Registration No. 33-78790
As filed with the Securities and Exchange Commission on January 21, 1997
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------------------------------------------
POST-EFFECTIVE AMENDMENT NO. EIGHT
TO
FORM S-11
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933, AS AMENDED
--------------------------------------------------------------
CNL AMERICAN PROPERTIES FUND, INC.
(Exact Name of Registrant as Specified in Charter)
400 East South Street, Suite 500
Orlando, Florida 32801
Telephone: (407) 422-1574
(Address of principal executive offices)
COPIES TO:
THOMAS H. McCORMICK, ESQUIRE
EDMUND D. GRAFF, ESQUIRE
Shaw, Pittman, Potts & Trowbridge
2300 N Street, N.W.
Washington, D.C. 20037
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
Supplement No. 8, dated January 21, 1997
to Prospectus, dated April 26, 1996
This Supplement is part of, and should be read in conjunction with, the
Prospectus dated April 26, 1996. 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 January 8, 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 January 8, 1997, will be reported in a
subsequent Supplement.
THE OFFERING
As of January 8, 1997, the Company had received aggregate subscription
proceeds of $140,906,401 (14,090,640 Shares) from 7,294 stockholders, including
$591,732 (59,173 Shares) issued pursuant to the Reinvestment Plan. As of January
8, 1997, net proceeds to the Company from its offering of shares after deduction
of Selling Commissions, Marketing Support and Due Diligence Expense
Reimbursement Fees and Organizational and Offering Expenses totalled
$125,079,586. As of January 8, 1997, the Company had invested or committed for
investment approximately $97,400,000 of such net proceeds in 96 Properties
(including one Property through a joint venture arrangement which consists of
land and building, seven Properties which consist of building only, 35
Properties which consist of land only and 53 Properties which consist of land
and building), in providing mortgage financing to the tenants of the 35
Properties consisting of land only and to pay Acquisition Fees and Acquisition
Expenses, leaving approximately $27,700,000 in offering proceeds available for
investment in Properties and Mortgage Loans. As of January 8, 1997, the Company
had incurred $6,340,788 in Acquisition Fees to the Advisor.
SUBSEQUENT OFFERING
On November 1, 1996, the Company filed a registration statement with
the Securities and Exchange Commission in connection with the proposed sale by
the Company of up to 27,500,000 shares of common stock in a public offering (the
"Subsequent Offering") expected to commence immediately following the
termination of this offering. Of the 27,500,000 shares of common stock to be
offered, 2,500,000 will be available only to stockholders purchasing through the
Reinvestment Plan. Until such time, if any, as the stockholders approve an
increase in the number of authorized shares of Common Stock of the Company, the
subsequent offering will be limited to 4,800,000 shares. The Board of Directors
expects to submit, for a vote of the stockholders at a meeting expected to be
held in April of 1997, a resolution to increase the number of authorized shares
of Common Stock of the Company from 20,000,000 to 75,000,000. The price per
share and the other terms of the Subsequent Offering, including the percentage
of gross proceeds payable to the Managing Dealer for selling commissions and
expenses in connection with the offering, payable to the Advisor for Acquisition
Fees and Acquisition Expenses and reimbursable to the Advisor for Organizational
and Offering Expenses, will be the same as those for this offering. Net proceeds
from the Subsequent Offering will be invested in additional Properties and
Mortgage Loans. Management believes that the increase in the amount of assets of
the Company that will result from the Subsequent Offering will also increase the
diversification of the Company's assets and the likelihood of Listing, although
there is no assurance that Listing will occur.
<PAGE>
REDEMPTION OF SHARES
The Company will not redeem any Shares during any period in which the
Company is making a public offering.
BUSINESS
PROPERTY ACQUISITIONS
Between April 10, 1996 and January 8, 1997, the Company acquired 48
Properties, including four Properties consisting of building only, 32 Properties
consisting of land and building and 12 Properties consisting of land only. The
Properties are one TGI Friday's Property (in Hamden, Connecticut), four Wendy's
Properties (one in each of Knoxville and Sevierville, Tennessee, and Camarillo
and San Diego, California), six Golden Corral Properties (one in each of Port
Richey, Florida ; Lufkin, Texas; Columbia, Tennessee; Moberly, Missouri; and
Brooklyn and Eastlake, Ohio), two Denny's Properties (one in each of Hillsboro
and McKinney, Texas), ten Boston Market Properties (one in each of Ellisville ,
Florissant and St. Joseph, Missouri; Upland, La Quinta and Merced, California;
Golden Valley, Minnesota; Corvallis, Oregon; Rockwall, Texas; and Atlanta,
Georgia), six Jack in the Box Properties (one in each of Los Angeles,
California; Las Vegas, Nevada; Humble and Dallas, and two in Houston, Texas),
two Arby's Properties (one in each of Kendallville and Avon, Indiana), two
Applebee's Properties (one in each of Montclair and Salinas, California), one
Ryan's Family Steak House Property (in Spring Hill, Florida), two Burger King
Properties (one in each of Chicago, Illinois, and Chattanooga, Tennessee) and 12
Pizza Hut Properties (one in each of Beaver, Bluefield, Huntington, Hurricane,
Milton, Ronceverte, Beckley, Belle and Cross Lanes, West Virginia, and Marietta,
Toledo and Bowling Green, Ohio) (hereinafter referred to as the "Twelve Pizza
Hut Properties"). For information regarding the 48 Properties acquired by the
Company prior to April 10, 1996, see the Prospectus dated April 26, 1996.
The Denny's Property in McKinney, Texas, and the Boston Market
Properties in Merced, California, and St. Joseph, Missouri, were acquired from
an Affiliate of the Company. The Affiliate had purchased and temporarily held
title to these Properties in order to facilitate the acquisition of the
Properties by the Company. The Properties were acquired by the Company for an
aggregate purchase price of $1,786,626, representing the cost of the Properties
to the Affiliate (including carrying costs) due to the fact that these amounts
were less than the Properties' appraised values.
In connection with the purchase of the TGI Friday's Property in Hamden,
Connecticut, the Wendy's Properties in Sevierville, Tennessee, and San Diego,
California, and the Golden Corral Property in Brooklyn, Ohio, which are building
only, the Company, as lessor, entered into long-term lease agreements with
unaffiliated lessees. The general terms of the lease agreements are described in
the section of the Prospectus entitled "Business - Description of Property
Leases." In connection with the purchase of the TGI Friday's and the Wendy's
Properties, which are to be constructed, the Company has entered into
development and indemnification and put agreements with the lessees. The general
terms of these agreements are described in the section of the Prospectus
entitled "Business - Site Selection and Acquisition of Properties - Construction
and Renovation." In connection with these acquisitions, the Company has also
entered into tri-party agreements with the lessees and the owners of the land.
The tri- party agreements provide that the ground lessees are responsible for
all obligations under the ground leases and provide certain rights to the
Company relating to the maintenance of its interests in the buildings in the
event of a default by the lessees under the terms of the ground leases. In
connection with the purchase of the Golden Corral Property, the Company has
entered into an assignment of an interest in the ground lease with the lessee
and the landlord of the land. The assignment provides that the ground lessee is
responsible for all obligations under the ground lease and provides certain
rights to the Company relating to the maintenance of its interest in the
building in the event of a default by the lessee under the terms of the ground
lease.
- 2 -
<PAGE>
In connection with the purchase of the Wendy's Properties in Knoxville,
Tennessee, and Camarillo, California, the Golden Corral Property in Port Richey,
Florida, the Denny's Properties, the Boston Market Properties, the Jack in the
Box Properties, the Arby's Properties, the Applebee's Properties, the Ryan's
Family Steak House Property and the Burger King Properties, 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, the Company has entered
into development and indemnification and put agreements with the lessees. The
general terms of these agreements are described in the section of the Prospectus
entitled "Business - Site Selection and Acquisition of Properties - Construction
and Renovation."
In connection with the acquisition of the Golden Corral Property in
Port Richey, Florida, which was undeveloped land on which a restaurant was
constructed, the Company incurred a Development/Construction Management Fee of
$21,500 payable to an Affiliate of the Company as an Acquisition Fee . See the
sections of the Prospectus entitled "Management Compensation" and "Business -
Site Selection and Acquisition of Properties."
The purchase prices for the Burger King Property in Chattanooga,
Tennessee, and the Golden Corral Property in Columbia, Tennessee, include
Development/Construction Management Fees of $100,000 and $37,850, respectively,
to an Affiliate of the Advisor for services provided in connection with the
development of the Properties. The Company considers these
Development/Construction Management Fees to be Acquisition Fees.
Development/Construction Management 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 Twelve Pizza Hut Properties, which are land
only, the Company acquired the land and is leasing ten of these parcels and two
of these parcels to the lessees, Castle Hill Holdings VI, L.L.C. and Castle Hill
Holdings VII, L.L.C. ("Castle Hill"), respectively, pursuant to two master lease
agreements (the "Master Lease Agreements"). Castle Hill has subleased the Twelve
Pizza Hut Properties to two of its affiliates, ten Properties to Midland Food
Services L.L.C., and two Properties to Midland Food Services II, L.L.C., which
are the operators of the restaurants. The general terms of the Master Lease
Agreements are similar to those described in the section of the Prospectus
entitled "Business - Description of Property Leases." If the lessees do not
exercise their option to purchase the Properties upon termination of the Master
Lease Agreements, the sublessees and lessees will surrender possession of the
Properties to the Company, together with any improvements on such Properties.
The lessees own the buildings located on the Twelve Pizza Hut Properties. In
connection with the acquisition of the Twelve Pizza Hut Properties, the Company
provided mortgage financing of $3,888,000 and $484,000, respectively, to the
lessees pursuant to Mortgage Loans evidenced by master mortgage notes (the
"Master Mortgage Notes") which are collateralized by the building improvements
on the Twelve Pizza Hut Properties. The Master Mortgage Notes bear interest at a
rate of 10.75% per annum and principal and interest are due in equal monthly
installments over 20 years starting July 1, 1996, for ten of the Properties and
starting February 1, 1997, for two of the Properties. The Master Mortgage Notes
equal approximately 85 percent and 76 percent, respectively, of the appraised
value of the related buildings. Management believes that, due to the fact that
the Company owns the underlying land relating to the Twelve Pizza Hut Properties
and due to other underwriting criteria, the Company has sufficient collateral
for the Master Mortgage Notes.
- 3 -
<PAGE>
As of January 8, 1997, the Company had initial commitments to acquire
13 properties, consisting of land and building . 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 13 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," except as
described below.
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.
- 4 -
<PAGE>
<TABLE>
<CAPTION>
Lease Term and
Property Renewal Options Minimum Annual Rent
- -------- --------------- -------------------
<S> <C>
Burger King 20 years; two five-year renewal 11% of Total Cost (1)
Chattanooga, TN (#2) options
Restaurant to be renovated
Golden Corral 15 years; four five-year renewal 10.75% of Total Cost (1)
Winchester, KY options
Restaurant to be constructed
Jack in the Box 18 years; four five-year renewal 10.25% of Total Cost (1);
Hollister, CA options increases by 8% after the fifth
Restaurant to be constructed lease year and after every five
years thereafter during the
lease term
Jack in the Box 18 years; four five-year renewal 10.25% of Total Cost (1);
Houston, TX options increases by 8% after the fifth
Restaurant to be constructed lease year and after every five
years thereafter during the
lease term
<CAPTION>
Property Percentage Rent Option to Purchase
- -------- --------------- ------------------
<S> <C>
Burger King for each lease year, (i) 8.5% None
Chattanooga, TN (#2) of annual gross sales minus
Restaurant to be renovated (ii) the minimum annual rent
for such lease year
Golden Corral for each lease year, 5% of the during the first through seventh lease
Winchester, KY amount by which annual gross sales years and the tenth through fifteenth
Restaurant to be constructed exceed a to be determined breakpoint lease years only
Jack in the Box for each lease year, (i) 5% at any time
Hollister, CA of annual gross sales minus after the seventh lease year (2)
Restaurant to be constructed (ii) the minimum annual rent
for such lease year
Jack in the Box for each lease year, (i) 5% at any time after the
Houston, TX of annual gross sales minus seventh lease year (2)
Restaurant to be constructed (ii) the minimum annual rent
for such lease year
- 5 -
<PAGE>
<CAPTION>
Lease Term and
Property Renewal Options Minimum Annual Rent
- -------- --------------- -------------------
<S> <C>
Jack in the Box 18 years; four five-year renewal 10.75% of Total Cost (1);
Humble, TX option increases by 8% after the fifth
Restaurant to be constructed lease year and by 10% after
every five years thereafter
during the lease term
Jack in the Box 18 years; four five-year renewal 10.25% of Total Cost (1);
Kent, WA options increases by 8% after the fifth
Restaurant to be constructed lease year and after every five
years thereafter during the
lease term
<CAPTION>
Property Percentage Rent Option to Purchase
- -------- --------------- ------------------
<S> <C>
Jack in the Box for each lease year, (i) 5% at any time after the
Humble, TX of annual gross sales minus seventh lease year (2)
Restaurant to be constructed (ii) the minimum annual rent
for such lease year
Jack in the Box for each lease year, (i) 5% at any time after the
Kent, WA of annual gross sales minus seventh lease year (2)
Restaurant to be constructed (ii) the minimum annual rent
for such lease year
- 6 -
<PAGE>
<CAPTION>
Lease Term and
Property Renewal Options Minimum Annual Rent
- -------- --------------- -------------------
<S> <C>
Jack in the Box 18 years; four five-year renewal 10.25% of Total Cost (1);
Kingsburg, CA options increases by 8% after the fifth
Restaurant to be constructed lease year and after every five
years thereafter during the
lease term
Jack in the Box 18 years; four five-year renewal 10.25% of Total Cost (1);
Lewiston, ID options increases by 8% after the fifth
Restaurant to be constructed lease year and after every five
years thereafter during the
lease term
Jack in the Box 18 years; four five-year renewal 10.25% of Total Cost (1);
Moscow, ID options increases by 8% after the fifth
Restaurant to be constructed lease year and after every five
years thereafter during the
lease term
Jack in the Box 18 years; four five-year renewal 10.25% of Total Cost (1);
Murietta, CA options increases by 8% after the fifth
Restaurant to be constructed lease year and after every five
years thereafter during the
lease term
Jack in the Box 18 years; four five-year renewal 10.25% of Total Cost (1);
Oxnard, CA options increases by 8% after the fifth
Restaurant to be constructed lease year and after every five
years thereafter during the
lease term
Jack in the Box 18 years; four five-year renewal 10.25% of Total Cost (1);
Palmdale, CA options increases by 8% after the fifth
Restaurant to be constructed lease year and after every five
years thereafter during the
lease term
<CAPTION>
Property Percentage Rent Option to Purchase
- -------- --------------- ------------------
<S> <C>
Jack in the Box for each lease year, (i) 5% at any time after the
Kingsburg, CA of annual gross sales minus seventh lease year (2)
Restaurant to be constructed (ii) the minimum annual rent
for such lease year
Jack in the Box for each lease year, (i) 5% at any time after the
Lewiston, ID of annual gross sales minus seventh lease year (2)
Restaurant to be constructed (ii) the minimum annual rent
for such lease year
Jack in the Box for each lease year, (i) 5% at any time after the
Moscow, ID of annual gross sales minus seventh lease year (2)
Restaurant to be constructed (ii) the minimum annual rent
for such lease year
Jack in the Box for each lease year, (i) 5% at any time after the
Murietta, CA of annual gross sales minus seventh lease year (2)
Restaurant to be constructed (ii) the minimum annual rent
for such lease year
Jack in the Box for each lease year, (i) 5% at any time after the
Oxnard, CA of annual gross sales minus seventh lease year (2)
Restaurant to be constructed (ii) the minimum annual rent
for such lease year
Jack in the Box for each lease year, (i) 5% at any time after the
Palmdale, CA of annual gross sales minus seventh lease year (2)
Restaurant to be constructed (ii) the minimum annual rent
for such lease year
- 7 -
<PAGE>
<CAPTION>
Lease Term and
Property Renewal Options Minimum Annual Rent
- -------- --------------- -------------------
<S> <C>
Shoney's 20 years; two five-year renewal 11% of Total Cost (1);
Indian Harbor, FL options increases by 10% after the fifth
Restaurant to be renovated lease year and after every five
years thereafter during the
lease term
<CAPTION>
Property Percentage Rent Option to Purchase
- -------- --------------- ------------------
<S> <C>
Shoney's for each lease year, 6% of at any time after the
Indian Harbor, FL the amount by which annual seventh lease year
Restaurant to be renovated gross sales exceed
$1,500,000 but are less than
$1,750,000, plus 4% of the
amount by which annual
gross sales exceed
$1,750,000
</TABLE>
FOOTNOTES:
(1) The "Total Cost" is equal to the sum of (i) the purchase price of the
property, (ii) closing costs, and (iii) actual development costs
incurred under the development agreement.
(2) In the event the Company purchases the property directly from the
lessee, the lessee will have no option to purchase the property.
- 8 -
<PAGE>
The following table sets forth the location of the 48 Properties acquired by the
Company, including the Twelve Pizza Hut Properties in which the Company acquired
the land only, 32 Properties in which the Company acquired the land and building
and the four Properties in which the Company acquired the building only, from
April 10, 1996 through January 8, 1997, a description of the competition, and a
summary of the principal terms of the acquisition and lease of each Property.
- 9 -
<PAGE>
PROPERTY ACQUISITIONS
From April 10, 1996 through January 8, 1997
<TABLE>
<CAPTION>
Lease Expira-
Purchase Date tion and
Property Location and Competition Price (1) Acquired Renewal Options
- --------------------------------- --------- -------- ---------------
<S> <C>
TGI Friday's (3) 04/24/96 09/2008; no
(the "Hamden Property") (3) renewal options
Restaurant to be constructed
The Hamden Property is located at the
southeast quadrant of Skiff Street and
Route 10 in Hamden, New Haven
County, Connecticut, in an area of mixed
retail, commercial, and residential
development. Other fast-food and
family-style restaurants located in
proximity to the Hamden Property
include a China Buffet, a Chili's, a Red
Lobster, a McDonald's, a Wendy's, and
several local restaurants.
Wendy's (20) $322,292 05/08/96 05/2016; two
(the "Knoxville Property") (excluding five-year renewal
Restaurant to be constructed closing and options
development
The Knoxville Property is located on the costs) (3)
north side of Western Avenue in
Knoxville, Knox County, Tennessee, in
an area of mixed retail, commercial, and
residential development. Other fast-food
and family-style restaurants located in
proximity to the Knoxville Property
include a KFC, a McDonald's, a Taco
Bell, a Kenny Rogers Roasters, a Long
John Silver's, a Krystal, a Hardee's, a
Shoney's, and several local restaurants.
<CAPTION>
Minimum Option
Property Location and Competition Annual Rent (2) Percentage Rent To Purchase
- --------------------------------- --------------- --------------- -----------
<S> <C>
TGI Friday's 15.043% of Total Cost (4); None at any time
(the "Hamden Property") increases by 10% after the after the
Restaurant to be constructed fifth lease year and after every third lease
five years thereafter during the year (5)
The Hamden Property is located at the lease term
southeast quadrant of Skiff Street and
Route 10 in Hamden, New Haven
County, Connecticut, in an area of mixed
retail, commercial, and residential
development. Other fast-food and
family-style restaurants located in
proximity to the Hamden Property
include a China Buffet, a Chili's, a Red
Lobster, a McDonald's, a Wendy's, and
several local restaurants.
Wendy's (20) 10.25% of Total Cost; for each lease at any time
(the "Knoxville Property") increases to 10.76% of Total year, (i) 6% of after the
Restaurant to be constructed Cost during the fourth through annual gross seventh lease
sixth lease years, increases to sales minus (ii) year
The Knoxville Property is located on the 11.95% of Total Cost during the minimum
north side of Western Avenue in the seventh through tenth lease annual rent for
Knoxville, Knox County, Tennessee, in years, increases to 12.70% of such lease year
an area of mixed retail, commercial, and Total Cost during the eleventh
residential development. Other fast-food through fifteenth lease years
and family-style restaurants located in and increases to 13.97% of
proximity to the Knoxville Property Total Cost during the sixteenth
include a KFC, a McDonald's, a Taco through twentieth lease years
Bell, a Kenny Rogers Roasters, a Long (4)
John Silver's, a Krystal, a Hardee's, a
Shoney's, and several local restaurants.
- 10 -
<PAGE>
<CAPTION>
Lease Expira-
Purchase Date tion and
Property Location and Competition Price (1) Acquired Renewal Options
- --------------------------------- --------- -------- ---------------
<S> <C>
Golden Corral $586,687 05/08/96 10/2011; two
(the "Port Richey Property") (excluding five-year renewal
Restaurant to be constructed closing and options
development
costs)(3)
The Port Richey Property is located on
the southeast quadrant of the
intersection of U.S. 19 and Stone Road,
Port Richey, Pasco County, Florida, in
an area of mixed retail, commercial, and
residential development. Other
fast-food and family-style restaurants
located in proximity to the Port Richey
Property include a Boston Market, a
Morrison's, a Burger King, a Checkers, a Bob
Evans, a Wendy's, a KFC, a Chili's, and
several local restaurants.
Twelve Pizza Hut Properties - Land
only
Ten Properties (8)(9) - located in Beaver, $1,512,000 05/17/96 05/2016; two
West Virginia (the "Beaver Property"), (excluding ten-year renewal
Bluefield, West Virginia (the "Bluefield closing costs) options
Property"), Huntington, West Virginia
(the"Hunting- ton Property"), Hurricane,
West Virginia (the "Hurricane Property"),
Milton, West Virginia (the "Milton Property"),
Ronceverte, West Virginia (the "Ronceverte
Property"), Beckley, West Virginia
(the "Beckley Property"), Belle, West Virginia
(the "Belle Property"), Cross
Lanes, West Virginia (the "Cross Lanes
Property") and Marietta, Ohio (the
"Marietta Property").
<CAPTION>
Minimum Option
Annual Rent (2) Percentage Rent To Purchase
--------------- --------------- -----------
<S> <C>
Golden Corral 11.25% of Total Cost (4); for each lease during the
(the "Port Richey Property") increases by 8% after the fifth year, eighth and
Restaurant to be constructed lease year and after every five commencing in ninth lease
years thereafter during the the second lease years only
lease term year (i) 5% of (7)
annual gross
The Port Richey Property is located on sales minus (ii)
the southeast quadrant of the the minimum
intersection of U.S. 19 and Stone Road, annual rent for
Port Richey, Pasco County, Florida, in such lease year
an area of mixed retail, commercial, and (6)
residential development. Other
fast-food and family-style restaurants
located in proximity to the Port Richey
Property include a Boston Market, a
Morrison's, a Burger King, a Checkers, a Bob
Evans, a Wendy's, a KFC, a Chili's, and
several local restaurants.
Twelve Pizza Hut Properties - Land
only
Ten Properties (8)(9) - located in Beaver, $166,320; increases by 10% None at any time
West Virginia (the "Beaver Property"), after the fifth and tenth after the
Bluefield, West Virginia (the "Bluefield lease years and 12% after the seventh lease
Property"), Huntington, West Virginia fifteenth lease year year
(the"Hunting- ton Property"), Hurricane,
West Virginia (the "Hurricane Property"),
Milton, West Virginia (the "Milton Property"),
Ronceverte, West Virginia (the "Ronceverte
Property"), Beckley, West Virginia
(the "Beckley Property"), Belle, West Virginia
(the "Belle Property"), Cross
Lanes, West Virginia (the "Cross Lanes
Property") and Marietta, Ohio (the
"Marietta Property").
- 11 -
<PAGE>
<CAPTION>
Lease Expira-
Purchase Date tion and
Property Location and Competition Price (1) Acquired Renewal Options
- --------------------------------- --------- -------- ---------------
<S> <C>
The Beaver Property is located on
the north side of U.S. Route 19 in Beaver,
Raleigh County, West Virginia, in an area
of mixed retail, commercial, and
residential development. Other
fast-food and family-style restaurants
located in proximity to the Beaver
Property include a McDonald's, a Hardee's,
a Wendy's, and a Long John Silver's.
The Bluefield Property is located on the
north side of Bluefield Avenue in
Bluefield, Mercer County, West Virginia,
in an area of mixed retail, commercial,
and residential development. Other fast-food
and family-style restaurants
located in proximity to the Bluefield Property
include a McDonald's, a Hardee's,
a Captain D's, and a Shoney's. (12)
The Huntington Property is located on the
south side of Madison Avenue in
Huntington, Cabell County, West Virginia,
in an area of mixed retail,
commercial, and residential development.
Other fast-food and family-style
restaurants located in proximity to the
Huntington Property include an Arby's,
three Burger Kings, a Chi Chi's, two
Dairy Queens, a Hardee's, a KFC, a Long
John Silver's, two McDonald's, a Papa
John's, a Rax, a Red Lobster, a Steak &
Ale, a Taco Bell, and several local restaurants.
<PAGE>
<CAPTION>
Minimum Option
Property Location and Competition Annual Rent (2) Percentage Rent To Purchase
- --------------------------------- --------------- --------------- -----------
<S> <C>
The Beaver Property is located on
the north side of U.S. Route 19 in Beaver,
Raleigh County, West Virginia, in an area
of mixed retail, commercial, and
residential development. Other
fast-food and family-style restaurants
located in proximity to the Beaver
Property include a McDonald's, a Hardee's,
a Wendy's, and a Long John Silver's.
The Bluefield Property is located on the
north side of Bluefield Avenue in
Bluefield, Mercer County, West Virginia,
in an area of mixed retail, commercial,
and residential development. Other fast-food
and family-style restaurants
located in proximity to the Bluefield Property
include a McDonald's, a Hardee's,
a Captain D's, and a Shoney's. (12)
The Huntington Property is located on the
south side of Madison Avenue in
Huntington, Cabell County, West Virginia,
in an area of mixed retail,
commercial, and residential development.
Other fast-food and family-style
restaurants located in proximity to the
Huntington Property include an Arby's,
three Burger Kings, a Chi Chi's, two
Dairy Queens, a Hardee's, a KFC, a Long
John Silver's, two McDonald's, a Papa
John's, a Rax, a Red Lobster, a Steak &
Ale, a Taco Bell, and several local restaurants.
- 12 -
<PAGE>
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Property Location and Competition Price (1) Acquired Renewal Options
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The Hurricane Property is located on
the southwest side of Hurricane Creek Road
in Hurricane, Putnam County, West Virginia,
in an area of mixed retail,
commercial, and residential development.
Other fast-food and family-style
restaurants located in proximity to the
Hurricane Property include a McDonald's,
a Subway Sandwich Shop, and several
local restaurants. (12)
The Milton Property is located on the
northeast corner of East Main Street and
Brickyard Avenue in Milton, Cabell County,
West Virginia, in an area of mixed
retail, commercial, and residential
development. Other fast-food and
family-style restaurants located in
proximity to the Milton Property include a
McDonald's, a Subway Sandwich Shop, a
Dairy Queen, and several local
restaurants.
The Ronceverte Property is located on the
north side of Seneca Trail in
Ronceverte, Greenbrier County, West Virginia,
in an area of mixed retail,
commercial, and residential development. Other
fast-food and family-style
restaurants located in proximity to the Ronceverte
Property include a KFC, a
Long John Silver's, a Subway Sandwich Shop, and
several local restaurants.
<CAPTION>
Minimum Option
Property Location and Competition Annual Rent (2) Percentage Rent To Purchase
- --------------------------------- --------------- --------------- -----------
<S> <C>
The Hurricane Property is located on
the southwest side of Hurricane Creek Road
in Hurricane, Putnam County, West Virginia,
in an area of mixed retail,
commercial, and residential development.
Other fast-food and family-style
restaurants located in proximity to the
Hurricane Property include a McDonald's,
a Subway Sandwich Shop, and several
local restaurants. (12)
The Milton Property is located on the
northeast corner of East Main Street and
Brickyard Avenue in Milton, Cabell County,
West Virginia, in an area of mixed
retail, commercial, and residential
development. Other fast-food and
family-style restaurants located in
proximity to the Milton Property include a
McDonald's, a Subway Sandwich Shop, a
Dairy Queen, and several local
restaurants.
The Ronceverte Property is located on the
north side of Seneca Trail in
Ronceverte, Greenbrier County, West Virginia,
in an area of mixed retail,
commercial, and residential development. Other
fast-food and family-style
restaurants located in proximity to the Ronceverte
Property include a KFC, a
Long John Silver's, a Subway Sandwich Shop, and
several local restaurants.
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Property Location and Competition Price (1) Acquired Renewal Options
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The Beckley Property is located on the
north side of Harper Road in Beckley,
Raleigh County, West Virginia, in an
area of mixed retail, commercial, and
residential development. Other fast-food
and family-style restaurants located in
proximity to the Beckley Property include
a McDonald's, a Long John Silver's, a
Wendy's, a Shoney's, a Bob Evans, a
Subway Sandwich Shop, a Hardee's, and
several local restaurants.
The Belle Property is located on the southwest
side of Dupont Avenue in Belle,
Kanawha County, West Virginia, in an area of
mixed retail, commercial, and
residential development. Other fast-food and
family-style restaurants located in
proximity to the Belle Property include
several local restaurants.
The Cross Lanes Property is located on the
northwest side of Goff Mountain Road
in Cross Lanes, Kanawha County, West Virginia,
in an area of mixed retail,
commercial, and residential development. Other
fast-food and family-style
restaurants located in proximity to the Cross
Lanes Property include a Hardee's,
a Papa John's, a Captain D's, a McDonald's, a
Taco Bell, a Bob Evans, a Wendy's,
a Shoney's a KFC, and several local restaurants.
<CAPTION>
Minimum Option
Property Location and Competition Annual Rent (2) Percentage Rent To Purchase
- --------------------------------- --------------- --------------- -----------
<S> <C>
The Beckley Property is located on the
north side of Harper Road in Beckley,
Raleigh County, West Virginia, in an
area of mixed retail, commercial, and
residential development. Other fast-food
and family-style restaurants located in
proximity to the Beckley Property include
a McDonald's, a Long John Silver's, a
Wendy's, a Shoney's, a Bob Evans, a
Subway Sandwich Shop, a Hardee's, and
several local restaurants.
The Belle Property is located on the southwest
side of Dupont Avenue in Belle,
Kanawha County, West Virginia, in an area of
mixed retail, commercial, and
residential development. Other fast-food and
family-style restaurants located in
proximity to the Belle Property include
several local restaurants.
The Cross Lanes Property is located on the
northwest side of Goff Mountain Road
in Cross Lanes, Kanawha County, West Virginia,
in an area of mixed retail,
commercial, and residential development. Other
fast-food and family-style
restaurants located in proximity to the Cross
Lanes Property include a Hardee's,
a Papa John's, a Captain D's, a McDonald's, a
Taco Bell, a Bob Evans, a Wendy's,
a Shoney's a KFC, and several local restaurants.
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Property Location and Competition Price (1) Acquired Renewal Options
- --------------------------------- --------- -------- ---------------
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The Marietta Property is located on
the east side of Acme Street in Marietta,
Washington County, Ohio, in an area of
mixed retail, commercial, and residential
development. Other fast-food and family-
style restaurants located in proximity
to the Marietta Property include a Burger
King, a Captain D's, a Dairy Queen, an
Elby's Big Boy, a KFC, a Long John Silver's,
a McDonald's, a Papa John's, a
Subway Sandwich Shop, a Taco Bell, a Wendy's,
and several local restaurants.
(12)
Two Properties (10)(11) - located in $316,000 12/05/96 12/2016; two
Toledo, Ohio (the "Toledo Property") (excluding ten-year renewal
and Bowling Green, Ohio (the "Bowling closing costs) options
Green Property")
The Toledo Property is located on the
northwest corner of the intersection of
Broadway Avenue and South Avenue, in
Toledo, Lucas County, Ohio, in an area of
mixed retail, commercial, and residential
development. Other fast-food and
family-style restaurants located in proximity
to the Toledo Property include a
Taco Bell, a McDonald's, a Rally's, a Subway
Sandwich Shop, and a local
restaurant.
<CAPTION>
Minimum Option
Property Location and Competition Annual Rent (2) Percentage Rent To Purchase
- --------------------------------- --------------- --------------- -----------
The Marietta Property is located on
the east side of Acme Street in Marietta,
Washington County, Ohio, in an area of
mixed retail, commercial, and residential
development. Other fast-food and family-
style restaurants located in proximity
to the Marietta Property include a Burger
King, a Captain D's, a Dairy Queen, an
Elby's Big Boy, a KFC, a Long John Silver's,
a McDonald's, a Papa John's, a
Subway Sandwich Shop, a Taco Bell, a Wendy's,
and several local restaurants.
(12)
Two Properties (10)(11) - located in $34,760; increases by 10% None at any time
Toledo, Ohio (the "Toledo Property") after the fifth and tenth after the
and Bowling Green, Ohio (the "Bowling lease years and 12% after seventh lease
Green Property") the fifteenth lease year year
The Toledo Property is located on the
northwest corner of the intersection of
Broadway Avenue and South Avenue, in
Toledo, Lucas County, Ohio, in an area of
mixed retail, commercial, and residential
development. Other fast-food and
family-style restaurants located in proximity
to the Toledo Property include a
Taco Bell, a McDonald's, a Rally's, a Subway
Sandwich Shop, and a local
restaurant.
</TABLE>
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<TABLE>
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Purchase Date tion and Minimum Option
Property Location and Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent To Purchase
- --------------------------------- --------- -------- --------------- --------------- --------------- -----------
<S> <C>
The Bowling Green Property is located
on the southeast corner of the
intersection of East Wooster Avenue
and Mercer Road, in Bowling Green,
Wood County, Ohio, in an area of
mixed retail, commercial, and
residential development. Other
fast-food and family-style
restaurants located in proximity
to the Bowling Green Property
include a Big Boy, a McDonald's,
a Wendy's, a Taco Bell, a Chi
Chi's, a Burger King, and a
Little Caesar's.
Denny's $367,672 06/05/96 06/2016; two 10.625% of Total for each lease during
(23) (excluding five-year renewal Cost (4); increases year, (i) 5% of the eighth,
closing and options by 11% after the fifth annual gross tenth, and
(the "Hillsboro Property") development lease year and after sales minus (ii) twelfth lease
Restaurant to be constructed costs) (3) every five years the minimum years only
thereafter during the annual rent for
The Hillsboro Property is lease term such lease year
located on the south side
of Highway 22 in Hillsboro,
Hill County, Texas, in an
area of mixed retail,
commercial, and residential
development. Other fast-food
and family-style restaurants
located in proximity to the
Hillsboro Property include
a McDonald's, an Arby's, a
Whataburger, a KFC, a Golden
Corral, and a Grandy's.
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<CAPTION>
Lease Expira-
Purchase Date tion and Minimum Option
Property Location and Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent To Purchase
- --------------------------------- --------- -------- --------------- --------------- --------------- -----------
<S> <C>
Denny's (23) (the "McKinney $977,256 06/05/96 12/2015; two $104,013; increases for each lease during the
Property") (excluding five-year by 11% after the year, (i) 5% of eighth, tenth,
Existing Restaurant closing renewal fifth lease year annual gross and twelfth
costs) options and after every sales minus (ii) lease years
The McKinney Property is located five years thereafter the minimum only
at the southwest quadrant of the during the lease term annual rent for
intersection of White Avenue and such lease year
U.S. 75 in McKinney, Collin County, (6)
Texas, in an area of mixed retail,
commercial, and residential
development. Other fast-food and
family-style restaurants located
in proximity to the McKinney
Property include an Applebee's,
an Arby's, a Boston Market, a Jack
in the Box, a Chili's, a Dairy Queen,
an IHOP, a Golden Corral, a Pizza
Hut, and several local restaurants.
Wendy's (20) $586,143 06/05/96 06/2016; 10.25% of Total for each lease at any time
(the "Camarillo Property") (excluding two five-year Cost; increases year, (i) 6% of after the
Restaurant to be constructed closing and renewal options to 10.76% of Total annual gross seventh lease
development Cost during the sales minus (ii) year
costs) (3) fourth through the minimum annual
The Camarillo Property is located sixth lease years, rent for such
at the southwest quadrant of Las increases to 11.95% lease year
Posas Road and the Ventura Freeway of Total Cost during
in Camarillo, Ventura County, the seventh through
California, in an area of mixed tenth lease years,
retail, commercial, and residential increases to 12.70%
development. Other fast-food and of Total Cost during
family-style restaurants located the eleventh through
in proximity to the Camarillo fifteenth lease years
Property include an Applebee's, and increases to 13.97%
a Del Taco, a McDonald's, and of Total Cost during
several local restaurants. the sixteenth through
twentieth lease years
(4)
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Lease Expira-
Purchase Date tion and Minimum Option
Property Location and Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent To Purchase
- --------------------------------- --------- -------- --------------- --------------- --------------- -----------
<S> <C>
Wendy's (20) $66,153 06/05/96 05/2015; two 12.204% of Total for each lease upon the
(the "Sevierville (excluding (3) five-year renewal Cost (4);increases year, (i) 6% of expiration of
Property") closing and options followed by 8% after the fifth annual gross the initial
Restaurant to be constructed development by one fifteen- lease year and after sales times the term of the
costs) (3) year renewal every five years Building Overage lease and
The Sevierville Property is option thereafter during the Multiplier (13) during any
located on the west side of Highway lease term minus (ii) the renewal
441 in Sevierville, Sevier County, minimum annual period
Tennessee, in an area of mixed rent for such thereafter
retail, commercial, and residential lease year (15)
development. Other fast-food and
family-style restaurants located
in proximity to the Sevierville
Property include a Damon's Ribs, an
IHOP, a Ruby Tuesday's, and several
local restaurants.
Boston Market (21) $408,879 06/18/96 06/2011; five 10.40% of Total Cost for each lease at any time
(the "Ellisville Property") (excluding five-year (4); increases by 10% year after the after the
Restaurant to be constructed closing and renewal options after the fifth lease fifth lease year, fifth lease
development year and after every (i) 5% of annual year
The Ellisville Property is costs) (3) five years thereafter gross sales minus
located on the north side of during the lease term (ii) the minimum
Manchester Road, in Ellisville, annual rent for
St. Louis County, Missouri, in an such lease year
area of mixed retail, commercial,
and residential development. Other
fast-food and family-style
restaurants located in proximity
to the Ellisville Property
include a KFC, a Burger King, a
Ponderosa, a Taco Bell, a McDonald's,
a Long John Silver's, a Pizza Hut, a
Hardee's, a Steak and Shake, a Red
Lobster, and several local restaurants.
- 18 -
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Lease Expira-
Purchase Date tion and Minimum Option
Property Location and Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent To Purchase
- --------------------------------- --------- -------- --------------- -------------------- --------------- -----------
<S> <C>
Boston Market (21) $603,386 06/19/96 06/2011; 10.40% of Total Cost for each lease at any time
(the "Golden Valley Property") (excluding five five-year (4); increases by 10% year after the after the
closing and renewal options after the fifth lease fifth lease year, fifth lease
Restaurant to be constructed development year and after every (i) 5% of annual year
costs) (3) five years thereafter gross sales minus
The Golden Valley Property is during the lease term (ii) the minimum
located on the north side of annual rent for
Highway 55 at Rhode Island such lease year
Avenue in Golden Valley,
Hennepin County, Minnesota,
in an area of mixed retail,
commercial, and residential
development. Other fast-food
and family-style restaurants
located in proximity to the
Golden Valley Property include
a McDonald's, a Perkins, and
several local restaurants.
Jack in the Box (22) $396,646 06/19/96 06/2014; 10.75% of Total for each lease at any time
(the "Humble #1 Property") (excluding four five-year Cost (4); increases year, (i) 5% of after the
Restaurant to be constructed closing and renewal options by 8% after the fifth annual gross seventh
development lease year and by 10% sales minus (ii) lease year
The Humble #1 Property is costs) (3) after every five years the minimum
located at the north side thereafter during the annual rent
of FM 1960 East in Humble, lease term for such lease
Harris County, Texas, in an year (6)
area of mixed retail,
commercial, and residential
development. Other fast-food
and family-style restaurants
located in proximity to the
Humble Property include a KFC,
a McDonald's, a Taco Bell,
a Wendy's, and a Burger King.
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Property Location and Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent To Purchase
- --------------------------------- --------- -------- --------------- -------------------- --------------- -----------
<S> <C>
Boston Market $350,358 07/09/96 07/2011; five 10.38% of Total Cost for each lease at any time
(the "Corvallis Property") (excluding five-year (4); increases by 10% year after the after the
Restaurant to be constructed closing and renewal options after the fifth lease fifth lease year, fifth lease
development year and after every (i) 5% of annual year
The Corvallis Property is costs) (3) five years thereafter gross sales minus
located at the southeast quadrant during the lease term (ii) the minimum
of the intersection of Highway annual rent for
99 and Northeast Circle Boulevard such lease year
in Corvallis, Benton County,
Oregon, in an area of mixed retail,
commercial, and residential
development. Other fast-food and
family-style restaurants located
in proximity to the Corvallis
Property include a KFC, a Wendy's,
a Subway Sandwich Shop, a Sizzler,
a McDonald's, a Burger King, a
Taco Bell, and several local
restaurants.
Jack in the Box (22) $343,160 07/09/96 07/2014; four 10.75% of Total Cost for each lease at any time
(the "Houston #1 Property") (excluding five-year (4); increases by 8% year, (i) 5% of after the
Restaurant to be constructed closing and renewal options after the fifth lease annual gross seventh
development year and by 10% after sales minus (ii) lease year
The Houston #1 Property is costs) (3) every five years the minimum
located on the east side of thereafter during the annual rent for
Veterans Memorial Drive with an lease term such lease year
access easement on Beltway 8 in (6)
Houston, Harris County, Texas, in
an area of mixed retail, commercial,
and residential development. Other
fast-food and family-style
restaurants located in proximity
to the Houston #1 Property
include a Whataburger, an Arby's,
a KFC, a Burger King, and several
local restaurants.
