------- ---------------- ------------------ ------------------
<S> <C>
Estimated Taxable Operating
Results:
Base Rent (1) (7) $173,045 (7) $107,449
Interest Income (2) - - - -
-------- --------
Total Revenues (7) 173,045 (7) 107,449
-------- --------
Asset Management Fees (3) (7) (10,223) (7) (6,154)
Mortgage Management Fee (4) - - - -
General and Administrative
Expenses (5) (7) (10,729) (7) (6,662)
-------- --------
Total Operating Expenses (7) (20,952) (7) (12,816)
-------- --------
Estimated Cash Available from
Operations (7) 152,093 (7) 94,633
Depreciation and Amortization
Expense (6) (7) (18,015) (7) (15,904)
-------- --------
Estimated Taxable Operating
Results (7) $134,078 (7) $ 78,729
======== ========
</TABLE>
See Footnotes
E-20
<PAGE>
<TABLE>
<CAPTION>
Boston Market Jack in the Box Jack in the Box KFC
Stafford, TX (16) Channelview, TX (8) Garland, TX (8) Putnam, CT Total
----------------- ------------------- ----------------- ---------- -------------
<S> <C>
Estimated Taxable Operating
Results:
Base Rent (1) $111,894 (7) (7) $ 89,960 $3,109,617
Interest Income (2) - - - - 437,918
-------- ------- ----------
Total Revenues 111,894 (7) (7) 89,960
-------- -------
Asset Management Fees (3) (6,409) (7) (7) (4,768) (173,800)
Mortgage Management Fee (4) - - - - (25,200)
General and Administrative
Expenses (5) (6,937) (7) (7) (5,578) (219,947)
-------- ------- --------
Total Operating Expenses (13,346) (7) (7) (10,346) (418,947)
-------- ------- --------
Estimated Cash Available from
Operations 98,548 (7) (7) 79,614 3,128,588
Depreciation and Amortization
Expense (6) (17,411) (7) (7) (13,688) (452,327)
-------- -------- --------
Estimated Taxable Operating
Results $ 81,137 (7) (7) $ 65,926 $2,676,261
======== ======== =========
</TABLE>
See Footnotes
E-21
<PAGE>
FOOTNOTES:
(1) Base rent does not include percentage rents which become due if specified
levels of gross receipts are achieved.
(2) The Company entered into a Master Mortgage Note agreement for $4,200,000,
collateralized by building improvements located on the Eight Pizza Hut
Properties and three additional Pizza Hut properties. The Master Mortgage
Note bears interest at a rate of 10.50% per annum and principal and interest
will be collected in equal monthly installments over 20 years beginning in
May 1997. Amount does not include $21,000 of loan commitment fees and
$21,000 in loan origination fees collected by the Company at closing from
the borrower.
(3) The Properties will be managed pursuant to an advisory agreement between the
Company and CNL Fund Advisors, Inc. (the "Advisor"), pursuant to which the
Advisor will receive monthly asset management fees in an amount equal to
one-twelfth of .60% of the Company's Real Estate Asset Value as of the end
of the preceding month as defined in such agreement. See "Management
Compensation."
(4) For managing the Mortgage Loans, the Advisor will be entitled to receive a
monthly mortgage management fee of one-twelfth of .60% of the total
principal amount of the Mortgage Loans as of the end of the preceding month.
See "Management Compensation."
(5) Estimated at 6.2% of gross rental and interest income based on the previous
experience of Affiliates of the Advisor with 18 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.
E-22
<PAGE>
(6) The estimated federal tax basis of the depreciable portion (the building
portion) of the Properties has been depreciated on the straight-line method
over 39 years. Acquisition fees allocated to the Master Mortgage Note have
been amortized on a straight-line basis over the life of the agreement (20
years).
(7) The Property is under construction or renovation and therefore was not
operational 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
-------- -------------------------------
Los Angeles Property July 6, 1997
Las Vegas Property July 6, 1997
Moscow Property July 21, 1997
Kent #1 Property July 21, 1997
Hollister Property July 21, 1997
Kingsburg Property July 21, 1997
Indian Harbour Beach Property July 23, 1997
Murrieta Property July 30, 1997
Humble Property August 2, 1997
Winchester Property August 2, 1997
Chattanooga Property June 24, 1997
Tampa Property August 10, 1997
Palmdale Property August 10, 1997
Houston #3 Property August 10, 1997
Houston #4 Property September 14, 1997
Oxnard Property September 28, 1997
Cedar Park Property September 29, 1997
Collinsville Property September 29, 1997
Taylorsville Property September 29, 1997
Ooltewah Property July 31, 1997
Arvada #2 Property October 13, 1997
Liberty #1 Property October 13, 1997
Dearborn Property October 13, 1997
Enumclaw Property October 13, 1997
Guadalupe Property November 12, 1997
Scottsdale Property September 14, 1997
Bacliff Property October 26, 1997
Indianapolis Property October 26, 1997
San Antonio Property October 27, 1997
Baltimore Property November 2, 1997
Gambrills Property November 2, 1997
Jessup Property November 2, 1997
Lansing Property November 2, 1997
Riverdale Property November 2, 1997
E-23
<PAGE>
Property Estimated Final Completion Date
-------- -------------------------------
Vacaville Property November 2, 1997
Waldorf Property November 2, 1997
Springfield Property November 2, 1997
Jacksonville #1 Property November 2, 1997
Corpus Christi Property November 17, 1997
Starke Property September 19, 1997
Fresno Property November 26, 1997
Corinth Property December 2, 1997
Jacksonville #2 Property December 3, 1997
Enid Property December 14, 1997
Liberty #2 Property December 16, 1997
Channelview Property December 29, 1997
Garland Property December 29, 1997
(8) The lessee of the Los Angeles, Las Vegas, Moscow, Kent #1, Hollister,
Kingsburg, Murrieta, Humble, Palmdale, Houston #3, Houston #4, and
Oxnard, Enumclaw, Bacliff, Fresno, Corinth, Channelview and Garland
Properties is the same unaffiliated lessee.
(9) The lessee of the Winchester, Jacksonville #1, Corpus Christi, Jacksonville
#2, Enid and Liberty #2 Properties is the same unaffiliated lessee.
(10) The lessee of the Chattanooga and Ooltewah Properties is the same
unaffiliated lessee.
(11) The lessee of the Tampa and Scottsdale Properties is the same unaffiliated
lessee.
(12) The lessee of the Bedford, Dallas, and Fort Worth Properties is the same
unaffiliated lessee.
(13) The lessee of the Taylorsville and Arvada #2 Properties is the same
unaffiliated lessee.
(14) The lessee of the Cedar Park and San Antonio Properties is the same
unaffiliated lessee.
(15) The lessee of the Collinsville and Liberty #1 Properties is the same
unaffiliated lessee.
(16) The lessee of the Dearborn, Indianapolis, Balitmore, Gambrills, Jessup,
Riverdale, Waldorf, Springfield, Southlake and Stafford Properties is the
same unaffiliated lessee or group of unaffiliated lessees.
(17) The lessee of the Leesburg and Fairfax Properties is the same unaffiliated
lessee.
(18) The lessee of the King of Prussia, McLean, Evansville, Hampton, Huntsville,
Knoxville, Louisville, Mobile, Montgomery, Nashville, Orlando, Pensacola,
Raleigh #1, Raleigh #2, Richmond #1, Richmond #2, Winston-Salem, Bethel
Park, Langhorne and Plymouth Meeting Properties is the same unaffiliated
lessee.
E-24