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<PAGE>
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Lease Expira-
Purchase Date tion and Minimum Option
Property Location and Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent To Purchase
- --------------------------------- --------- -------- --------------- -------------------- --------------- -----------
<S> <C>
Arby's (24) $739,628 07/10/96 07/2016; two $75,812; increases by for each lease during the
(the "Kendallville Property") (excluding five-year 4.14% after the third year, (i) 4% of seventh and
Existing restaurant closing renewal options lease year and after annual gross tenth lease
costs) every three years sales minus (ii) years only
The Kendallville Property is thereafter during the the minimum
located on the north side of lease term annual rent for
West North Street in Kendallville, such lease year
Noble County, Indiana, in an area
of mixed retail, commercial and
residential development. Other
fast-food and family-style
restaurants located in proximity
to the Kendallville Property
include a KFC, a McDonald's, a
Wendy's, a Pizza Hut, a Subway
Sandwich Shop, and several local
restaurants
Boston Market $499,820 07/15/96 07/2011; five 10.38% of Total Cost for each lease at any time
(the "Rockwall Property") (excluding five-year (4); increases by 10% year after the after the
Restaurant to be constructed closing and renewal options after the fifth lease fifth lease year, fifth lease
development year and after every (i) 4% of annual year
The Rockwall Property is located costs) (3) five years thereafter gross sales minus
on the northeast corner of FM 740 during the lease term (ii) the minimum
and the to be constructed Steger annual rent for
Town Drive in Rockwall, Rockwall such lease year
County, Texas, in an area of mixed
retail, commercial, and residential
development. Other fast-food and
family-style restaurants located in
proximity to the Rockwall Property
include an Arby's, a Jack in the
Box, a Dairy Queen, a KFC, a
McDonald's, a Pizza Hut, a Sonic
Drive-In, a Whataburger, a Wendy's,
a Chili's, a Taco Bell, and several
local restaurants.
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<PAGE>
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Lease Expira-
Purchase Date tion and Minimum Option
Property Location and Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent To Purchase
- --------------------------------- --------- -------- --------------- -------------------- --------------- -----------
<S> <C>
Boston Market (25) $762,737 07/24/96 07/2011; five 10.38% of Total Cost for each lease at any time
(the "Upland Property") (excluding five-year (4); increases by 10% year after the after the
Restaurant to be constructed closing and renewal options after the fifth lease fifth lease year, fifth lease
development year and after every (i) 4% of annual year
The Upland Property is located costs) (3) five years thereafter gross sales minus
at the northeast quadrant of the during the lease term (ii) the minimum
intersection of Mountain Avenue annual rent for
and Foothill Boulevard, Upland, such lease year
San Bernardino County, California
in an area of mixed retail,
commercial, and residential
development. Other fast-food
and family-style restaurants
located in proximity to the
Upland Property include an
Burger King, a Taco Bell, a KFC,
two Del Taco's, a Jack in the Box,
a McDonald's, an Outback Steakhouse
and several local restaurants.
Jack in the Box (22) $387,621 08/05/96 07/2014; four 10.75% of Total Cost for each lease at any time
(the "Houston #2 Property") (excluding five-year (4); increases by 8% year, (i) 5% of after the
Restaurant to be constructed closing and renewal options after the fifth lease annual gross seventh
development year and by 10% after sales minus (ii) lease year
The Houston #2 Property is costs (3) every five years the minimum
located on the south side of thereafter during the annual rent for
Interstate 45 and U.S. Highway lease term such lease year
90A in Houston, Harris County, (6)
Texas, in an area of mixed retail,
commercial, and residential
development. Other fast-food and
family-style restaurants located
in proximity to the Houston #2
Property include two Whataburger's,
a Taco Bell, a Wendy's, a Pizza Hut,
a Little Caesar's, a McDonald's, and
a local restaurant.
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Lease Expira-
Purchase Date tion and Minimum Option
Property Location and Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent To Purchase
- --------------------------------- --------- -------- --------------- -------------------- --------------- -----------
<S> <C>
Applebee's $879,753 08/23/96 08/2016; two 11% of Total Cost for each lease at any time
(the "Montclair Property") (excluding five-year (4); increases by year, (i) 5% of after the
Restaurant to be constructed closing and renewal options 10% after the fifth annual gross fifth lease
development lease year and after sales minus (ii) year (17)
The Montclair Property is located costs) (3) every five years the minimum
on a pad site within the Montclair thereafter during annual rent for
Plaza Regional Mall, on the east the lease term such lease year
side of Montevista Avenue, north
of I-10, in Montclair, San
Bernardino County, California,
in an area of mixed retail,
commercial, and residential
development. Other fast-food and
family-style restaurants located
in proximity to the Montclair
Property include an Olive Garden,
a Tony Roma's, a Red Lobster, and
a local restaurant.
Golden Corral $997,296 08/23/96 05/2010; three $142,823; increases for each lease upon the
(the "Brooklyn Property") (excluding (18) five-year by 10% after the fifth year, (i) 4% of expiration
Existing restaurant closing renewal options lease year and after annual gross of the lease
costs) every five years sales minus (ii) (15)
The Brooklyn Property is located thereafter during the the minimum annual
at Northcliff Avenue and Ridge lease term rent for such lease
Road in Brooklyn, Cuyahoga County, year
Ohio, in an area of mixed retail,
commercial, and residential
development. Other fast-food and
family-style restaurants located in
proximity to the Brooklyn Property
include an Applebee's, a McDonald's,
a Dunkin Donuts, a Boston Market,
and several local restaurants.
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Lease Expira-
Purchase Date tion and Minimum Option
Property Location and Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent To Purchase
- --------------------------------- --------- -------- --------------- -------------------- --------------- -----------
<S> <C>
Boston $664,898 09/06/96 09/2011; five 10.38% of Total Cost for each lease at any time
Market (25) (excluding five-year (4); increases by 10% year after the after the
closing and renewal options after the fifth lease fifth lease year, fifth
(the "La Quinta development year and after every (i) 4% of annual lease year
Property") costs) (3) five years thereafter gross sales minus
Restaurant to be constructed during the lease term (ii) the minimum
annual rent for
The La Quinta Property is such lease year
located on a pad site within the
Albertson's/Walmart Shopping Center,
at the northeast quadrant of State
Highway 111 and Simon Drive, in La
Quinta, Riverside County, California,
in an area of mixed retail,
commercial, residential, and
recreational development. Other
fast-food and family-style
restaurants located in proximity to
the La Quinta Property include a
Taco Bell, a McDonald's, and several
local restaurants.
Boston Market $559,682 09/17/96 07/2011; five 10.38% of Total Cost for each lease at any time
(the "Merced Property") (excluding five-year (4); increases by 10% year after the after the
Restaurant to be constructed closing and renewal options after the fifth lease fifth lease year fifth
development year and after every (i) 4% of annual lease year
The Merced Property is located costs) (3) five years thereafter gross sales minus
at the northwest corner of the during the lease term (ii) the minimum
intersection of "M" Street and annual rent for
Olive Avenue in Merced, Merced such lease year
County, California, in an area
of mixed retail, commercial, and
residential development. Other
fast-food and family-style
restaurants located in proximity
to the Merced Property include a
Burger King, an IHOP, a Jack in
the Box, a McDonald's, a Pizza
Hut, a Red Lobster, and several
local restaurants.
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<CAPTION>
Lease Expira-
Purchase Date tion and Minimum Option
Property Location and Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent To Purchase
- --------------------------------- --------- -------- --------------- -------------------- --------------- -----------
<S> <C>
Ryan's Family $654,588 09/18/96 09/2016; two 10.875% of Total Cost for each lease at any time
Steak House (excluding five-year (4); increases by 12% year, (i) 5% of after the
closing and renewal options after the fifth lease annual gross tenth
(the "Spring Hill development year and after every sales minus (ii) lease year
Property") costs) (3) five years thereafter the minimum
Restaurant to be constructed during the lease term annual rent for
such lease year
The Spring Hill Property is
located at the northwest corner
of Cortez Boulevard and Chambord
Street in Spring Hill, Hernando
County, Florida, in an area of
mixed retail, commercial, and
residential development. Other
fast-food and family-style
restaurants located in proximity
to the Spring Hill Property
include an Arby's, a McDonald's,
a Subway Sandwich Shop, a Wendy's,
and a local restaurant.
Arby's (24) $790,676 09/18/96 09/2016; two $81,044; increases by for each lease during the
(the "Avon Property") (excluding five-year 4.14% after the third year, (i) 4% of seventh and
Existing restaurant closing renewal options lease year and after annual gross tenth lease
costs) every three years sales minus (ii) years only
The Avon Property is located on thereafter during the the minimum
the southwest corner of Avon lease term annual rent for
Crossing Drive and Merchants such lease year
Drive in the Avon Crossing Shopping
Center, in Avon, Hendricks County,
Indiana, in an area of mixed retail,
commercial, and residential
development. Other fast-food and
family-style restaurants located
in proximity to the Avon Property
include a Burger King, a McDonald's,
a Noble Roman's Pizza, a Taco Bell,
a Wendy's, and several local
restaurants.
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Lease Expira-
Purchase Date tion and Minimum Option
Property Location and Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent To Purchase
- --------------------------------- --------- -------- --------------- -------------------- --------------- -----------
<S> <C>
Boston Market (21) $697,652 09/19/96 09/2011; five 10.38% of Total Cost for each lease at any time
(the "Florissant Property") (excluding five-year (4); increases by 10% year after the after the
Restaurant to be constructed closing and renewal options after the fifth lease fifth lease year fifth
development year and after every (i) 5% of annual lease year
The Florissant Property is costs) (3) five years thereafter gross sales minus
located on the north side of U.S. during the lease term (ii) the minimum
Highway 67 North, northeast of the annual rent for
intersection of North Waterford such lease year
Road and U.S. Highway 67, in
Florissant, St. Louis County,
Missouri, in an area of mixed
retail, commercial, and residential
development. Other fast-food and
family-style restaurants located
in proximity to the Florissant
Property include an Applebee's, a
Burger King, a Church's Fried
Chicken, a Dairy Queen, a Denny's, a
Domino's, a KFC, a McDonald's, a
Ponderosa, a Rally's, a Shoney's,
a Subway Sandwich Shop, two Taco
Bell's, a Wendy's, a White Castle,
and several local restaurants.
Applebee's $732,477 09/19/96 09/2016; two 10.87% of Total Cost for each lease at any time
(the "Salinas Property") (excluding five-year (4); increases by 10% year, (i) 5% of after the
Restaurant to be constructed closing and renewal options after the fifth lease annual gross seventh
development year and after every sales minus (ii) lease year
The Salinas Property is located costs) (3) five years thereafter the minimum
on the west side of North Davis during the lease term annual rent for
Road in the Westridge Shopping such lease year
Center, in Salinas, Monterey County,
California, in an area of mixed
retail, commercial, and residential
development. Other fast-food and
family-style restaurants located
in proximity to the Salinas Property
include an IHOP, and several local
restaurants.
- 26 -
<PAGE>
<CAPTION>
Lease Expira-
Purchase Date tion and Minimum Option
Property Location and Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent To Purchase
- --------------------------------- --------- -------- --------------- -------------------- --------------- -----------
<S> <C>
Burger King (27) $940,934 10/02/96 12/2016; two 11% of Total Cost (4) for each lease None
(the "Chicago Property") (excluding five-year year, (i) 8.5% of
Restaurant to be constructed closing and renewal options annual gross
development sales minus (ii)
The Chicago Property is located costs)(3) the minimum
on the southwest corner of 40th annual rent for
Street and Pulaski Road, in such lease year
Chicago, Cook County, Illinois,
in an area of mixed retail,
commercial, and residential
development. Other fast-food and
family-style restaurants located
in proximity to the Chicago
Property include an Arby's, a Long
John Silver's, and a local restaurant.
Wendy's (3) 10/16/96 10/2011; three 13.39% of Total Cost for each lease upon the
(the "San Diego Property") (3) five-year (4); increases by 8% year, (i) 6% of expiration
Restaurant to be constructed renewal options after the fifth lease annual gross of the
year and after every sales times the initial
The San Diego Property is located five years thereafter Building Overage term of
at the northeast corner of Gill during the lease term Multiplier (14) the lease
Village Way and Rio San Diego minus (ii) the and during
Drive, in San Diego, San Diego minimum annual any renewal
County, California, in an area rent for such period
of mixed retail, commercial, and lease year thereafter
residential development. Other
fast-food and family-style
restaurants located in proximity
to the San Diego Property include
a Burger King, a Jack in the Box,
and a McDonald's.
- 27 -
<PAGE>
<CAPTION>
Lease Expira-
Purchase Date tion and Minimum Option
Property Location and Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent To Purchase
- --------------------------------- --------- -------- --------------- -------------------- --------------- -----------
<S> <C>
Golden Corral (26) $1,060,031 11/19/96 10/2011; four 10.75% of Total Cost for each lease during the
(the "Lufkin Property") (excluding five-year (4) year, 5% of the first through
Restaurant to be constructed closing and renewal options amount by which seventh lease
development annual gross years and the
The Lufkin Property is located costs) (3) sales exceed tenth through
on the east side of South First $2,543,062 fifteenth lease
Street and the west side of years only
Brentwood Drive, in Lufkin,
Angelica County, Texas, in an area
of mixed retail, commercial, and
residential development. Other
fast-food and family-style
restaurants located in proximity
to the Lufkin Property include a
Burger King, a Whataburger, an
Arby's, a Long John Silver's, a
Sonic Drive-In, a McDonald's, and
several local restaurants.
Golden Corral $1,306,876 12/03/96 12/2016; two $147,024; increases for each lease at any
(the "Columbia Property") (excluding five-year by 12% after the year, (i) 6% of time after
Existing Restaurant closing renewal options fifth lease year and annual gross the seventh
costs) after every five sales minus (ii) lease year
The Columbia Property is located years thereafter the minimum
on the southeast corner of South during the lease term annual rent for
James Campbell Boulevard and such lease year
Hillary Drive, in Columbia, Maury
County, Tennessee, in an area of
mixed retail, commercial, and
residential development. Other
fast-food and family-style
restaurants located in proximity
to the Columbia Property include
an Applebee's, a Checkers, a
Krystal's, a Ponderosa, a Ruby
Tuesday, a Sonic, a Subway Sandwich
Shop, a Shoney's, an Arby's, a
Burger King, a Waffle House, a
New Orleans Famous Fried Chicken,
and a Western Sizzling.
- 28 -
<PAGE>
<CAPTION>
Lease Expira-
Purchase Date tion and Minimum Option
Property Location and Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent To Purchase
- --------------------------------- --------- -------- --------------- -------------------- --------------- -----------
<S> <C>
Burger King (27) $613,608 12/05/96 12/2016; two 11% of Total Cost for each lease None
(the "Chattanooga Property") (excluding five-year (4) year, (i) 8.5% of
Restaurant to be constructed closing and renewal options annual gross
development sales minus (ii)
The Chattanooga Property is costs) (3) the minimum
located on the southwest corner annual rent for
of Amnicola Highway and Riverport such lease year
Road, in Chattanooga, Hamilton
County, Tennessee, in an area of
mixed commercial and manufacturing
development. Other fast-food and
family-style restaurants located
in proximity to the Chattanooga
Property include a Bo Jangles.
Golden Corral $1,654,144 12/16/96 12/2016; two $186,091; increases for each lease at any time
(the "Eastlake Property") (excluding five-year by 10% after the fifth year, (i) 5% of after the
Existing restaurant closing renewal options lease year and after annual gross seventh
costs) every five years sales minus (ii) lease year
The Eastlake Property is located thereafter during the minimum
within the southwest quadrant of the lease term annual rent for
the intersection formed by Vine such lease year
Street and 337th Street, in
Eastlake, Lake County, Ohio, in
an area of mixed retail and
commercial development. Other
fast-food and family-style
restaurants located in proximity
to the Eastlake Property include
a Wendy's, a Little Caesar's, a
Subway Sandwich Shop, and several
local restaurants.
- 29 -
<PAGE>
<CAPTION>
Lease Expira-
Purchase Date tion and Minimum Option
Property Location and Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent To Purchase
- --------------------------------- --------- -------- --------------- -------------------- --------------- -----------
<S> <C>
Golden Corral (26) $363,400 12/17/96 12/2011; four 10.75% of Total Cost for each lease during the
(the "Moberly Property") (excluding five-year (4) year, 5% of the first
Restaurant to be constructed closing and renewal options amount by which through
development annual gross seventh
The Moberly Property is located costs) (3) sales exceed lease years
on the northwest corner of U.S. $2,199,271 (6) and the
Highway 24 East and Silva Lane, tenth
in Moberly, Randolph County, through
Missouri, in an area of mixed fifteenth
retail, commercial, and lease
residential development. Other years only
fast-food and family-style
restaurants located in proximity
to the Moberly Property include
a Pizza Hut, a Hardee's, a Burger
King, a Taco Bell, a Long John
Silver's, a McDonald's, a KFC, and
several local restaurants.
Boston Market (21) $252,130 12/17/96 6/2011; five $82,437; increases for each lease at any time
(the "St. Joseph Property") (excluding five-year by 10% after the year after the after the
Existing restaurant closing renewal fifth lease year fifth lease year, fifth
costs) (16) options and after every (i) 5% of annual lease year
The St. Joseph Property is five years gross sales minus
located in the Venture/Cub Foods thereafter during (ii) the minimum
shopping center on the east side the lease term annual rent for
of North Belt Highway, in St. such lease year
Joseph, Buchanan County, Missouri,
in an area of mixed retail,
commercial, and residential
development. Other fast-food and
family-style restaurants located
in proximity to the St. Joseph
Property include a KFC, two
McDonald's, two Taco Bell's, a
Long John Silver's, a Hardee's, an
Arby's, a Black-eyed Pea, two
Burger King's, a Church's Fried
Chicken, two Pizza Hut's, a Ryan's
Family Steak House, a Sonic, and a
Wendy's.
- 30 -
<PAGE>
<CAPTION>
Lease Expira-
Purchase Date tion and Minimum Option
Property Location and Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent To Purchase
- --------------------------------- --------- -------- --------------- -------------------- --------------- -----------
<S> <C>
Boston Market $550,540 12/17/96 12/2011; five 10.38% of Total Cost for each lease at any time
(the "Atlanta Property") (excluding five-year (4); increases by 10% year after the after the
Restaurant to be constructed closing and renewal options after the fifth lease fifth lease year, fifth lease
development year and after every (i) 5% of annual year
The Atlanta Property is located costs) (3) five years thereafter gross sales minus
on the south side of Briarcliff during the lease term (ii) the minimum
Road at the junction with North annual rent for
Druid Hills Road, in Atlanta, such lease year
Dekalb County, Georgia, in an
area of mixed retail, commercial,
and residential development. Other
fast-food and family-style
restaurants located in proximity
to the Atlanta Property include an
Arby's, a Burger King, a
Chick-Fil-A, a Grady's, a
McDonald's, a Taco Bell, and several
local restaurants.
Jack in the Box (22) $831,459 12/17/96 12/2014; four $85,225 (19); increases for each lease None
(the "Dallas Property") (excluding five-year by 8% after the fifth year, (i) 5% of
Restaurant to be constructed closing renewal options lease year and after annual gross
costs) every five years sales minus (ii)
The Dallas Property is located (3)(19) thereafter during the the minimum
within the southwest portion of lease term annual rent for
the intersection formed by such lease year
Interstate Highway 20 and Wheatland (6)
Road, in Dallas, Dallas County,
Texas, in an area of mixed retail,
commercial, and residential
development. Other fast-food and
family-style restaurants located
in proximity to the Dallas
Property include an Arby's, a
Wendy's, and a Sonic.
- 31 -
<PAGE>
<CAPTION>
Lease Expira-
Purchase Date tion and Minimum Option
Property Location and Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent To Purchase
- --------------------------------- --------- -------- --------------- -------------------- --------------- -----------
<S> <C>
Jack in the Box (22) $1,397,771 01/07/97 01/2015; four $143,272 (19); increases for each lease None
(the "Los Angeles Property") (excluding five-year by 8% after the fifth year, (i) 5% of
Restaurant to be constructed closing renewal options lease year and after annual gross
costs) every five years sales minus (ii)
The Los Angeles Property is (3)(19) thereafter during the the minimum
located at the northwest corner lease term annual rent for
of the intersection of Wilshire such lease year
Boulevard and Sycamore Avenue, in (6)
Los Angeles, Los Angeles County,
California, in an area of mixed
retail, commercial, and residential
development. Other fast-food and
family-style restaurants located
in proximity to the Los Angeles
Property include several McDonald's,
a KFC, several Burger Kings, a
Numero Uno Pizza, a Subway Sandwich
Shop, an El Pollo Loco, a Denny's, a
Pizza Hut, a Taco Bell, and several
local restaurants.
Jack in the Box (22) $1,248,333 01/07/97 01/2015; four $127,954 (19); for each lease None
(the "Las Vegas Property") (excluding five-year increases by 8% after year, (i) 5% of
Restaurant to be constructed closing renewal options the fifth lease year annual gross
costs) and after every five sales minus (ii)
The Las Vegas Property is located (3)(19) years thereafter the minimum
at the northeast corner of the during the lease term annual rent for
intersection of Sunset Road and such lease year
Pecos Road, in Las Vegas, Clark (6)
County, Nevada, in an area of
mixed retail, commercial, and
residential development. Other
fast-food and family-style
restaurants located in proximity
to the Las Vegas Property include
an Arby's, a Burger King, a KFC,
two Del Tacos, a McDonald's, a
Subway Sandwich Shop, an Olive
Garden, an Outback Steakhouse,
two Taco Bells, a Wendy's, a
Dairy Queen, and several local
restaurants.
</TABLE>
- 32 -
<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:
<TABLE>
<CAPTION>
Property Federal Tax Basis Property Federal Tax Basis
<S> <C>
Hamden Property $1,195,000 La Quinta Property $ 485,000
Knoxville Property 510,000 Merced Property 401,000
Port Richey Property 1,208,000 Spring Hill Property 1,363,000
Hillsboro Property 742,000 Avon Property 484,000
McKinney Property 627,000 Florissant Property 618,000
Camarillo Property 672,000 Salinas Property 648,000
Sevierville Property 519,000 Chicago Property 753,000
Ellisville Property 635,000 San Diego Property 641,000
Golden Valley Property 529,000 Lufkin Property 977,000
Humble #1 Property 610,000 Columbia Property 880,000
Corvallis Property 624,000 Chattanooga Property 706,000
Houston #1 Property 620,000 Eastlake Property 1,250,000
Kendallville Property 304,000 Moberly Property 863,000
Rockwall Property 422,000 St. Joseph Property 594,000
Upland Property 433,000 Atlanta Property 683,000
Houston #2 Property 595,000 Dallas Property 507,000
Montclair Property 825,000 Las Angeles Property 567,000
Brooklyn Property 1,040,000 Las Vegas Property 592,000
</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 Hamden,
Port Richey, Hillsboro, Lufkin and Moberly Properties, minimum annual
rent will become due and payable on the earlier of (i) the date the
certificate of occupancy for the restaurant is issued, (ii) the date the
restaurant opens for business to the public or (iii) a specified number
of days (ranging from 150 to 180) after execution of the lease. For the
Knoxville, Camarillo, Sevierville, Montclair, Spring Hill , Salinas
and San Diego Properties, minimum annual rent will become due and
payable on the earlier of (i) the date the certificate of occupancy for
the restaurant is issued, (ii) the date the restaurant opens for
business to the public, (iii) a specified number of days (ranging from
120 to 180) after execution of the lease or (iv) the date the tenant
receives from the landlord its final funding of the construction costs.
For the Corvallis, Ellisville, Golden Valley and Rockwall Properties,
minimum annual rent will become due and payable on the earlier of (i)
180 days after execution of the lease or (ii) the date the tenant
receives from the landlord its final funding of the construction costs.
For the Humble #1, Houston #1 and Houston #2 Properties, minimum annual
rent will become due and payable on the earlier of (i) the date the
restaurant opens for business to the public or (ii) 180 days after the
execution of the lease. For the Upland, La Quinta, Merced, Florissant,
St. Joseph and Atlanta 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 Chicago and Chattanooga
Properties, minimum annual rent will become due and payable on the
possession dates, which are December 28, 1996 and April 4, 1997,
respectively (the "Possession Date"). During the period commencing with
the effective date of the lease to the date minimum annual rent becomes
payable for
- 33 -
<PAGE>
the Knoxville, Camarillo, Sevierville, Ellisville, Golden Valley,
Humble #1, Corvallis, Houston #1, Rockwall, Upland, Houston #2,
Montclair, La Quinta, Merced, Spring Hill, Florissant , Salinas, San
Diego, Lufkin, Moberly, St. Joseph and Atlanta Properties, as described
above, the tenant shall pay monthly "interim rent" equal to a specified
rate per annum (ranging from 10% to 11%) of the amount funded by the
Company in connection with the purchase and construction of the
Properties. For the Chicago Property, "interim rent" equal to 11
percent per annum of the amount funded by the Company in connection
with the purchase and construction of the Property shall accrue prior
to the Possession Date and shall be payable in a single lump sum at the
time of final funding of the construction costs.
(3) The Company accepted an assignment of an interest in the ground lease
relating to the Hamden , Sevierville and San Diego Properties,
effective April 24, 1996 , June 5, 1996 and October 16, 1996,
respectively, in consideration of its funding of certain preliminary
development costs and its agreement to fund remaining development costs
not in excess of the amounts specified below. The development
agreements for the Properties which are to be constructed provide that
construction must be completed no later than the dates set forth below.
The maximum cost to the Company, (including the purchase price of the
land (if applicable), development costs (if applicable), and closing
and acquisition costs) is not expected to, but may, exceed the amounts
set forth below:
<TABLE>
<CAPTION>
Property Estimated Maximum Cost Estimated Final Completion Date
<S> <C>
Hamden Property $1,200,972 Opened for business August 26, 1996
Knoxville Property 830,966 Opened for business July 8, 1996
Port Richey Property 1,675,000 Opened for business September 30, 1996
Hillsboro Property 1,119,248 August 28, 1997
Camarillo Property 1,264,789 Opened for business July 28, 1996
Sevierville Property 517,571 Opened for business June 13, 1996
Ellisville Property 1,026,746 Opened for business September 3, 1996
Golden Valley Property 1,128,899 Opened for business September 30, 1996
Humble #1 Property 949,413 Opened for business September 12, 1996
Corvallis Property 952,684 Opened for business October 6, 1996
Houston #1 Property 926,397 Opened for business September 25, 1996
Rockwall Property 795,087 Opened for business October 27, 1996
Upland Property 977,643 Opened for business September 30, 1996
Houston #2 Property 926,235 Opened for business July 14, 1996
Montclair Property 1,654,545 Opened for business December 16, 1996
La Quinta Property 951,872 Opened for business December 16, 1996
Merced Property 930,834 Opened for business October 6, 1996
Spring Hill Property 1,881,818 February 15, 1997
Florissant Property 1,264,986 Opened for business December 29, 1996
Salinas Property 1,339,000 February 6, 1997
Chicago Property 1,613,636 March 1, 1997
San Diego Property 638,966 Opened for business December 6, 1996
Lufkin Property 1,454,545 Opened for business December 27, 1996
Chattanooga Property 1,181,818 April 4, 1997
Moberly Property 1,294,011 June 15, 1997
Atlanta Property 1,216,003 June 15, 1997
Dallas Property (19) June 15, 1997
Los Angeles Property (19) July 6, 1997
Las Vegas Property (19) July 6, 1997
</TABLE>
- 34 -
<PAGE>
(4) The "Total Cost" is equal to the sum of (i) the purchase price of the
Property, (ii) closing costs, and (iii) actual development costs
incurred under the development agreement, and in the case of the
Hamden, Port Richey and Hillsboro Properties, (iv) "construction
financing costs" during the development period.
(5) If the lessee exercises its purchase option after the third lease year
and before the eleventh lease year, the purchase price to be paid by
the lessee shall be equal to the net present value of the monthly lease
rental payments for the remainder of the lease term (including previous
and scheduled rent increases) discounted at the lesser of (i) 11% per
annum, or (ii) the then-current annual yield on 7-year Treasury
securities plus 4.5%, plus the full amount of any late fees, default
interest, enforcement costs or other sums otherwise due or payable by
the lessee under the lease. If the lessee exercises its option after
the tenth lease year, the purchase price to be paid by the lessee shall
be equal to the net present value of the monthly lease payments for the
remainder of the lease term (based, however, for purposes hereof on the
initial monthly installment amount of annual rental and not including
previous and scheduled increases) discounted at 11% per annum, plus the
full amount of any late fees, default interest, enforcement costs or
other sums otherwise due or payable by the lessee under the lease.
(6) Percentage rent shall be calculated on a calendar year basis (January 1
to December 31).
(7) If the Property is not producing percentage rent and the lessee
determines, in good faith, that the restaurant has become uneconomic
and unsuitable the lessee may elect, during the first through seventh
and again during the tenth through 15th lease years:
(i) to purchase the Property for a purchase price, net of closing
costs, equal to the greater of (a) the then fair-market value of the
Property as determined by an independent appraisal, or (b) 100% of the
Company's original cost for the Property if the Company is successful
in effectuating the lessee's purchase through a tax-free "like-kind"
exchange, or 120% of the Company's original cost for the Property if a
tax-free, "like-kind" exchange is not effectuated; or
(ii) to sublet the Property as described in the section of the
Prospectus entitled "Description of Property Leases - Assignment and
Sublease;" or
(iii) to substitute the Property for another Golden Corral restaurant
property on terms similar to those described in the section of the
Prospectus entitled "Description of Property Leases - Substitution of
Properties."
(8) The lease relating to this Property is a land lease only. The Company
entered into a Mortgage Loan evidenced by a Master Mortgage Note for
$3,888,000 collateralized by building improvements. The Master Mortgage
Note bears interest at a rate of 10.75% per annum and principal and
interest will be collected in equal monthly installments over 20 years
beginning in July 1996.
(9) The Company entered into a Master Lease Agreement for the Beaver,
Bluefield, Huntington, Hurricane, Milton, Ronceverte, Beckley, Belle,
Cross Lanes and Marietta Properties.
- 35 -
<PAGE>
(10) The lease relating to this Property is a land lease only. The Company
entered into a Mortgage Loan evidenced by a Master Mortgage Note for
$484,000 collateralized by building improvements. The Master Mortgage
Note bears interest at a rate of 10.75% per annum and principal and
interest will be collected in equal monthly installments over 20 years
beginning in February 1997.
(11) The Company entered into a Master Lease Agreement for the Toledo and
Bowling Green Properties.
(12) The Company and the lessee entered into remediation and indemnity
agreements on May 17, 1996, with the seller of the land and an adjacent
site owner/operator (the "Indemnitors") due to Phase I and Phase II
environmental testing results indicating that there were action levels
of environmental contamination on the Bluefield, Hurricane and Marrieta
Properties relating to underground gasoline storage tanks from one
property adjacent to the Hurricane Property and past use of the other
two Properties. Under the remediation and indemnity agreements, the
Indemnitors have agreed to notify all applicable federal, state, or
local government agencies or authorities of the environmental
contamination, to undertake all remediation work on these sites at no
expense to the Company or lessee, and to indemnify, defend and hold
harmless the Company, the lessee and investors from losses arising out
of or related to any claim, action, proceeding, lawsuit, notice of
violation or demand by any (i) governmental authority in connection
with the presence of any environmental contamination, (ii) failure of
the Indemnitors to notify any applicable governmental authorities,
(iii) remediation work, and (iv) claim, action, proceeding, lawsuit, or
demand by third parties who are not the successors in interest of the
indemnified parties and are not affiliated with the indemnified
parties. If as to any of the affected sites, the remediation work is
not satisfactorily completed within two years after the effective date,
such that the Company is willing, in its discretion, to remain the
owner of a particular affected site, the Company may "put" the
particular affected site back to the seller, and the seller will
purchase the Company's ownership interest in the affected site.
(13) The "Building Overage Multiplier" is calculated as follows:
Building Overage Multiplier = (purchase price of the
building)/[purchase price of the building + (annual rent due under the
land lease/land lease cap rate)]
(14) The "Building Overage Multiplier" is calculated as follows:
Building Overage Multiplier = (purchase price of the
building)/(purchase price of the building + $685,714)
(15) In the event that the aggregate amount of percentage rent paid by the
lessee to the Company over the term of the lease shall equal or exceed
15% of the purchase price paid by the Company, then the option purchase
price shall equal one dollar. In the event that the aggregate
percentage rent paid shall be less than 15% of the purchase price paid
by the Company, then the option purchase price shall equal the
difference of 15% of the purchase price, less the aggregate percentage
rent paid to the landlord by the lessee under the lease.
(16) The Company has committed to pay $793,326, including development costs.
Of the total committed, $252,130 was paid at closing.
(17) The lessee also has the option to purchase the Property after the
lessee operates at least five Applebee's restaurants.
(18) The Company accepted an assignment of an interest in the ground lease
relating to the Brooklyn Property effective August 23, 1996.
(19) The Company paid for all construction costs in advance at closing;
therefore, minimum annual rent was determined on the date acquired and
is not expected to change.
(20) The lessee of the Knoxville, Camarillo, and Sevierville Properties is
the same unaffiliated lessee.
- 36 -
<PAGE>
(21) The lessee of the Ellisville, Golden Valley , Florissant and St. Joseph
Properties is the same unaffiliated lessee.
(22) The lessee of the Humble #1, Houston #1 , Houston #2, Dallas, Los
Angeles and Las Vegas Properties is the same unaffiliated lessee.
(23) The lessee of the Hillsboro and McKinney Properties is the same
unaffiliated lessee.
(24) The lessee of the Kendallville and Avon Properties is the same
unaffiliated lessee.
(25) The lessee of the Upland and La Quinta Properties is the same
unaffiliated lessee.
(26) The lessee of the Lufkin and Moberly Properties is the same
unaffiliated lessee.
(27) The lessee of the Chicago and Chattanooga Properties is the same
unaffiliated lessee.
- 37 -
<PAGE>
BORROWING AND SECURED EQUIPMENT LEASES
Between April 10, 1996 and January 8, 1997, the Company obtained ten
advances totalling $3,613,396 under its $15,000,000 Loan. The proceeds of the
advances were used to acquire Equipment for nine restaurant properties at a cost
of approximately $3,613,396, including Secured Equipment Lease Servicing Fees of
$70,070 to the Advisor. Six of the ten advances 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 (as defined in the Loan). Two
of the remaining advances relating to the Winnemucca Secured Equipment Lease are
considered to be an interest only loan for the first three months and upon
obtaining an additional advance in January 1997, will become a fully amortizing
term loan repayable over the duration of the Winnemucca Secured Equipment Lease,
but in no event greater than six years. The other two remaining advances
relating to the Hopkinsville Secured Equipment Lease and the Spring Hill Secured
Equipment Lease are considered to be interest only loans for the first two
months and upon obtaining an additional advance prior to February 1997 will
become fully amortizing term loans repayable over six years. The advances will
bear interest at a rate per annum equal to 215 basis points above the Reserve
Adjusted LIBOR Rate (as defined in the Loan).
The following table sets forth a summary of the principal terms of the
acquisition and lease of the Equipment.
- 38 -
<PAGE>
SECURED EQUIPMENT LEASES
From April 10, 1996 through January 8, 1997
<TABLE>
<CAPTION>
Option
Description Purchase Price (1) Date Acquired Lease Expiration Annual Rent (2) To Purchase
- --------------------------------- ------------------ -------------- ---------------- --------------- -----------
<S> <C>
Equipment for Golden Corral $538,790 06/14/96 06/2003 $109,617 (3)
restaurant in Middleburg (excluding closing
Heights, Ohio (8)(10) costs and Secured
(The "Middleburg Heights Secured Equipment Lease
Equipment Lease") Servicing Fee)
Equipment for Golden Corral $560,411 07/02/96 07/2003 $113,994 (3)
restaurant in Brooklyn, (excluding closing
Ohio (8) costs and Secured
(The "Brooklyn Secured Equipment Lease
Equipment Lease") Servicing Fee)
Equipment for TGI Friday's $509,573 07/15/96 07/2001 $132,664 (4)
restaurant in Hazlet, New (excluding closing
Jersey (9) costs and Secured
(The "Hazlet Secured Equipment Equipment Lease
Lease") Servicing Fee)
Equipment for TGI Friday's $562,742 08/09/96 08/2001 $146,484 (2) (4)
restaurant in Marlboro, New (excluding closing
Jersey (9) costs and Secured
(The "Marlboro Secured Equipment Lease
Equipment Lease") Servicing Fee)
Equipment for Denny's $143,075 (5) (5) (6) (6) (7)
restaurant in Winnemucca, (excluding closing
Nevada costs and Secured
(The "Winnemucca Secured Equipment Lease
Equipment Lease") Servicing Fee)
- 39 -
<PAGE>
<CAPTION>
Option
Description Purchase Price (1) Date Acquired Lease Expiration Annual Rent (2) To Purchase
- --------------------------------- ------------------ -------------- ---------------- --------------- -----------
<S> <C>
Equipment for Golden Corral $150,000 (8) (9) (9) (10)
restaurant in Hopkinsville, (excluding closing
Kentucky costs and Secured
(The "Hopkinsville Secured Equipment Lease
Equipment Lease") Servicing Fee)
Equipment for Golden Corral $466,573 12/04/96 12/2003 $7,901 (10)
restaurant in Columbia, (excluding closing
Tennessee costs and Secured
(The "Columbia Secured Equipment Lease
Equipment Lease") Servicing Fee)
Equipment for Ryan's Family $150,000 (11) (12) (12) (10)
Steak House in Spring Hill, (excluding closing
Florida costs and Secured
(The "Spring Hill Secured Equipment Lease
Equipment Lease") Servicing Fee)
Equipment for Applebee's $454,693 12/31/96 12/2003 $7,954 (10)
restaurant in Montclair, (excluding closing
California costs and Secured
(The "Montclair Secured Equipment Lease
Equipment Lease") Servicing Fee)
</TABLE>
FOOTNOTES:
(1) The Secured Equipment Lease is expected to be treated as a loan secured
by personal property for federal income tax purposes.
(2) Rental payments due under the Secured Equipment Lease are payable
monthly, commencing on the effective date of the lease.
(3) At the end of the lease term, if no event of default has occurred under
the terms of the Secured Equipment Lease, the lessee will have the
option to purchase the Equipment for $1.
(4) Lessee may purchase the Equipment prior to the expiration of the
Secured Equipment Lease, at the then present value of the remaining
rental payments, discounted at a rate of ten percent per annum.
(5) On August 28, 1996, the Company obtained an advance of $102,570 for
partial funding of the Equipment for a restaurant property in
Winnemucca, Nevada. On September 30, 1996, the Company obtained another
advance of $44,157 for additional funding of the Equipment
- 40 -
<PAGE>
for the restaurant property. The Company anticipates obtaining another
advance under its Loan totalling $146,727 to fund the balance of the
acquisition price of the Equipment in January 1997.
(6) The temporary Secured Equipment Lease entered into on August 28, 1996,
had a term of four months and required the payment of monthly rent of
$913. On September 30, 1996, the temporary Secured Equipment Lease was
amended to have a term of three months and requires the payment of
monthly rent of $1,306. Upon funding the balance of the Equipment
purchase price, which is expected to occur in the fourth month
following the initial Equipment funding, the Company will enter into a
final Secured Equipment Lease. The final Secured Equipment Lease is
expected to have a term of approximately seven years and provide for
the payment of rent (payable monthly) in an amount equal to the total
purchase price of the Equipment plus interest at a rate of 10.68% per
annum.
(7) Lessee may purchase the Equipment prior to the expiration of the final
Secured Equipment Lease, at the then present value of the remaining
rental payments, discounted at a rate of 10.68% per annum.
(8) On November 20, 1996, the Company obtained an advance of $153,676 for
partial funding of the Equipment for a restaurant property in
Hopkinsville, Kentucky. The Company anticipates obtaining another
advance of $261,916 to fund the balance of the acquisition price of the
Equipment within three months of obtaining the initial advance of
$153,676 described above.
(9) The temporary Secured Equipment Lease entered into on November 20,
1996, has a term of three months and requires the payment of monthly
rent of $1,281. Upon funding the balance of the Equipment purchase
price, which is expected to occur in the third month following the
initial Equipment funding, the Company will enter into a final Secured
Equipment Lease. The final Secured Equipment Lease is expected to have
a term of approximately seven years and provide for the payment of rent
(payable monthly) in an amount equal to the total purchase price of the
Equipment plus interest at a rate of ten percent per annum.
(10) Lessee may purchase the Equipment prior to the expiration of the final
Secured Equipment Lease, at the then present value of the remaining
rental payments, discounted at a rate of ten percent per annum.
(11) On December 12, 1996, the Company obtained an advance of $155,234 for
partial funding of the Equipment for a restaurant property in Spring
Hill, Florida. The Company anticipates obtaining another advance of
approximately $250,000 to fund the balance of the acquisition price of
the Equipment within three months of obtaining the initial advance of
$155,234 described above.
(12) The temporary Secured Equipment Lease entered into on December 12,
1996, has a term of three months and requires the payment of monthly
rent of $2,648. Upon funding the balance of the Equipment purchase
price, which is expected to occur in the third month following the
initial Equipment funding, the Company will enter into a final Secured
Equipment Lease. The final Secured Equipment Lease is expected to have
a term of approximately seven years and provide for the payment of rent
(payable monthly) in an amount equal to the total purchase price of the
Equipment plus interest at a rate of 10.875% per annum.
(13) The lessee of the Middleburg Heights and Brooklyn Secured Equipment
Leases is the same unaffiliated lessee.
(14) The lessee of the Hazlet and Marlboro Secured Equipment Leases is the
same unaffiliated lessee.
(15) The lessee of the Middleburg Heights Secured Equipment Lease leases the
restaurant property from an Affiliate of the Advisor.
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<PAGE>
MANAGEMENT COMPENSATION
FEES AND EXPENSES PAID TO THE
ADVISOR AND ITS AFFILIATES
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 $11,250,000 if 15,000,000 Shares are sold), and a marketing
support and due diligence expense reimbursement fee of 0.5% (a maximum of
$750,000 if 15,000,000 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 September 30, 1996, the Company had incurred $7,722,067
for Selling Commissions due to the Managing Dealer, a substantial portion
(approximately $7,200,000) of which has been paid as commissions to other
Soliciting Dealers. In addition, as of September 30, 1996, the Company had
incurred $514,805 in marketing support and due diligence expense reimbursement
fees due 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
$300,000 if 15,000,000 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 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. The
Company has determined, however, that the Company may pay the Soliciting Dealer
Servicing Fee directly to any Soliciting Dealer exempt from registration as a
broker-dealer and whose clients held Shares on such date. As of September 30,
1996, 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 September 30, 1996, the
Company had incurred $4,633,240 in such acquisition fees payable to the Advisor.
Acquisition fees incurred by the Company as of June 30, 1996, are included as
part of the cost of land and buildings on operating leases, net investment in
direct financing lease and other assets.
Development/Construction Management Fees to Affiliates of the Company.
In connection with the acquisition of Properties that have been constructed or
renovated by Affiliates, the Company will incur development/construction
management fees of generally 5% to 10% of the cost of constructing or renovating
a Property, payable to Affiliates of the Company as Acquisition Fees. Such fees
will be included in the purchase price of Properties purchased from developers
that are Affiliates of the Company. See "Business -Site Selection and
Acquisition of Properties." Development/construction management fees, which are
based on the number of Properties purchased from developers that are Affiliates
of the Company, the cost of construction or renovation of such Properties and
the percentage amount of each development/construction management fee, are not
determinable at this time. As of September 30, 1996, the Company had incurred
$21,500 in Development/Construction Management Fees to Affiliates.
Construction Financing Fees to Affiliates of the Company. In connection
with the acquisition of Properties from affiliated or unaffiliated developers,
to whom Affiliates of the Company have provided construction financing, the
Company will incur construction financing fees, payable to Affiliates of the
Company as Acquisition Fees. Such fees will be in an amount equal to generally
1% to 2% of the total amount of each loan plus the difference between the
Affiliate - lender's cost of funds and the amount of interest charged to the
developer with such difference determined by applying an annual percentage rate
of generally
- 42 -
<PAGE>
1.5% to 3% throughout the duration of the loan to the outstanding amount of the
loan. Such fees will be included in the purchase price of Properties purchased
from developers that receive such loans. See "Business Site Selection and
Acquisition of Properties." Construction loan fees, which are based on the
number of Properties for which Affiliates of the Company provide construction
financing, the amount and duration of such loans and the amount of each
construction financing fee, are not determinable at this time. As of September
30, 1996, no such fees had been incurred by the Company.
The total of all Acquisition Fees and Acquisition Expenses shall be
reasonable and shall not exceed an amount equal to 6% of the Real Estate Asset
Value of a Property unless a majority of the Board of Directors, including a
majority of the Independent Directors, not otherwise interested in the
transaction approves fees in excess of these limits subject to a determination
that the transaction is commercially competitive, fair and reasonable to the
Company.
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) as of the
end of the preceding month. As of September 30, 1996, the Company had incurred
$167,886 of such fees, $10,595 of which has been capitalized as part of the cost
of building for Properties under construction.
Mortgage Management Fee. For managing 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. As of September 30, 1996, the Company had incurred $41,561 of
such fees.
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. As of September 30, 1996, the
Company had incurred $46,292 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, excluding Distributions attributable to proceeds of the Sale
of a Property (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. See "The Advisor and The Advisory Agreement
- -The Advisory Agreement." As of September 30, 1996, 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 September
30, 1996, 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
- 43 -
<PAGE>
on a day-to-day basis. As of September 30, 1996, the Company had incurred
$1,315,488 of such costs that are included in stock issuance costs and $304,207
of such costs that are included in general and administrative expenses.
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. As of September 30, 1996, the Advisor and its Affiliates had incurred
$3,181,611, $267,970, and $262,390 on behalf of the Company for Organizational
and Offering Expenses, Acquisition Expenses, and Operating Expenses,
respectively.
SELECTED FINANCIAL DATA
The following table sets forth certain financial information for CNL
American Properties Fund, Inc., 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 Supplement and Exhibit B to the Prospectus.
<TABLE>
<CAPTION>
May 2,
1994 (Date
Nine Months Ended of Inception)
September 30, Year Ended through
1996 December 31, December 31,
(Unaudited) 1995 1994
--------------------- --------------- --------------
<S> <C>
Revenues $3,883,714 $ 659,131 $ -
Net earnings 2,757,759 368,779 -
Cash distributions declared (1) 3,403,427 638,618 -
Earnings per Share 0.41 0.19 -
Cash distributions declared
per Share 0.50 0.34 -
Weighted average number of
Shares outstanding (2) 6,771,120 1,898,350 -
</TABLE>
September 30,
1996 December 31, December 31,
(Unaudited) 1995 1994
-------------- --------------- ------------
Total assets $97,998,150 $33,603,084 $929,585
Total equity 89,528,514 31,980,648 200,000
(1) Approximately 11 percent and 40 percent of cash distributions
($0.06 and $0.14 per Share) for the nine months ended
September 30, 1996 and the year ended December 31, 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.
- 44 -
<PAGE>
(2) The weighted average number of Shares outstanding is based
upon the period the Company was operational.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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 Restaurant Chains. In addition, the Company may provide
Mortgage Loans for the purchase of buildings, generally by tenants that lease
the underlying land from the Company. To a lesser extent, the Company intends to
offer Secured Equipment Leases to operators of Restaurant Chains. Secured
Equipment Leases will be funded from the proceeds of the Loan, in an amount up
to 10% of Gross Proceeds from the offering, which the Company has obtained.
As of September 30, 1996, the Company owned 82 Properties (including
one Property through a joint venture arrangement consisting of land and
building, 42 consisting of land and building, six consisting of building only
and 33 consisting of land only and in connection with which the Company provided
Mortgage Loans to the tenant for the purchase of the buildings on the
Properties). Of the 82 Properties, ten were under construction at September 30,
1996. In addition, as of September 30, 1996, the Company had entered into five
Secured Equipment Leases.
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 availability of proceeds from the Company's
anticipated subsequent 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.
LIQUIDITY AND CAPITAL RESOURCES
In April 1995, the Company commenced an offering of its Shares of
common stock. As of September 30, 1996, the Company had received subscription
proceeds of $102,960,892 (10,296,089 Shares) from the offering, including
$391,348 (39,135 Shares) through the Reinvestment Plan.
As of September 30, 1996, net proceeds to the Company from its offering
of Shares and capital contributions from the Advisor after deduction of Selling
Commissions, Marketing Support and Due Diligence Expense Reimbursement Fees and
Organizational and Offering Expenses, totalled $90,224,022.
- 45 -
<PAGE>
As of September 30, 1996, approximately $80,872,000 had been used to invest, or
committed for investment, in 82 Properties (ten of which were undeveloped land
on which a restaurant was being constructed), in providing mortgage financing of
$12,363,000 to the tenants of the 33 Properties consisting of land only and to
pay Acquisition Fees to the Advisor totalling $4,633,240 and certain Acquisition
Expenses. The Company acquired 12 of the 82 Properties from Affiliates, for
purchase prices totalling approximately $8,979,000. 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. The Company
expects to use Net Offering Proceeds from the sale of Shares to purchase
additional Properties, to fund construction costs relating to the Properties
under construction and to make Mortgage Loans. 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.
On March 5, 1996, the Company entered into the Loan with a bank. The
Loan is 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. Generally, advances under the Loan will be fully amortizing
term loans repayable in terms equal to the duration of the Secured Equipment
Leases, but in no event greater than 72 months. In addition, advances for
short-term needs (to acquire equipment to be leased under Secured Equipment
Leases) may be requested in an aggregate amount which does not exceed the
Revolving Sublimit (defined in the Loan as $1,000,000) and such advances may be
repaid and readvanced; provided, however, that advances made pursuant to the
Revolving Sublimit shall be converted to term loans the earlier of (i) the end
of each 60 day period following the closing date (defined in the Loan as March
5, 1996), or (ii) when the aggregate amount outstanding equals or exceeds
$1,000,000. Interest on advances made pursuant to the Revolving Sublimit shall
be paid monthly in arrears. In addition, principal amounts under advances
pursuant to the Revolving Sublimit, if not sooner paid or converted into term
loans, shall be paid, together with any unpaid interest relating to such
advances, to the bank on March 5, 1998. Generally, all advances under the Loan
will bear interest at either (i) a rate per annum equal to 215 basis points
above the Reserve Adjusted LIBOR Rate (as defined in the Loan) or (ii) a rate
per annum equal to the bank's prime rate, whichever the Company selects at the
time advances are made. As a condition of obtaining the Loan, the Company agreed
to grant to the bank a first security interest in the Secured Equipment Leases.
In connection with the Loan, the Company incurred a commitment fee, legal fees
and closing costs of $53,500 relating to the Loan. As of September 30, 1996, the
Company had obtained advances totalling $2,417,572 relating to the Loan. The
proceeds were used to fund Secured Equipment Leases at an aggregate cost of
approximately $2,364,000, including Secured Equipment Lease Servicing Fees of
$46,292 to the Advisor and to pay loan costs of $53,500 described above. The
Company expects to use the proceeds of the Loan to fund the Secured Equipment
Lease program, as described above.
During the quarter ended September 30, 1996, the Company entered into
interest rate swap agreements to reduce the impact of changes in interest rates
on its floating rate long-term debt. At September 30, 1996, the Company had
outstanding two interest rate swap agreements with a commercial bank, having a
total notional amount of approximately $2,206,000. Those agreements effectively
change the Company's interest rate exposure on approximately $1,641,000 of the
outstanding floating rate notes to a fixed nine percent per annum and
approximately $565,000 of the outstanding floating rate notes to a fixed rate of
8.75% per annum. The Company is exposed to credit loss in the event of
nonperformance by the other party to the interest rate swap agreements. However,
the Company does not anticipate nonperformance by the counterparty.
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 once construction is completed. 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. As of September 30, 1996,
the aggregate maximum development costs the Company had agreed to pay was
approximately $12,162,800, of which approximately $6,976,000
- 46 -
<PAGE>
in land and other costs had been incurred as of September 30, 1996. The
buildings under construction as of September 30, 1996, are expected to be
operational by February 1997. In connection with the purchase of each Property,
the Company, as lessor, entered into a long-term, triple-net lease agreement.
During the period October 1, 1996 through January 8, 1997, the Company
acquired 14 additional Properties (11 Properties consisting of land and
building, eight of which are being constructed, two Properties consisting of
land only and one Property consisting of building only which is being
constructed) for cash at a total cost of approximately $10,535,000, excluding
development and closing costs. The development costs (including the purchase of
the land and closing costs) to be paid by the Company relating to the nine
Properties under construction are estimated to be approximately $10,877,000. The
buildings under construction are expected to be operational by July 1997.
The Company presently is negotiating to acquire additional Properties,
but as of January 8, 1997, had not acquired any such Properties.
In addition, during the period October 1, 1996 through January 8, 1997,
the Company obtained four additional advances totalling approximately $1,249,000
under its $15,000,000 Loan. The proceeds of the advances were used to fund four
Secured Equipment Leases at a cost of approximately $1,249,000, including
Secured Equipment Lease Servicing Fees of $23,778 paid to the Advisor.
On November 1, 1996, the Company filed a registration statement with the
Securities and Exchange Commission in connection with the proposed sale by the
Company of up to 27,500,000 shares of common stock in a public offering (the
"Subsequent Offering") expected to commence immediately following the
termination of the Company's current $150,000,000 offering. Of the 27,500,000
shares of common stock to be offered, 2,500,000 will be available only to
stockholders purchasing through the reinvestment plan. Until such time, if any,
as the stockholders approve an increase in the number of authorized shares of
common stock of the Company, the subsequent offering will be limited to
4,800,000 shares. The Board of Directors expects to submit, for a vote of the
stockholders at a meeting expected to be held in April of 1997, a resolution to
increase the number of authorized shares of common stock of the Company from
20,000,000 to 75,000,000. The price per share and the other terms of the
Subsequent Offering, including the percentage of gross proceeds payable to the
managing dealer for selling commissions and expenses in connection with the
offering, payable to the Advisor for acquisition fees and acquisition expenses
and reimbursable to the Advisor for organizational and offering expenses, will
be the same as those for the Company's current offering. Net proceeds from the
Subsequent Offering will be invested in additional Properties and mortgage
loans. Management believes that the increase in the amount of assets of the
Company that will result from the Subsequent Offering will also increase the
diversification of the Company's assets and the likelihood of listing the
Company's shares of common stock on a national securities exchange or
over-the-counter market ("Listing"), although there is no assurance
that Listing will occur.
As of January 8, 1997, the Company had received subscription proceeds
of $140,906,434 (14,090,643 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
Organizational and Offering Expenses, net proceeds to the Company totalled
approximately $125,000,000. As of January 8, 1997, the Company had invested or
committed for investment approximately $97,400,000 of such net proceeds in 96
Properties, in providing mortgage financing to the tenants of the 35 Properties
consisting of land only through Mortgage Loans, and in paying Acquisition Fees
to the Advisor totalling $6,340,788 and certain Acquisition Expenses, leaving
approximately $27,700,000 in Net Offering Proceeds available for investment in
Properties and Mortgage Loans.
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, by
the Company, all 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 September 30,
1996, the Company had $22,256,995 invested in such short-term investments as
compared to $11,508,445 at December 31, 1995. The increase in the amount
invested in short-term investments reflects subscription proceeds derived from
the sale of shares during the nine months ended September 30, 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,
- 47 -
<PAGE>
to pay organization and offering and acquisition costs, to pay Distributions to
stockholders, to meet Company expenses and, in management's discretion, to
create cash reserves.
During the nine months ended September 30, 1996 and 1995, Affiliates of
the Company incurred on behalf of the Company $615,600 and $1,974,281,
respectively, for certain Offering Expenses. In addition, during the nine months
ended September 30, 1996 and 1995, Affiliates of the Company incurred on behalf
of the Company $136,341 and $75,501 for certain Acquisition Expenses and
$208,156 and $22,930 for certain Operating Expenses. As of September 30, 1996,
the Company owed the Advisor $236,463 for such amounts, accounting and
administrative expenses and Acquisition Fees. As of November 5, 1996, 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. Other liabilities increased to $7,944,717 at September
30, 1996, from $1,256,486 at December 31, 1995, primarily as a result of the
accrual of construction costs incurred and unpaid as of September 30, 1996.
During the nine months ended September 30, 1996 and 1995, 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
$3,244,519 and $124,187, respectively. Based on current and anticipated future
cash from operations, the Company declared Distributions to the stockholders of
$3,403,427 and $187,684 during the nine months ended September 30, 1996 and
1995, respectively ($1,534,940 and $172,536 for the quarters ended September 30,
1996 and 1995, respectively). On October 1, 1996, November 1, 1996, and December
1, 1996, the Company declared Distributions to its stockholders totalling
$615,914, $683,907 and $731,569, respectively, payable in December 1996. In
addition, on January 1, 1997, the Company declared Distributions to its
stockholders totalling $827,967 payable in March 1997. For the nine months ended
September 30, 1996, approximately 89 percent of the Distributions received by
stockholders were considered to be ordinary income and 11 percent were
considered a return of capital for federal income tax purposes. However, no
amounts distributed or to be distributed to the stockholders as of January 8,
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. The Advisor has 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. Accordingly,
management believes that any anticipated decrease in the Company's liquidity in
1997, due to its investment of available Net Offering Proceeds in Properties and
Mortgage Loans, will not have an adverse effect on the Company's operations.
During the operational stage, management believes that the leases will generate
cash flow in excess of Operating Expenses. Since the leases are expected
generally to have an initial term of 15 to 20 years, with two or more five-year
renewal options, and provide for specified percentage rent in addition to the
annual base rent and, in certain cases, increases in the base rent at specified
times during the terms of the leases, it is anticipated that rental income will
increase over time.
Due to anticipated low Operating Expenses, rental income expected to be
obtained from Properties after they are acquired, the fact that as of January 8,
1997, the Company had entered into Secured Equipment Leases for amounts borrowed
under the Loan and the fact that payments due to the Company from the Secured
Equipment Leases are expected to exceed debt service requirements for the Loan,
management does not believe that working capital reserves will be necessary at
this time. Management has
- 48 -
<PAGE>
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
No significant operations commenced until the Company received the
minimum offering proceeds of $1,500,000 on June 1, 1995.
As of September 30, 1996, the Company and its consolidated joint
venture had purchased 82 Properties, including one which is owned through a
Joint Venture consisting of land and building, 42 Properties consisting of land
and building, six Properties consisting of building only and 33 Properties
consisting of land only, and entered into lease agreements relating to these
Properties. The leases provide for minimum base annual rental payments (payable
in monthly installments) ranging from approximately $75,800 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.
During the nine months ended September 30, 1996 and 1995, the Company
and its consolidated joint venture, CNL/Corral South Joint Venture, earned
$2,667,866 and $122,787, respectively, in rental income from operating leases
and earned income from the direct financing leases from 72 and 14 Properties,
respectively, ($963,681 and $122,418 of which was earned during the quarters
ended September 30, 1996 and 1995, respectively) . Because the Company did not
commence significant operations until it received the minimum offering proceeds
on June 1, 1995, and has not yet acquired all of its Properties, revenues for
the nine months ended September 30, 1996, represent only a portion of revenues
which the Company is expected to earn in future periods in which the Company's
Properties are operational.
During the nine months ended September 30, 1996, the Company entered
into two Mortgage Loans in the principal sum of $12,363,000, collateralized by a
mortgage on the buildings relating to 33 Pizza Hut Properties. The Mortgage
Loans bear interest at a rate of 10.75% per annum and are being collected in 240
equal monthly installments totalling $125,513. In connection therewith, the
Company earned $796,378 in interest income relating to such Mortgage Loans
during the nine months ended September 30, 1996, $330,880 of which was earned
during the quarter ended September 30, 1996.
During the quarter ended September 30, 1996, five lessees, or groups of
affiliated lessees of the Company, Golden Corral Corporation , Castle Hill
Holdings V, L.L.C. and Castle Hill Holdings VI, L.L.C. (hereinafter referred to
as Castle Hill), DenAmerica Corporation, Briad Restaurant Group, Inc. and Corral
Northeast, Inc., each contributed more than ten percent of the Company's total
rental income. Golden Corral Corporation is the lessee under leases relating to
five restaurants , Castle Hill is the lessee under leases relating to 33
restaurants, DenAmerica Corporation is the lessee under leases relating to five
restaurants, Briad Restaurant Group, Inc. is the lessee under leases relating to
four restaurants and two Secured Equipment Leases and Corral Northeast, Inc. is
the lessee under leases relating to two restaurants. During the quarter ended
September 30, 1996, the Company also earned $330,880 in interest income from
- 49 -
<PAGE>
mortgage notes receivable under which Castle Hill is the borrower. In addition,
five restaurant chains, Golden Corral Family Steakhouse , Pizza Hut, TGI
Friday's, Denny's and Boston Market each accounted for more than ten percent of
the Company's total rental income during the quarter ended September 30, 1996.
Because the Company has not yet completed its acquisition of Properties, it is
not possible to determine which lessees or Restaurant Chains will contribute
more than ten percent of the Company's rental income during the remainder of
1996 and subsequent years, with the exception of Castle Hill , Pizza Hut and
Boston Market, each of which the Company anticipates will contribute more than
ten percent of the Company's income during the remainder of 1996 . In the event
that certain lessees, borrowers or Restaurant Chains contribute more than ten
percent of the Company's total income in the current and future years, any
failure of such lessees, borrowers or Restaurants Chains could materially affect
the Company's income.
During the nine months ended September 30, 1996 and 1995, the Company
also earned $419,470 and $42,117, respectively, in interest income from
investments in money market accounts or other short-term, highly liquid
investments and other income, $207,681 and $34,289 of which was earned during
the quarters ended September 30, 1996 and 1995, respectively. Interest income
from investing in money market accounts or other short-term, highly liquid
investments is expected to increase as the Company invests subscription proceeds
in highly liquid investments pending the acquisition of Properties or investing
in Mortgage Loans. However, 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 $1,104,368 and $78,564 for the nine months ended September 30, 1996 and
1995, respectively, of which $434,261 and $74,822 were incurred during the
quarters ended September 30, 1996 and 1995, respectively. Operating expenses
increased during the quarter and nine months ended September 30, 1996, as
compared to the quarter and nine months ended September 30, 1995, primarily as a
result of the fact that the Company did not commence operations until June 1,
1995. General and administrative expenses as a percentage of total revenues is
expected to decrease as the Company acquires additional Properties and the
Properties under construction become operational. However, asset management fees
and depreciation and amortization expense are expected to increase as the
Company acquires additional Properties.
- 50 -
<PAGE>
PRIOR PERFORMANCE INFORMATION
The information presented in this section represents the historical
experience of certain real estate programs organized by certain officers and
directors of the Advisor. INVESTORS IN THE COMPANY SHOULD NOT ASSUME THAT THEY
WILL EXPERIENCE RETURNS, IF ANY, COMPARABLE TO THOSE EXPERIENCED BY INVESTORS IN
SUCH PRIOR REAL ESTATE PROGRAMS. INVESTORS WHO PURCHASE SHARES IN THE COMPANY
WILL NOT THEREBY ACQUIRE ANY OWNERSHIP INTEREST IN ANY PARTNERSHIPS TO WHICH THE
FOLLOWING INFORMATION RELATES.
Two Directors of the Company, Robert A. Bourne and James M. Seneff,
Jr., individually or with others have served as general partners of 84 and 85
real estate limited partnerships, respectively, including the 18 publicly
offered CNL Income Fund partnerships, which purchased properties similar to
those to be acquired by the Company, listed in the table below. None of these
limited partnerships has been audited by the IRS. Of course, there is no
guarantee that the Company will not be audited. Based on an analysis of the
operating results of the prior partnerships, the general partners of these
partnerships believe that each of such partnerships has met or is meeting its
principal investment objectives in a timely manner.
CNL Realty Corporation, which was organized as a Florida corporation in
November 1985 and whose sole stockholders are Messrs. Bourne and Seneff,
currently serves as the corporate general partner with Messrs. Bourne and Seneff
as individual general partners of 18 CNL Income Fund limited partnerships, all
of which were organized to invest in fast-food, family-style and, in the case of
two funds, casual dining restaurant properties similar to those that the Company
intends to acquire and have investment objectives similar to those of the
Company. As of September 30, 1996, these 18 partnerships had raised a
total of $580,510,431 from a total of 47,461 investors, and had invested in 653
fast-food or family-style restaurant properties.
As of September 30, 1996, 17 of the 18 CNL public partnerships had
completed their offerings. As indicated in Exhibit C, the eight public
partnerships, the offerings of which were fully subscribed between October 1991
and September 1996, had made annualized cash distributions to limited partners
in amounts equal to from 4.5% to 9.1% of invested capital as of June 30, 1996.
As of June 30, 1996, an average of approximately .54% (ranging from zero to
2.4%) of the cumulative cash distributions to limited partners from these
partnerships constituted cash distributions that exceeded accumulated net income
on a GAAP basis, primarily as the result of depreciation deductions. Accumulated
net income includes deductions for depreciation and amortization expense and
income from certain non-cash items. The partnerships do not treat these amounts,
which are presented as a "return of capital on a GAAP basis" in Table III of the
Prior Performance Tables included in Exhibit C, as a return of capital for any
other purpose. Certain additional information relating to the offerings and
investment history of the 18 public partnerships is set forth below.
<TABLE>
<CAPTION>
Date 90% of Net
Number of Proceeds Fully
Maximum Limited Invested or
Name of Offering Partnership Committed to
Partnership Amount (1) Date Closed Units Sold Investment (2)
- ----------- ---------- ----------- ---------- --------------
<S> <C>
CNL Income $15,000,000 December 31, 1986 30,000 December 1986
Fund, Ltd. (30,000 Units)
CNL Income $25,000,000 August 21, 1987 50,000 November 1987
Fund II, Ltd. (50,000 Units)
CNL Income $25,000,000 April 29, 1988 50,000 June 1988
Fund III, Ltd. (50,000 Units)
CNL Income $30,000,000 December 6, 1988 60,000 February 1989
Fund IV, Ltd. (60,000 Units)
- 51 -
<PAGE>
CNL Income $25,000,000 June 7, 1989 50,000 December 1989
Fund V, Ltd. (50,000 Units)
CNL Income $35,000,000 January 19, 1990 70,000 May 1990
Fund VI, Ltd. (70,000 Units)
CNL Income $30,000,000 August 1, 1990 30,000,000 January 1991
Fund VII, Ltd. (30,000,000 Units)
CNL Income $35,000,000 March 7, 1991 35,000,000 September 1991
Fund VIII, Ltd. (35,000,000 Units)
CNL Income $35,000,000 September 6, 1991 3,500,000 November 1991
Fund IX, Ltd. (3,500,000 Units)
CNL Income $40,000,000 March 18, 1992 4,000,000 June 1992
Fund X, Ltd. (4,000,000 Units)
CNL Income $40,000,000 September 28, 1992 4,000,000 September 1992
Fund XI, Ltd. (4,000,000 Units)
CNL Income $45,000,000 March 15, 1993 4,500,000 July 1993
Fund XII, Ltd. (4,500,000 Units)
CNL Income $40,000,000 August 26, 1993 4,000,000 August 1993
Fund XIII, Ltd. (4,000,000 Units)
CNL Income $45,000,000 February 22, 1994 4,500,000 May 1994
Fund XIV, Ltd. (4,500,000 Units)
CNL Income $40,000,000 September 1, 1994 4,000,000 December 1994
Fund XV, Ltd. (4,000,000 Units)
CNL Income $45,000,000 June 12, 1995 4,500,000 August 1995
Fund XVI, Ltd. (4,500,000 Units)
CNL Income $30,000,000 September 19, 1996 3,000,000 (3)
Fund XVII, Ltd. (3,000,000 Units)
CNL Income $35,000,000 (4) (4) (4)
Fund XVIII, Ltd. (3,500,000 Units)
</TABLE>
- ------------------------------------
(1) The amount stated includes the exercise by the general partners of each
partnership of their option to increase by $5,000,000 the maximum size
of the offering of CNL Income Fund, Ltd., CNL Income Fund II, Ltd., CNL
Income Fund III, Ltd., CNL Income Fund IV, Ltd., CNL Income Fund VI,
Ltd., CNL Income Fund VIII, Ltd., CNL Income Fund X, Ltd., CNL Income
Fund XII, Ltd., CNL Income Fund XIV, Ltd., CNL Income Fund XVI, Ltd.,
and CNL Income Fund XVIII, Ltd.
(2) For a description of the property acquisitions by these limited
partnerships during the last ten years, see the table set forth on the
following page.
- 52 -
<PAGE>
(3) As of September 30, 1996, CNL Income Fund XVII, Ltd. had purchased 19
properties for approximately $20,130,700, representing an investment of
77% of net proceeds received.
(4) As of September 30, 1996, CNL Income Fund XVIII, Ltd., which is
offering a maximum of 3,500,000 limited partnership units
($35,000,000), had received subscriptions totalling $606,756 (60,676
units). As of such date, CNL Income Fund XVIII, Ltd. had not purchased
any properties.
As of September 30, 1996, Mr. Seneff and Mr. Bourne, directly or
through affiliated entities, also had served as joint general partners of 64
nonpublic real estate limited partnerships. The offerings of 63 of these 64
nonpublic limited partnerships had terminated as of September 30, 1996. These 63
partnerships raised a total of $164,419,266 from approximately 4,111 investors,
and purchased, directly or through participation in a joint venture or limited
partnership, interests in a total of 197 projects as of September 30, 1996.
These 197 projects consist of 19 apartment projects (comprising 11% of the total
amount raised by all 64 partnerships), 13 office buildings (comprising 5% of the
total amount raised by all 64 partnerships), 151 fast-food or family-style
restaurant property and business investments (comprising 69% of the total amount
raised by all 64 partnerships), one condominium development (comprising .5% of
the total amount raised by all 64 partnerships), four hotels/motels (comprising
5% of the total amount raised by all 64 partnerships), seven commercial/retail
properties (comprising 9% of the total amount raised by all 64 partnerships),
and two tracts of undeveloped land (comprising .5% of the total amount raised by
all 64 partnerships). The offering of the one remaining nonpublic limited
partnership (offering of $15,000,000) had raised $335,831 from eight investors
(approximately 2.25% of the total offering amount) as of September 30, 1996.
Mr. Bourne also has served, without Mr. Seneff, as a general partner of
one additional nonpublic real estate limited partnership program which raised a
total of $600,000 from 13 investors and purchased, through participation in a
limited partnership, one apartment building located in Georgia with a purchase
price of $1,712,000.
Mr. Seneff also has served, without Mr. Bourne, as a general partner of
two additional nonpublic real estate limited partnerships which raised a total
of $240,000 from 12 investors and purchased two office buildings with an
aggregate purchase price of $928,390. Both of the office buildings are located
in Florida.
Of the 83 real estate limited partnerships whose offerings had closed
as of September 30, 1996 (including 17 CNL Income Fund limited partnerships) in
which Mr. Seneff and/or Mr. Bourne serve or have served as general partners in
the past ten years, 35 invested in restaurant properties leased on a
"triple-net" basis, including six which also invested in franchised restaurant
businesses (accounting for approximately 93% of the total amount raised by all
83 real estate limited partnerships).
The following table sets forth summary information, as of September 30,
1996 regarding property acquisitions during the ten preceding years by the 17
limited partnerships that, either individually or through a joint venture or
partnership arrangement, acquired restaurant properties and that have investment
objectives similar to those of the Company.
<TABLE>
<CAPTION>
Name of Type of Method of Type of
Partnership Property Location Financing Program
<S> <C>
CNL Income 20 fast-food or AL, AZ, CA, FL, All cash Public
Fund, Ltd. family-style GA, LA, MD, OK,
restaurants TX, VA
CNL Income 43 fast-food or AL, AZ, CO, FL, All cash Public
Fund II, Ltd. family-style GA, IL, IN, LA,
restaurants MI, MN, MO, NC,
NM, OH, TX, WY
CNL Income 32 fast-food or AZ, CA, FL, GA, All cash Public
Fund III, Ltd. family-style IA, IL, IN, KS, KY,
restaurants MD, MI, MN, MO,
NE, OK, TX
- 53 -
<PAGE>
CNL Income 43 fast-food or AL, DC, FL, GA, All cash Public
Fund IV, Ltd. family-style IL, IN, KS, MA,
restaurants MD, MI, MS, NC,
OH, PA, TN, TX,
VA
CNL Income 30 fast-food or FL, GA, IL, IN, All cash Public
Fund V, Ltd. family-style MI, NH, NY, OH,
restaurants SC, TN, TX, UT,
WA
CNL Income 46 fast-food or AR, AZ, FL, IN, All cash Public
Fund VI, Ltd. family-style MA, MI, MN, NC,
restaurants NE, NM, NY, OH,
OK, PA, TN, TX,
VA, WY
CNL Income 45 fast-food or AZ, CO, FL, GA, All cash Public
Fund VII, Ltd. family-style IN, LA, MI, MN,
restaurants OH, SC, TN, TX,
UT, WA
CNL Income 40 fast-food or AZ, FL, IN, LA, All cash Public
Fund VIII, Ltd. family-style MI, MN, NC, NY,
restaurants OH, TN, TX, VA
CNL Income 41 fast-food or AL, FL, GA, IL, All cash Public
Fund IX, Ltd. family-style IN, LA, MI, MN,
restaurants MS, NC, NH, NY,
OH, SC, TN, TX
CNL Income 49 fast-food or AL, CA, CO, FL, All cash Public
Fund X, Ltd. family-style ID, IL, LA, MI,
restaurants MO, MT, NC, NH,
NM, NY, OH, PA,
SC, TN, TX
CNL Income 39 fast-food or AL, AZ, CA, CO, All cash Public
Fund XI, Ltd. family-style CT, FL, KS, LA,
restaurants MA, MI, MS, NC,
NH, NM, OH, OK,
PA, SC, TX, VA,
WA
CNL Income 49 fast-food or AL, AZ, CA, FL, All cash Public
Fund XII, Ltd. family-style GA, LA, MO, MS,
restaurants NC, NM, OH, SC,
TN, TX, WA
CNL Income 48 fast-food or AL, AR, AZ, CA, All cash Public
Fund XIII, Ltd. family-style CO, FL, GA, IN,
restaurants KS, LA, MD, NC,
OH, PA, SC, TN,
TX, VA
- 54 -
<PAGE>
CNL Income 56 fast-food or AL, AZ, CO, FL, All cash Public
Fund XIV, Ltd. family-style GA, KS, LA, MO,
restaurants MS, NC, NJ, NV,
OH, SC, TN, TX,
VA
CNL Income 47 fast-food or CA, FL, GA, KS, All cash Public
Fund XV, Ltd. family-style KY, MO, MS, NC,
restaurants NJ, NM, OH, OK,
PA, SC, TN, TX,
VA
CNL Income 43 fast-food or AZ, CA, CO, DC, All cash Public
Fund XVI, Ltd. family-style FL, GA, ID, IN,
restaurants KS, MN, MO, NC,
NM, NV, OH, TN,
TX, UT, WI
CNL Income 19 fast-food, CA, FL, GA, IL, All cash Public
Fund XVII, Ltd. family-style or IN, MI, NV, OH,
casual dining SC, TN, TX
restaurant
properties
CNL Income (1) (1) All cash Public
Fund XVIII, Ltd.
</TABLE>
- ------------------------------------
(1) As of September 30, 1996, CNL Income Fund XVIII, Ltd. had not purchased
any properties.
A more detailed description of the acquisitions by real estate limited
partnerships sponsored by Messrs. Bourne and Seneff is set forth in prior
performance Table VI, included in Part II of the registration statement filed
with the Securities and Exchange Commission for this offering. A copy of Table
VI is available to stockholders from the Company upon request, free of charge.
In addition, upon request to the Company, the Company will provide, without
charge, a copy of the most recent Annual Report on Form 10-K filed with the
Securities and Exchange Commission for CNL Income Fund, Ltd., CNL Income Fund
II, Ltd., CNL Income Fund III, Ltd., CNL Income Fund IV, Ltd., CNL Income Fund
V, Ltd., CNL Income Fund VI, Ltd., CNL Income Fund VII, Ltd., CNL Income Fund
VIII, Ltd., CNL Income Fund IX, Ltd., CNL Income Fund X, Ltd., CNL Income Fund
XI, Ltd., CNL Income Fund XII, Ltd., CNL Income Fund XIII, Ltd., CNL Income Fund
XIV, Ltd., CNL Income Fund XV, Ltd., CNL Income Fund XVI, Ltd., CNL Income Fund
XVII, Ltd., and CNL Income Fund XVIII, Ltd., as well as a copy, for a reasonable
fee, of the exhibits filed with such reports.
In order to provide potential purchasers of Shares in the Company with
information to enable them to evaluate the prior experience of the Messrs.
Seneff and Bourne as general partners of real estate limited partnerships,
including those set forth in the foregoing table, certain financial and other
information concerning those limited partnerships with investment objectives
similar to one or more of the Company's investment objectives in which Messrs.
Seneff and Bourne are general partners is provided in the Prior Performance
Tables included as Exhibit C. Information about the previous public
partnerships, the offerings of which were fully subscribed between October 1991
and September 1996, is included therein. Potential stockholders are encouraged
to examine the Prior Performance Tables attached as Exhibit C (in Table III),
which include information as to the operating results of these prior
partnerships, for more detailed information concerning the experience of Messrs.
Seneff and Bourne.
- 55 -
<PAGE>
THE ADVISOR AND THE ADVISORY AGREEMENT
THE ADVISORY AGREEMENT
The Advisory Agreement was renewed for a period of one year with the
unanimous approval of the Board of Directors, including the Independent
Directors, and shall expire on April 19, 1997, subject to successive one-year
renewals upon mutual consent of the parties.
SUMMARY OF THE
ARTICLES OF INCORPORATION AND BYLAWS
DESCRIPTION OF CAPITAL STOCK
The Company will not issue share certificates except to stockholders
who make a written request to the Company.
- 56 -
<PAGE>
ADDENDUM TO
EXHIBIT B
FINANCIAL INFORMATION
THE UPDATED PRO FORMA FINANCIAL STATEMENTS AND THE UNAUDITED FINANCIAL
STATEMENTS OF CNL AMERICAN PROPERTIES FUND, INC. CONTAINED IN THIS ADDENDUM
SHOULD BE READ IN CONJUNCTION WITH EXHIBIT B TO THE ATTACHED PROSPECTUS, DATED
APRIL 26, 1996.
<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 September 30, 1996 B-2
Pro Forma Consolidated Statement of Earnings for the nine months ended September 30, 1996 B-3
Pro Forma Consolidated Statement of Earnings for the year ended December 31, 1995 B-4
Notes to Pro Forma Consolidated Financial Statements for the nine months ended
September 30, 1996 and the year ended December 31, 1995 B-5
Updated Unaudited Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets as of September 30, 1996 and December 31, 1995 B-9
Condensed Consolidated Statements of Earnings for the nine months ended
September 30, 1996 and 1995 B-10
Condensed Consolidated Statements of Stockholders' Equity for the nine months
ended June 30, 1996 and the year ended December 31, 1995 B-11
Condensed Consolidated Statements of Cash Flows for the nine months ended
September 30, 1996 and 1995 B-12
Notes to Condensed Consolidated Financial Statements for the nine months ended
September 30, 1996 and 1995 B-14
<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 September
30, 1996, including the receipt of $102,960,893 in gross offering proceeds from
the sale of 10,296,089 shares of common stock pursuant to a Form S-11 under the
Securities Act of 1933, as amended, effective March 29, 1995, and the
application of such proceeds to purchase 82 properties (including 42 properties
which consist of land and building, one property through a joint venture
arrangement which consists of land and building, six properties which consist of
building only and 33 properties consisting of land only), 10 of which were under
construction at September 30, 1996, to provide mortgage financing to the lessees
of the 33 properties consisting of land only, and to pay organizational and
offering expenses, acquisition fees and miscellaneous acquisition expenses, (ii)
the receipt of $37,945,508 in gross offering proceeds from the sale of 3,794,551
additional shares of common stock during the period October 1, 1996 through
January 8, 1997, and (iii) the application of such funds to purchase 14
additional properties acquired during the period October 1, 1996 through January
8, 1997 (nine of which are under construction and consist of land and building,
one which is under construction and consists of building only, two properties
which consist of land and building and two properties which consist of land
only), to pay additional costs for the 10 properties under construction at
September 30, 1996, 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 September 30, 1996, includes the transactions described in (i) above
from its historical consolidated balance sheet, adjusted to give effect to the
transactions in (ii) and (iii) above, as if they had occurred on September 30,
1996.
The Pro Forma Consolidated Statements of Earnings for the nine months
ended September 30, 1996 and the year ended December 31, 1995, include the
historical operating results of the properties described in (i) above from the
dates of their acquisitions plus operating results for the seven of the 96
properties that were owned by the Company as of January 8, 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) June 2, 1995 (the date the Company became
operational), to (B) the earlier of (1) the date the property was acquired by
the Company or (2) the end of the pro forma period presented. No pro forma
adjustments have been made to the Pro Forma Consolidated Statements of Earnings
for the remaining 89 properties owned by the Company as of January 8, 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
SEPTEMBER 30, 1996
</TABLE>
<TABLE>
<CAPTION>
Pro Forma
ASSETS Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C>
Land and buildings on operating
leases, less accumulated
depreciation $ 50,053,887 $ 15,143,401 (a) $ 65,197,288
Net investment in direct
financing leases (b) 10,840,639 5,350,726 (a) 16,191,365
Cash and cash equivalents 22,256,995 8,862,665 (a) 31,119,660
Receivables 153,642 153,642
Mortgage notes receivable 12,311,892 12,311,892
Prepaid expenses 29,283 29,283
Organization costs, less
accumulated amortization 14,682 14,682
Loan costs, less accumulated
amortization 38,183 38,183
Accrued rental income 314,564 314,564
Other assets 1,984,383 665,473 (a) 2,649,856
------------ ----------- ------------
$ 97,998,150 $ 30,022,265 $128,020,415
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Note payable $ 2,376,235 $ 2,376,235
Accrued interest payable 11,238 11,238
Accrued construction costs payable 4,887,602 $ (4,887,602)(a) -
Accounts payable and accrued
expenses 38,363 38,363
Escrowed real estate taxes payable 9,696 9,696
Due to related parties 390,489 390,489
Deferred financing income 41,973 41,973
Rents paid in advance 425,584 425,584
------------ ------------ ------------
Total liabilities 8,181,180 (4,887,602) 3,293,578
------------ ------------ ------------
Minority interest 288,456 - 288,456
------------ ------------ ------------
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
10,316,089 shares; issued and
outstanding, as adjusted,
14,110,640 shares 103,161 37,946 (a) 141,107
Capital in excess of par value 90,340,860 34,871,921 (a) 125,212,781
Accumulated distributions in
excess of net earnings (915,507) (915,507)
------------ ------------ ------------
89,528,514 34,909,867 124,438,381
------------ ------------ ------------
$ 97,998,150 $ 30,022,265 $128,020,415
============ ============ ============
</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
NINE MONTHS ENDED SEPTEMBER 30, 1996
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
Revenues:
Rental income from
operating leases $2,342,959 $ 43,538 (1) $2,386,497
Earned income from
direct financing leases (2) 324,907 34,282 (1) 359,189
Interest income from
mortgage notes receivable 796,378 796,378
Other interest and income 419,470 (16,508)(3) 402,962
---------- ---------- ----------
3,883,714 61,312 3,945,026
---------- ---------- ----------
Expenses:
General operating and
administrative 402,046 402,046
Professional services 50,101 50,101
Asset and mortgage management
fees to related party 175,773 4,352 (4) 180,125
State and other taxes 40,366 1,129 (5) 41,495
Interest expense 47,269 47,269
Depreciation and amortization 388,813 3,300 (6) 392,113
---------- ---------- ----------
1,104,368 8,781 1,113,149
---------- ---------- ----------
Earnings Before Minority
Interest in Earnings of
Consolidated Joint Venture 2,779,346 52,531 2,831,877
Minority Interest in Earnings of
Consolidated Joint Venture (21,587) (21,587)
---------- ---------- ----------
Net Earnings $2,757,759 $ 52,531 $2,810,290
========== ========== ==========
Earnings Per Share of
Common Stock $ .41 $ .42
========== ==========
Weighted Average Number of
Shares of Common Stock
Outstanding 6,771,120 6,771,120
========== ==========
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, 1995
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
Revenues:
Rental income from
operating leases $ 498,817 $ 96,945 (1) $ 595,762
Earned income from direct
financing leases (2) 28,935 28,935
Contingent rental income 12,024 12,024
Interest income 119,355 (29,664)(3) 89,691
--------- --------- ---------
659,131 67,281 726,412
--------- --------- ---------
Expenses:
General operating and
administrative 134,759 134,759
Professional services 8,119 8,119
Asset management fee to
related party 23,078 4,368 (4) 27,446
State taxes 20,189 1,769 (5) 21,958
Depreciation and amortization 104,131 14,700 (6) 118,831
--------- --------- ---------
290,276 20,837 311,113
--------- --------- ---------
Earnings Before Minority
Interest in Earnings of
Consolidated Joint Venture 368,855 46,444 415,299
Minority Interest in Earnings
of Consolidated Joint Venture (76) (76)
--------- --------- ---------
Net Earnings $ 368,779 $ 46,444 $ 415,223
========= ========= =========
Earnings Per Share of
Common Stock (7) $ .19 $ .22
========= =========
Weighted Average Number
of Shares of Common Stock
Outstanding (7) 1,898,350 1,905,970
========= =========
See accompanying notes to unaudited pro forma consolidated financial statements.
B-4
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
AND THE YEAR ENDED DECEMBER 31, 1995
Pro Forma Consolidated Balance Sheet:
(a) Represents gross proceeds of $37,945,508 from the issuance of 3,794,551
shares of common stock during the period October 1, 1996 through
January 8, 1997, used (i) to acquire 14 properties for $14,545,488 (of
which one property consists of building only, two properties consist of
land only and 11 properties consist of land and building), (ii) to fund
estimated construction costs of $9,794,166 ($4,887,602 of which was
accrued as construction costs payable at September 30, 1996) relating
to 10 wholly-owned properties under construction at September 30, 1996,
(iii) to pay acquisition fees of $1,707,548 ($1,042,075 of which was
allocated to properties and $665,473 of which was classified as other
assets and will be allocated to future properties) and to pay selling
commissions and offering expenses (stock issuance costs) of $3,035,641,
which have been netted against capital in excess of par value, leaving
$8,862,665 in cash and cash equivalents available for future
investment.
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 con-
struction and Acquisition
closing costs) fees
and additional allocated
construction costs to property Total
------------------ ----------- -----
<S> <C>
Burger King in Chicago, IL $ 1,577,172 $ 84,491 $ 1,661,663
Wendy's in San Diego, CA 608,189 32,582 640,771
Golden Corral in Lufkin, TX 1,365,226 73,137 1,438,363
Golden Corral in Columbia, TN 1,294,199 69,332 1,363,531
Two Pizza Huts in Ohio 316,000 16,929 332,929
Burger King in Chattanooga, TN 1,155,455 61,900 1,217,355
Golden Corral in Eastlake, OH 1,637,199 87,707 1,724,906
Golden Corral in Moberly, MO 1,172,196 62,796 1,234,992
Boston Market in St. Joseph, MO 786,262 42,121 828,383
Boston Market in Atlanta, GA 1,159,027 62,091 1,221,118
Jack in the Box in Dallas, TX 830,459 44,489 874,948
Jack in the Box in Las Vegas, NV 1,247,333 66,822 1,314,155
Jack in the Box in Los Angeles, CA 1,396,771 74,827 1,471,598
Ten wholly owned properties
under construction at
September 30, 1996 4,906,564 262,851 5,169,415
----------- ----------- -----------
$19,452,052 $ 1,042,075 $20,494,127
=========== =========== ===========
Adjustment classified
as follows:
Land and buildings on
operating leases $15,143,401
Net investment in
direct financing
leases 5,350,726
-----------
$20,494,127
===========
</TABLE>
B-5
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
AND THE YEAR ENDED DECEMBER 31, 1995
Pro Forma Consolidated Balance Sheet - Continued:
(b) In accordance with generally accepted accounting principles, leases in
which the present value of future minimum lease payments equals or
exceeds 90 percent of the value of the related properties are treated
as direct financing leases rather than as land and buildings. The
categorization of the leases has no effect on rental revenues received.
Fourteen properties have been classified as direct financing leases.
For the leases classified as direct financing leases, the building
portions of six of the properties have been classified as direct
financing leases while the land portions of these leases are operating
leases.
Pro Forma Consolidated Statements of Earnings:
(1) Represents rental income from operating leases and earned income from
direct financing leases for the seven of the 96 properties acquired
during the period June 2, 1995 (the date the Company began operations)
through January 8, 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) June 2, 1995 (the date the Company became
operational), to (B) the earlier of (i) the date the Pro Forma Property
was acquired by the Company or (ii) the end of the pro forma period
presented. Each of the seven Pro Forma Properties was acquired from an
affiliate who had purchased and temporarily held title to the property.
The noncancellable leases for the Pro Forma Properties in place during
the period the affiliate owned the properties were assigned to the
Company at the time the Company acquired the properties. The following
presents the actual date the Pro Forma Properties were acquired by the
Company as compared to the date the Pro Forma Properties were treated
as becoming operational as a rental property for purposes of the Pro
Forma Consolidated Statements of Earnings.
Date Pro Forma
Date Placed Property Became
in Service Operational as
By the Company Rental Property
-------------- ---------------
Jack in the Box in
Los Angeles, CA June 1995 June 1995
Kenny Rogers Roasters in
Grand Rapids, MI August 1995 June 1995
Kenny Rogers Roasters in
Franklin, TN August 1995 June 1995
Denny's in Pasadena, TX September 1995 August 1995
Denny's in Shawnee, OK September 1995 August 1995
Denny's in Grand Rapids, MI March 1996 September 1995
Denny's in McKinney, TX June 1996 December 1995
B-6
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
AND THE YEAR ENDED DECEMBER 31, 1995
Pro Forma Consolidated Statements of Earnings - Continued:
In accordance with generally accepted accounting principles, lease
revenue from leases accounted for under the operating method is
recognized over the terms of the leases. For operating leases providing
escalating guaranteed minimum rents, income is reported on a
straight-line basis over the terms of the leases. For leases accounted
for as direct financing leases, future minimum lease payments are
recorded as a receivable. The difference between the receivable and the
estimated residual values less the cost of the properties is recorded
as unearned income. The unearned income is amortized over the lease
terms to provide a constant rate of return. Accordingly, pro forma
rental income from operating leases and earned income from direct
financing leases does not necessarily represent rental payments that
would have been received if the properties had been operational for the
full pro forma period.
Generally, the leases provide for the payment of percentage rent in
addition to base rental income. However, due to the fact that no
percentage rent was due under the leases for the Pro Forma Properties
during the portion of 1996 and 1995 that the previous owners held the
properties, no pro forma adjustment was made for percentage rental
income for the nine months ended September 30, 1996 and the year ended
December 31, 1995.
(2) See Note (b) under "Pro Forma Consolidated Balance Sheet" above for a
description of direct financing leases.
(3) Represents adjustment to interest income due to the decrease in the
amount of cash available for investment in interest bearing accounts
during the periods commencing (A) on the later of (i) the dates the Pro
Forma Properties became operational as rental properties by the
previous owners or (ii) June 2, 1995 (the date the Company became
operational), through (B) the earlier of (i) the actual dates of
acquisition by the Company or the end of the pro forma period
presented, as described in Note (1) above. The estimated pro forma
adjustment is based upon the fact that interest income on interest
bearing accounts was earned at a rate of approximately four percent per
annum by the Company during the nine months ended September 30, 1996
and the year ended December 31, 1995.
(4) Represents incremental increase in asset management fees relating to
the Pro Forma Properties for the period commencing (A) on the later of
(i) the date the Pro Forma Properties became operational as rental
properties by the previous owners or (ii) June 2, 1995 (the date the
Company became operational), through (B) the earlier of (i) the date
the Pro Forma Properties were acquired by the Company or (ii) the end
of the pro forma period presented, as described in Note (1) above.
Asset management fees are equal to 0.60% of the Company's Real Estate
Asset Value (estimated to be approximately $6,219,000 and $5,241,000
for the Pro Forma Properties for the nine months ended September 30,
1996 and the year ended December 31, 1995, 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 five 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.
B-7
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
AND THE YEAR ENDED DECEMBER 31, 1995
Pro Forma Consolidated Statements of Earnings - Continued:
(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 nine
months ended September 30, 1996, and during the period the Company was
operational, June 2, 1995 (the date following when the Company received
the minimum offering proceeds and funds were released from escrow)
through December 31, 1995.
As a result of three of the six Pro Forma Properties being treated in
the Pro Forma Consolidated Statement of Earnings for the year ended
December 31, 1995, as placed in service on June 2, 1995 (the date the
Company became operational), the Company assumed approximately 347,100
shares of common stock were sold, and the net offering proceeds were
available for investment, on June 2, 1995. Due to the fact that
approximately 184,800 of these shares of common stock were actually
sold subsequently, during the period June 3, 1995 through June 20,
1995, the weighted average number of shares outstanding for the pro
forma period was adjusted. Pro forma earnings per share were calculated
based upon the weighted average number of shares of common stock
outstanding, as adjusted, during the period the Company was
operational, June 2, 1995 through December 31, 1995.
B-8
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
ASSETS 1996 1995
------------- -----------
Land and buildings on operating leases,
less accumulated depreciation $50,053,887 $19,723,726
Net investment in direct financing leases 10,840,639 1,373,882
Cash and cash equivalents 22,256,995 11,508,445
Receivables 153,642 113,613
Mortgage notes receivable 12,311,892 -
Prepaid expenses 29,283 8,090
Organization costs, less accumulated
amortization of $5,318 and $2,318 14,682 17,682
Loan costs, less accumulated amortization
of $15,317 at September 30, 1996 38,183 -
Accrued rental income 314,564 39,142
Other assets 1,984,383 818,504
----------- -----------
$97,998,150 $33,603,084
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Note payable $ 2,376,235 $ -
Accrued interest payable 11,238 -
Accrued construction costs payable 4,887,602 1,058,825
Accounts payable and accrued expenses 38,363 79,904
Escrowed real estate taxes payable 9,696 9,696
Due to related parties 390,489 248,584
Deferred financing income 41,973 -
Rents paid in advance 425,584 25,351
----------- -----------
Total liabilities 8,181,180 1,422,360
----------- -----------
Minority interest 288,456 200,076
----------- -----------
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 10,316,089 and 3,865,416,
respectively 103,161 38,654
Capital in excess of par value 90,340,860 32,211,833
Accumulated distributions in excess of
net earnings (915,507) (269,839)
----------- -----------
Total stockholders' equity 89,528,514 31,980,648
----------- -----------
$97,998,150 $33,603,084
=========== ===========
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 Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
---------- ---------- ---------- ----------
Revenues:
Rental income from
operating leases $ 724,958 $ 122,418 $2,342,959 $ 122,787
Earned income from direct
financing leases 238,723 - 324,907 -
Interest income from
mortgage notes receiv-
able 330,880 - 796,378 -
Other interest and income 207,681 34,289 419,470 42,117
---------- ---------- ---------- ----------
1,502,242 156,707 3,883,714 164,904
---------- ---------- ---------- ----------
Expenses:
General operating and
administrative 132,727 43,112 402,046 46,464
Professional services 1,710 1,392 50,101 1,392
Asset and mortgage
management fees to
related party 78,100 3,864 175,773 3,864
State and other taxes 27,982 3,500 40,366 3,519
Interest expense 43,691 - 47,269 -
Depreciation and amorti-
zation 150,051 22,954 388,813 23,325
---------- ---------- ---------- ----------
434,261 74,822 1,104,368 78,564
---------- ---------- ---------- ----------
Earnings Before Minority
Interest in Loss (Income)
of Consolidated Joint
Venture 1,067,981 81,885 2,779,346 86,340
Minority Interest in Loss
(Income) of Consolidated
Joint Venture 736 - (21,587) -
---------- ---------- ---------- ----------
Net Earnings $1,068,717 $ 81,885 $2,757,759 $ 86,340
========== ========== ========== ==========
Earnings Per Share of
Common Stock $ 0.12 $ 0.06 $ 0.41 $ 0.08
========== ========== ========== ==========
Weighted Average Number of
Shares of Common Stock
Outstanding 8,993,595 1,324,609 6,771,120 1,088,791
========== ========== ========== ==========
See accompanying notes to condensed consolidated financial statements.
B-10
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Nine Months Ended September 30, 1996 and
Year Ended December 31, 1995
<TABLE>
<CAPTION>
Accumulated
distributions
Common stock Capital in in excess
Number Par excess of of net
of shares value par value earnings Total
--------- ----- --------- ------------- -----
<S> <C>
Balance at
December 31, 1994 20,000 $ 200 $ 199,800 $ - $ 200,000
Subscriptions
received for
common stock
through public
offering and
distribution
reinvestment
plan 3,845,416 38,454 38,415,704 - 38,454,158
Stock issuance
costs - - (6,403,671) - (6,403,671)
Net earnings - - - 368,779 368,779
Distributions
declared and
paid ($.03
to $.06 per
share) - - - (638,618) (638,618)
---------- -------- ----------- ----------- -----------
Balance at
December 31, 1995 3,865,416 38,654 32,211,833 (269,839) 31,980,648
Subscriptions
received for
common stock
through public
offering and
distribution
reinvestment
plan 6,450,673 64,507 64,442,227 - 64,506,734
Stock issuance
costs - - (6,313,200) - (6,313,200)
Net earnings - - - 2,757,759 2,757,759
Distributions
declared and
paid ($.06
per share) - - - (3,403,427) (3,403,427)
---------- -------- ----------- ----------- -----------
Balance at
September 30,
1996 10,316,089 $103,161 $90,340,860 $ (915,507) $89,528,514
========== ======== =========== =========== ===========
</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
Nine Months Ended
September 30,
1996 1995
------------ ------------
Increase (Decrease) in Cash and Cash
Equivalents:
Net cash provided by operating
activities $ 3,244,519 $ 124,187
------------ ------------
Cash Flows From Investing Activities:
Additions to land and buildings
on operating leases (27,023,938) (13,588,527)
Investment in direct financing
leases (9,406,953) -
Investment in mortgage notes
receivable (12,363,000) -
Collection of deferred financing
income 43,270 -
Collection of mortgage notes
payments 86,815 -
Increase in other assets (877,463) (188,531)
------------ ------------
Net cash used in investing
activities (49,541,269) (13,777,058)
------------ ------------
Cash Flows From Financing Activities:
Reimbursement of acquisition,
organization and stock issuance
costs paid by related parties
on behalf of the Company (765,996) (2,268,907)
Proceeds of borrowing on line
of credit 2,417,572 -
Payment on line of credit (41,337) -
Payment of loan costs (53,500) -
Contribution from minority
interest of consolidated
joint venture 97,419 200,000
Subscriptions received from
stockholders 64,506,734 20,746,392
Distribution to minority interest (30,626) -
Distributions to stockholders (3,406,759) (15,148)
Payment of stock issuance costs (5,680,757) (1,729,078)
Other 2,550 -
------------ ------------
Net cash provided by
financing activities 57,045,300 16,933,259
------------ ------------
Net Increase in Cash and Cash Equivalents 10,748,550 3,280,388
Cash and Cash Equivalents at Beginning
of Period 11,508,445 945
------------ ------------
Cash and Cash Equivalents at End
of Period $ 22,256,995 $ 3,281,333
============ ============
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
Nine Months Ended
September 30,
1996 1995
------------ --------
Supplemental Schedule of Non-Cash
Investing and Financing Activities:
Related parties paid certain
acquisition, organization and
stock issuance costs on behalf
of the Company as follows:
Acquisition costs $ 136,341 $ 75,501
Organization costs - 20,000
Stock issuance costs 615,600 1,974,281
------------ ------------
$ 751,941 $ 2,069,782
============ ============
Land, building and other costs
incurred and unpaid at end of
period $ 5,080,365 $ 1,037,687
============ ============
Commissions, marketing support and
due diligence expense reimbursement
fee, and other stock issuance costs
incurred and unpaid at end of period $ 193,781 $ 310,657
============ ============
Distributions declared and unpaid at
end of period $ - $ 172,536
============ ============
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 and Nine Months Ended September 30, 1996 and 1995
1. Organization and Nature of Business:
CNL American Properties Fund, Inc. (the "Company") was organized in
Maryland on May 2, 1994, 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,
family-style and casual dining restaurant chains. To a lesser extent,
the Company intends to offer furniture, fixtures and equipment
financing ("Secured Equipment Leases") to operators of restaurant
chains. Secured Equipment Leases will be funded from the proceeds of a
loan of up to ten percent of the gross proceeds from the Company's
current $150,000,000 offering.
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 and nine months ended September 30, 1996, may not be
indicative of the results that may be expected for the year ending
December 31, 1996. Amounts as of December 31, 1995, 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, 1995.
The Company was a development stage enterprise from May 2, 1994 through
June 1, 1995. Since operations had not begun, activities through June
1, 1995, were devoted to organization of the Company.
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.
B-14
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Quarters and Nine Months Ended September 30, 1996 and 1995
2. Basis of Presentation - Continued:
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The
Statement requires that an entity review long-lived assets and certain
identifiable intangibles, to be held and used, for impairment whenever
events or changes in circumstances indicate that the carrying amount of
the asset may not be recoverable. Adoption of this standard had no
material effect on the Company's financial position or results of
operations.
Cash and Cash Equivalents - The Company considers all highly liquid
investments with a maturity of three months or less when purchased to
be cash equivalents. Cash and cash equivalents consist of demand
deposits at commercial banks, certificates of deposit and money market
funds (some of which are backed by government securities). Cash
equivalents are stated at cost plus accrued interest, which
approximates market value.
Cash accounts maintained on behalf of the Company in demand deposits at
commercial banks, money market funds and certificates of deposit may
exceed federally insured levels; however, the Company has not
experienced any losses in such accounts. The Company limits investment
of temporary cash investments to financial institutions with high
credit standing; therefore, management believes it is not exposed to
any significant credit risk on cash and cash equivalents.
Rents Paid in Advance - Rents paid in advance by lessees for future
periods are deferred upon receipt and are recognized as revenues during
the period in which the rental income is earned. Rents paid in advance
include "interim rent" payments required to be paid under the terms of
certain leases for construction properties, equal to a pre-determined
rate times the amount funded by the Company during the period
commencing with the effective date of the lease to the date minimum
annual rent becomes payable. Once minimum annual rent becomes payable,
the "interim rent" payments are amortized and recorded as income either
(i) over the lease term so as to produce a constant periodic rate of
return for leases accounted for using the direct financing method, or
(ii) over the lease term using the straight-line method for leases
accounted for using the operating method, whichever is applicable.
B-15
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Quarters and Nine Months Ended September 30, 1996 and 1995
2. Basis of Presentation - Continued:
Interest Rate Swaps - Income or expense associated with interest rate
swap agreements related to equipment financing is recognized on the
accrual basis over the life of the swap agreement as an adjustment to
interest expense.
Earnings Per Share - Earnings per share are calculated based upon the
weighted average number of shares of common stock outstanding during
the period the Company was operational.
3. Leases:
The Company leases its land, buildings and equipment subject to Secured
Equipment Leases to operators 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 73 of the
Company's Properties have been classified as operating leases
(including the leases relating to ten Properties under construction as
of September 30, 1996) and the leases relating to nine Properties and
four 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 three 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:
September 30, December 31,
1996 1995
Land $29,397,769 $ 8,890,471
Buildings 19,716,006 10,049,032
----------- -----------
49,113,775 18,939,503
Less accumulated
depreciation (423,115) (100,318)
----------- -----------
48,690,660 18,839,185
Construction in
progress 1,363,227 884,541
----------- -----------
$50,053,887 $19,723,726
=========== ===========
B-16
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Quarters and Nine Months Ended September 30, 1996 and 1995
4. Land and Buildings on Operating Leases - Continued:
Some leases provide for escalating guaranteed minimum rents throughout
the lease term. Income from these scheduled rent increases is
recognized on a straight-line basis over the terms of the leases. For
the quarter and nine months ended September 30, 1996, the Company
recognized $99,342 and $275,422, respectively, and for the quarter and
nine months ended September 30, 1995, the Company recognized $8,984 and
$9,034, respectively, of such rental income.
The following is a schedule of future minimum lease payments to be
received on the noncancellable operating leases at September 30, 1996:
1996 $ 1,187,752
1997 4,396,156
1998 4,400,938
1999 4,418,883
2000 4,446,816
Thereafter 65,292,354
-----------
$84,142,899
===========
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:
September 30, December 31,
1996 1995
------------- -----------
Minimum lease payments
receivable $ 20,935,800 $ 2,498,881
Estimated residual
values 441,657 343,740
Less unearned income (10,536,818) (1,468,739)
------------ ------------
Net investment in
direct financing
leases $ 10,840,639 $ 1,373,882
============ ============
B-17
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Quarters and Nine Months Ended September 30, 1996 and 1995
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 September 30, 1996:
1996 $ 432,805
1997 1,736,012
1998 1,736,012
1999 1,736,012
2000 1,739,331
Thereafter 13,555,628
-----------
$20,935,800
===========
6. Mortgage Notes Receivable:
In January 1996, in connection with the acquisition of land for 23
Pizza Hut restaurants, the Company accepted a promissory note in the
principal sum of $8,475,000, collateralized by a mortgage on the
buildings on the 23 Pizza Hut Properties. The promissory note bears
interest at a rate of 10.75% per annum and is being collected in 240
equal monthly installments of $86,041. As of September 30, 1996,
$8,425,423 was outstanding relating to this note, including $23,187 in
accrued interest.
In addition, in May 1996, in connection with the acquisition of land
for 10 Pizza Hut restaurants, the Company accepted a promissory note in
the principal sum of $3,888,000, collateralized by a mortgage on the
buildings on the 10 Pizza Hut Properties. The promissory note bears
interest at a rate of 10.75% per annum and is being collected in 240
equal monthly installments of $39,472. As of September 30, 1996,
$3,886,469 was outstanding relating to this note, including $12,520 in
accrued interest.
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments," requires disclosure of the fair
value of significant financial instruments. Management believes, based
upon the current terms, that the estimated fair value of the Company's
mortgage notes receivable as of September 30, 1996, was $12,311,892,
the same as its carrying value.
B-18
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Quarters and Nine Months Ended September 30, 1996 and 1995
7. Note Payable:
On March 5, 1996, the Company entered into a line of credit (the
"Loan") and security agreement with a bank. The Loan is 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. Generally, advances under the Loan will be fully
amortizing term loans repayable in terms equal to the duration of the
Secured Equipment Leases, but in no event greater than 72 months. In
addition, advances for short-term needs (to acquire equipment to be
leased under Secured Equipment Leases) may be requested in an aggregate
amount which does not exceed the Revolving Sublimit (defined in the
Loan as $1,000,000) and such advances may be repaid and readvanced;
provided, however, that advances made pursuant to the Revolving
Sublimit shall be converted to term loans the earlier of (i) the end of
each 60 day period following the closing date (defined in the Loan as
March 5, 1996), or (ii) when the aggregate amount outstanding equals or
exceeds $1,000,000. Interest on advances made pursuant to the Revolving
Sublimit shall be paid monthly in arrears. In addition, principal
amounts under advances pursuant to the Revolving Sublimit, if not
sooner paid or converted into term loans, shall be paid, together with
any unpaid interest relating to such advances, to the bank on March 5,
1998. Generally, all advances under the Loan will bear interest at
either (i) a rate per annum equal to 215 basis points above the Reserve
Adjusted LIBOR Rate (as defined in the Loan) or (ii) a rate per annum
equal to the bank's prime rate, whichever the Company selects at the
time advances are made. As a condition of obtaining the Loan, the
Company agreed to grant to the bank a first security interest in the
Secured Equipment Leases. In connection with the Loan, the Company
incurred a commitment fee, legal fees and closing costs of $53,500.
As of September 30, 1996, the Company had obtained seven advances
totalling $2,417,572 relating to the Loan. In general, the advances are
fully amortizing terms loans repayable over six years and bear interest
at a rate per annum equal to 215 basis points above the Reserve
Adjusted LIBOR Rate. The proceeds of the advances were used to fund
Secured Equipment Leases at an aggregate cost of approximately
$2,364,000 and to pay $53,500 in loan costs described above. As of
September 30, 1996, $2,376,235 of principal was outstanding relating to
the Loan, plus $11,238 of accrued interest.
B-19
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Quarters and Nine Months Ended September 30, 1996 and 1995
7. Note Payable - Continued:
During the quarter ended September 30, 1996, the Company entered into
interest rate swap agreements to reduce the impact of changes in
interest rates on its floating rate long-term debt. At September 30,
1996, the Company had outstanding two interest rate swap agreements
with a commercial bank, having a total notional amount of approximately
$2,206,000. Those agreements effectively change the Company's interest
rate exposure on approximately $1,641,000 of the outstanding floating
rate notes to a fixed nine percent per annum and approximately $565,000
of the outstanding floating rate notes to a fixed rate of 8.75% per
annum. The Company is exposed to credit loss in the event of
nonperformance by the other party to the interest rate swap agreements.
However, the Company does not anticipate nonperformance by the
counterparty.
8. Stock Issuance Costs:
The Company has incurred certain expenses of its offering 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
CNL Fund Advisors, Inc. (the "Advisor"). The Advisor has agreed to pay
all organizational and 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.
As of September 30, 1996 and December 31, 1995, the Company had
incurred a total of $12,736,871 and $6,423,671, respectively, in
organizational and offering costs, including $8,236,871 and $3,076,333,
respectively, in commissions and marketing support and due diligence
expense reimbursement fees (see Note 10). Of these amounts as of
September 30, 1996 and December 31, 1995, $12,716,871 and $6,403,671,
respectively, has been treated as stock issuance costs and $20,000 has
been treated as organization costs. The stock issuance costs have been
charged to stockholders' equity subject to the three percent cap
described above.
B-20
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Quarters and Nine Months Ended September 30, 1996 and 1995
9. Distributions:
Distributions declared for the nine months ended September 30, 1996,
represent approximately $3,015,000 of ordinary income and approximately
$389,000 of return of capital to stockholders for federal income tax
purposes. No amounts distributed to the stockholders for the nine
months ended September 30, 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
nine months ended September 30, 1996, may not be indicative of the
results that may be expected for the year ending December 31, 1996.
10. Related Party Transactions:
During the nine months ended September 30, 1996, the Company incurred
$4,838,005 in selling commissions due to CNL Securities Corp. for
services in connection with the offering of shares. A substantial
portion of this amount (approximately $4,520,000) was or will be paid
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 nine months ended
September 30, 1996, the Company incurred $322,534 of such 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 and structuring the terms of the Mortgage
Loans equal to 4.5% of the total amount raised from the sale of shares.
During the nine months ended September 30, 1996, the Company incurred
$2,902,803 of such fees. Such fees are included in land and buildings
on operating leases, net investment in direct financing leases 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 of generally five to ten
percent of the cost of constructing or renovating a Property, payable
to affiliates of the Company as acquisition fees. Such fees will be
included in the purchase
B-21
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Quarters and Nine Months Ended September 30, 1996 and 1995
10. Related Party Transactions - Continued:
price of Properties purchased from developers that are affiliates of
the Company. During the quarter and nine months ended September 30,
1996, the Company incurred $21,500 in development/construction
management fees. No development/con- struction management fees were
incurred for the quarter and nine months ended September 30, 1995.
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 two
percent of the purchase price of the equipment that is the subject of a
Secured Equipment Lease. During the quarter and nine months ended
September 30, 1996, the Company incurred $35,516 and $46,292,
respectively, in secured equipment lease servicing fees. Such fees are
included in net investment in direct financing leases and other assets.
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 .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 quarter and nine months ended September 30, 1996, the
Company incurred $80,971 and $181,497, respectively, in total asset and
mortgage management fees, $2,871 and $5,724, respectively, of which was
capitalized as part of the cost of Properties under construction.
During the quarter and nine months ended September 30, 1995, the
Company incurred $5,400 in asset management fees, $1,536 of which was
capitalized as part of the cost of building for Properties under
construction.
B-22
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Quarters and Nine Months Ended September 30, 1996 and 1995
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 offering of shares) on a day-to-day
basis. For the nine months ended September 30, 1996 and 1995, the
expenses incurred for these services were classified as follows:
1996 1995
-------- ------
Stock issuance costs $558,383 $515,772
General operating and
administrative expenses 236,191 20,504
-------- --------
$794,574 $536,276
======== ========
During the nine months ended September 30, 1996, the Company acquired
three Properties for an aggregate purchase price of approximately
$2,358,000 from affiliates of the Company. The affiliates had purchased
and temporarily held title to these Properties in order to facilitate
the acquisition of the Properties by the Company. Each Property was
acquired at a cost equal to the cost of the Property to the affiliate
(including carrying costs) due to the fact that these amounts were less
than each Property's appraised value.
B-23
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Quarters and Nine Months Ended September 30, 1996 and 1995
10. Related Party Transactions - Continued:
The due to related parties consisted of the following at:
September 30, December 31,
1996 1995
------------- --------
Due to the Advisor:
Expenditures incurred
on behalf of the
Company and account-
ing and administra-
tive services $ 53,961 $108,316
Acquisition fees 182,502 45,118
Asset and mortgage
management fees - 9,108
Distributions - 3,332
-------- --------
236,463 165,874
-------- --------
Due to CNL Securities
Corp:
Commissions 144,397 75,197
Marketing support
and due diligence
expense reimburse-
ment fees 9,629 5,013
-------- --------
154,026 80,210
-------- --------
Other - 2,500
-------- --------
$390,489 $248,584
======== ========
11. Concentration of Credit Risk:
The following schedule presents total rental and earned income from
individual lessees, or affiliated groups of lessees, each representing
more than ten percent of the Company's total rental and earned income
for at least one of the quarters ended September 30:
1996 1995
---- ----
Castle Hill Holdings V,
L.L.C. and Castle Hill
Holdings VI, L.L.C.
("Castle Hill") $184,765 $ -
Golden Corral Corporation 143,214 37,568
Briad Restaurant Group, Inc. 129,775 -
Corral Northeast, Inc. 113,182 -
DenAmerica Corporation 109,270 18,977
Roasters Corp. 52,754 29,387
Foodmaker, Inc. 41,115 33,591
B-24
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Quarters and Nine Months Ended September 30, 1996 and 1995
11. Concentration of Credit Risk - Continued:
During the quarter ended September 30, 1996, the Company also earned
$330,880 in interest income from mortgage notes receivable under which
Castle Hill is the borrower.
In addition, the following schedule presents total rental and earned
income from individual restaurant chains, each representing more than
ten percent of the Company's total rental and earned income for at
least one of the quarters ended September 30:
1996 1995
-------- ------
Golden Corral Family
Steakhouse Restaurants $306,106 $ 37,568
Pizza Hut 184,765 -
TGI Friday's 129,775 -
Denny's 109,270 18,977
Boston Market 108,111 3,265
Kenny Rogers' Roasters 52,754 29,387
Jack in the Box 41,115 33,591
Although the Company's Properties are geographically diverse and the
Company's lessees 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 total 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.
It is expected that the percentage of total rental and earned income
contributed by these lessees, borrowers and restaurant chains will
decrease as additional Properties are acquired and leased in 1996 and
subsequent years.
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 once construction is
completed. 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 $12,162,800, of which approximately
$6,976,000 in land and other costs had been
B-25
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Quarters and Nine Months Ended September 30, 1996 and 1995
12. Commitments - Continued:
incurred as of September 30, 1996. The buildings currently under
construction are expected to be operational by February 1997. In
connection with the purchase of each Property, the Company, as lessor,
entered into a long-term, triple-net lease agreement.
In August 1996, the Company entered into a temporary Secured Equipment
Lease, as lessor, with an operator of a family-style restaurant. In
connection therewith, the Company provided initial funding of $102,570
for the equipment. The Company has agreed to fund the remaining balance
of the equipment purchase price of approximately $191,000. Upon funding
the balance, which is expected to occur in December 1996, the Company
will enter into a final Secured Equipment Lease. Until a final Secured
Equipment Lease is entered into, the tenant will pay monthly rent in
accordance with the temporary lease.
13. Subsequent Events:
During the period October 1, 1996 through November 5, 1996, the Company
received subscription proceeds for an additional 1,315,769 shares
($13,157,688) of common stock.
Subsequent to September 30, 1996, the Company declared distributions of
$615,914 and $683,758, respectively, or $.059375 per share of common
stock, payable in December 1996, to stockholders of record on October
1, 1996 and November 1, 1996, respectively.
During the period October 1, 1996 through November 5, 1996, the Company
acquired two Properties (both of which are undeveloped land on which
restaurants are being constructed) for cash at a total cost of
approximately $940,934, excluding closing and development costs. The
development costs (including the purchase of the land and closing
costs) to be paid by the Company relating to the two properties under
construction are estimated to be approximately $2,253,000. The
buildings under construction are expected to be operational by February
1997. In connection with the purchase of each Property, the Company, as
lessor, entered into a long-term, triple-net lease agreement.
On November 1, 1996, the Company filed a registration statement with
the Securities and Exchange Commission in connection with the proposed
sale by the Company of up to 27,500,000 shares of common stock in a
public offering (the
B-26
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Quarters and Nine Months Ended September 30, 1996 and 1995
13. Subsequent Events - Continued:
"Subsequent Offering") expected to commence immediately following the
termination of the Company's current $150,000,000 offering. Until such
time, if any, as the stockholders approve an increase in the number of
authorized shares of Common Stock of the Company, the subsequent
offering will be limited to 4,800,000 shares.
B-27
<PAGE>
ADDENDUM TO
EXHIBIT C
PRIOR PERFORMANCE TABLES
THE FOLLOWING INFORMATION UPDATES AND
REPLACES THE CORRESPONDING INFORMATION
IN EXHIBIT C TO THE ATTACHED PROSPECTUS,
DATED APRIL 26, 1996.
<PAGE>
EXHIBIT C
PRIOR PERFORMANCE TABLES
The information in this Exhibit C contains certain relevant summary
information concerning certain prior public partnerships sponsored by two of the
Company's principals (who also serve as the Chairman of the Board and President
of the Company) and their Affiliates (the "Prior Public Partnerships") which
like the Company, were formed to invest in restaurant properties leased on a
triple-net basis to operators of national and regional fast-food and
family-style restaurant chains.
A more detailed description of the acquisitions by the Prior Public
Partnerships is set forth in Part II of the registration statement filed with
the Securities and Exchange Commission for this Offering and is available from
the Company upon request, without charge. In addition, upon request to the
Company, the Company will provide, without charge, a copy of the most recent
Annual Report on Form 10-K filed with the Securities and Exchange Commission for
CNL Income Fund, Ltd., CNL Income Fund II, Ltd., CNL Income Fund III, Ltd., CNL
Income Fund IV, Ltd., CNL Income Fund V, Ltd., CNL Income Fund VI, Ltd., CNL
Income Fund VII, Ltd., CNL Income Fund VIII, Ltd., CNL Income Fund IX, Ltd., CNL
Income Fund X, Ltd., CNL Income Fund XI, Ltd., CNL Income Fund XII, Ltd., CNL
Income Fund XIII, Ltd., CNL Income Fund XIV, Ltd., CNL Income Fund XV, Ltd., CNL
Income Fund XVI, Ltd., CNL Income Fund XVII, Ltd. and CNL Income Fund XVIII,
Ltd., as well as a copy, for a reasonable fee, of the exhibits filed with such
reports.
The investment objectives of the Prior Public Partnerships (like those
of the Company) generally include preservation and protection of capital, the
potential for increased income and protection against inflation, and potential
for capital appreciation, all through investment in restaurant properties. In
addition, the investment objectives of the Prior Public Partnerships included
making partially tax-sheltered distributions.
STOCKHOLDERS SHOULD NOT CONSTRUE INCLUSION OF THE FOLLOWING TABLES AS
IMPLYING THAT THE COMPANY WILL HAVE RESULTS COMPARABLE TO THOSE REFLECTED IN
SUCH TABLES. DISTRIBUTABLE CASH FLOW, FEDERAL INCOME TAX DEDUCTIONS, OR OTHER
FACTORS COULD BE SUBSTANTIALLY DIFFERENT. STOCKHOLDERS SHOULD NOTE THAT, BY
ACQUIRING SHARES IN THE COMPANY, THEY WILL NOT BE ACQUIRING ANY INTEREST IN ANY
PRIOR PUBLIC PARTNERSHIPS.
Description of Tables
The following Tables are included herein:
Table I - Experience in Raising and Investing Funds
Table II - Compensation to Sponsor
Table III - Operating Results of Prior Programs
Table V - Sales or Disposal of Properties
Unless otherwise indicated in the Tables, all information contained in
the Tables is as of June 30, 1996. The following is a brief description of the
Tables:
Table I - Experience in Raising and Investing Funds
Table I presents information on a percentage basis showing the
experience of two of the principals of the Company and their Affiliates in
raising and investing funds for the Prior Public Partnerships, the offerings of
which were fully subscribed between October 1991 and September 1996.
C-1
<PAGE>
The Table sets forth information on the offering expenses incurred and
amounts available for investment expressed as a percentage of total dollars
raised. The Table also shows the percentage of property acquisition cost
leveraged, the date the offering commenced, and the time required to raise funds
for investment.
Table II - Compensation to Sponsor
Table II provides information, on a total dollar basis, regarding
amounts and types of compensation paid to the general partners of the Prior
Public Partnerships.
The Table indicates the total offering proceeds and the portion of such
offering proceeds paid or to be paid to two of the principals of the Company and
their Affiliates in connection with the Prior Public Partnerships, the offerings
of which were fully subscribed between October 1991 and September 1996. The
Table also shows the amounts paid to two of the principals of the Company and
their Affiliates from cash generated from operations and from cash generated
from sales or refinancing by each of the Prior Public Partnerships on a
cumulative basis commencing with inception and ending June 30, 1996.
Table III - Operating Results of Prior Programs
Table III presents a summary of operating results for the period from
inception through June 30, 1996, of the Prior Public Partnerships, the offerings
of which were fully subscribed between October 1991 and September 1996.
The Table includes a summary of income or loss of the Prior Public
Partnerships, which are presented on the basis of generally accepted accounting
principles ("GAAP"). The Table also shows cash generated from operations, which
represents the cash generated from operations of the properties of the Prior
Public Partnerships, as distinguished from cash generated from other sources
(special items). The section of the Table entitled "Special Items" provides
information relating to cash generated from or used by items which are not
directly related to the operations of the properties of the Prior Public
Partnerships, but rather are related to items of a partnership nature. These
items include proceeds from capital contributions of limited partners and
disbursements made from these sources of funds, such as syndication and
organizational costs, acquisition of the properties and other costs which are
related more to the organization of the partnership and the acquisition of
properties than to the actual operations of the partnerships.
The Table also presents information pertaining to investment income,
returns of capital on a GAAP basis, cash distributions from operations, sales
and refinancing proceeds expressed in total dollar amounts as well as
distributions and tax results on a per $1,000 investment basis.
Table IV - Results of Completed Programs
Table IV is omitted from this Exhibit C because none of the directors
of the Company or their Affiliates has been involved in completed public
programs which made investments similar to those of the Company.
Table V - Sales or Disposal of Properties
Table V provides information regarding the sale or disposal of
properties owned by the Prior Public Partnerships between October 1991 and June
1996.
This Table includes the selling price of the property, the cost of the
property, the date acquired and the date of sale.
C-2
<PAGE>
TABLE I
EXPERIENCE IN RAISING AND INVESTING FUNDS
<TABLE>
<CAPTION>
CNL Income CNL Income CNL Income CNL Income CNL Income
Fund X, Fund XI, Fund XII, Fund XIII, Fund XIV,
Ltd. Ltd. Ltd. Ltd. Ltd.
<S> <C>
Dollar amount offered $40,000,000 $40,000,000 $45,000,000 $40,000,000 $45,000,000
=========== =========== =========== =========== ===========
Dollar amount raised 100.0% 100.0% 100.0% 100.0% 100.0%
----------- ----------- ----------- ----------- -----------
Less offering expenses:
Selling commissions
and discounts (8.5) (8.5) (8.5) (8.5) (8.5)
Organizational expenses (3.0) (3.0) (3.0) (3.0) (3.0)
Marketing support and
due diligence expense
reimbursement fees
(includes amounts
reallowed to
unaffiliated
entities) (0.5) (0.5) (0.5) (0.5) (0.5)
----------- ----------- ----------- ----------- -----------
(12.0) (12.0) (12.0) (12.0) (12.0)
----------- ----------- ----------- ----------- -----------
Reserve for operations -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Percent available for
investment 88.0% 88.0% 88.0% 88.0% 88.0%
=========== =========== =========== =========== ===========
Acquisition costs:
Cash down payment 83.0% 83.0% 83.0% 82.5% 82.5%
Acquisition fees paid
to affiliates 5.0 5.0 5.0 5.5 5.5
Loan costs -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Total acquisition costs 88.0% 88.0% 88.0% 88.0% 88.0%
=========== =========== =========== =========== ===========
Percent leveraged
(mortgage financing
divided by total
acquisition costs) -- -- -- -- --
Date offering began 9/09/91 3/18/92 9/29/92 3/31/93 8/27/93
Length of offering (in
months) 6 6 6 5 6
Months to invest 90% of
amount available for
investment measured
from date of offering 7 6 11 10 11
</TABLE>
Note 1: Pursuant to a Registration Statement on Form S-11 under the Securities
Act of 1933, as amended, effective August 11, 1995, CNL Income Fund
XVII, Ltd. and CNL Income Fund XVIII, Ltd. each registered for sale
$30,000,000 of units of limited partnership interest (the "Units").
The offering of Units of CNL Income Fund XVII, Ltd. commenced September
2, 1995. Pursuant to the Registration Statement, the offering of Units
of CNL Income Fund XVIII, Ltd. would not commence until the offering of
Units of CNL Income Fund XVII, Ltd. had terminated. As of June 30,
1996, CNL Income Fund XVII, Ltd. was in the offering stage; therefore,
CNL Income Fund XVIII, Ltd. had not commenced its offering of Units.
C-3
<PAGE>
<TABLE>
<CAPTION>
CNL Income CNL Income CNL Income CNL Income
Fund XV, Fund XVI, Fund XVII, Fund XVIII,
Ltd. Ltd. Ltd. Ltd.
(Note 1) (Note 1)
<S> <C>
Dollar amount offered $40,000,000 $45,000,000
=========== ===========
Dollar amount raised 100.0% 100.0%
----------- -----------
Less offering expenses:
Selling commissions
and discounts (8.5) (8.5)
Organizational expenses (3.0) (3.0)
Marketing support and
due diligence expense
reimbursement fees
(includes amounts
reallowed to
unaffiliated
entities) (0.5) (0.5)
----------- -----------
(12.0) (12.0)
----------- -----------
Reserve for operations -- --
----------- -----------
Percent available for
investment 88.0% 88.0%
=========== ===========
Acquisition costs:
Cash down payment 82.5% 82.5%
Acquisition fees paid
to affiliates 5.5 5.5
Loan costs -- --
----------- -----------
Total acquisition costs 88.0% 88.0%
=========== ===========
Percent leveraged
(mortgage financing
divided by total -- --
acquisition costs)
2/23/94 9/02/94
Date offering began
Length of offering (in 6 9
months)
Months to invest 90% of
amount available for
investment measured 10 11
from date of offering
</TABLE>
C-4
<PAGE>
TABLE II
COMPENSATION TO SPONSOR
<TABLE>
<CAPTION>
CNL Income CNL Income CNL Income CNL Income CNL Income
Fund X, Fund XI, Fund XII, Fund XIII, Fund XIV,
Ltd. Ltd. Ltd. Ltd. Ltd.
<S> <C>
Date offering commenced 9/09/91 3/18/92 9/29/92 3/31/93 8/27/93
Dollar amount raised $40,000,000 $40,000,000 $45,000,000 $40,000,000 $45,000,000
=========== =========== =========== =========== ===========
Amount paid to sponsor from
proceeds of offering:
Selling commissions and
discounts 3,400,000 3,400,000 3,825,000 3,400,000 3,825,000
Real estate commissions - - - - -
Acquisition fees 2,000,000 2,000,000 2,250,000 2,200,000 2,475,000
Marketing support and
due diligence expense
reimbursement fees
(includes amounts
reallowed to
unaffiliated entities) 200,000 200,000 225,000 200,000 225,000
----------- ----------- ----------- ----------- -----------
Total amount paid to sponsor 5,600,000 5,600,000 6,300,000 5,800,000 6,525,000
=========== =========== =========== =========== ===========
Dollar amount of cash generated
from operations before
deducting payments to
sponsor:
1996 (6 Months) 1,877,818 1,866,649 1,986,907 1,701,335 1,857,023
1995 3,603,470 3,758,271 3,928,473 3,482,461 3,823,939
1994 3,828,234 3,574,474 3,933,486 3,232,046 2,897,432
1993 3,499,905 3,434,512 3,320,549 1,148,550 329,957
1992 3,141,123 1,525,462 63,401 - -
1991 204,240 - - - -
1990 - - - - -
1989 - - - - -
1988 - - - - -
1987 - - - - -
1986 - - - - -
1985 - - - - -
1984 - - - - -
1983 - - - - -
1982 - - - - -
1981 - - - - -
1980 - - - - -
1979 - - - - -
1978 - - - - -
Amount paid to sponsor from
operations (administrative,
accounting and management fees):
1996 (6 Months) 55,272 55,339 55,932 53,682 57,121
1995 76,108 106,086 109,111 103,083 114,095
1994 42,741 76,533 84,524 83,046 84,801
1993 38,999 78,926 73,789 27,003 8,220
1992 39,505 30,237 2,031 - -
1991 2,834 - - - -
1990 - - - - -
1989 - - - - -
1988 - - - - -
1987 - - - - -
1986 - - - - -
1985 - - - - -
1984 - - - - -
1983 - - - - -
1982 - - - - -
1981 - - - - -
1980 - - - - -
1979 - - - - -
1978 - - - - -
Dollar amount of property
sales and refinancing
before deducting payments
to sponsor:
Cash 1,057,386 - 1,640,000 286,411 696,012
Notes - - - - -
Amount paid to sponsors
from property sales and
refinancing:
Real estate commissions - - - - -
Incentive fees - - - - -
Other - - - - -
</TABLE>
Note 1: During the year ended December 31, 1995, CNL Income Fund X, Ltd.
received proceeds of $7,200 for a small parcel of land as a result of
an easement relating to a certain property.
C-5
<PAGE>
<TABLE>
<CAPTION>
CNL Income CNL Income CNL Income CNL Income
Fund XV, Fund XVI, Fund XVII, Fund XVIII,
Ltd. Ltd. Ltd. Ltd.
(Note 2) (Note 2)
<S> <C>
Date offering commenced 2/23/94 9/02/94
Dollar amount raised $40,000,000 $45,000,000
=========== ===========
Amount paid to sponsor from
proceeds of offering:
Selling commissions and
discounts 3,400,000 3,825,000
Real estate commissions - -
Acquisition fees 2,200,000 2,475,000
Marketing support and
due diligence expense
reimbursement fees
(includes amounts
reallowed to
unaffiliated entities) 200,000 225,000
----------- -----------
Total amount paid to sponsor 5,800,000 6,525,000
=========== ===========
Dollar amount of cash generated
from operations before
deducting payments to
sponsor:
1996 (6 Months) 1,741,150 1,936,583
1995 3,361,477 2,619,840
1994 1,154,454 212,171
1993 - -
1992 - -
1991 - -
1990 - -
1989 - -
1988 - -
1987 - -
1986 - -
1985 - -
1984 - -
1983 - -
1982 - -
1981 - -
1980 - -
1979 - -
1978 - -
Amount paid to sponsor from
operations (administrative,
accounting and management fees):
1996 (6 Months) 53,223 74,887
1995 122,107 138,445
1994 37,620 7,023
1993 - -
1992 - -
1991 - -
1990 - -
1989 - -
1988 - -
1987 - -
1986 - -
1985 - -
1984 - -
1983 - -
1982 - -
1981 - -
1980 - -
1979 - -
1978 - -
Dollar amount of property
sales and refinancing
before deducting payments
to sponsor:
Cash 811,706 775,000
Notes - -
Amount paid to sponsors
from property sales and
refinancing:
Real estate commissions - -
Incentive fees - -
Other - -
</TABLE>
Note 2: Pursuant to a Registration Statement on Form S-11 under the Securities
Act of 1933, as amended, effective August 11, 1995, CNL Income Fund
XVII, Ltd. and CNL Income Fund XVIII, Ltd. each registered for sale
$30,000,000 of units of limited partnership interest (the "Units"). The
offering of Units of CNL Income Fund XVII, Ltd. commenced September 2,
1995. Pursuant to the Registration Statement, the offering of Units of
CNL Income Fund XVIII, Ltd. would not commence until the offering of
Units of CNL Income Fund XVII, Ltd. had terminated. As of June 30,
1996, CNL Income Fund XVII, Ltd. was in the offering stage; therefore,
CNL Income Fund XVIII, Ltd. had not commenced its offering of Units. As
of June 30, 1996, CNL Income Fund XVII, Ltd. had sold 2,113,286 Units,
representing $21,132,863 of capital contributed by limited partners,
and 13 properties had been acquired. From commencement of the offering
through June 30, 1996, total selling commissions and discounts were
$1,796,293, due diligence expense reimbursement fees were $105,665, and
acquisition fees were $950,978, for a total amount paid to sponsor of
$2,852,936. CNL Income Fund XVII, Ltd. had cash generated from
operations for the period November 3, 1995 (the date funds were
originally released from escrow) through June 30, 1996, of $266,033.
CNL Income Fund XVII, Ltd. made payments of $47,754 to the sponsor from
operations for this period.
C-6
<PAGE>
TABLE III
Operating Results of Prior Programs
CNL INCOME FUND X, LTD.
<TABLE>
<CAPTION>
1990
(Note 1) 1991 1992 1993
------------ ------------ ------------ -------------
<S> <C>
Gross revenue $ 0 $ 80,723 $ 2,985,620 $ 3,729,533
Equity in earnings of unconsolidated
joint venture 0 0 184,425 273,564
Profit from sale of properties 0 0 0 0
Interest income 0 77,424 149,051 35,072
Less: Operating expenses 0 (7,078) (147,094) (178,294)
Interest expense 0 0 0 0
Depreciation and amortization 0 (5,603) (261,058) (215,143)
Minority interest in income of
consolidated joint venture 0 0 (4,902) (8,159)
------------ ------------ ------------ ------------
Net income - GAAP basis 0 145,466 2,906,042 3,636,573
============ ============ ============ ============
Taxable income
- from operations 0 187,164 2,652,037 2,936,325
============ ============ ============ ============
- from gain on sale 0 0 0 0
============ ============ ============ ============
Cash generated from operations
(Notes 2 and 5) 0 201,406 3,101,618 3,460,906
Cash generated from sales (Note 4) 0 0 0 0
Cash generated from refinancing 0 0 0 0
------------ ------------ ------------ ------------
Cash generated from operations, sales
and refinancing 0 201,406 3,101,618 3,460,906
Less: Cash distributions to investors
(Note 6)
- from operating cash flow 0 (163,012) (2,760,446) (2,659,655)
- from sale of properties 0 0 0 0
- from cash flow from prior period 0 0 0 0
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions 0 38,394 341,172 801,251
Special items (not including sales and
refinancing):
Limited partners' capital
contributions 0 19,972,663 20,027,337 0
General partners' capital
contributions 1,000 0 0 0
Organization costs 0 (10,000) 0 0
Syndication costs 0 (1,942,339) (1,880,824) 0
Acquisition of land and buildings 0 (7,317,942) (12,095,378) (316)
Investment in direct financing
leases 0 (3,024,796) (8,018,153) (46,364)
Investment in joint ventures 0 0 (3,687,069) 0
Return of capital from joint
ventures 0 0 0 0
Deposit received for sale of land
and building 0 0 0 0
Increase in other assets (78) (482,466) 0 0
Reimbursement of syndication and
acquisition costs paid on behalf
of CNL Income Fund X, Ltd. by
related parties 0 (815,938) (313,196) (544)
Distributions to holder of minority
interest 0 0 (5,729) (5,543)
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 922 6,417,576 (5,631,840) 748,484
============ ============ ============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 0 17 70 73
============ ============ ============ ============
- from recapture 0 0 0 0
============ ============ ============ ============
Capital gain (loss) 0 0 0 0
============ ============ ============ ============
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
6 Months
1994 1995 1996
------------ ------------ ------------
<S> <C>
Gross revenue $ 3,710,792 $ 3,544,446 $ 1,763,069
Equity in earnings of unconsolidated
joint venture 271,512 267,799 134,133
Profit from sale of properties 0 67,214 0
Interest income 46,456 72,600 30,695
Less: Operating expenses (138,507) (189,230) (116,253)
Interest expense 0 0 0
Depreciation and amortization (208,941) (201,696) (95,126)
Minority interest in income of
consolidated joint venture (8,471) (9,066) (3,986)
------------ ------------ ------------
Net income - GAAP basis 3,672,841 3,552,067 1,712,532
============ ============ ============
Taxable income
- from operations 3,212,304 2,956,800 1,447,328
============ ============ ============
- from gain on sale 0 50,819 0
============ ============ ============
Cash generated from operations
(Notes 2 and 5) 3,785,493 3,527,362 1,822,546
Cash generated from sales (Note 4) 0 1,057,386 0
Cash generated from refinancing 0 0 0
------------ ------------ ------------
Cash generated from operations, sales
and refinancing 3,785,493 4,584,748 1,822,546
Less: Cash distributions to investors
(Note 6)
- from operating cash flow (3,500,017) (3,527,362) (1,822,546)
- from sale of properties 0 0 0
- from cash flow from prior period 0 (172,641) (17,454)
------------ ------------ ------------
Cash generated (deficiency) after cash
distributions 285,476 884,745 (17,454)
Special items (not including sales and
refinancing):
Limited partners' capital
contributions 0 0 0
General partners' capital
contributions 0 0 0
Organization costs 0 0 0
Syndication costs 0 0 0
Acquisition of land and buildings 0 (359,506) (978)
Investment in direct financing
leases 0 (566,097) (1,542)
Investment in joint ventures 0 0 (129,503)
Return of capital from joint
ventures 0 0 0
Deposit received for sale of land
and building 0 69,000 0
Increase in other assets 0 0 0
Reimbursement of syndication and
acquisition costs paid on behalf
of CNL Income Fund X, Ltd. by
related parties 0 0 0
Distributions to holder of minority
interest (7,909) (7,998) (3,677)
------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 277,567 20,144 (153,154)
============ ============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 80 73 36
============ ============ ============
- from recapture 0 0 0
============ ============ ============
Capital gain (loss) 0 1 0
============ ============ ============
</TABLE>
C-8
<PAGE>
TABLE III - CNL INCOME FUND X, LTD. (continued)
<TABLE>
<CAPTION>
1990
(Note 1) 1991 1992 1993
------------ ------------ ------------ ------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 0 13 73 66
- from capital gain 0 0 0 0
- from investment income from
prior period 0 0 0 0
- from return of capital (Note 3) 0 2 0 0
------------ ------------ ------------ ------------
Total distributions on GAAP basis
(Note 6) 0 15 73 66
============ ============ ============ ============
Source (on cash basis)
- from sales 0 0 0 0
- from refinancing 0 0 0 0
- from operations 0 15 73 66
- from cash flow from prior
period 0 0 0 0
------------ ------------ ------------ ------------
Total distributions on cash basis
(Note 6) 0 15 73 66
============ ============ ============ ============
Total cash distributions as a
percentage of original $1,000
investment (Notes 7 and 8) 0.00% 5.75% 7.38% 8.75%
Total cumulative cash distributions
per $1,000 investment from inception 0 15 88 154
Amount (in percentage terms) remaining
invested in program properties at the
end of each year (period) presented
(original total acquisition cost of
properties retained, divided by original
total acquisition cost of all properties
in program) (Note 4) N/A 100% 100% 100%
</TABLE>
Note 1: Pursuant to a registration statement on Form S-11 under the Securities
Act of 1933, as amended, CNL Income Fund X, Ltd. ("CNL X") and CNL
Income Fund IX, Ltd. each registered for sale $35,000,000 units of
limited partnership interests ("Units"). The offering of Units of CNL
Income Fund IX, Ltd. commenced March 20, 1991. Pursuant to the
registration statement, CNL X's offering of Units could not commence
until the offering of Units of CNL Income Fund IX, Ltd. was terminated.
CNL Income Fund IX, Ltd. terminated its offering of Units on September
6, 1991, at which time the maximum offering proceeds of $35,000,000 had
been received. Upon the termination of the offering of Units of CNL
Income Fund IX, Ltd., CNL X commenced its offering of Units.
Activities through September 24, 1991, were devoted to organization of
the partnership and operations had not begun.
Note 2: Cash generated from operations includes cash received from tenants,
plus distributions from joint ventures, less cash paid for expenses,
plus interest received.
Note 3: Cash distributions presented above as a return of capital on a GAAP
basis represent the amount of cash distributions in excess of
accumulated net income on a GAAP basis. Accumulated net income includes
deductions for depreciation and amortization expense and income from
certain non-cash items. This amount is not required to be presented as
a return of capital except for purposes of this table, and CNL Income
Fund X, Ltd. has not treated this amount as a return of capital for any
other purpose.
Note 4: In August 1995, CNL Income Fund X, Ltd. sold one of its properties
and received net sales proceeds of $1,050,186. In September 1995, the
partnership reinvested $928,122 in an additional property. In addition,
in January 1996, the partnership reinvested the remaining net sales
proceeds in an additional property as tenants-in-common with affiliates
of the general partners.
Note 5: Cash generated from operations per this table agrees to cash
generated from operations per the statement of cash flows included in
the financial statements of CNL Income Fund X, Ltd.
Note 6: As a result of the partnership's change in investor services agents in
1993, distributions are now declared at the end of each quarter and
paid in the following quarter. Since this table generally presents
distributions on a cash basis (rather than amounts declared),
distributions on a cash basis for 1993 only reflect payments for three
quarters. Distributions declared for the quarters ended December 31,
1993, 1994 and 1995, are reflected in the 1994, 1995 and 1996 columns,
respectively, for distributions on a cash basis due to the payment of
such distributions in January 1994, 1995 and 1996, respectively. As a
result of 1994, 1995 and 1996 distributions being presented on a cash
basis, distributions declared and unpaid as of December 31, 1994 and
1995, and June 30, 1996 are not included in the 1994, 1995 and 1996
totals, respectively.
C-9
<PAGE>
<TABLE>
<CAPTION>
6 Months
1994 1995 1996
------------ ------------ ------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 88 87 42
- from capital gain 0 2 0
- from investment income from
prior period 0 4 4
- from return of capital (Note 3) 0 0 0
------------ ------------ ------------
Total distributions on GAAP basis
(Note 6) 88 93 46
============ ============ ============
Source (on cash basis)
- from sales 0 0 0
- from refinancing 0 0 0
- from operations 88 88 46
- from cash flow from prior
period 0 5 0
------------ ------------ ------------
Total distributions on cash basis
(Note 6) 88 93 46
============ ============ ============
Total cash distributions as a
percentage of original $1,000
investment (Notes 7 and 8) 9.06% 9.03% 9.00%
Total cumulative cash distributions
per $1,000 investment from inception 242 335 381
Amount (in percentage terms) remaining
invested in program properties at the
end of each year (period) presented
(original total acquisition cost of
properties retained, divided by original
total acquisition cost of all properties
in program) (Note 4) 100% 99% 100%
</TABLE>
Note 7: On December 31, 1994 and December 31, 1995, CNL Income Fund X, Ltd.
declared a special distribution of cumulative excess operating reserves
equal to .25% and .10%, respectively, of the total invested capital.
Accordingly, the total yield for 1994 and 1995 was 9.06% and 9.03%,
respectively.
Note 8: Total cash distributions as a percentage of original $1,000 investment
are calculated based on actual distributions declared for the period.
(See Note 6 above)
Note 9: Certain data for columns representing less than 12 months have been
annualized.
C-10
<PAGE>
TABLE III
Operating Results of Prior Programs
CNL INCOME FUND XI, LTD.
<TABLE>
<CAPTION>
1991
(Note 1) 1992 1993 1994
------------ ------------ ------------ ------------
<S> <C>
Gross revenue $ 0 $ 1,269,086 $ 3,831,648 $ 3,852,107
Equity in earnings of unconsolidated
joint ventures 0 33,367 121,059 119,370
Profit from sale of properties 0 0 0 0
Interest income 0 150,535 24,258 30,894
Less: Operating expenses 0 (63,390) (206,987) (179,717)
Interest expense 0 0 0 0
Depreciation and amortization 0 (180,631) (469,127) (481,226)
Minority interests in income of
consolidated joint ventures 0 (23,529) (68,399) (68,936)
------------ ------------ ------------ ------------
Net income - GAAP basis 0 1,185,438 3,232,452 3,272,492
============ ============ ============ ============
Taxable income
- from operations 0 1,295,104 2,855,026 2,947,445
============ ============ ============ ============
- from gain on sale 0 0 0 0
============ ============ ============ ============
Cash generated from operations
(Notes 2 and 4) 0 1,495,225 3,355,586 3,497,941
Cash generated from sales 0 0 0 0
Cash generated from refinancing 0 0 0 0
------------ ------------ ------------ ------------
Cash generated from operations, sales
and refinancing 0 1,495,225 3,355,586 3,497,941
Less: Cash distributions to investors
(Note 5)
- from operating cash flow 0 (1,205,030) (2,495,002) (3,400,001)
- from sale of properties 0 0 0 0
- from cash flow from prior period 0 0 0 0
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions 0 290,195 860,584 97,940
Special items (not including sales and
refinancing):
Limited partners' capital
contributions 0 40,000,000 0 0
General partners' capital
contributions 1,000 0 0 0
Minority interests' capital
contributions 0 426,367 0 0
Organization costs 0 (10,000) 0 0
Syndication costs 0 (3,922,875) 0 0
Acquisition of land and buildings 0 (26,428,556) (276,157) 0
Investment in direct financing
leases 0 (6,716,561) (276,206) 0
Investment in joint ventures 0 (1,658,925) (772) 0
Reimbursement of syndication and
acquisition costs paid on behalf
of CNL Income Fund XI, Ltd. by
related parties 0 (1,011,487) (900) 0
Increase in other assets 0 (122,024) 0 0
Distributions to holders of minority
interests 0 (17,467) (51,562) (57,641)
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 1,000 828,667 254,987 40,299
============ ============ ============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 0 45 71 73
============ ============ ============ ============
- from recapture 0 0 0 0
============ ============ ============ ============
Capital gain (loss) 0 0 0 0
============ ============ ============ ============
</TABLE>
C-11
<PAGE>
<TABLE>
<CAPTION>
6 Months
1995 1996
------------ ------------
<S> <C>
Gross revenue $ 3,820,990 $ 1,905,317
Equity in earnings of unconsolidated
joint ventures 118,384 56,598
Profit from sale of properties 0 0
Interest income 51,192 24,214
Less: Operating expenses (237,126) (148,842)
Interest expense 0 0
Depreciation and amortization (481,226) (240,613)
Minority interests in income of
consolidated joint ventures (70,038) (34,437)
------------ ------------
Net income - GAAP basis 3,202,176 1,562,237
============ ============
Taxable income
- from operations 2,985,221 1,414,282
============ ============
- from gain on sale 0 0
============ ============
Cash generated from operations
(Notes 2 and 4) 3,652,185 1,811,310
Cash generated from sales 0 0
Cash generated from refinancing 0 0
------------ ------------
Cash generated from operations, sales
and refinancing 3,652,185 1,811,310
Less: Cash distributions to investors
(Note 5)
- from operating cash flow (3,500,023) (1,790,012)
- from sale of properties 0 0
- from cash flow from prior period 0 0
------------ -----------
Cash generated (deficiency) after cash
distributions 152,162 21,298
Special items (not including sales and
refinancing):
Limited partners' capital
contributions 0 0
General partners' capital
contributions 0 0
Minority interests' capital
contributions 0 0
Organization costs 0 0
Syndication costs 0 0
Acquisition of land and buildings 0 0
Investment in direct financing
leases 0 0
Investment in joint ventures 0 0
Reimbursement of syndication and
acquisition costs paid on behalf
of CNL Income Fund XI, Ltd. by
related parties 0 0
Increase in other assets 0 0
Distributions to holders of minority
interests (54,227) (27,839)
------------ ------------
Cash generated (deficiency) after cash
distributions and special items 97,935 (6,541)
============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 74 35
============ ============
- from recapture 0 0
============ ============
Capital gain (loss) 0 0
============ ============
</TABLE>
C-12
<PAGE>
TABLE III - CNL INCOME FUND XI, LTD. (continued)
<TABLE>
<CAPTION>
1991
(Note 1) 1992 1993 1994
------------ ------------ ------------ ------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 0 41 62 81
- from capital gain 0 0 0 0
- from investment income from
prior period 0 0 0 4
- from return of capital (Note 3) 0 1 0 0
------------ ------------ ------------ ------------
Total distributions on GAAP basis
(Note 5) 0 42 62 85
============ ============ ============ ============
Source (on cash basis)
- from sales 0 0 0 0
- from refinancing 0 0 0 0
- from operations 0 42 62 85
- from cash flow from prior
period 0 0 0 0
------------ ------------ ------------ ------------
Total distributions on cash basis
(Note 5) 0 42 62 85
============ ============ ============ ============
Total cash distributions as a
percentage of original $1,000
investment (Notes 6 and 7) 0.00% 6.17% 8.31% 8.56%
Total cumulative cash distributions
per $1,000 investment from inception 0 42 104 189
Amount (in percentage terms) remaining
invested in program properties at the
end of each year (period) presented
(original total acquisition cost of
properties retained, divided by original
total acquisition cost of all properties
in program) N/A 100% 100% 100%
</TABLE>
Note 1: The registration statement relating to the offering of Units by CNL
Income Fund XI, Ltd. became effective on March 12, 1992. Activities
through April 22, 1992, were devoted to organization of the partnership
and operations had not begun.
Note 2: Cash generated from operations includes cash received from tenants,
plus distributions from joint ventures, less cash paid for expenses,
plus interest received.
Note 3: Cash distributions presented above as a return of capital on a GAAP
basis represent the amount of cash distributions in excess of
accumulated net income on a GAAP basis. Accumulated net income includes
deductions for depreciation and amortization expense and income from
certain non-cash items. This amount is not required to be presented as
a return of capital except for purposes of this table, and CNL Income
Fund XI, Ltd. has not treated this amount as a return of capital for
any other purpose.
Note 4: Cash generated from operations per this table agrees to cash
generated from operations per the statement of cash flows included in
the financial statements of CNL Income Fund XI, Ltd.
Note 5: As a result of the partnership's change in investor services agents in
1993, distributions are now declared at the end of each quarter and
paid in the following quarter. Since this table generally presents
distributions on a cash basis (rather than amounts declared),
distributions on a cash basis for 1993 only reflect payments for three
quarters. Distributions declared for the quarters ended December 31,
1993, 1994 and 1995, are reflected in the 1994, 1995 and 1996 columns,
respectively, for distributions on a cash basis due to the payment of
such distributions in January 1994, 1995 and 1996, respectively. As a
result of 1994, 1995 and 1996 distributions being presented on a cash
basis, distributions declared and unpaid as of December 31, 1994 and
1995, and June 30, 1996 are not included in the 1994, 1995 and 1996
totals, respectively.
Note 6: On December 31, 1995, CNL Income Fund XI, Ltd. declared a special
distribution of cumulative excess operating reserves equal to .10% of
the total invested capital. Accordingly, the total yield for 1995 was
8.78%.
Note 7: Total cash distributions as a percentage of original $1,000 investment
are calculated based on actual distributions declared for the period.
(See Note 5 above)
Note 8: Certain data for columns representing less than 12 months have been
annualized.
C-13
<PAGE>
<TABLE>
<CAPTION>
6 Months
1995 1996
------------ ------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 79 39
- from capital gain 0 0
- from investment income from
prior period 9 5
- from return of capital (Note 3) 0 1
------------ ------------
Total distributions on GAAP basis
(Note 5) 88 45
============ ============
Source (on cash basis)
- from sales 0 0
- from refinancing 0 0
- from operations 88 45
- from cash flow from prior
period 0 0
------------ ------------
Total distributions on cash basis
(Note 5) 88 45
============ ============
Total cash distributions as a
percentage of original $1,000
investment (Notes 6 and 7) 8.78% 8.75%
Total cumulative cash distributions
per $1,000 investment from inception 277 322
Amount (in percentage terms) remaining
invested in program properties at the
end of each year (period) presented
(original total acquisition cost of
properties retained, divided by original
total acquisition cost of all properties
in program) 100% 100%
</TABLE>
C-14
<PAGE>
TABLE III
Operating Results of Prior Programs
CNL INCOME FUND XII, LTD.
<TABLE>
<CAPTION>
1991
(Note 1) 1992 1993 1994
------------ ------------ ------------ ------------
<S> <C>
Gross revenue $ 0 $ 25,133 $ 3,374,640 $ 4,397,881
Equity in earnings of joint ventures 0 46 49,604 85,252
Profit (Loss) from sale of properties 0 0 0 0
Interest income (Note 7) 0 45,228 190,082 65,447
Less: Operating expenses 0 (7,211) (193,804) (192,951)
Interest expense 0 0 0 0
Depreciation and amortization 0 (3,997) (286,293) (327,795)
------------ ------------ ------------ ------------
Net income - GAAP basis 0 59,199 3,134,229 4,027,834
============ ============ ============ ============
Taxable income
- from operations 0 58,543 2,749,072 3,301,005
============ ============ ============ ============
- from gain (loss) on sale 0 0 0 0
============ ============ ============ ============
Cash generated from operations
(Notes 2 and 5) 0 61,370 3,246,760 3,848,962
Cash generated from sales (Note 7) 0 0 0 0
Cash generated from refinancing 0 0 0 0
------------ ------------ ------------ ------------
Cash generated from operations, sales
and refinancing 0 61,370 3,246,760 3,848,962
Less: Cash distributions to investors
(Note 6)
- from operating cash flow 0 (61,370) (1,972,769) (3,768,754)
- from sale of properties 0 0 0 0
- from return of capital (Note 4) 0 (60,867) 0 0
- from cash flow from prior period 0 0 0 0
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions 0 (60,867) 1,273,991 80,208
Special items (not including sales and
refinancing):
Limited partners' capital
contributions 0 21,543,270 23,456,730 0
General partners' capital
contributions 1,000 0 0 0
Organization costs 0 (10,000) 0 0
Syndication costs 0 (2,066,937) (2,277,637) 0
Acquisition of land and buildings 0 (7,536,009) (15,472,737) (230)
Investment in direct financing
leases 0 (2,503,050) (11,875,100) (591)
Loan to tenant of joint venture,
net of repayments 0 0 (207,189) 6,400
Investment in joint ventures 0 (372,045) (468,771) (4,400)
Increase in restricted cash 0 0 0 0
Reimbursement of syndication and
acquisition costs paid on behalf
of CNL Income Fund XII, Ltd. by
related parties 0 (704,923) (432,749) 0
Increase in other assets 0 (654,497) 0 0
Other 0 0 0 973
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 1,000 7,634,942 (6,003,462) 82,360
============ ============ ============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 0 5 64 73
============ ============ ============ ============
- from recapture 0 0 0 0
============ ============ ============ ============
Capital gain (loss) 0 0 0 0
============ ============ ============ ============
</TABLE>
C-15
<PAGE>
<TABLE>
<CAPTION>
6 Months
1995 1996
------------ ------------
<S> <C>
Gross revenue $ 4,404,792 $ 2,171,212
Equity in earnings of joint ventures 81,582 55,297
Profit (Loss) from sale of properties 0 (15,355)
Interest income (Note 7) 84,197 49,199
Less: Operating expenses (228,404) (150,511)
Interest expense 0 0
Depreciation and amortization (327,795) (156,420)
------------ ------------
Net income - GAAP basis 4,014,372 1,953,422
============ ============
Taxable income
- from operations 3,262,046 1,591,118
============ ============
- from gain (loss) on sale 0 (66,395)
============ ============
Cash generated from operations
(Notes 2 and 5) 3,819,362 1,930,975
Cash generated from sales (Note 7) 0 1,640,000
Cash generated from refinancing 0 0
------------ ------------
Cash generated from operations, sales
and refinancing 3,819,362 3,570,975
Less: Cash distributions to investors
(Note 6)
- from operating cash flow (3,819,362) (1,930,975)
- from sale of properties 0 0
- from return of capital (Note 4) 0 0
- from cash flow from prior period (5,645) (26,529)
------------ ------------
Cash generated (deficiency) after cash
distributions (5,645) 1,613,471
Special items (not including sales and
refinancing):
Limited partners' capital
contributions 0 0
General partners' capital
contributions 0 0
Organization costs 0 0
Syndication costs 0 0
Acquisition of land and buildings 0 0
Investment in direct financing
leases 0 0
Loan to tenant of joint venture,
net of repayments 7,008 3,774
Investment in joint ventures 0 (1,655,928)
Increase in restricted cash 0 0
Reimbursement of syndication and
acquisition costs paid on behalf
of CNL Income Fund XII, Ltd. by
related parties 0 0
Increase in other assets 0 0
Other 0 0
------------ ------------
Cash generated (deficiency) after cash
distributions and special items 1,363 (38,683)
============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 72 35
============ ============
- from recapture 0 0
============ ============
Capital gain (loss) 0 (1)
============ ============
</TABLE>
C-16
<PAGE>
TABLE III - CNL INCOME FUND XII, LTD. (continued)
<TABLE>
<CAPTION>
1991
(Note 1) 1992 1993 1994
------------ ------------ ------------ ------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 0 5 46 84
- from capital gain 0 0 0 0
- from investment income from
prior period 0 0 0 0
- from return of capital (Note 3) 0 7 0 0
------------ ------------ ------------ ------------
Total distributions on GAAP basis
(Note 6) 0 12 46 84
============ ============ ============ ============
Source (on cash basis)
- from sales 0 0 0 0
- from refinancing 0 0 0 0
- from operations 0 6 46 84
- from return of capital (Note 4) 0 6 0 0
- from cash flow from prior period 0 0 0 0
------------ ------------ ------------ ------------
Total distributions on cash basis
(Note 6) 0 12 46 84
============ ============ ============ ============
Total cash distributions as a
percentage of original $1,000
investment (Notes 8 and 9) 0.00% 5.00% 6.75% 8.50%
Total cumulative cash distributions
per $1,000 investment from inception 0 12 58 142
Amount (in percentage terms) remaining
invested in program properties at the
end of each year (period) presented
(original total acquisition cost of
properties retained, divided by original
total acquisition cost of all properties
in program) N/A 100% 100% 100%
</TABLE>
Note 1: Pursuant to a registration statement on Form S-11 under the Securities
Act of 1933, as amended, CNL Income Fund XII, Ltd. ("CNL XII") and CNL
Income Fund XI, Ltd. each registered for sale $40,000,000 units of
limited partnership interests ("Units"). The offering of Units of CNL
Income Fund XI, Ltd. commenced March 12, 1992. Pursuant to the
registration statement, CNL XII could not commence until the offering
of Units of CNL Income Fund XI, Ltd. was terminated. CNL Income Fund
XI, Ltd. terminated its offering of Units on September 28, 1992, at
which time the maximum offering proceeds of $40,000,000 had been
received. Upon the termination of the offering of Units of CNL Income
Fund XI, Ltd., CNL XII commenced its offering of Units. Activities
through October 8, 1992, were devoted to organization of the
partnership and operations had not begun.
Note 2: Cash generated from operations includes cash received from tenants,
plus distributions from joint ventures, less cash paid for expenses,
plus interest received.
Note 3: Cash distributions presented above as a return of capital on a GAAP
basis represent the amount of cash distributions in excess of
accumulated net income on a GAAP basis. Accumulated net income includes
deductions for depreciation and amortization expense and income from
certain non-cash items. This amount is not required to be presented as
a return of capital except for purposes of this table, and CNL Income
Fund XII, Ltd. has not treated this amount as a return of capital for
any other purpose.
Note 4: CNL Income Fund XII, Ltd. makes its distributions in the current
period rather than in arrears based on estimated operating results. In
cases where distributions exceed cash from operations in the current
period, once finally determined, subsequent distributions are lowered
accordingly in order to avoid any return of capital. This amount is not
required to be presented as a return of capital except for purposes of
this table, and CNL Income Fund XII, Ltd. has not treated this amount
as a return of capital for any other purpose.
Note 5: Cash generated from operations per this table agrees to cash
generated from operations per the statement of cash flows included in
the financial statements of CNL Income Fund XII, Ltd.
Note 6: As a result of the partnership's change in investor services agents in
1993, distributions are now declared at the end of each quarter and
paid in the following quarter. Since this table generally presents
distributions on a cash basis (rather than amounts declared),
distributions on a cash basis for 1993 only reflect payments for three
quarters. Distributions declared for the quarters ended December 31,
1993, 1994 and 1995, are reflected in the 1994, 1995 and 1996 columns,
respectively, for distributions on a cash basis due to the payment of
such distributions in January 1994, 1995 and 1996, respectively. As a
result of 1994, 1995 and 1996 distributions being presented on a cash
basis, distributions declared and unpaid as of December 31, 1994 and
1995, and June 30, 1996 are not included in the 1994, 1995 and 1996
totals, respectively.
C-17
<PAGE>
<TABLE>
<CAPTION>
6 Months
1995 1996
------------ ------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 85 44
- from capital gain 0 0
- from investment income from
prior period 0 0
- from return of capital (Note 3) 0 0
------------ ------------
Total distributions on GAAP basis
(Note 6) 85 44
============ ============
Source (on cash basis)
- from sales 0 0
- from refinancing 0 0
- from operations 85 43
- from return of capital (Note 4) 0 0
- from cash flow from prior period 0 1
------------ ------------
Total distributions on cash basis
(Note 6) 85 44
============ ============
Total cash distributions as a
percentage of original $1,000
investment (Notes 8 and 9) 8.53% 8.50%
Total cumulative cash distributions
per $1,000 investment from inception 227 271
Amount (in percentage terms) remaining
invested in program properties at the
end of each year (period) presented
(original total acquisition cost of
properties retained, divided by original
total acquisition cost of all properties
in program) 100% 100%
</TABLE>
Note 7: In April 1996, CNL Income Fund XII, Ltd. sold one of its properties to
an unrelated third party for $1,640,000. As a result of this
transaction, CNL Income Fund XII, Ltd. recognized a loss of $15,355 for
financial reporting purposes primarily due to acquisition fees and
miscellaneous acquisition expenses CNL Income Fund XII, Ltd. had
allocated to this property. In May 1996, CNL Income Fund XII, Ltd.
reinvested the proceeds from this sale, along with additional funds,
for a total of $1,655,928 in Middleburg Joint Venture.
Note 8: On December 31, 1995, CNL Income Fund XII, Ltd. declared a special
distribution of cumulative excess operating reserves equal to .10% of
the total invested capital. Accordingly, the total yield for 1995 was
8.53%.
Note 9: Total cash distributions as a percentage of original $1,000 investment
are calculated based on actual distributions declared for the period.
(See Note 6 above)
Note 10: Certain data for columns representing less than 12 months have been
annualized.
C-18
<PAGE>
TABLE III
Operating Results of Prior Programs
CNL INCOME FUND XIII, LTD.
<TABLE>
<CAPTION>
1992
(Note 1) 1993 1994 1995
------------ ------------ ------------ ------------
<S> <C>
Gross revenue $ 0 $ 966,564 $ 3,558,447 $ 3,806,944
Equity in earnings of joint ventures 0 1,305 43,386 98,520
Profit (Loss) from sale of properties
(Note 4) 0 0 0 (29,560)
Interest income 0 181,568 77,379 51,410
Less: Operating expenses 0 (59,390) (183,311) (214,705)
Interest expense 0 0 0 0
Depreciation and amortization 0 (148,170) (378,269) (393,435)
------------ ------------ ------------ ------------
Net income - GAAP basis 0 941,877 3,117,632 3,319,174
============ ============ ============ ============
Taxable income
- from operations 0 978,535 2,703,252 2,920,859
============ ============ ============ ============
- from gain (loss) on sale 0 0 0 0
============ ============ ============ ============
Cash generated from operations
(Notes 2 and 3) 0 1,121,547 3,149,000 3,379,378
Cash generated from sales (Note 4) 0 0 0 286,411
Cash generated from refinancing 0 0 0 0
------------ ------------ ------------ ------------
Cash generated from operations, sales
and refinancing 0 1,121,547 3,149,000 3,665,789
Less: Cash distributions to investors
(Note 5)
- from operating cash flow 0 (528,364) (2,800,004) (3,350,014)
- from sale of properties 0 0 0 0
- from cash flow from prior period 0 0 0 0
------------ ------------ ------------ ------------
Cash generated (deficiency) after
cash distributions 0 593,183 348,996 315,775
Special items (not including sales
and refinancing):
Limited partners' capital
contributions 0 40,000,000 0 0
General partners' capital
contributions 1,000 0 0 0
Syndication costs 0 (3,932,017) (181) 0
Acquisition of land and buildings 0 (19,691,630) (5,764,308) (336,116)
Investment in direct financing leases 0 (6,760,624) (1,365,075) 0
Investment in joint ventures 0 (314,998) (545,139) (140,052)
Reimbursement of organization,
syndication and acquisition costs
paid on behalf of CNL Income Fund
XIII, Ltd. by related parties 0 (799,980) (25,036) (3,074)
Increase in other assets 0 (454,909) 9,226 0
Other 0 0 0 954
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 1,000 8,639,025 (7,341,517) (162,513)
============ ============ ============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 0 33 67 72
============ ============ ============ ============
- from recapture 0 0 0 0
============ ============ ============ ============
Capital gain (loss) (Note 4) 0 0 0 0
============ ============ ============ ============
</TABLE>
C-19
<PAGE>
<TABLE>
<CAPTION>
6 Months
1996
------------
<S> <C>
Gross revenue $ 1,773,791
Equity in earnings of joint ventures 52,525
Profit (Loss) from sale of properties
(Note 4) 0
Interest income 18,430
Less: Operating expenses (173,194)
Interest expense 0
Depreciation and amortization (196,717)
------------
Net income - GAAP basis 1,474,835
============
Taxable income
- from operations 1,427,419
============
- from gain (loss) on sale 0
============
Cash generated from operations
(Notes 2 and 3) 1,647,653
Cash generated from sales (Note 4) 0
Cash generated from refinancing 0
------------
Cash generated from operations, sales
and refinancing 1,647,653
Less: Cash distributions to investors
(Note 5)
- from operating cash flow (1,647,653)
- from sale of properties 0
- from cash flow from prior period (52,351)
------------
Cash generated (deficiency) after
cash distributions (52,351)
Special items (not including sales
and refinancing):
Limited partners' capital
contributions 0
General partners' capital
contributions 0
Syndication costs 0
Acquisition of land and buildings 0
Investment in direct financing leases 0
Investment in joint ventures 0
Reimbursement of organization,
syndication and acquisition costs
paid on behalf of CNL Income Fund
XIII, Ltd. by related parties 0
Increase in other assets 0
Other 0
------------
Cash generated (deficiency) after cash (52,351)
distributions and special items ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 35
============
- from recapture 0
============
Capital gain (loss) (Note 4) 0
============
</TABLE>
C-20
<PAGE>
TABLE III - CNL INCOME FUND XIII, LTD. (continued)
<TABLE>
<CAPTION>
1992
(Note 1) 1993 1994 1995
------------ ------------ ------------ ------------
<S> <C>
0 18 70 82
0 0 0 0
0 0 0 2
------------ ------------ ------------ ------------
0 18 70 84
============ ============ ============ ============
0 0 0 0
0 0 0 0
0 18 70 84
0 0 0 0
------------ ------------ ------------ ------------
0 18 70 84
============ ============ ============ ============
0.00% 5.33% 7.56% 8.44%
0 18 88 172
N/A 100% 100% 100%
</TABLE>
Note 1: The registration statement relating to the offering of Units by CNL
Income Fund XIII, Ltd. became effective on March 17, 1993. Activities
through April 15, 1993, were devoted to organization of the partnership
and operations had not begun.
Note 2: Cash generated from operations includes cash received from tenants,
plus distributions from joint ventures, less cash paid for expenses,
plus interest received.
Note 3: Cash generated from operations per this table agrees to cash
generated from operations per the statement of cash flows included in
the financial statements of CNL Income Fund XIII, Ltd.
Note 4: During 1995, the partnership sold one of its properties to a tenant for
its original purchase price, excluding acquisition fees and
miscellaneous acquisition expenses. The net sales proceeds were used
to acquire an additional property. As a result of this transaction,
the partnership recognized a loss for financial reporting purposes of
$29,560 primarily due to acquisition fees and miscellaneous acquisition
expenses the partnership had allocated to the property and due to the
accrued rental income relating to future scheduled rent increases that
the partnership had recorded and reversed at the time of sale.
Note 5: As a result of the partnership's change in investor services agents in
1993, distributions are now declared at the end of each quarter and
paid in the following quarter. Since this table generally presents
distributions on a cash basis (rather than amounts declared),
distributions on a cash basis for 1993 only reflect payments for three
quarters. Distributions declared for the quarters ended December 31,
1993, 1994 and 1995, are reflected in the 1994, 1995 and 1996 columns,
respectively, for distributions on a cash basis due to the payment of
such distributions in January 1994, 1995 and 1996, respectively. As a
result of 1994, 1995 and 1996 distributions being presented on a cash
basis, distributions declared and unpaid as of December 31, 1994 and
1995, and June 30, 1996, are not included in the 1994, 1995 and 1996
totals, respectively.
Note 6: Total cash distributions as a percentage of original $1,000 investment
are calculated based on actual distributions declared for the period.
(See Note 5 above)
Note 7: Certain data for columns representing less than 12 months have been
annualized.
C-21
<PAGE>
<TABLE>
<CAPTION>
6 Months
1996
------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 37
- from capital gain 0
- from investment income from prior
period 6
------------
Total distributions on GAAP basis (Note 5) 43
============
Source (on cash basis)
- from sales 0
- from refinancing 0
- from operations 41
- from cash flow from prior period 2
------------
Total distributions on cash basis (Note 5) 43
============
Total cash distributions as a percentage
of original $1,000 investment (Note 6) 8.50%
Total cumulative cash distributions per
$1,000 investment from inception 215
Amount (in percentage terms) remaining
invested in program properties at the
end of each year (period) presented
(original total acquisition cost of
properties retained, divided by original
total acquisition cost of all properties
in program) 100%
</TABLE>
C-22
<PAGE>
TABLE III
Operating Results of Prior Programs
CNL INCOME FUND XIV, LTD.
<TABLE>
<CAPTION>
1992
(Note 1) 1993 1994 1995
------------ ------------ ------------ ------------
<S> <C>
Gross revenue $ 0 $ 256,234 $ 3,135,716 $ 4,017,266
Equity in earnings of joint ventures 0 1,305 35,480 338,717
Profit (Loss) from sale of properties
(Note 4) 0 0 0 (66,518)
Interest income 0 27,874 200,499 50,724
Less: Operating expenses 0 (14,049) (181,980) (248,840)
Interest expense 0 0 0 0
Depreciation and amortization 0 (28,918) (257,640) (340,112)
------------ ------------ ------------ ------------
Net income - GAAP basis 0 242,446 2,932,075 3,751,237
============ ============ ============ ============
Taxable income
- from operations 0 278,845 2,482,240 3,162,165
============ ============ ============ ============
- from gain on sale 0 0 0 0
============ ============ ============ ============
Cash generated from operations
(Notes 2 and 3) 0 321,737 2,812,631 3,709,844
Cash generated from sales (Note 4) 0 0 0 696,012
Cash generated from refinancing 0 0 0 0
------------ ------------ ------------ ------------
Cash generated from operations, sales
and refinancing 0 321,737 2,812,631 4,405,856
Less: Cash distributions to investors
(Note 5)
- from operating cash flow 0 (9,050) (2,229,952) (3,543,751)
- from sale of properties 0 0 0 0
- from cash flow from prior period 0 0 0 0
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions 0 312,687 582,679 862,105
Special items (not including sales and
refinancing):
Limited partners' capital
contributions 0 28,785,100 16,214,900 0
General partners' capital
contributions 1,000 0 0 0
Syndication costs 0 (2,771,892) (1,618,477) 0
Acquisition of land and buildings 0 (13,758,004) (11,859,237) (964,073)
Investment in direct financing leases 0 (4,187,268) (5,561,748) (75,352)
Investment in joint ventures 0 (315,209) (1,561,988) (1,087,218)
Return of capital from joint venture 0 0 0 0
Reimbursement of organization,
syndication and acquisition costs
paid on behalf of CNL Income Fund
XIV, Ltd. by related parties 0 (706,215) (376,738) (577)
Increase in other assets 0 (444,267) 0 0
Other 0 0 0 5,530
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 1,000 6,914,932 (4,180,609) (1,259,585)
============ ============ ============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 0 16 56 70
============ ============ ============ ============
- from recapture 0 0 0 0
============ ============ ============ ============
Capital gain (loss) (Note 4) 0 0 0 0
============ ============ ============ ============
</TABLE>
C-23
<PAGE>
<TABLE>
<CAPTION>
6 Months
1996
------------
<S> <C>
Gross revenue $ 1,987,463
Equity in earnings of joint ventures 177,099
Profit (Loss) from sale of properties
(Note 4) 0
Interest income 21,659
Less: Operating expenses (138,978)
Interest expense 0
Depreciation and amortization (170,044)
------------
Net income - GAAP basis 1,877,199
============
Taxable income
- from operations 1,570,651
============
- from gain on sale 0
============
Cash generated from operations
(Notes 2 and 3) 1,799,902
Cash generated from sales (Note 4) 0
Cash generated from refinancing 0
------------
Cash generated from operations, sales
and refinancing 1,799,902
Less: Cash distributions to investors
(Note 5)
- from operating cash flow (1,799,902)
- from sale of properties 0
- from cash flow from prior period (56,358)
------------
Cash generated (deficiency) after cash
distributions (56,358)
Special items (not including sales and
refinancing):
Limited partners' capital
contributions 0
General partners' capital
contributions 0
Syndication costs 0
Acquisition of land and buildings 0
Investment in direct financing leases 0
Investment in joint ventures 0
Return of capital from joint venture 0
Reimbursement of organization,
syndication and acquisition costs
paid on behalf of CNL Income Fund
XIV, Ltd. by related parties 0
Increase in other assets 0
Other 0
------------
Cash generated (deficiency) after cash
distributions and special items (56,358)
============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 35
============
- from recapture 0
============
Capital gain (loss) (Note 4) 0
============
</TABLE>
C-24
<PAGE>
TABLE III - CNL INCOME FUND XIV, LTD. (continued)
<TABLE>
<CAPTION>
1992
(Note 1) 1993 1994 1995
------------ ------------ ------------ ------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 0 1 51 79
- from capital gain 0 0 0 0
- from return of capital 0 0 0 0
------------ ------------ ------------ ------------
Total distributions on GAAP basis (Note 5) 0 1 51 79
============ ============ ============ ============
Source (on cash basis)
- from sales 0 0 0 0
- from refinancing 0 0 0 0
- from operations 0 1 51 79
- from cash flow from prior period 0 0 0 0
------------ ------------ ------------ ------------
Total distributions on cash basis (Note 5) 0 1 51 79
============ ============ ============ ============
Total cash distributions as a percentage
of original $1,000 investment (Note 6) 0.00% 4.50% 6.50% 8.06%
Total cumulative cash distributions
per $1,000 investment from inception 0 1 52 131
Amount (in percentage terms) remaining
invested in program properties at the
end of each year (period) presented
(original total acquisition cost of
properties retained, divided by original
total acquisition cost of all properties
in program) N/A 100% 100% 100%
</TABLE>
Note 1: Pursuant to a registration statement on Form S-11 under the Securities
Act of 1933, as amended, CNL Income Fund XIV, Ltd. ("CNL XIV") and CNL
Income Fund XIII, Ltd. each registered for sale $40,000,000 units of
limited partnership interests ("Units"). The offering of Units of CNL
Income Fund XIII, Ltd. commenced March 17, 1993. Pursuant to the
registration statement, CNL XIV could not commence until the offering
of Units of CNL Income Fund XIII, Ltd. was terminated. CNL Income Fund
XIII, Ltd. terminated its offering of Units on August 26, 1993, at
which time the maximum offering proceeds of $40,000,000 had been
received. Upon the termination of the offering of Units of CNL Income
Fund XIII, Ltd., CNL XIV commenced its offering of Units. Activities
through September 13, 1993, were devoted to organization of the
partnership and operations had not begun.
Note 2: Cash generated from operations includes cash received from tenants,
plus distributions from joint ventures, less cash paid for expenses,
plus interest received.
Note 3: Cash generated from operations per this table agrees to cash
generated from operations per the statement of cash flows included in
the financial statements of CNL Income Fund XIV, Ltd.
Note 4: During 1995, the partnership sold two of its properties to a tenant for
its original purchase price, excluding acquisition fees and
miscellaneous acquisition expenses. The net sales proceeds were used
to acquire two additional properties. As a result of these
transactions, the partnership recognized a loss for financial reporting
purposes of $66,518 primarily due to acquisition fees and miscellaneous
acquisition expenses the partnership had allocated to the property and
due to the accrued rental income relating to future scheduled rent
increases that the partnership had recorded and reversed at the time of
sale.
Note 5: As a result of the partnership's change in investor services agents in
1993, distributions are now declared at the end of each quarter and
paid in the following quarter. Since this table generally presents
distributions on a cash basis (rather than amounts declared),
distributions on a cash basis for 1993 only reflect payments for three
quarters. Distributions declared for the quarters ended December 31,
1993, 1994 and 1995, are reflected in the 1994, 1995 and 1996 columns,
respectively, for distributions on a cash basis due to the payment of
such distributions in January 1994, 1995 and 1996, respectively. As a
result of 1994, 1995 and 1996 distributions being presented on a cash
basis, distributions declared and unpaid as of December 31, 1994 and
1995, and June 30, 1996 are not included in the 1994, 1995 and 1996
totals, respectively.
Note 6: Total cash distributions as a percentage of original $1,000 investment
are calculated based on actual distributions declared for the period.
(See Note 5 above)
Note 7: Certain data for columns representing less than 12 months have been
annualized.
C-25
<PAGE>
<TABLE>
<CAPTION>
6 Months
1996
------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 41
- from capital gain 0
- from return of capital 0
------------
Total distributions on GAAP basis (Note 5) 41
============
Source (on cash basis)
- from sales 0
- from refinancing 0
- from operations 40
- from cash flow from prior period 1
------------
Total distributions on cash basis (Note 5) 41
============
Total cash distributions as a percentage
of original $1,000 investment (Note 6) 8.25%
Total cumulative cash distributions
per $1,000 investment from inception 172
Amount (in percentage terms) remaining
invested in program properties at the
end of each year (period) presented
(original total acquisition cost of
properties retained, divided by original
total acquisition cost of all properties
in program) 100%
</TABLE>
C-26
<PAGE>
TABLE III
Operating Results of Prior Programs CNL
INCOME FUND XV, LTD.
<TABLE>
<CAPTION>
1993 6 Months
(Note 1) 1994 1995 1996
------------ ------------ ------------ ------------
<S> <C>
Gross revenue $ 0 $ 1,143,586 $ 3,546,320 $ 1,799,609
Equity in earnings of joint venture 0 8,372 280,606 144,539
Profit (Loss) from sale of properties
(Note 4) 0 0 (71,023) 0
Interest income 0 167,734 88,059 21,155
Less: Operating expenses 0 (62,926) (228,319) (138,719)
Interest expense 0 0 0 0
Depreciation and amortization 0 (70,848) (243,175) (124,093)
------------ ------------ ------------ ------------
Net income - GAAP basis 0 1,185,918 3,372,468 1,702,491
============ ============ ============ ============
Taxable income
- from operations 0 1,026,715 2,861,912 1,399,634
============ ============ ============ ============
- from gain on sale 0 0 0 0
============ ============ ============ ============
Cash generated from operations
(Notes 2 and 3) 0 1,116,834 3,239,370 1,687,927
Cash generated from sales (Note 4) 0 0 811,706 0
Cash generated from refinancing 0 0 0 0
------------ ------------ ------------ ------------
Cash generated from operations, sales
and refinancing 0 1,116,834 4,051,076 1,687,927
Less: Cash distributions to investors
(Note 5)
- from operating cash flow 0 (635,944) (2,650,003) (1,600,000)
- from sale of properties 0 0 0 0
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions 0 480,890 1,401,073 87,927
Special items (not including sales and
refinancing):
Limited partners' capital contra-
bunions 0 40,000,000 0 0
General partners' capital contra-
bunions 1,000 0 0 0
Syndication costs 0 (3,892,003) 0 0
Acquisition of land and buildings 0 (22,152,379) (1,625,601) 0
Investment in direct financing
leases 0 (6,792,806) (2,412,973) 0
Investment in joint venture 0 (1,564,762) (720,552) (145,526)
Reimbursement of organization,
syndication and acquisition costs
paid on behalf of CNL Income Fund
XV, Ltd. by related parties 0 (1,098,197) (23,507) 0
Increase in other assets 0 (187,757) 0 0
Other (38) (6,118) 25,150 0
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 962 4,786,868 (3,356,410) (57,599)
============ ============ ============ ============
TAX AND DISTRIBUTION DATA PER $1,000
INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 0 33 71 35
============ ============ ============ ============
- from recapture 0 0 0 0
============ ============ ============ ============
Capital gain (loss) (Note 4) 0 0 0 0
============ ============ ============ ============
</TABLE>
C-27
<PAGE>
TABLE III - CNL INCOME FUND XV, LTD. (continued)
<TABLE>
<CAPTION>
1993 6 Months
(Note 1) 1994 1995 1996
------------ ------------ ------------ ------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 0 21 66 40
- from capital gain 0 0 0 0
------------ ------------ ------------ ------------
Total distributions on GAAP basis (Note 5) 0 21 66 40
============ ============ ============ ============
Source (on cash basis)
- from sales 0 0 0 0
- from refinancing 0 0 0 0
- from operations 0 21 66 40
------------ ------------ ------------ ------------
Total distributions on cash basis (Note 5) 0 21 66 40
============ ============ ============ ============
Total cash distributions as a percentage
of original $1,000 investment (Note 6) 0.00% 5.00% 7.25% 8.00%
Total cumulative cash distributions per
$1,000 investment from inception 0 21 87 127
Amount (in percentage terms) remaining
invested in program properties at the
end of each year (period) presented
(original total acquisition cost of
properties retained, divided by original
total acquisition cost of all properties
in program) N/A 100% 100% 100%
</TABLE>
Note 1: The registration statement relating to this offering of Units of CNL
Income Fund XV, Ltd. became effective February 23, 1994. Activities
through March 23, 1994, were devoted to organization of the partnership
and operations had not begun.
Note 2: Cash generated from operations includes cash received from tenants,
plus distributions from joint venture, less cash paid for expenses,
plus interest received.
Note 3: Cash generated from operations per this table agrees to cash
generated from operations per the statement of cash flows included in
the financial statements of CNL Income Fund XV, Ltd.
Note 4: During 1995, the partnership sold three of its properties to a tenant
for its original purchase price, excluding acquisition fees and
miscellaneous acquisition expenses. The majority of the net sales
proceeds were used to acquire additional properties. As a result of
these transactions, the partnership recognized a loss for financial
reporting purposes of $71,023 primarily due to acquisition fees and
miscellaneous acquisition expenses the partnership had allocated to the
three properties and due to the accrued rental income relating to
future scheduled rent increases that the partnership had recorded and
reversed at the time of sale.
Note 5: Distributions declared for the quarters ended December 31, 1994 and
1995 are reflected in the 1995 and 1996 columns, respectively, due to
the payment of such distributions in January 1995 and 1996,
respectively. As a result of distributions being presented on a cash
basis, distributions declared and unpaid as of December 31, 1994 and
1995, and June 30, 1996 are not included in the 1994, 1995 and 1996
totals, respectively.
Note 6: Total cash distributions as a percentage of original $1,000 investment
are calculated based on actual distributions declared for the period.
(See Note 5 above)
Note 7: Certain data for columns representing less than 12 months have been
annualized.
C-28
<PAGE>
TABLE III
Operating Results of Prior Programs
CNL INCOME FUND XVI, LTD.
<TABLE>
<CAPTION>
1993 6 Months
(Note 1) 1994 1995 1996
------------ ------------ ------------ ------------
<S> <C>
Gross revenue $ 0 $ 186,257 $ 2,702,504 $ 2,143,589
Profit from sale of properties (Note 5) 0 0 0 124,305
Interest income 0 21,478 321,137 43,562
Less: Operating expenses 0 (10,700) (274,595) (148,823)
Interest expense 0 0 0 0
Depreciation and amortization 0 (9,458) (318,205) (270,831)
------------ ------------ ------------ ------------
Net income - GAAP basis 0 187,577 2,430,841 1,891,802
============ ============ ============ ============
Taxable income
- from operations 0 189,864 2,139,382 1,550,241
============ ============ ============ ============
- from gain on sale (Note 5) 0 0 0 0
============ ============ ============ ============
Cash generated from operations
(Notes 2 and 3) 0 205,148 2,481,395 1,861,696
Cash generated from sales (Note 5) 0 0 0 775,000
Cash generated from refinancing 0 0 0 0
------------ ------------ ------------ ------------
Cash generated from operations, sales
and refinancing 0 205,148 2,481,395 2,636,696
Less: Cash distributions to investors
(Note 4)
- from operating cash flow 0 (2,845) (1,798,921) (1,631,251)
- from sale of properties 0 0 0 0
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions 0 202,303 682,474 1,005,445
Special items (not including sales and
refinancing):
Limited partners' capital contra-
bunions 0 20,174,172 24,825,828 0
General partners' capital contra-
bunions 1,000 0 0 0
Syndication costs 0 (1,929,465) (2,452,743) 0
Acquisition of land and buildings 0 (13,170,132) (16,012,458) (2,392,562)
Investment in direct financing
leases 0 (975,853) (5,595,236) (382,372)
Increase in restricted cash 0 0 0 (775,000)
Reimbursement of organization,
syndication and acquisition costs
paid on behalf of CNL Income Fund
XVI, Ltd. by related parties 0 (854,154) (405,569) 0
Collection of overpayment of acquit-
cyton and syndication costs paid
by related parties on behalf of the
partnership 0 0 0 1,204
Increase in other assets 0 (443,625) (58,720) 0
Other (36) (20,714) 20,714 0
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 964 2,982,532 1,004,290 (2,543,285)
============ ============ ============ ============
TAX AND DISTRIBUTION DATA PER $1,000
INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 0 17 53 34
============ ============ ============ ============
- from recapture 0 0 0 0
============ ============ ============ ============
Capital gain (loss) (Note 5) 0 0 0 0
============ ============ ============ ============
</TABLE>
C-29
<PAGE>
TABLE III - CNL INCOME FUND XVI, LTD. (continued)
<TABLE>
<CAPTION>
1993 6 Months
(Note 1) 1994 1995 1996
------------ ------------ ------------ ------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 0 1 45 33
- from capital gain 0 0 0 3
- from investment income from
prior period 0 0 0 0
------------ ------------ ------------ ------------
Total distributions on GAAP basis (Note 4) 0 1 45 36
============ ============ ============ ============
Source (on cash basis)
- from sales 0 0 0 0
- from refinancing 0 0 0 0
- from operations 0 1 45 36
------------ ------------ ------------ ------------
Total distributions on cash basis (Note 4) 0 1 45 36
============ ============ ============ ============
Total cash distributions as a percentage
of original $1,000 investment (Note 6) 0.00% 4.50% 6.00% 8.00%
Total cumulative cash distributions per
$1,000 investment from inception 0 1 46 82
Amount (in percentage terms) remaining
invested in program properties at the
end of each year (period) presented
(original total acquisition cost of
properties retained, divided by original
total acquisition cost of all properties
in program) (Note 5) N/A 100% 100% 98%
</TABLE>
Note 1: Pursuant to a registration statement on Form S-11 under the Securities
Act of 1933, as amended, CNL Income Fund XVI, Ltd. ("CNL XVI") and CNL
Income Fund XV, Ltd. each registered for sale $40,000,000 units of
limited partnership interests ("Units"). The offering of Units of CNL
Income Fund XV, Ltd. commenced February 23, 1994. Pursuant to the
registration statement, CNL XVI could not commence until the offering
of Units of CNL Income Fund XV, Ltd. was terminated. CNL Income Fund
XV, Ltd. terminated its offering of Units on September 1, 1994, at
which time the maximum offering proceeds of $40,000,000 had been
received. Upon the termination of the offering of Units of CNL Income
Fund XV, Ltd., CNL XVI commenced its offering of Units. Activities
through September 22, 1994, were devoted to organization of the
partnership and operations had not begun.
Note 2: Cash generated from operations includes cash received from tenants,
less cash paid for expenses, plus interest received.
Note 3: Cash generated from operations per this table agrees to cash
generated from operations per the statement of cash flows included in
the financial statements of CNL Income Fund XVI, Ltd.
Note 4: Distributions declared for the quarters ended December 31, 1994 and
1995 are reflected in the 1995 and 1996 columns, respectively, due to
the payment of such distributions in January 1995 and 1996,
respectively. As a result of distributions being presented on a cash
basis, distributions declared and unpaid as of December 31, 1994 and
1995, and June 30, 1996 are not included in the 1994, 1995 and 1996
totals, respectively.
Note 5: In April 1996, CNL Income Fund XVI, Ltd. sold one of its properties for
$775,000, resulting in a gain for financial reporting purposes of
$124,305. As of June 30, 1996, the net sales proceeds of $775,000,
plus accrued interest of $3,526, were being held in an interest-bearing
escrow account. The general partners believe that the sale of this
property will qualify as a like-kind exchange transaction in accordance
with Section 1031 of the Internal Revenue Code. As a result, no gain
or loss was recognized for federal income tax purposes. The remaining
net sales proceeds are expected to be invested in an additional
property or used for other Partnership purposes.
Note 6: Total cash distributions as a percentage of original $1,000 investment
are calculated based on actual distributions declared for the period.
(See Note 5 above)
Note 7: Certain data for columns representing less than 12 months have been
annualized.
C-30
<PAGE>
TABLE III
Operating Results of Prior Programs CNL
INCOME FUND XVII, LTD.
1995 6 Months
(Note 1) 1996
------------ ------------
Gross revenue $ 0 $ 264,636
Profit from sale of properties 0 0
Interest income 12,153 102,696
Less: Operating expenses (3,493) (68,597)
Interest expense 0 0
Depreciation and amortization (309) (32,931)
------------ ------------
Net income - GAAP basis 8,351 265,804
============ ============
Taxable income
- from operations 12,153 254,708
============ ============
- from gain on sale 0 0
============ ============
Cash generated from operations
(Notes 2 and 3) 9,012 257,021
Cash generated from sales 0 0
Cash generated from refinancing 0 0
------------ ------------
Cash generated from operations, sales
and refinancing 9,012 257,021
Less: Cash distributions to investors
(Note 4)
- from operating cash flow (1,199) (142,120)
- from sale of properties 0 0
------------ ------------
Cash generated (deficiency) after cash
distributions 7,813 114,901
Special items (not including sales and
refinancing):
Limited partners' capital contra-
bunions 5,696,921 15,435,942
General partners' capital contra-
bunions 1,000 0
Syndication costs (604,348) (1,544,293)
Acquisition of land and buildings (332,928) (10,087,458)
Investment in direct financing
leases 0 (1,258,674)
Increase in restricted cash 0 0
Reimbursement of organization,
syndication and acquisition costs
paid on behalf of CNL Income Fund
XVII, Ltd. by related parties (347,907) (339,105)
Increase in other assets (221,282) (65,775)
Other (410) 0
------------ ------------
Cash generated (deficiency) after cash
distributions and special items 4,198,859 2,255,538
============ ============
TAX AND DISTRIBUTION DATA PER $1,000
INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 36 194
============ ============
- from recapture 0 0
============ ============
Capital gain (loss) 0 0
============ ============
C-31
<PAGE>
TABLE III - CNL INCOME FUND XVII, LTD. (continued)
1995 6 Months
(Note 1) 1996
------------ ------------
Cash distributions to investors
Source (on GAAP basis)
- from investment income 4 108
- from capital gain 0 0
- from investment income from
prior period 0 0
------------ ------------
Total distributions on GAAP basis (Note 4) 0 108
============ ============
Source (on cash basis)
- from sales 0 0
- from refinancing 0 0
- from operations 4 108
------------ ------------
Total distributions on cash basis (Note 4) 4 108
============ ============
Total cash distributions as a percentage
of original $1,000 investment (Note 5) 0.00% 5.17%
Total cumulative cash distributions per
$1,000 investment from inception 4 112
Amount (in percentage terms) remaining
invested in program properties at the
end of each year (period) presented
(original total acquisition cost of
properties retained, divided by original
total acquisition cost of all properties
in program) N/A 100%
Note 1: Pursuant to a registration statement on Form S-11 under the Securities
Act of 1933, as amended, CNL Income Fund XVII, Ltd. ("CNL XVII") and
CNL Income Fund XVIII, Ltd. each registered for sale $30,000,000 units
of limited partnership interests ("Units"). The offering of Units of
CNL Income Fund XVII, Ltd. commenced September 2, 1995. Pursuant to
the registration statement, CNL XVIII could not commence until the
offering of Units of CNL Income Fund XVII, Ltd. was terminated. CNL
Income Fund XVII, Ltd. terminated its offering of Units on September
19, 1996, at which time subscriptions for the maximum offering proceeds
of $30,000,000 had been received. Upon the termination of the offering
of Units of CNL Income Fund XVII, Ltd., CNL XVIII commenced its
offering of Units. Activities through September 30, 1996, were devoted
to organization of the partnership and operations had not begun.
Note 2: Cash generated from operations includes cash received from tenants,
less cash paid for expenses, plus interest received.
Note 3: Cash generated from operations per this table agrees to cash generated
from operations per the statement of cash flows included in the
financial statements of CNL Income Fund XVII, Ltd.
Note 4: Distributions declared for the quarter ended December 31, 1995 are
reflected in the 1996 column due to the payment of such distributions
in January 1996. As a result of distributions being presented on a cash
basis, distributions declared and unpaid as of June 30, 1996 are not
included in the 1996 totals.
Note 5: Total cash distributions as a percentage of original $1,000 investment
are calculated based on actual distributions declared for the period.
(See Note 4 above)
Note 6: Certain data for columns representing less than 12 months have been
annualized.
C-32
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
<TABLE>
<CAPTION>
===================================================================================================================================
Cost of Properties
Selling Price, Net of Including Closing and
Closing Costs and GAAP Adjustments Soft Costs
---------------------------------------------- -------------------------------------
Purchase Total
Cash money Adjustments acquisition
received Mortgage mortgage resulting cost, capital
net of balance taken from Original improvements
Date Date of closing at time back by application mortgage closing and
Property Acquired Sale costs of sale program of GAAP Total financing soft costs (1) Total
===================================================================================================================================
<S> <C>
CNL Income Fund, Ltd.:
Burger King -
San Dimas, CA 02/05/87 06/12/92 $1,169,021 0 0 0 $1,169,021 0 $955,000 $955,000
Wendy's -
Fairfield, CA 07/01/87 10/03/94 1,018,490 0 0 0 1,018,490 0 861,500 861,500
CNL Income Fund II, Ltd.:
Golden Corral -
Salisbury, NC 05/29/87 07/21/93 746,800 0 0 0 746,800 0 642,800 642,800
Pizza Hut -
Graham, TX 08/24/87 07/28/94 261,628 0 0 0 261,628 0 205,500 205,500
Golden Corral -
Medina, OH 11/18/87 11/30/94 626,582 0 0 0 626,582 0 743,000 743,000
CNL Income Fund IV, Ltd.:
Taco Bell -
York, PA 03/22/89 04/27/94 712,000 0 0 0 712,000 0 616,501 616,501
Burger King -
Hastings, MI 08/12/88 12/15/95 518,650 0 0 0 518,650 0 419,936 419,936
CNL Income Fund V, Ltd.:
Perkins -
Myrtle Beach, SC (2) 02/28/90 08/25/95 0 0 1,040,000 0 1,040,000 0 986,418 986,418
CNL Income Fund VI, Ltd.:
Hardee's -
Batesville, AR 11/02/89 05/24/94 791,211 0 0 0 791,211 0 605,500 605,500
Hardee's -
Heber Springs, AR 02/13/90 05/24/94 638,270 0 0 0 638,270 0 532,893 532,893
Hardee's -
Little Canada, MN 11/28/89 06/29/95 899,503 0 0 0 899,503 0 821,692 821,692
<CAPTION>
Excess
(deficiency)
of property
operating cash
receipts over
cash
expenditures
==================================================================
<S> <C>
CNL Income Fund, Ltd.:
Burger King -
San Dimas, CA $214,021
Wendy's -
Fairfield, CA 156,990
CNL Income Fund II, Ltd.:
Golden Corral -
Salisbury, NC 104,000
Pizza Hut -
Graham, TX 56,128
Golden Corral -
Medina, OH (116,418)
CNL Income Fund IV, Ltd.:
Taco Bell -
York, PA 95,499
Burger King -
Hastings, MI 98,714
CNL Income Fund V, Ltd.:
Perkins -
Myrtle Beach, SC (2) 53,582
CNL Income Fund VI, Ltd.:
Hardee's -
Batesville, AR 185,711
Hardee's -
Heber Springs, AR 105,377
Hardee's -
Little Canada, MN 77,811
</TABLE>
C-33
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
<TABLE>
<CAPTION>
===================================================================================================================================
Cost of Properties
Selling Price, Net of Including Closing and
Closing Costs and GAAP Adjustments Soft Costs
------------------------------------------------ -------------------------------
Purchase Total
Cash money Adjustments acquisition
received Mortgage mortgage resulting cost, capital
net of balance taken from Original improvements
Date Date of closing at time back by application mortgage closing and
Property Acquired Sale costs of sale program of GAAP Total financing soft costs (1) Total
===================================================================================================================================
<S> <C>
CNL Income Fund VII, Ltd.:
Taco Bell -
Kearns, UT 06/14/90 05/19/92 700,000 0 0 0 700,000 0 560,202 560,202
Hardee's -
St. Paul, MN 08/09/90 05/24/94 869,036 0 0 0 869,036 0 742,333 742,333
Perkins -
Florence, SC (3) 08/28/90 08/25/95 0 0 1,160,000 0 1,160,000 0 1,084,905 1,084,905
Church's Fried Chicken -
Jacksonville, FL (4) 04/30/90 12/01/95 0 0 240,000 0 240,000 0 233,728 233,728
CNL Income Fund VIII, Ltd.:
Denny's -
Ocoee, FL 03/16/91 07/31/95 1,184,865 0 0 0 1,184,865 0 949,199 949,199
Church's Fried Chicken -
Jacksonville, FL (4) 09/28/90 12/01/95 0 0 240,000 0 240,000 0 238,153 238,153
Church's Fried Chicken -
Jacksonville, FL (5) 09/28/90 12/01/95 0 0 220,000 0 220,000 0 215,845 215,845
CNL Income Fund X, Ltd.:
Shoney's -
Denver, CO 03/04/92 08/11/95 1,050,186 0 0 0 1,050,186 0 987,679 987,679
CNL Income Fund XII, Ltd.:
Golden Corral -
Houston, TX 12/28/92 04/10/96 1,640,000 0 0 0 1,640,000 0 1,636,643 1,636,643
CNL Income Fund XIII, Ltd.:
Checkers -
Houston, TX 03/31/94 04/24/95 286,411 0 0 0 286,411 0 286,411 286,411
<CAPTION>
Excess
(deficiency)
of property
operating cash
receipts over
cash
expenditures
===================================================================
<S> <C>
CNL Income Fund VII, Ltd.:
Taco Bell -
Kearns, UT 139,798
Hardee's -
St. Paul, MN 126,703
Perkins -
Florence, SC (3) 75,095
Church's Fried Chicken -
Jacksonville, FL (4) 6,272
CNL Income Fund VIII, Ltd.:
Denny's -
Ocoee, FL 235,666
Church's Fried Chicken -
Jacksonville, FL (4) 1,847
Church's Fried Chicken -
Jacksonville, FL (5) 4,155
CNL Income Fund X, Ltd.:
Shoney's -
Denver, CO 62,507
CNL Income Fund XII, Ltd.:
Golden Corral -
Houston, TX 3,357
CNL Income Fund XIII, Ltd.:
Checkers -
Houston, TX 0
</TABLE>
C-34
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
<TABLE>
<CAPTION>
===================================================================================================================================
Cost of Properties
Selling Price, Net of Including Closing and
Closing Costs and GAAP Adjustments Soft Costs
---------------------------------------- ----------------------------------------
Purchase Total
Cash money Adjustments acquisition
received Mortgage mortgage resulting cost, capital
net of balance taken from Original improvements
Date Date of closing at time back by application mortgage closing and
Property Acquired Sale costs of sale program of GAAP Total financing soft costs (1) Total
===================================================================================================================================
<S> <C>
CNL Income Fund XIV, Ltd.:
Checkers -
Knoxville, TN 03/31/94 03/01/95 339,031 0 0 0 339,031 0 339,031 339,031
Checkers -
Dallas, TX 03/31/94 03/01/95 356,981 0 0 0 356,981 0 356,981 356,981
CNL Income Fund XV, Ltd.:
Checkers -
Knoxville, TN 05/27/94 03/01/95 263,221 0 0 0 263,221 0 263,221 263,221
Checkers -
Leavenworth, KS 06/22/94 03/01/95 259,600 0 0 0 259,600 0 259,600 259,600
Checkers -
Knoxville, TN 07/08/94 03/01/95 288,885 0 0 0 288,885 0 288,885 288,885
CNL Income Fund XVI, Ltd.:
Long John Silver's -
Appleton, WI 06/24/95 04/24/96 775,000 0 0 0 775,000 0 613,838 613,838
<CAPTION>
Excess
(deficiency)
of property
operating cash
receipts over
cash
expenditures
===================================================================
<S> <C>
CNL Income Fund XIV, Ltd.:
Checkers -
Knoxville, TN 0
Checkers -
Dallas, TX 0
CNL Income Fund XV, Ltd.:
Checkers -
Knoxville, TN 0
Checkers -
Leavenworth, KS 0
Checkers -
Knoxville, TN 0
CNL Income Fund XVI, Ltd.:
Long John Silver's -
Appleton, WI 161,162
</TABLE>
(1) Amounts shown do not include pro rata share of original offering costs or
acquisition fees.
(2) Amount shown is face value and does not represent discounted current value.
The mortgage note bears interest at a rate of 10.25% per annum and provides
for a balloon payment of $1,006,004 in July 2000.
(3) Amount shown is face value and does not represent discounted current value.
The mortgage note bears interest at a rate of 10.25% per annum and provides
for a balloon payment of $1,106,657 in July 2000.
(4) Amounts shown are face value and do not represent discounted current value.
Each mortgage note bears interest at a rate of 10.00% per annum and provides
for a balloon payment of $218,252 in December 2005.
(5) Amount shown is face value and does not represent discounted current value.
The mortgage note bears interest at a rate of 10.00% per annum and provides
for a balloon payment of $200,324 in December 2005.
C-35
<PAGE>
ADDENDUM TO
EXHIBIT E
PRO FORMA ESTIMATE OF TAXABLE INCOME
BEFORE DIVIDENDS PAID DEDUCTION
THE PRO FORMA ESTIMATE OF TAXABLE
INCOME CONTAINED IN THIS ADDENDUM
SHOULD BE READ IN CONJUNCTION WITH
EXHIBIT E TO THE ATTACHED PROSPECTUS,
DATED APRIL 26, 1996.
<PAGE>
PRO FORMA ESTIMATE OF TAXABLE INCOME BEFORE DIVIDENDS PAID DEDUCTION OF
CNL AMERICAN PROPERTIES FUND, INC.
GENERATED FROM THE OPERATIONS OF PROPERTIES ACQUIRED FROM APRIL 10, 1996
THROUGH JANUARY 8, 1997
For a 12-Month Period (Unaudited)
The following schedule represents pro forma unaudited estimates of taxable
income before dividends paid deduction of each Property acquired by the Company
from April 10, 1996 through January 8, 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. For information
regarding the 48 Properties acquired by the Company prior to April 10, 1996, see
Exhibit E to the attached Prospectus dated April 26, 1996.
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>
TGI Friday's Wendy's Golden Corral Ten Pizza
Hamden, CT (7) Knoxville, TN (7)(9) Port Richey, FL (7) Hut Properties
-------------- -------------------- ------------------- --------------
<S> <C>
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction:
Base Rent (1) $ 173,714 $ 81,898 $ 196,972 $ 166,320
Interest Income (2) - - - 415,686
---------- ---------- ---------- ----------
Total Revenues 173,714 81,898 196,972 582,006
---------- ---------- ---------- ----------
Asset Management Fees (3) (6,808) (4,746) (10,233) (8,922)
Mortgage Management Fee (4) - - - (23,167)
General and Administrative
Expenses (5) (10,770) (5,078) (12,212) (36,084)
---------- ---------- ---------- ----------
Total Operating Expenses (17,578) (9,824) (22,445) (68,173)
---------- ---------- ---------- ----------
Estimated Cash Available from
Operations 156,136 72,074 174,527 513,833
Depreciation and Amortization
Expense (6) (30,652) (13,081) (30,970) (10,498)
---------- ---------- ---------- ----------
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction of the Company $ 125,484 $ 58,993 $ 143,557 $ 503,335
========== ========== ========== ==========
</TABLE>
See Footnotes
E-1
<PAGE>
<TABLE>
<CAPTION>
Denny's Denny's Wendy's Wendy's
Hillsboro, TX (7)(12) McKinney, TX (12) Camarillo, CA (7)(9) Sevierville, TN(7)(9)
--------------------- ----------------- -------------------- ---------------------
<S> <C>
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction:
Base Rent (1) $ 114,346 $ 104,013 $ 124,655 $ 60,735
Interest Income (2) - - - -
---------- ---------- ---------- ---------
Total Revenues 114,346 104,013 124,655 60,735
---------- ---------- ---------- ----------
Asset Management Fees (3) (6,319) (5,874) (7,224) (2,956)
Mortgage Management Fee (4) - - - -
General and Administrative
Expenses (5) (7,089) (6,449) (7,729) (3,766)
---------- ---------- ---------- ----------
Total Operating Expenses (13,408) (12,323) (14,953) (6,722)
---------- ---------- ---------- ----------
Estimated Cash Available from
Operations 100,938 91,690 109,702 54,013
Depreciation and Amortization
Expense (6) (19,022) (16,066) (17,220) (13,308)
---------- ---------- ---------- ----------
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction of the Company $ 81,916 $ 75,624 $ 92,482 $ 40,705
========== ========== ========== ==========
</TABLE>
See Footnotes
E-2
<PAGE>
<TABLE>
<CAPTION>
Boston Market Boston Market Jack in the Box Boston Market
Ellisville, MO (7)(10) Golden Valley, MN (7)(10) Humble #1, TX (7)(11) Corvallis, OR (7)
---------------------- ------------------------- --------------------- -----------------
<S> <C>
Pro Forma Estimate
of Taxable
Income Before Dividends
Paid Deduction:
Base Rent (1) $ 102,675 $ 112,890 $ 100,061 $ 95,085
Interest Income (2) - - - -
---------- ---------- ---------- ----------
Total Revenues 102,675 112,890 100,061 95,085
---------- ---------- ---------- ----------
Asset Management Fees (3) (5,864) (6,448) (5,603) (5,440)
Mortgage Management Fee (4) - - - -
General and Administrative
Expenses (5) (6,366) (6,999) (6,204) (5,895)
---------- ---------- ---------- ----------
Total Operating Expenses (12,230) (13,447) (11,807) (11,335)
---------- ---------- ---------- ----------
Estimated Cash Available from
Operations 90,445 99,443 88,254 83,750
Depreciation and Amortization
Expense (6) (16,272) (13,561) (15,646) (16,006)
---------- ---------- ---------- ----------
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction of the Company $ 74,173 $ 85,882 $ 72,608 $ 67,744
========== ========== ========== ==========
</TABLE>
See Footnotes
E-3
<PAGE>
<TABLE>
<CAPTION>
Jack in the Box Arby's Boston Market
Houston #1, TX (7)(11) Kendallville, IN (13) Rockwall, TX (7)
---------------------- --------------------- ----------------
<S> <C>
Pro Forma Estimate
of Taxable
Income Before Dividends
Paid Deduction:
Base Rent (1) $ 95,757 $ 75,812 $ 79,356
Interest Income (2) - - -
---------- ----------- ----------
Total Revenues 95,757 75,812 79,356
---------- ----------- ----------
Asset Management Fees (3) (5,362) (4,430) (4,551)
Mortgage Management Fee (4) - - -
General and Administrative
Expenses (5) (5,937) (4,700) (4,920)
---------- ----------- ----------
Total Operating Expenses (11,299) (9,130) (9,471)
---------- ----------- ----------
Estimated Cash Available from
Operations 84,458 66,682 69,885
Depreciation and Amortization
Expense (6) (15,890) (7,794) (10,813)
---------- ----------- ----------
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction of the Company $ 68,568 $ 58,888 $ 59,072
========== =========== ==========
</TABLE>
See Footnotes
E-4
<PAGE>
<TABLE>
<CAPTION>
Boston Market Jack in the Box Applebee's Golden Corral
Upland, CA (7)(14) Houston #2, TX (7)(11) Montclair, CA (7) Brooklyn, OH (8)
------------------ ---------------------- ----------------- ----------------
<S> <C>
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction:
Base Rent (1) $ 101,479 $ 97,618 $ 176,084 $ 142,823
Interest Income (2) - - - -
---------- ---------- ---------- ----------
Total Revenues 101,479 97,618 176,084 142,823
---------- ---------- ---------- ----------
Asset Management Fees (3) (5,819) (5,467) (9,563) (5,921)
Mortgage Management Fee (4) - - - -
General and Administrative
Expenses (5) (6,292) (6,052) (10,917) (8,855)
---------- ---------- ---------- ----------
Total Operating Expenses (12,111) (11,519) (20,480) (14,776)
---------- ---------- ---------- ----------
Estimated Cash Available from
Operations 89,368 86,099 155,604 128,047
Depreciation and Amortization
Expense (6) (11,115) (15,257) (21,142) (26,658)
---------- ---------- ---------- ----------
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction of the Company $ 78,253 $ 70,842 $ 134,462 $ 101,389
========== ========== ========== ==========
</TABLE>
See Footnotes
E-5
<PAGE>
<TABLE>
<CAPTION>
Ryan's Family
Boston Market Boston Market Steak House Arby's
La Quinta, CA (7)(14) Merced, CA (7) Spring Hill, FL (7) Avon, IN (13)
--------------------- ----------------- ------------------- -------------
<S> <C>
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction:
Base Rent (1) $ 98,804 $ 96,704 $ 204,392 $ 81,044
Interest Income (2) - - - -
---------- ---------- ---------- ----------
Total Revenues 98,804 96,704 204,392 81,044
---------- ---------- ---------- ----------
Asset Management Fees (3) (5,660) (5,540) (11,112) (4,738)
Mortgage Management Fee (4) - - - -
General and Administrative
Expenses (5) (6,126) (5,996) (12,672) (5,025)
---------- ---------- ---------- ----------
Total Operating Expenses (11,786) (11,536) (23,784) (9,763)
---------- ---------- ---------- ----------
Estimated Cash Available from
Operations 87,018 85,168 180,608 71,281
Depreciation and Amortization
Expense (6) (12,439) (10,283) (34,952) (12,415)
---------- ---------- ---------- ----------
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction of the Company $ 74,579 $ 74,885 $ 145,656 $ 58,866
========== ========== ========== ==========
</TABLE>
See Footnotes
E-6
<PAGE>
<TABLE>
<CAPTION>
Boston Market Applebee's Burger King
Florissant, MO (7)(10) Salinas, CA (7) Chicago, IL (7)(16)
---------------------- --------------- -------------------
<S> <C>
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction:
Base Rent (1) $ 131,306 $ 145,549 $ 173,489
Interest Income (2) - - -
---------- ---------- ----------
Total Revenues 131,306 145,549 173,489
---------- ---------- ----------
Asset Management Fees (3) (7,523) (7,950) (9,463)
Mortgage Management Fee (4) - - -
General and Administrative
Expenses (5) (8,141) (9,024) (10,756)
---------- ---------- ----------
Total Operating Expenses (15,664) (16,974) (20,219)
---------- ---------- ----------
Estimated Cash Available from
Operations 115,642 128,575 153,270
Depreciation and Amortization
Expense (6) (15,852) (16,617) (19,317)
---------- ---------- ----------
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction of the Company $ 99,790 $ 111,958 $ 133,953
========== ========== ==========
</TABLE>
See Footnotes
E-7
<PAGE>
<TABLE>
<CAPTION>
Wendy's Golden Corral Golden Corral Burger King
San Diego, CA (7) Lufkin, TX (7)(8)(15) Columbia, TN Chattanooga, TN (7)(16)
----------------- --------------------- ------------- -----------------------
<S> <C>
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction:
Base Rent (1) $ 82,267 $ 148,984 $ 147,024 $ 127,536
Interest Income (2) - - - -
---------- ---------- ---------- ---------
Total Revenues 82,267 148,984 147,024 127,536
---------- ---------- ---------- ----------
Asset Management Fees (3) (3,649) (8,191) (7,765) (6,933)
Mortgage Management Fee (4) - - - -
General and Administrative
Expenses (5) (5,101) (9,237) (9,115) (7,907)
---------- ---------- ---------- ----------
Total Operating Expenses (8,750) (17,428) (16,880) (14,840)
---------- ---------- ---------- ----------
Estimated Cash Available from
Operations 73,517 131,556 130,144 112,696
Depreciation and Amortization
Expense (6) (16,430) (25,044) (22,551) (18,107)
---------- ---------- ---------- -----------
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction of the Company $ 57,087 $ 106,512 $ 107,593 $ 94,589
========== ========== ========== ==========
</TABLE>
See Footnotes
E-8
<PAGE>
<TABLE>
<CAPTION>
Two Pizza Hut Golden Corral Golden Corral Boston Market
Properties Eastlake, OH Moberly, MO (7)(8)(15) St. Joseph, MO (10)
------------- ------------ ---------------------- -------------------
<S> <C>
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction:
Base Rent (1) $ 34,760 $ 186,091 $ 128,356 $ 82,437
Interest Income (2) 51,678 - - -
---------- ---------- ---------- ---------
Total Revenues 86,438 186,091 128,356 82,437
---------- ---------- ---------- ----------
Asset Management Fees (3) (1,896) (9,823) (7,033) (4,718)
Mortgage Management Fee (4) (2,904) - - -
General and Administrative
Expenses (5) (5,359) (11,538) (7,958) (5,111)
---------- ---------- ---------- ----------
Total Operating Expenses (10,159) (21,361) (14,991) (9,829)
---------- ---------- ---------- ----------
Estimated Cash Available from
Operations 76,279 164,730 113,365 72,608
Depreciation and Amortization
Expense (6) (1,307) (32,063) (22,117) (15,246)
---------- ---------- ---------- ----------
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction of the Company $ 74,972 $ 132,667 $ 91,248 $ 57,362
========== ========== ========== ==========
</TABLE>
See Footnotes
E-9
<PAGE>
<TABLE>
<CAPTION>
Boston Market Jack in the Box Jack in the Box
Atlanta, GA (7) Dallas, TX (7)(11) Los Angeles, CA (7)(11)
--------------- ------------------ -----------------------
<S> <C>
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction:
Base Rent (1) $ 121,366 $ 85,225 $ 143,272
Interest Income (2) - - -
---------- ---------- ----------
Total Revenues 121,366 85,225 143,272
---------- ---------- ----------
Asset Management Fees (3) (6,954) (4,983) (8,381)
Mortgage Management Fee (4) - - -
General and Administrative
Expenses (5) (7,525) (5,284) (8,883)
---------- ---------- ----------
Total Operating Expenses (14,479) (10,267) (17,264)
---------- ---------- ----------
Estimated Cash Available from
Operations 106,887 74,958 126,008
Depreciation and Amortization
Expense (6) (17,504) (13,004) (14,548)
---------- ---------- ----------
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction of the Company $ 89,383 $ 61,954 $ 111,460
========== ========== ==========
</TABLE>
See Footnotes
E-10
<PAGE>
Jack in the Box
Las Vegas, NV (7)(11) Total
--------------------- -----
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction:
Base Rent (1) $ 127,954 $4,548,853
Interest Income (2) - 467,364
---------- ----------
Total Revenues 127,954 5,016,217
---------- ----------
Asset Management Fees (3) (7,484) (247,346)
Mortgage Management Fee (4) - (26,071)
General and Administrative
Expenses (5) (7,933) (311,005)
---------- ----------
Total Operating Expenses (15,417) (584,422)
---------- ----------
Estimated Cash Available from
Operations 112,537 4,431,795
Depreciation and Amortization
Expense (6) (15,187) (655,954)
---------- ----------
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction of the Company $ 97,350 $3,775,841
========== ==========
- ------------------------------------
FOOTNOTES:
(1) Base rent does not include percentage rents which become due if
specified levels of gross receipts are achieved.
(2) The Company entered into a Master Mortgage Note agreement for
$3,888,000, collateralized by building improvements located on ten of
the Twelve Pizza Hut Properties. The Master Mortgage Note bears
interest at a rate of 10.75% per annum and principal and interest will
be collected in equal monthly installments over 20 years beginning in
July 1996. Amount does not include $19,440 of loan commitment fees and
$19,440 in loan origination fees collected by the Company at closing
from the borrower. In addition, the Company entered into a Master
Mortgage Note agreement for $484,000, collateralized by building
improvements located on two of the Twelve Pizza Hut Properties. The
Master Mortgage Note bears interest at a rate of 10.75% per annum and
principal and interest will be collected in equal monthly installments
over 20 years beginning in February 1997. Amount does not include
$2,420 of loan commitment fees and $2,420 in loan origination fees
collected by the Company at closing from the borrower.
(3) The Properties will be managed pursuant to an advisory agreement
between the Company and CNL Fund Advisors, Inc. (the "Advisor"),
pursuant to which the Advisor will receive monthly asset management
fees in an amount equal to one-twelfth of .60% of the Company's Real
Estate Asset Value as of the end of the preceding month as defined in
such agreement. See "Management Compensation."
(4) For managing the Mortgage Loans, the Advisor will be entitled to
receive a monthly mortgage management fee of one-twelfth of .60% of the
total principal amount of the Mortgage Loans as of the end of the
preceding month. See "Management Compensation."
(5) Estimated at 6.2% of gross rental income and interest income based on
the previous experience of Affiliates of the Advisor with 17 public
limited partnerships which own properties similar to those owned by the
Company. Amount does not include soliciting dealer servicing fee due to
the fact that such fee will not be incurred until December 31 of the
year following the year in which the offering terminates.
E-11
<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. In connection with the Twelve Pizza
Hut Properties, acquisition fees allocated to the Master Mortgage Notes
have been amortized on a straight-line basis over the life of the
agreements (20 years).
(7) The Company accepted an assignment of an interest in the ground lease
relating to the Hamden and Sevierville Properties effective April 24,
1996 and June 5, 1996, respectively, in consideration of its funding of
certain preliminary development costs and its agreement to fund
remaining development. The development agreements for the Properties
which are to be constructed provide that construction must be completed
no later than the dates set forth below:
<TABLE>
<CAPTION>
Property Estimated Final Completion Date Property Estimated Final Completion Date
-------- ------------------------------- -------- -------------------------------
<S> <C>
Hamden Property Opened for business August 26, 1996 La Quinta Property Opened for business December 16, 1996
Knoxville Property Opened for business July 8, 1996 Merced Property Opened for business October 6, 1996
Port Richey Property Opened for business September 30, 1996 Spring Hill Property February 15, 1997
Hillsboro Property August 28, 1997 Florissant Property Opened for business December 29, 1996
Camarillo Property Opened for business July 28, 1996 Salinas Property February 6, 1997
Sevierville Property Opened for business June 13, 1996 Chicago Property March 1, 1997
Ellisville Property Opened for business September 3, 1996 San Diego Property Opened for business December 6, 1996
Golden Valley Property Opened for business September 30, 1996 Lufkin Property Opened for business December 27, 1996
Humble #1 Property Opened for business September 12, 1996 Chattanooga Property April 4, 1997
Corvallis Property Opened for business October 6, 1996 Moberly Property June 15, 1997
Houston #1 Property Opened for business September 25, 1996 Atlanta Property June 15, 1997
Rockwall Property Opened for business October 27, 1996 Dallas Property June 15, 1997
Upland Property Opened for business September 30, 1996 Los Angeles Property July 6, 1997
Houston #2 Property Opened for business July 14, 1996 Las Vegas Property July 6, 1997
Montclair Property Opened for business December 16, 1996
</TABLE>
(8) The Company accepted an assignment of an interest in a ground lease
relating to the Brooklyn Property effective August 23, 1996.
(9) The lessee of the Knoxville, Camarillo, and Sevierville Properties is
the same unaffiliated lessee.
(10) The lessee of the Ellisville, Golden Valley, Florissant and St. Joseph
Properties is the same unaffiliated lessee.
(11) The lessee of the Humble #1, Houston #1, Houston #2, Dallas, Los
Angeles and Las Vegas Properties is the same unaffiliated lessee.
(12) The lessee of the Hillsboro and McKinney Properties is the same
unaffiliated lessee.
(13) The lessee of the Kendallville and Avon Properties is the same
unaffiliated lessee.
(14) The lessee of the Upland and La Quinta Properties is the same
unaffiliated lessee.
(15) The lessee of the Lufkin and Moberly Properties is the same
unaffiliated lessee.
(16) The lessee of the Chicago and Chattanooga Properties is the same
unaffiliated lessee.
E-12
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
Shares of Common Stock
Minimum Purchase -- 250 Shares ($2,500)
100 Shares ($1,000) for IRAs and Keogh and Pension Plans
(Minimum purchase may be higher in certain states)
CNL AMERICAN PROPERTIES FUND, INC. (the "Company") is a Maryland
corporation which intends to qualify and remain qualified for federal income tax
purposes as a real estate investment trust (a "REIT"). The Company may sell up
to 16,500,000 Shares for a maximum of $165,000,000. The Company has been formed
primarily to acquire restaurant properties (the "Properties") located across the
United States to be leased on a long-term, "triple-net" basis to creditworthy
operators of selected national and regional fast-food, family-style, and casual
dining restaurant chains (the "Restaurant Chains"). Under the Company's
triple-net leases, the tenant will be responsible for property costs associated
with ongoing operations, including repairs, maintenance, property taxes,
utilities, and insurance. In addition, the leases will be structured to require
the tenant to pay (i) base annual rent, with automatic increases in the base
rent, and (ii) percentage rent based on certain restaurant sales above a
specified level. The Company may provide financing (the "Mortgage Loans") for
the purchase of buildings, generally by tenants that lease the underlying land
from the Company. To a lesser extent, the Company intends to offer furniture,
fixture and equipment financing ("Secured Equipment Leases") to operators of
Restaurant Chains. Secured Equipment Leases will be funded from the proceeds of
a loan in an amount up to 10% of Gross Proceeds (the "Loan") which the Company
has obtained. The Company is not a mutual fund or other type of investment
company within the meaning of the Investment Company Act of 1940, and is not
subject to regulation thereunder. The Company is not affiliated with the United
States Government.
There are significant risks associated with an investment in the Company (see
"Risk Factors"), including the following:
o Both the number of Properties that the Company will acquire and the
diversification of its investments will be reduced to the extent that the
total proceeds of the offering are less than $165,000,000. As of April 9,
1996, the total offering proceeds were $57,887,405.
o The Company will rely on CNL Fund Advisors, Inc. (the "Advisor") with
respect to all investment decisions subject to approval by the Board of
Directors in certain circumstances. The experience of the Advisor and
Directors of the Company with mortgage financing and equipment leasing is
limited.
o The Advisor and its Affiliates are or will be engaged in other activities
that will result in potential conflicts of interest with the services that
the Advisor will provide to the Company.
o The Company owned, as of April 9, 1996, 48 Properties of the anticipated
total of 140 to 160 Properties, and investors, therefore, will not have the
opportunity to evaluate all the Properties that the Company eventually will
acquire.
o There is currently no public trading market for the Shares, and there is no
assurance that one will develop.
o If the Shares are not listed on a national securities exchange or
over-the-counter market ("Listing") within ten years of commencement of the
offering, as to which there can be no assurance, the Company will commence
orderly sale of its assets and the distribution of the proceeds. Listing
does not assure liquidity.
o Market and economic conditions that the Company cannot control will have an
effect (either positive or negative) on the value of the Company's
investments and the amount of cash that the Company receives from tenants
and lessees.
o Prior to meeting certain conditions, the Company may incur debt, including
debt to make Distributions to stockholders, but will not encumber
Properties.
THE COMPANY'S PRIMARY INVESTMENT OBJECTIVES are to preserve, protect,
and enhance the Company's assets while (i) making Distributions commencing in
the initial year of Company operations; (ii) obtaining fixed income through the
receipt of base rent, and increasing the Company's income (and Distributions)
and providing protection against inflation through automatic increases in base
rent and receipt of percentage rent, and obtaining fixed income through the
receipt of payments from Secured Equipment Leases; (iii) qualifying as a REIT
for federal income tax purposes; and (iv) providing stockholders of the Company
with liquidity of their investment within five to ten years after commencement
of the offering, either in whole or in part, through (a) Listing, or (b) the
commencement of orderly sales of the Company's assets and distribution of the
proceeds thereof (outside the ordinary course of business and consistent with
its objective of qualifying as a REIT). There can be no assurance that these
investment objectives will be met.
This Prospectus describes an investment in Shares of the Company. The
Company will use stockholders' funds to purchase the Properties and make
Mortgage Loans and will borrow money to fund Secured Equipment Leases. No
stockholder may hold more than 9.8% of the total Shares. Of the proceeds from
the sale of Shares, approximately 84% (in the event $150,000,000 or more is
raised) will be used to acquire Properties and make Mortgage Loans, and
approximately 9% will be paid in fees and expenses to Affiliates of the Company
for their services; the balance will be used to pay other expenses of the
offering. The Company has registered an offering of 16,500,000 Shares, with
1,500,000 of such Shares available only to stockholders purchasing Shares in
this initial public offering who receive a copy of this Prospectus and who elect
to participate in the Company's reinvestment plan (the "Reinvestment Plan"). Any
participation in such plan by a person who becomes a stockholder otherwise than
by participating in this offering must be made pursuant to a solicitation under
a separate prospectus. See "Summary of Reinvestment Plan." Prior programs
sponsored by Affiliates of the Company and the Advisor are in limited
partnership form. See "Prior Performance Information."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Price to Selling Proceeds to
Public Commissions(1) Company(2)
- --------------------------------------------------------------------------------
Per Share ................ $ 10.00 $ 0.75 $ 9.25
- --------------------------------------------------------------------------------
Total Minimum ............ $ 1,500,000 $ 112,500 $ 1,387,500
- --------------------------------------------------------------------------------
Total Maximum(3) ......... $165,000,000 $12,375,000 $152,625,000
================================================================================
(footnotes on following page)
April 26, 1996
<PAGE>
(Cover Page Continued From Previous Page)
(1) CNL Securities Corp. (the "Managing Dealer") will receive Selling
Commissions of 7.5% on sales of Shares, subject to reduction in certain
circumstances. The Managing Dealer, which is an Affiliate of the
Company, may engage other broker-dealers that are members of the
National Association of Securities Dealers, Inc. or other entities
exempt from broker-dealer registration (collectively, the "Soliciting
Dealers") to sell Shares and reallow to them commissions of up to 7%
with respect to Shares which they sell. The amounts indicated for
Selling Commissions assume that reduced Selling Commissions are not
paid in connection with the purchase of any Shares and do not include a
0.5% marketing support and due diligence expense reimbursement fee
payable to the Managing Dealer, all or a portion of which may be
reallowed to certain Soliciting Dealers. Such amounts also do not
include a Soliciting Dealer Servicing Fee payable to the Managing
Dealer by the Company (see "Management Compensation"), all or a portion
of which may be reallowed to certain Soliciting Dealers. See "The
Offering -- Plan of Distribution" for a discussion of the circumstances
under which reduced Selling Commissions may be paid and a description
of the marketing support and due diligence expense reimbursement fee
payable to the Managing Dealer.
(2) Before deducting (i) organizational and offering expenses of the
Company estimated to be 3% of gross offering proceeds computed at
$10.00 per Share sold ("Gross Proceeds") on the sale of 15,000,000
Shares and (ii) the marketing support and due diligence expense
reimbursement fee. Organizational and offering expenses exclude Selling
Commissions and the marketing support and due diligence reimbursement
fee. The Advisor will pay all organizational and offering expenses
which exceed 3% of the Gross Proceeds.
(3) Assumes that the Managing Dealer exercises its option to sell an
additional 5,000,000 Shares in the event the offering is
oversubscribed. Also includes 1,500,000 Shares which may be issued
pursuant to the Company's Reinvestment Plan. Those stockholders who
elect to participate in the Reinvestment Plan will have their
Distributions reinvested in additional Shares.
NEITHER THE ATTORNEY GENERAL OF THE STATE OF NEW YORK NOR THE ATTORNEY
GENERAL OF THE STATE OF NEW JERSEY OR THE BUREAU OF SECURITIES OF THE STATE OF
NEW JERSEY HAS PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
-----------------------------------------------------
All subscription funds for Shares will be deposited in an interest-bearing
escrow account with SouthTrust Estate & Trust Company, Inc., which will act as
the escrow agent for this offering. As of June 1, 1995, the Company had received
aggregate subscription proceeds of $1,955,500, which exceeded the minimum
offering amount of $1,500,000, and $1,836,500 of the funds (excluding funds
received from Iowa, Minnesota, New York, Ohio and Pennsylvania investors) were
released from escrow. As of April 9, 1996, the Company had received aggregate
subscription proceeds of $57,887,405 (5,788,741 Shares) from 3,440 stockholders,
including $128,151 (12,815 Shares) issued pursuant to the Reinvestment Plan. The
Company has elected to extend the offering of Shares until a date no later than
March 29, 1997 (two years after the initial date of this Prospectus), in states
that permit such extension.
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THIS OFFERING TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY
STATE IN WHICH SUCH OFFER OR SALE WOULD BE UNLAWFUL, AND NO SUBSCRIPTION WILL BE
ACCEPTED FROM ANY PERSON WHO DOES NOT MEET THE SUITABILITY STANDARDS SET FORTH
HEREIN. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE HEREUNDER SHALL
CREATE, UNDER ANY CIRCUMSTANCES, AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. IF, HOWEVER, ANY MATERIAL
CHANGE OCCURS WHILE THIS PROSPECTUS IS REQUIRED BY LAW TO BE DELIVERED, THIS
PROSPECTUS WILL BE AMENDED OR SUPPLEMENTED ACCORDINGLY.
THE USE OF FORECASTS IN THIS OFFERING IS PROHIBITED. ANY REPRESENTATIONS TO
THE CONTRARY, AND ANY PREDICTIONS, WRITTEN OR ORAL, AS TO THE AMOUNT OR
CERTAINTY OF ANY PRESENT OR FUTURE CASH BENEFIT OR TAX CONSEQUENCE WHICH MAY
FLOW FROM AN INVESTMENT IN THIS COMPANY IS PROHIBITED.
-----------------------------------------------------
-ii-
<PAGE>
TABLE OF CONTENTS
Page
SUMMARY OF THE OFFERING................................................... 1
RISK FACTORS.............................................................. 9
Investment Risks .................................................... 9
Real Estate and Financing Risks ..................................... 12
Tax Risks ........................................................... 15
SUITABILITY STANDARDS AND HOW TO SUBSCRIBE ............................... 17
ESTIMATED USE OF PROCEEDS ................................................ 19
MANAGEMENT COMPENSATION .................................................. 20
CONFLICTS OF INTEREST .................................................... 26
Prior and Future Programs ........................................... 26
Acquisition of Properties ........................................... 26
Sales of Properties ................................................. 27
Joint Investment With An Affiliated Program ......................... 27
Competition for Management Time ..................................... 27
Compensation of the Advisor ......................................... 28
Relationship with Managing Dealer ................................... 28
Legal Representation ................................................ 28
Certain Conflict Resolution Procedures .............................. 28
SUMMARY OF REINVESTMENT PLAN ............................................. 30
REDEMPTION OF SHARES ..................................................... 32
BUSINESS ................................................................. 34
General ............................................................. 34
Property Acquisitions ............................................... 37
Site Selection and Acquisition of Properties ........................ 70
Standards for Investment in Properties .............................. 73
Description of Properties............................................ 74
Description of Property Leases ...................................... 75
Joint Venture Arrangements .......................................... 78
Mortgage Loans....................................................... 79
Management Services ................................................. 80
Borrowing ........................................................... 80
Sale of Properties, Mortgage Loans, and Secured Equipment Leases .... 81
Franchise Regulation ................................................ 82
Competition ......................................................... 82
Regulation of Mortgage Loans and Secured Equipment Leases ........... 82
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
OF THE COMPANY ....................................................... 82
MANAGEMENT................................................................ 87
General ............................................................. 87
Fiduciary Responsibility of the Board of Directors .................. 87
Directors and Executive Officers ..................................... 88
Independent Directors ............................................... 90
Committees of the Board of Directors ................................ 90
Compensation of Directors and Executive Officers .................... 91
Management Compensation ............................................. 91
THE ADVISOR AND THE ADVISORY AGREEMENT ................................... 91
The Advisor ......................................................... 91
The Advisory Agreement .............................................. 91
PRIOR PERFORMANCE INFORMATION ............................................ 94
INVESTMENT OBJECTIVES AND POLICIES ....................................... 98
General ............................................................. 98
Certain Investment Limitations ...................................... 99
DISTRIBUTION POLICY ...................................................... 100
General ............................................................. 100
Distributions ....................................................... 101
-iii-
<PAGE>
Page
SUMMARY OF THE ARTICLES OF INCORPORATION AND BYLAWS ...................... 101
General ............................................................. 101
Description of Capital Stock ........................................ 102
Board of Directors .................................................. 102
Stockholder Meetings ................................................ 103
Advance Notice for Stockholder Nominations for
Directors and Proposals of New Business ........................... 103
Amendments to the Articles of Incorporation ......................... 103
Mergers, Combinations, and Sale of Assets ........................... 103
Termination of the Company and REIT Status .......................... 103
Restriction of Ownership ............................................ 104
Responsibility of Directors ......................................... 105
Limitation of Liability and Indemnification ......................... 105
Removal of Directors ................................................ 106
Inspection of Books and Records ..................................... 106
Restrictions on "Roll-Up" Transactions .............................. 106
FEDERAL INCOME TAX CONSIDERATIONS ........................................ 107
Introduction ........................................................ 107
Taxation of the Company ............................................. 107
Taxation of Stockholders ............................................ 112
State and Local Taxes ............................................... 115
Characterization of Property Leases ................................. 115
Characterization of Secured Equipment Leases ........................ 116
Investment in Joint Ventures ........................................ 116
REPORTS TO STOCKHOLDERS .................................................. 117
THE OFFERING ............................................................. 118
General ............................................................. 118
Plan of Distribution ................................................ 118
Subscription Procedures ............................................. 120
Escrow Arrangements ................................................. 122
ERISA Considerations ................................................ 122
Determination of Offering Price ..................................... 124
SUPPLEMENTAL SALES MATERIAL .............................................. 124
LEGAL OPINIONS ........................................................... 124
EXPERTS 124
ADDITIONAL INFORMATION ................................................... 124
DEFINITIONS .............................................................. 125
Form of Amended Reinvestment Plan .................................. Exhibit A
Financial Information .............................................. Exhibit B
Prior Performance Tables ........................................... Exhibit C
Subscription Agreement ............................................. Exhibit D
Pro Forma Estimate of Taxable Income ............................... Exhibit E
-iv-
<PAGE>
SUMMARY OF THE OFFERING
THIS SECTION SUMMARIZES CERTAIN INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS AND IS INTENDED FOR QUICK REFERENCE ONLY. THIS IS NOT A COMPLETE
DESCRIPTION OF THE INVESTMENT. POTENTIAL STOCKHOLDERS MUST READ AND EVALUATE THE
FULL TEXT OF THIS PROSPECTUS AND ALL SUPPORTING DOCUMENTS ATTACHED AS EXHIBITS
HERETO IN ORDER TO EVALUATE AN INVESTMENT IN THE COMPANY. THE FOLLOWING SUMMARY
THEREFORE IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THIS
PROSPECTUS AND THE SUPPORTING DOCUMENTS.
CNL AMERICAN PROPERTIES FUND, INC.
CNL American Properties Fund, Inc. (the "Company") is a Maryland corporation
which intends to qualify and remain qualified for federal income tax purposes as
a real estate investment trust (a "REIT"). The Company's address is 400 East
South Street, Suite 500, Orlando, Florida 32801, telephone (407) 422-1574 or
toll free (800) 522-3863.
The Company has acquired and intends to continue to acquire restaurant
properties (the "Properties") located across the United States. The Properties
will be leased to creditworthy operators of selected national and regional
restaurant chains, primarily fast-food, family-style, and casual dining chains
(the "Restaurant Chains"). The Company expects to structure its leases of the
Properties to provide for payment of base annual rents with automatic increases
and percentage rents based on gross sales. All leases will be on a long-term
(generally, 15 to 20 years, plus renewal options for an additional 10 to 20
years), "triple-net" basis, which means that the tenant will be responsible for
repairs, maintenance, property taxes, utilities, and insurance. The Company has
provided and intends to continue to provide financing (the "Mortgage Loans") for
the purchase of buildings, generally by tenants that lease the underlying land
from the Company. The Company expects that the economic effects of the Mortgage
Loans will be similar to those of its leases (generally with full repayment in
15 to 20 years). The Company also will offer furniture, fixtures and equipment
("Equipment") financing to operators of Restaurant Chains pursuant to which the
Company will provide, through direct financing leases, the Equipment
(collectively, the "Secured Equipment Leases"). No offering proceeds will be
used for the purpose of funding Secured Equipment Leases. The Company has
obtained a $15,000,000 line of credit (the "Loan") to be used by the Company to
fund Secured Equipment Leases. The Loan provides that the Company will be able
to receive advances under the line of credit until March 4, 1998. Generally,
advances under the Loan will be fully amortizing term loans repayable over
periods of time equal to the duration of the Secured Equipment Leases, but in no
event greater than 72 months. The Company intends to limit advances under the
Loan to 10% of Gross Proceeds of the offering. See "Business" for a description
of the types of Restaurant Chains that may be selected by the Advisor, the
Property selection and acquisition processes, the nature of the Mortgage Loans
and Secured Equipment Leases and a description of the Loan.
Under the Company's Articles of Incorporation, the Company automatically will
terminate and dissolve on December 31, 2005 unless the shares of Common Stock of
the Company, including the shares offered hereby (the "Shares"), are listed on a
national securities exchange or over-the-counter market ("Listing"), in which
event the Company automatically will become a perpetual life entity. If Listing
does not occur within ten years after commencement of the offering, the Company
will undertake, outside the ordinary course of business and consistent with its
objective of qualifying as a REIT, the orderly Sale of the Company's assets, the
distribution of Net Sales Proceeds of such Sales to stockholders and the
limitation of its activities to those related to its orderly liquidation, unless
the stockholders owning a majority of the Shares elect to amend the Articles of
Incorporation to extend the duration of the Company. See "Risk Factors -- Real
Estate and Financing Risks" for a complete discussion of risks relating to
future disposition of the Company's assets. If Listing occurs (which is not
assured), then the Board of Directors may elect to cause the Company to encumber
any or all of the Company's Properties in connection with any borrowing. The
Board of Directors anticipates that such borrowing, in the aggregate, will not
exceed 50% of Real Estate Asset Value, although the maximum amount the Company
may borrow is 300% of Net Assets (an amount which the Company anticipates will
correspond to approximately 75% of Real Estate Asset Value). In general, Net
Assets are the Company's total assets (other than intangibles), calculated at
cost, less total liabilities. As a perpetual life entity following Listing, the
Company would not be required to dissolve and return capital to stockholders. If
Listing occurs, in order to liquidate their investment stockholders would have
to sell their Shares in the market on which the Shares are traded. Listing is no
assurance of liquidity. See "Risk Factors -- Investment Risks" for a discussion
of risks associated with the lack of liquidity of the Shares and with borrowing.
In addition, following Listing the Company intends to reinvest proceeds from
Sales of Properties rather than distribute such proceeds to stockholders.
<PAGE>
RISK FACTORS
The "Risk Factors" section discusses in detail the more important risks
associated with an investment in the Company, including risks associated with an
investment in a real estate investment trust such as the Company, risks
associated with an investment in real estate such as the Properties, risks
associated with the Mortgage Loans, risks associated with Secured Equipment
Leases, and tax risks. These risks include:
o Risks of reduced diversification in the Company's investments if the
Company does not raise $165,000,000 from sales of Shares.
o Risks of reliance on CNL Fund Advisors, Inc. (the "Advisor") and the
Board of Directors, which together will have responsibility for the
management of the Company and its investments, subject to the ability
of the stockholders to elect the Directors.
o Risks relating to the fact that the services to be performed by the
Advisor and its Affiliates for the Company in connection with the
offering, the selection and acquisition of the Properties, the making
of Mortgage Loans, the administration of the Secured Equipment Lease
program and the general operation of the Company will result in
conflicts of interest.
o Risks related to the fact that, because as of April 9, 1996, the
Company owned only 48 Properties of the anticipated total of 140 to
160 Properties, stockholders therefore will not have the opportunity
to evaluate all the Properties that the Company eventually will
acquire.
o Risks that stockholders who must sell their Shares will not be able to
sell them quickly because it is not anticipated that there will be a
public market for the Shares in the near term, and there can be no
assurance that the Listing will occur.
o Market risks associated with investments in real estate, which means
that the amount of cash the Company will receive from tenants, lessees
or borrowers cannot be predicted.
o Risks that the Company, prior to meeting certain conditions, may incur
debt, including debt to make Distributions, but will not encumber
Properties.
o Risks of defaults by tenants, lessees or borrowers resulting in
decreased income.
o Risks relating to the fact that the vote of stockholders owning at
least a majority but less than all of the Shares will bind all of the
stockholders as to matters such as the election of Directors and
amendment of the Company's governing documents.
o Risks that restrictions on ownership of more than 9.8% of the shares
of the Company's Common Stock (the "Common Stock") by any single
stockholder or certain related stockholders may have the effect of
inhibiting a change in control of the Company even if such a change is
in the interest of a majority of the stockholders.
o Risks that the Company may not qualify or remain qualified as a REIT
for federal income tax purposes, which could result in subjecting the
Company to federal income tax on its taxable income at regular
corporate rates and, in turn, thereby reducing the amount of funds
available for paying Distributions to stockholders.
ESTIMATED USE OF PROCEEDS
The Company is using the proceeds of the sale of the Shares to acquire
Properties, to make Mortgage Loans, generally in connection with such
acquisitions, and to pay expenses relating to the organization of the Company
and the sale of the Shares. Management of the Company and the Advisor have
estimated an average purchase price of $800,000 to $900,000 per Property based
on their past experience in acquiring similar properties and in light of current
market conditions, although prices of Properties may be lower or higher. See
"Business -- Property Acquisitions" for a description of the Properties the
Company has acquired and the Mortgage Loan the Company has made as of April 9,
1996. Assuming CNL Securities Corp. (the "Managing Dealer") exercises its option
to increase the offering from 10,000,000 Shares ($100,000,000) to up to
15,000,000 Shares ($150,000,000)
-2-
<PAGE>
and 15,000,000 Shares are sold, the Company will acquire approximately 140 to
160 Properties. In addition, the Company has registered an offering of an
additional 1,500,000 Shares ($15,000,000) available only to stockholders who
receive a copy of this Prospectus and who elect to participate in the Company's
reinvestment plan (the "Reinvestment Plan"). See "Estimated Use of Proceeds" and
"Business -- General" for a more detailed description of the anticipated use of
offering proceeds. Secured Equipment Leases will be funded solely from the
proceeds of the Loan and the number of Secured Equipment Leases will not depend
on the amount raised in the offering.
CONFLICTS OF INTEREST
Certain officers and Directors of the Company who are also officers or
directors of the Advisor will experience conflicts of interest in their
management of the Company. These arise principally from their involvement in
other activities that will conflict with those of the Company and include
matters related to (i) allocation of properties and management time and services
between the Company and various partnerships and other entities, (ii) the timing
and terms of the sale of a Property, (iii) negotiation and funding of Mortgage
Loans, (iv) administration of the Secured Equipment Lease program, (v)
investments with Affiliates of the Advisor, (vi) compensation of the Advisor,
(vii) the Company's relationship with the Managing Dealer, which is an Affiliate
of the Company and the Advisor, and (viii) the fact that the Company's
securities and tax counsel also serves as securities and tax counsel for certain
Affiliates of the Company, and that neither the Company nor the stockholders
will have separate counsel.
The Directors of the Company who are independent of the Advisor (the
"Independent Directors") are responsible for monitoring the activities of the
Advisor and must approve all of the Advisor's actions that involve a potential
conflict other than certain such actions specifically permitted by the Articles
of Incorporation. The "Conflicts of Interest" section discusses in more detail
the more significant of these potential conflicts of interest, as well as the
procedures that have been established to resolve a number of these potential
conflicts.
MANAGEMENT
The Company has retained the Advisor, pursuant to an advisory agreement, to
handle the day-to-day operations of the Company, to select the Company's real
estate investments, and to administer its Secured Equipment Lease program. The
five members of the Board of Directors will oversee the management of the
Company. Three of the Directors of the Company are independent of the Advisor
and have responsibility for reviewing its performance. The Directors are elected
to the Board of Directors annually by the stockholders.
All of the officers and directors of the Advisor also are officers or Directors
of the Company. The Advisor will have responsibility for (i) selecting the
Properties that the Company will acquire, formulating and evaluating the terms
of each proposed acquisition, and arranging for the acquisition of the Property
by the Company, (ii) identifying potential lessees for the Properties and
potential borrowers for the Mortgage Loans, and formulating, evaluating, and
negotiating the terms of each lease of a Property and each Mortgage Loan, and
(iii) locating and identifying potential lessees and formulating, evaluating,
and negotiating the terms of each Secured Equipment Lease. All of the foregoing
actions are subject to approval by the Board of Directors. The Advisor also will
have the authority, subject to approval by a majority of the Board of Directors,
including a majority of the Independent Directors, to select Properties for Sale
in keeping with the Company's investment objectives and based on an analysis of
economic conditions both nationally and in the vicinity of the Property being
considered for Sale.
The Company's Articles of Incorporation provide that, if Listing does not occur
within ten years from the commencement of this offering, the Company will
commence orderly Sales of its assets and distribute the proceeds thereof. In
that case, the Company will engage only in activities related to its orderly
liquidation unless the stockholders elect otherwise.
See "Management" and "The Advisor and the Advisory Agreement" for a description
of the business background of the individuals responsible for the management of
the Company and the Advisor, as well as for a description of the services that
the Advisor will provide.
-3-
<PAGE>
MANAGEMENT COMPENSATION
The Advisor, the Managing Dealer, and other Affiliates of the Advisor will
receive compensation for services they will perform for the Company and also
will receive expense reimbursements from the Company for expenses they pay on
behalf of the Company. See "Management Compensation" for a description of
compensation paid to the Advisor and Affiliates as of December 31, 1995. The
following paragraphs summarize the more significant items of compensation.
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
$11,250,000 if 15,000,000 Shares are sold), and a marketing support and due
diligence expense reimbursement fee of 0.5% (a maximum of $750,000 if 15,000,000
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. In addition,
the Company will incur a Soliciting Dealer Servicing Fee in the amount of .20%
of Invested Capital (as defined below) (a maximum of $300,000 if 15,000,000
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 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. The Company also may
pay the Soliciting Dealer Servicing Fee directly to any Soliciting Dealer exempt
from registration as a broker-dealer and whose clients held Shares on such date.
In general, the stockholders' investment in the Company ("Invested Capital") is
the number of Shares they own, multiplied by $10.00 per Share, reduced by the
portion of all prior Distributions received by stockholders from the Sale of one
or more Properties and by any amounts paid by the Company to repurchase Shares
pursuant to the redemption plan.
For identifying the Properties and structuring the terms of the acquisition and
leases of the Properties, the Advisor will receive Acquisition Fees equal to
4.5% of Gross Proceeds (a maximum of $6,750,000 if 15,000,000 Shares are sold)
from the sale of Shares.
In connection with the acquisition of Properties that have been constructed or
renovated by Affiliates, subject in each case to the approval of a majority of
the Board of Directors including a majority of the Independent Directors, the
Company will incur Development/Construction Management Fees of generally 5% to
10% of the cost of constructing or renovating a Property, payable to Affiliates
of the Company as Acquisition Fees. Such fees will be included in the purchase
price of Properties purchased from developers that are Affiliates of the
Company. See "Business - Site Selection and Acquisition of Properties."
Development/Construction Management Fees, which are based on the number of
Properties purchased from developers that are Affiliates of the Company, the
cost of construction or renovation of such Properties, and the percentage amount
of each development/construction management fee, are not determinable at this
time.
In connection with the acquisition of Properties from affiliated or
unaffiliated developers, subject in each case to the approval of a majority of
the Board of Directors including a majority of the Independent Directors, to
whom Affiliates of the Company have provided construction financing, the Company
will incur Construction Financing Fees, payable to Affiliates of the Company as
Acquisition Fees. Such fees will be in an amount equal to generally 1% to 2% of
the total amount of each loan plus the difference between the Affiliate-lender's
cost of funds and the amount of interest charged to the developer, with such
difference determined by applying an annual percentage rate of generally 1.5% to
3% throughout the duration of the loan to the outstanding amount of the loan.
Such fees will be included in the purchase price of Properties purchased from
developers that receive such loans. See "Business - Site Selection and
Acquisition of Properties." Construction Financing Fees, which are based on the
number of Properties for which Affiliates of the Company provide construction
financing, the amount and duration of such loans, and the amount of each
construction financing fee, are not determinable at this time.
The total of all Acquisition Fees and Acquisition Expenses shall be reasonable
and shall not exceed an amount equal to 6% of the Real Estate Asset Value of a
Property, or in the case of a Mortgage Loan, 6% of the funds advanced, unless a
majority of the Board of Directors, including a majority of the Independent
Directors, not otherwise interested in the transaction approves fees in excess
of these limits subject to a determination that the transaction is commercially
competitive, fair and reasonable to the Company.
-4-
<PAGE>
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) as of the end of the preceding month.
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.
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.
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, excluding
Distributions attributable to proceeds of the Sale of a Property (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. See "The Advisor and The Advisory Agreement -- The Advisory
Agreement."
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.
Payment of certain fees is subject to conditions and restrictions or to change
under certain specified circumstances. The Advisor and its Affiliates also may
receive reimbursement for out-of-pocket expenses that they incur on behalf of
the Company, subject to certain expense limitations, and a subordinated
incentive fee if Listing occurs.
SUMMARY OF REINVESTMENT PLAN
The Company has established the Reinvestment Plan pursuant to which
stockholders may elect to have their cash Distributions from the Company
automatically reinvested in Shares. See "Summary of Reinvestment Plan," "Federal
Income Tax Considerations -- Taxation of Stockholders," and the form of
Reinvestment Plan accompanying this Prospectus as Exhibit A for more specific
information about the Reinvestment Plan. Expenses incurred in connection with
the Reinvestment Plan, including Selling Commissions and marketing support and
due diligence expense reimbursement fees, will be paid by the Company. A person
who becomes a stockholder otherwise than by participating in this offering may
purchase Shares through the Reinvestment Plan only after receipt of a separate
prospectus relating solely to the Reinvestment Plan.
BUSINESS (PURCHASE AND SALE OF PROPERTIES AND OFFERING OF MORTGAGE LOANS AND
SECURED EQUIPMENT LEASES)
Properties and Mortgage Loans. The types of Properties which the Company
intends to purchase and lease to third parties, as well as a description of the
Properties acquired by the Company as of April 9, 1996, appears in the section
entitled "Business." It is expected that the Company will invest in Properties
of selected national and regional restaurant chains, primarily fast-food,
family-style, and casual dining chains, the most rapidly growing segments of the
restaurant industry in recent years. Management intends to structure the
Company's investments to allow it to participate, to the maximum extent
possible, in any sales growth in these industry segments, as reflected in the
Properties that it owns. The Properties, which typically are or will be
freestanding and will be located across the United States, are or will be leased
on a "triple-net" basis to creditworthy operators of the Restaurant Chains to be
selected by the Advisor and approved by the Board of Directors. The Properties
may consist of both land and building, the land underlying the building with the
building owned by the tenant or a third party, or the building only with the
land owned by a third party. The Properties have been or will be purchased for
cash and will not be encumbered by any liens. If Listing occurs, however, the
Board of Directors may elect
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to cause the Company to borrow funds in connection with the purchase of
additional Properties or for other Company purposes and to encumber any or all
of the Company's Properties in connection with any such borrowing. The Board of
Directors anticipates that, in the aggregate, borrowing will not exceed 50% of
Real Estate Asset Value, although the maximum amount of borrowing, in the
absence of a satisfactory showing that a higher level of borrowing is
appropriate (as determined by a majority of the Independent Directors), shall
not exceed 300% of Net Assets (an amount which the Company anticipates will
correspond to approximately 75% of Real Estate Asset Value). Management expects
to acquire Properties in part with a view to diversification among Restaurant
Chains and the geographic location of the Properties. The Company estimates that
it will acquire at least 140 to 160 Properties if the maximum of 15,000,000
Shares is sold, based on an estimated average purchase price of $800,000 to
$900,000 per Property.
To a lesser extent the Company will offer Mortgage Loans to finance the
purchase of buildings by operators of Restaurant Chains. In general, the Company
intends to offer Mortgage Loans in circumstances in which the Company owns the
land underlying the building to be financed and the borrower under the Mortgage
Loan also enters into a long-term ground lease for the underlying land.
Management believes that this combined leasing and financing structure provides
the benefit of allowing the Company to receive the return of its initial
investment plus interest on each financed building, which is generally a
depreciating asset, while retaining the ownership of the underlying land, which
is generally an appreciating asset. However, none of the prior programs
organized by Affiliates of the Company has offered Mortgage Loans and the
experience of the Advisor and Directors of the Company with mortgage financing
is limited. See "Risk Factors - Investment Risks - Risks Associated With
Mortgage Loans."
As of April 9, 1996, the Company owned 48 Properties (including 21 Properties
which consist of land and building, one Property through a joint venture
arrangement which consists of land and building, three Properties which consist
of a building only, and 23 Properties which consist of land only). In addition,
the Company had initial commitments to acquire 12 Properties (including one
Property which is land and building, one Property which is building only, and 10
Properties which are land only). The acquisition of each of these Properties is
subject to the fulfillment of certain conditions. Although the Company believes
that there is a reasonable probability that the Company will acquire these
Properties, there can be no assurance that these conditions will be satisfied or
that the Company will purchase one or more of these Properties. The Company has
undertaken to supplement this Prospectus during the offering period to describe
the acquisition of Properties at such time as the Company believes that a
reasonable probability exists that a Property will be acquired by the Company.
Based upon the experience of management of the Company and the Advisor and the
proposed acquisition methods, a reasonable probability that the Company will
acquire a Property normally will occur as of the date on which (i) a commitment
letter is executed by a proposed lessee, (ii) a satisfactory credit underwriting
for the proposed lessee has been completed, and (iii) a satisfactory site
inspection has been completed. See "Business -- General."
In connection with the acquisition of the 23 Properties which are land only,
the Company has made a single Mortgage Loan secured by the buildings and other
improvements on such Properties.
In connection with the initial commitments with the ten Properties consisting
of land only, the Company anticipates providing mortgage financing to the tenant
which will be collateralized by the building improvements. If the Mortgage Loan
is executed, it is expected to be executed under substantially the same terms
described in "Business - Mortgage Loans."
Secured Equipment Leases. The Secured Equipment Leases will be funded solely
from the proceeds of the Loan. The Company expects that the Secured Equipment
Leases will be structured so that they will be treated as loans secured by
personal property for federal income tax purposes. The Company has neither
identified any prospective operators of Restaurant Chains that will participate
in such financing arrangements nor negotiated any specific terms of a Secured
Equipment Lease. See "Business -- General."
The Company has established certain conflict resolution procedures relating to
(i) transactions between the Company and the Advisor or its Affiliates, (ii)
certain future offerings, and (iii) allocation of restaurant properties and
Secured Equipment Leases among certain affiliated entities. See "Conflicts of
Interest -- Certain Conflict Resolution Procedures."
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For the first five to ten years after commencement of this offering, the
Company intends to reinvest in additional Properties and Mortgage Loans any
proceeds of the Sale of a Property or Mortgage Loan that are not
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required to be distributed to stockholders in order to preserve the Company's
status as a REIT for federal income tax purposes. The proceeds from the Sale of
Secured Equipment Leases will be used to fund additional Secured Equipment
Leases, or to reduce the Company's outstanding indebtedness on the Loan. At or
prior to the end of the ten-year period, the Company intends to provide
stockholders of the Company with liquidity of their investment, either in whole
or in part, through Listing (although there is no assurance of such liquidity),
or by commencing orderly Sales of the Company's assets. If Listing occurs, the
Company intends to reinvest in additional Properties, Mortgage Loans, and
Secured Equipment Leases any Net Sales Proceeds not required to be distributed
to stockholders in order to preserve the Company's status as a REIT. See
"Business -- General" and "Business -- Sale of Properties, Mortgage Loans, and
Secured Equipment Leases."
INVESTMENT OBJECTIVES AND POLICIES
The Company's primary investment objectives are:
o to preserve, protect, and enhance the Company's assets.
o to make Distributions commencing in the initial year of Company
operations.
o to obtain fixed income through the receipt of base rent, as well as to
increase the Company's income (and Distributions) and provide
protection against inflation through automatic increases in base rent
and receipt of percentage rent, and to obtain fixed income through the
receipt of payments on Secured Equipment Leases.
o to qualify and remain qualified as a REIT for federal income tax
purposes.
o to provide stockholders of the Company with liquidity of their
investment within five to ten years after commencement of the
offering, although liquidity cannot be assured thereby, either through
(i) Listing or (ii) outside the ordinary course of business and
consistent with its objective of qualifying as a REIT, the
commencement of orderly Sales of the Company's assets and distribution
of the proceeds thereof.
The Company intends to meet these objectives by following certain investment
policies discussed herein, as summarized on the preceding pages. See "Business
- -- General," "Business -- Site Selection and Acquisition of Properties,"
"Business -- Description of Leases," and "Investment Objectives and Policies"
for a more complete description of the manner in which the structure of the
Company's business will facilitate the Company's ability to meet its investment
objectives. There can be no assurance that these objectives will be met. The
Company's investment objectives are subject to review by the Independent
Directors and may not be changed without the approval of stockholders owning a
majority of the shares of outstanding Common Stock.
DESCRIPTION OF SHARES
A stockholder's investment will be recorded on the books of the Company. The
Company will provide, upon the request of any stockholder wishing to transfer
his or her Shares, a transfer form to be completed and executed by the
stockholder and returned to the Company. The Company will not issue share
certificates.
After the termination of the offering, any stockholder may request that the
Company redeem for cash all or a significant portion of such stockholder's
Shares. The sole source of funds for any such requested redemption will be the
net proceeds available from the sale of Shares pursuant to the Reinvestment
Plan. There can be no assurance that such net proceeds will be sufficient to
permit the Company to redeem all such Shares presented for redemption. See
"Redemption of Shares."
An annual meeting of stockholders will be held each year for the election of
the Directors. Other business matters may be presented at the annual meeting or
at special stockholder meetings. Each Share is entitled to one vote on each
matter to be voted on by stockholders, including the election of the Directors.
Stockholders who do not vote with the majority of Shares entitled to vote on
questions presented nonetheless will be bound by the majority vote.
Stockholder approval is required under Maryland law and the Company's Articles
of Incorporation and Bylaws for certain types of transactions. Generally, the
Articles of Incorporation and Bylaws may be amended upon
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a majority vote of stockholders. Stockholders holding a majority of the Shares
must approve a merger or a sale or other disposition of substantially all of the
Company's assets other than in the ordinary course of business. Stockholders
objecting to the terms of a merger, sale, or other disposition of substantially
all of the Company's assets have the right to petition a court for the appraisal
and payment of the fair value of their Shares in certain instances. The
affirmative vote of a majority of the Shares outstanding and entitled to vote is
required to approve the voluntary dissolution of the Company.
In order to facilitate compliance with certain restrictions imposed on REITs by
the Internal Revenue Code of 1986, as amended (the "Code"), the Articles of
Incorporation generally restrict direct or indirect ownership (applying certain
attribution rules) of more than 9.8% of the outstanding shares of Common Stock
by one Person, as defined in the Articles of Incorporation. See "Summary of the
Articles of Incorporation and Bylaws -- Restriction on Ownership."
For a more complete description of the Shares and the capital structure of the
Company, please refer to the "Summary of the Articles of Incorporation and
Bylaws -- Description of Capital Stock" section of the Prospectus.
DISTRIBUTION POLICY
Consistent with the Company's objective of qualifying as a REIT, the Company
expects to calculate and declare Distributions monthly during the offering
period, and quarterly thereafter, and make Distributions quarterly.
Distributions were expected to commence not later than the close of the first
full calendar quarter after the first release of funds from escrow to the
Company, and in fact the Company declared Distributions in June 1995, and paid
such Distributions in July 1995. For the year ended December 31, 1995, the
Company declared and paid Distributions totalling $638,618. The Board of
Directors, in its discretion, will determine the amount of the Distributions
made by the Company, which amount will depend primarily on net cash from
operations. The Company intends to increase Distributions in accordance with
increases in net cash from operations. Consistent with the Company's objective
of qualifying as a REIT, the Company expects to distribute at least 95% of its
real estate investment trust taxable income, although the Board of Directors, in
its discretion, may increase that percentage as it deems appropriate. If the
cash available to the Company is insufficient to make Distributions, the Company
may obtain the needed cash by borrowing funds, issuing new securities, or
selling assets. These methods of obtaining cash could affect future
Distributions by increasing operating costs or reducing income. In such an
event, it is possible that the Company could pay Distributions in excess of its
earnings and profits and, accordingly, that such Distributions could constitute
a return of capital for federal income tax purposes, although such Distributions
would not reduce stockholders' aggregate Invested Capital. For the year ended
December 31, 1995, 59.82% of the Distributions declared and paid were
characterized as ordinary income and 40.18% as return of capital for federal
income tax basis. Due to the fact that the Company had not acquired all of its
Properties and was still in its offering period as of December 31, 1995, the
characterization of Distributions for federal income tax purposes is not
considered by management to be necessarily representative of the
characterization of Distributions in future years.
PRIOR PERFORMANCE OF AFFILIATES
The "Prior Performance Information" section of this Prospectus contains a
narrative discussion of the public and private real estate limited partnerships
sponsored by Affiliates of the Company and of the Advisor during the past ten
years, including 17 public limited partnerships formed to invest in restaurants
leased on a "triple-net" basis to operators of national and regional fast-food
and family-style restaurant chains. As of December 31, 1995, these partnerships,
which purchase properties similar to those to be acquired by the Company, had
purchased 628 fast-food and family-style restaurant properties. Based on an
analysis of the operating results of the 79 real estate limited partnerships in
which principals of the Company have served, individually or with others, as
general partners, the Company believes that each of such partnerships has met,
or currently is in the process of meeting, its principal investment objectives.
Certain statistical data relating to the public limited partnerships with
investment objectives similar to those of the Company are contained in Exhibit
C--Prior Performance Tables.
TAX STATUS OF THE COMPANY
The Company has made the election under Section 856(c) of the Internal Revenue
Code of 1986, as amended (the "Code"), to be taxed as a REIT under the Code
beginning with its taxable year ending December 31, 1995. As a REIT for federal
income tax purposes, the Company generally will not be subject to federal income
tax on income that it distributes to its stockholders. Under the Code, REITs are
subject to numerous organizational
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and operational requirements, including a requirement that they distribute at
least 95% of their taxable income, as figured on an annual basis. If the Company
fails to qualify for taxation as a REIT in any taxable year, it will be subject
to federal income tax (including any applicable alternative minimum tax) on its
taxable income at regular corporate rates and will not be permitted to qualify
for treatment as a REIT for federal income tax purposes for four years following
the year during which qualification is lost. See "Risk Factors -- Tax Risks" and
"Federal Income Tax Considerations." Even if the Company qualifies as a REIT for
federal income tax purposes, it may be subject to certain federal, state, and
local taxes on its income and property and to federal income and excise taxes on
its undistributed income. See "Federal Income Tax Considerations."
THE OFFERING
A maximum of 10,000,000 Shares ($100,000,000) in the Company are being offered
at a price of $10.00 per Share. If the Managing Dealer exercises its option (in
the event the offering is oversubscribed) to sell an additional 5,000,000
Shares, a maximum of 15,000,000 ($150,000,000) Shares in the Company will be
offered at a price of $10.00 per Share. The Company also has registered an
offering of an additional 1,500,000 Shares ($15,000,000) that are available only
to stockholders who receive a copy of this Prospectus and elect to participate
in the Reinvestment Plan. Any participation in such plan subsequent to this
offering must be made pursuant to solicitation under a separate prospectus. See
"Summary of Reinvestment Plan."
The Shares are being offered by the Managing Dealer and other broker-dealers
that are members of the National Association of Securities Dealers, Inc. or
exempt from broker-dealer registration (the "Soliciting Dealers") on a "best
efforts" basis, which means that no one is guaranteeing that any minimum number
of Shares will be sold. Both the Company and the Advisor are Affiliates of the
Managing Dealer. See "The Offering -- Plan of Distribution."
All subscription funds for Shares of the Company will be deposited in an
interest-bearing escrow account with SouthTrust Estate & Trust Company, Inc. See
"The Offering" for a description of the current status of the offering.
A minimum investment of 250 Shares ($2,500) is required. IRAs, Keogh plans, and
pension plans must make a minimum investment of at least 100 Shares ($1,000),
except for Iowa tax-exempt stockholders who must make a minimum investment of
250 Shares ($2,500). For Minnesota stockholders only, IRAs and qualified plans
must make a minimum investment of 200 Shares ($2,000). In addition, Nebraska,
New York, and North Carolina stockholders must make a minimum investment of 500
Shares ($5,000). Following an initial subscription for at least the required
minimum investment, any stockholder may make additional purchases in increments
of one Share. Maine stockholders, however, may not purchase additional Shares in
amounts less than the applicable minimum investment except with respect to
Shares purchased pursuant to the Reinvestment Plan. See "The Offering --
General," "The Offering -- Subscription Procedures," and "Summary of
Reinvestment Plan."
DEFINITIONS
This Prospectus includes simplified terms and definitions to make the
Prospectus easier to understand. These simplified terms and definitions do not
include all of the details of the terms, however, and stockholders therefore
should review the "Definitions" section for a more complete understanding.
RISK FACTORS
The purchase of Shares involves significant risks and therefore is suitable
only for persons who understand the possible consequences of an investment in
the Company and who are able to bear the risk of loss of their investment.
Prospective stockholders should consider the following risks in addition to
other information describing an investment in the Shares set forth elsewhere in
this Prospectus.
INVESTMENT RISKS
Possible Lack of Diversification. There can be no assurance that the Company
will sell the maximum number of Shares. The potential profitability of the
Company and its ability to diversify its investments, both geographically and by
type of restaurant Properties purchased, will be limited by the amount of funds
at its disposal.
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Risks of Reliance on Management. Stockholders will be relying entirely on the
management ability of the Advisor and on the oversight of the Board of
Directors. Stockholders have no right or power to take part in the management of
the Company, except through the exercise of their stockholder voting rights.
Thus, no prospective stockholder should purchase any of the Shares offered
hereby unless the prospective stockholder is willing to entrust all aspects of
the management of the Company to the Advisor and the Board of Directors. None of
the prior programs organized by Affiliates of the Company has offered Mortgage
Loans or Secured Equipment Leases. See "Management" for a discussion of the
experience of the directors of the Advisor and the Directors of the Company in
real estate investments and Equipment financing. Also see "Conflicts of
Interests" for a discussion of the potential for realization by the Advisor and
its Affiliates of substantial commissions, fees, compensation, and other income
and for a discussion of various other conflicts of interest.
Risks of Reliance on Advisor. The Advisor, with approval from the Board of
Directors, will be responsible for the daily management of the Company,
including all acquisitions, dispositions, and financings. The Advisor may be
terminated by the Board of Directors, with or without cause, but only subject to
payment and release from all guarantees and other obligations incurred in
connection with its role as Advisor. See "Management Compensation."
Risk Associated with Leverage. Other than the Loan or to preserve its status as
a REIT, the Company does not intend to borrow money and until Listing occurs,
the Company will not encumber Properties in connection with any borrowing. At
all times, the maximum amount the Company may borrow is 300% of the Company's
Net Assets, although the Board of Directors anticipates that the aggregate
amount of any borrowing by the Company will not exceed 50% of Real Estate Asset
Value. The use of borrowing may present an element of risk in the event that the
cash flow from lease payments on its Properties and payments on Secured
Equipment Leases are insufficient to meet its debt obligations. In addition,
lenders to the Company may seek to impose restrictions on future borrowings,
Distributions and operating policies of the Company.
Conflicts of Interest. As discussed in detail in "Conflicts of Interest," the
Company will be subject to conflicts of interest arising out of its relationship
to the Advisor and its Affiliates. Such conflicts include matters related to (i)
allocation of Properties and management time and services between the Company
and various partnerships and other entities as to each of which the officers and
directors of the Advisor and certain Directors and officers of the Company have
management responsibilities, (ii) the timing and terms of the sale of a
Property, (iii) negotiation and funding of Mortgage Loans, (iv) negotiation and
funding of Secured Equipment Leases, (v) investments with Affiliates of the
Advisor, (vi) compensation to the Advisor, (vii) the Company's relationship with
the Managing Dealer (which is an Affiliate of the Company and the Advisor), and
(viii) the fact that the Company's securities and tax counsel also serves as
securities and tax counsel for certain Affiliates of the Company and that
neither the Company nor the stockholders will have separate counsel. See
"Conflicts of Interest."
Lack of Liquidity of Shares. Stockholders may not be able to sell their Shares
promptly at a desired price; therefore, the Shares should be considered as a
long-term investment only. Currently there is no public market for the Shares.
The Board of Directors, with or without the consent of the stockholders, may
apply for Listing if the Board of Directors (including a majority of Independent
Directors) determines Listing to be in the best interests of the stockholders.
There can be no assurance, however, that the Company will apply for Listing,
that any such application will be made before the passage of a significant
period of time, that any application will be accepted or, even if accepted, that
a public trading market will develop. In any event, the Articles of
Incorporation provide that the Company will not apply for Listing before the
completion or termination of the offering. In the event Listing occurs, Shares
may be sold only through the national securities exchange or the
over-the-counter market on which the Shares are listed.
Risks Associated With Management of Joint Ventures. The Independent Directors
of the Company must approve all Joint Venture or general partnership
arrangements to which the Company is a party. Subject to such approval, the
Company may enter into a Joint Venture with an unaffiliated party to purchase a
Property, and the Joint Venture or general partnership agreement relating to
that Joint Venture or partnership may provide that the Company will share
management control of the Joint Venture with the unaffiliated party. In the
event the Joint Venture or general partnership agreement provides that the
Company will have sole management control of the Joint Venture, such agreement
may be ineffective as to a third party who has no notice of the agreement, and
the Company therefore may be unable to control fully the activities of such
Joint Venture. In the event that the Company enters into a Joint Venture with
another program sponsored by an Affiliate, it is anticipated that the Company
will not have sole management control of the Joint Venture.
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Lack of Control of Property Management. The Company uses "triple-net" leases
and, therefore, day-to-day management of the Properties will be the
responsibility of the tenants of the Properties. In general, the Company intends
to enter into leasing agreements only with tenants having substantial prior
experience in the restaurant industry, but there can be no assurance that the
Company will be able to make such arrangements because, as of April 9, 1996, the
Company had purchased only 48 Properties.
Risks Associated With Mortgage Loans. None of the prior programs organized by
Affiliates of the Company has offered Mortgage Loans and the experience of the
Advisor and Directors of the Company with mortgage financing is limited. In the
event that a borrower defaults on a Mortgage Loan, the Company may not be able
to sell the real property which it holds as security for the Mortgage Loan at a
price that would enable the Company to recover the balance of the Mortgage Loan.
The Mortgage Loans may also be subject to regulation by federal, state and local
authorities and subject to various laws and judicial and administrative
decisions. The Company may determine not to make Mortgage Loans in any
jurisdiction in which it believes the Company has not complied in all material
respects with applicable requirements.
Risks Associated With Secured Equipment Leases. None of the prior programs
organized by Affiliates of the Company has offered Secured Equipment Leases and
the experience of the Advisor and Directors of the Company with Equipment
leasing is limited. In the event that a lessee defaults on a Secured Equipment
Lease, the Company may not be able to sell the subject Equipment at a price that
would enable the Company to recover its costs associated with such Equipment.
The Secured Equipment Lease program may also be subject to regulation by
federal, state and local authorities and subject to various laws and judicial
and administrative decisions. The Company may determine not to operate the
Secured Equipment Lease program in any jurisdiction in which it believes the
Company has not complied in all material respects with applicable requirements.
In addition, there are certain federal income tax risks associated with the
Secured Equipment Lease program. See " -- Tax Risks."
Binding Nature of Majority Stockholder Vote. Stockholders may take certain
actions, including approving most amendments to the Articles of Incorporation
and Bylaws, by a vote of a majority of the Shares outstanding and entitled to
vote. Certain provisions designed to preserve the Company's status as a REIT
cannot be amended without a "supermajority" vote of two-thirds of the Shares
entitled to vote. All actions taken, if approved by the holders of the requisite
number of Shares, would be binding on all stockholders. Certain of these
provisions may discourage or make it more difficult for another party to acquire
control of the Company or to effect a change in the operation of the Company.
The Board of Directors has the power to cause the issuance of additional Shares
without obtaining stockholder approval.
If Listing occurs, the business of the Company may continue indefinitely
without any specific time limitation by which the Company must distribute Net
Sales Proceeds to the stockholders. In that case, the stockholders would be
dependent upon the sale of their Shares for the return of their investment in
the Company. There can be no assurance that the price a stockholder would
receive in a sale on an exchange or in the over-the-counter market will be
representative of the value of the assets owned by the Company or that it will
equal or exceed the amount a stockholder paid for the Shares.
Under certain circumstances, the Company may prevent the ownership, transfer,
and/or accumulation of Shares in order to protect the status of the Company as a
REIT or, as otherwise deemed by the Board of Directors, to be in the best
interests of the stockholders. See "Summary of the Articles of Incorporation and
Bylaws -- Restriction of Ownership."
Restrictions on Transfer Relating to REIT Status. The Articles of Incorporation
generally restrict direct or indirect ownership (applying certain attribution
rules) of more than 9.8% of the outstanding Common Stock or 9.8% of any series
of outstanding Preferred Stock by one Person (as defined in the Articles of
Incorporation). See "Summary of the Articles of Incorporation and Bylaws --
Restriction of Ownership."
Limited Liability of Officers and Directors. The Articles of Incorporation and
Bylaws provide that an officer or Director's liability to the Company, its
stockholders, or third parties for monetary damages may be limited. Generally,
the Company is obligated under the Articles of Incorporation and the Bylaws to
indemnify its officers and Directors against certain liabilities incurred in
connection with their services in such capacities. The Company has executed
indemnification agreements with each officer and Director which will indemnify
the officer or Director for any such liabilities that he or she incurs. Such
indemnification agreements could limit the legal remedies available to the
Company and the stockholders against the Directors and Officers of the Company.
See "Summary of the Articles of Incorporation and Bylaws -- Limitation of
Director and Officer Liability."
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Risks for Retirement Plan Stockholders. The Company believes that the assets of
the Company will not be deemed, under ERISA, to be "plan assets" of any Plan
that invests in the Shares, although it has not requested an opinion of Counsel
to that effect. If the assets of the Company were deemed to be "plan assets"
under ERISA (i) it is not clear that the exemptions from the "prohibited
transaction" rules under ERISA would be available for the Company's
transactions, and (ii) the prudence standards of ERISA would apply to
investments made by the Company (and might not be met). ERISA makes plan
fiduciaries personally responsible for any losses resulting to the plan from any
breach of fiduciary duty and the Code imposes nondeductible excise taxes on
prohibited transactions.
Risk of Insufficient Working Capital. There can be no assurance that the
Company will have sufficient working capital. As of December 31, 1995, the
Company had stockholders' equity of $31,980,648.
Use of Leverage to Make Distributions. The Company may incur indebtedness if
necessary to satisfy the requirement that the Company distribute at least 95% of
its real estate investment trust taxable income or otherwise, as is necessary or
advisable to assure that the Company maintains its qualification as a REIT for
federal income tax purposes. In such an event, it is possible that the Company
could make Distributions in excess of its earnings and profits and, accordingly,
that such Distributions could constitute a return of capital for federal income
tax purposes, although such Distributions would not reduce stockholders'
aggregate Invested Capital.
REAL ESTATE AND FINANCING RISKS
Risks Related to an Unspecified Property Offering. The Company has established
certain criteria for evaluating Restaurant Chains, particular Properties, and
the operators of the Properties proposed for investment by the Company. See
"Business -- Standards for Investment" and "Business -- General" for a
description of these criteria and the types of Properties in which the Company
intends to invest. Because the Company, as of April 9, 1996, had acquired only
48 Properties (see "Business - Property Acquisitions" for a description),
prospective investors have no information to assist them in evaluating the
merits of the additional 92 to 112 Properties expected to be purchased or
developed by the Company. There is no limit on the number of restaurant
Properties of a particular Restaurant Chain which the Company may acquire,
although the Board of Directors currently does not anticipate that the Company
will invest more than 25% of its Gross Proceeds in Properties of any one
Restaurant Chain.
No assurance can be given that the Company will be successful in obtaining
suitable investments on financially attractive terms or that, if investments are
made, the objectives of the Company will be achieved. There also can be no
assurance that all of the Properties will operate profitably or that defaults
will not occur. See "Management" and "Prior Performance Information," however,
for a description of the prior real estate experience of the Affiliates of the
Company and the Advisor.
The Advisor or its Affiliates from time to time expect to acquire land or
restaurant properties on a temporary basis with the intention of subsequently
transferring the properties to one or more of the CNL Group, Inc. ("CNL")
programs, including the Company, although the Company has adopted guidelines to
minimize such conflicts. This practice could represent a risk to the Company and
result in increased potential conflicts of interest among the Company, the
Advisor, its Affiliates and prior or future programs formed by Affiliates of the
Advisor. See "Conflicts of Interest -- Acquisition of Properties."
Possible Delays in Investment. To the extent consistent with the Company's
objective of qualifying as a REIT, the offering proceeds may remain uninvested
for up to the later of two years from the initial date of this Prospectus or one
year after termination of the offering, although it is expected that
substantially all net offering proceeds will be invested prior to the end of
such period. See "Prior Performance Information" for a summary description of
the investment experience of Affiliates and the Advisor in prior CNL programs,
which is not necessarily indicative of the rate at which the proceeds of this
offering will be invested.
An extended offering period, the inability of the Advisor to find suitable
Properties, or the fact that a program formed by Affiliates of the Advisor
subsequent to the commencement of this offering currently is in the process of
acquiring fast-food and family-style restaurant properties to substantially
complete its acquisition program prior to the time that the Company has funds
available to invest in Properties may result in delays in investment of Company
funds in Properties and in the receipt of a return from real property
investments.
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Revenues received by the Company pending investment in Properties or making
Mortgage Loans will be limited to the rates of return available on short-term,
highly liquid investments with appropriate safety of principal. These rates of
return, which affect the amount of cash available to make Distributions to the
stockholders, are expected to be lower than the Company would receive under its
Property leases or Mortgage Loans. Further, to the extent consistent with the
Company's objective of qualifying as a REIT, any funds of the Company required
to be invested in Properties and not so invested or reserved for Company
purposes within the later of two years from the initial date of this Prospectus,
or one year after the termination of the offering, will be distributed pro rata
to the then stockholders of the Company in accordance with the Articles of
Incorporation.
Risks of Acquiring Properties Under Construction. The Company intends to
acquire sites on which a particular restaurant to be owned by the Company is to
be built as well as existing restaurants (including restaurants which require
renovation). To the extent that the Company acquires property on which
improvements are to be constructed or completed or renovations are to be made,
the Company may be subject to certain risks in connection with the developer's
ability to control construction costs, and the timing of completion of
construction, or to build in conformity with plans, specifications, and
timetables. The Company's agreements with the developer will provide certain
safeguards designed to minimize these risks. Further, in the event of a default
by a developer, the Company generally will have the right to require the tenant
to repurchase the Property that is under development at a pre-established price
designed to reimburse the Company for all costs incurred by the Company in
connection with the acquisition and development of the Property. There can be no
assurance, however, that under such circumstances, the tenant will have
sufficient funds to fulfill its obligations. See "Business -- Site Selection and
Acquisition Properties."
Risks of Joint Investment in Properties. In the event that the Company enters
into a Joint Venture with another program formed by Affiliates of the Advisor,
there will be a potential risk of impasse in certain joint venture decisions
since the approval of the Company and of each co-venturer is required for
certain decisions. In any Joint Venture with an affiliated program, however, the
Company will have the right to buy the other co- venturer's interest or to sell
its own interest on specified terms and conditions in the event of an impasse
regarding a Sale. Under such circumstances, it is possible that neither party
will have the funds necessary to consummate the transaction. See "Business --
Joint Venture Arrangements." In addition, the Company may experience difficulty
in locating a third party purchaser for its Joint Venture interest and in
obtaining a favorable sale price for such Joint Venture interest.
Investments in Joint Ventures may involve the risk that the Company's
co-venturer may have economic or business interests or goals which, at a
particular time, are inconsistent with the interests or goals of the Company,
that such co-venturer may be in a position to take action contrary to the
Company's instructions, requests, policies or objectives, or that such
co-venturer may experience financial difficulties. Among other things, actions
by a co-venturer might subject property owned by the Joint Venture to
liabilities in excess of those contemplated by the terms of the joint venture
agreement or to other adverse consequences.
Risks Relating to the Ability of the Company to Liquidate. The Company
intends, to the extent consistent with the its objective of qualifying as a
REIT, to reinvest Net Sales Proceeds from the Sale of Properties, Mortgage
Loans, and Secured Equipment Leases in additional Properties, Mortgage Loans,
and Secured Equipment Leases for the first five to ten years after commencement
of the offering. If Listing occurs, the proceeds from Sales may be reinvested in
other Properties, Mortgage Loans, or Secured Equipment Leases for an indefinite
period of time. Unless Listing occurs within ten years after commencement of the
offering, the Company will undertake, to the extent consistent with the
Company's objective of qualifying as a REIT, the orderly Sale of the Company's
assets, the distribution of the Net Sales Proceeds of such Sales to
stockholders, and will engage only in activities related to its orderly
liquidation unless the stockholders elect otherwise. Neither the Advisor nor the
Board of Directors may be able to control the timing of Sales due to market
conditions, and there can be no assurance that the Company will be able to sell
its assets so as to return stockholders' aggregate Invested Capital, to generate
a profit for the stockholders, or to fully satisfy its obligations under the
Loan. Invested Capital, in the aggregate, will be returned to stockholders upon
disposition of the Properties only if the Properties are sold for more than
their original purchase price, although return of capital, for federal income
tax purposes, is not necessarily limited to stockholder distributions following
Sales of Properties. See "Federal Income Tax Considerations." In the event that
a purchase money obligation is taken in partial payment of the sales price of a
Property, the proceeds of the Sale will be realized over a period of years.
Further, entering into Mortgage Loans with terms of 15 to 20 years and Secured
Equipment Leases with terms of five to seven years may cause any intended
liquidation of the Company to be delayed beyond the time of disposition of the
Properties and until such time as the Mortgage Loans and Secured Equipment
Leases expire or are sold.
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Risks Relating to Tenant Purchase Rights. Certain tenants are expected to have
the right to purchase the Property from the Company, commencing a specified
number of years after the date of the lease, which may lessen the ability of the
Advisor and the Board of Directors to freely control the Sale of the Property.
The leases also generally provide the tenant with a right of first refusal on
any proposed sale provisions. See "Business -- Description of Leases -- Right of
Tenant to Purchase." A tenant will have no obligation to purchase the restaurant
it leases.
Risks of Real Property Investments. The value of leased Properties such as
those to be acquired by the Company, the ability of the tenants to pay rent on a
timely basis, and the amount of the rent, may be adversely affected by certain
changes in general or local economic or market conditions, increased costs of
energy or food products, increased costs and shortages of labor, competitive
factors, fuel shortages, quality of restaurant management, the ability of a
Restaurant Chain to fulfill any obligations to operators of its restaurants,
limited alternative uses for the building, changing consumer habits,
condemnation or uninsured losses, changing demographics, changing traffic
patterns, inability to remodel outmoded restaurants as required by the franchise
or lease agreement, voluntary termination by a tenant of its obligations under a
lease, and other factors. Neither the Company nor the Board of Directors can
control these factors.
Each Property will have a single tenant, and tenants may lease more than one
Property. Events such as the default or financial failure of a tenant therefore
could cause one or more Properties to become vacant under certain circumstances.
Vacancies would reduce the cash receipts of the Company and, at least until the
Company is able to re-lease any such Properties, could decrease their ultimate
resale value. The value of the Company's Properties will depend principally upon
the value of the leases of the Properties. Minor defaults by a tenant may
continue for some time before the Advisor or Board of Directors determines that
it is in the interest of the Company to evict that tenant.
If a Property becomes vacant, the Company may be unable either to re-lease the
Property for the rent due under the prior lease or to re-lease the Property
without incurring additional expenditures relating to the Property. The Company
could experience delays in enforcing its rights against, and collecting rents
(and, under certain circumstances, real estate taxes and insurance costs) due
from, a defaulting tenant.
The Company will not be a party to any franchise agreement between a Restaurant
Chain and a tenant, and such agreement could therefore be modified or canceled
without notice to, or the prior consent of, the Company. In that event, the
tenant could be required to cease its operations at a Property, although the
tenant's obligation to pay rent to the Company would continue. Before operations
at the Property could resume, however, the Company would be required to locate a
new tenant acceptable to a Restaurant Chain.
The inability of tenants to make lease payments or of borrowers to make
Mortgage Loan payments as a result of any of these factors could result in a
decrease in the amount of cash available to make Distributions to the
stockholders.
If the Company, as lessor, incurs any liability which is not fully covered by
insurance, the Company would be liable for such amounts, and returns to the
stockholders could be reduced. See "Business -- Description of Leases -
Insurance, Taxes, Maintenance, and Repairs" for a description of the types of
insurance that the leases of the Properties will require the tenant to obtain.
Risks of Adverse Trends in Restaurant Industry. The Properties in which the
Company intends to invest are expected to be operated by Restaurant Chains
within the fast-food, family-style, or casual dining segments of the restaurant
industry, and the Company does not intend to invest in other segments of the
restaurant industry. The success of the future operations of fast-food,
family-style, and casual dining segments will depend largely on their ability to
adapt to dominant trends in the restaurant industry, including greater
competitive pressures, increased consolidation of the leading fast-food chains,
industry overbuilding, dependence on consumer spending and dining patterns and
changing demographics, the introduction of new concepts and menu items,
availability of labor, levels of food prices, and general economic conditions.
See "Business -- General" for a description of the size and nature of the
restaurant industry and current trends in the industry. The success of a
particular Restaurant Chain concept, the Restaurant Chain's ability to fulfill
any obligations to operators of its restaurants, and trends in the fast-food,
family-style, and casual dining segments of the restaurant industry will affect
the income that the Company derives from restaurants which are part of such
Restaurant Chain.
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Risks Resulting From Competition. The Company will compete with other entities,
including Affiliates, for the acquisition of restaurant sites and completed
restaurants. See "Conflicts of Interest -- Prior and Future Programs." In
addition, the restaurant business is highly competitive, and it is anticipated
that any restaurant Property acquired by the Company will compete with other
restaurants in the vicinity. The extent to which the Company will be entitled to
receive rent, in the form of percentage rent, in excess of the base rent
(including automatic increases in the base rent) for the Properties will depend
in part on the ability of the tenants to compete successfully with other
restaurants in the vicinity. In addition, the Company will compete with other
financing sources for suitable tenants and properties.
Possible Environmental Liabilities. Under various federal and state
environmental laws and regulations, a current or previous owner or operator of
real estate may be required to investigate and clean up certain hazardous or
toxic substances, asbestos-containing materials, or petroleum product releases
at the property, and may be held liable to a governmental entity or to third
parties for property damage and for investigation and cleanup costs incurred by
such parties in connection with the contamination. In addition, some
environmental laws create a lien on the contaminated site in favor of the
government for damages and costs it incurs in connection with the contamination.
The presence of contamination or the failure to remediate contaminations may
adversely affect the owner's ability to sell or lease real estate or to borrow
using the real estate as collateral. The owner or operator of a site may be
liable under common law to third parties for damages and injuries resulting from
environmental contamination emanating from the site.
All of the Properties will be acquired by the Company subject to satisfactory
Phase I environmental assessments or satisfactory Phase II environmental
assessments. A Phase I or Phase II environmental assessment may be determined by
the Board of Directors or the Advisor to be satisfactory if a problem exists and
has not been resolved at the time the Property is acquired provided that the
seller has agreed in writing to indemnify the Company. There can be no
assurance, however, that any seller will be able to pay under an indemnity
obtained by the Company. Further, no assurances can be given that all
environmental liabilities have been identified or that no prior owner, operator
or current occupant has created an environmental condition not known to the
Company. Moreover, no assurances can be given that (i) future laws, ordinances
or regulations will not impose any material environmental liability or (ii) the
current environmental condition of the Properties will not be affected by
tenants and occupants of the Properties, by the condition of land or operations
in the vicinity of the Properties (such as the presence of underground storage
tanks), or by third parties unrelated to the Company.
Risks Relating to Unspecified Secured Equipment Leases. The Company, as of the
date of this Prospectus, has not entered into any arrangements that create a
reasonable probability that the Company will extend a Secured Equipment Lease to
a particular operator, and therefore prospective stockholders have no
information to assist them in evaluating the merits of the Secured Equipment
Lease program or of any Secured Equipment Lease. No assurance can be given that
the Company will be successful in identifying suitable operators or negotiating
Secured Equipment Leases on financially attractive terms or that lessees will
fulfill their obligations under Secured Equipment Leases.
TAX RISKS
Effect of Failure to Qualify as a REIT. The Company intends to operate so as to
qualify and remain qualified as a REIT for federal income tax purposes,
commencing with its taxable year ending December 31, 1995. A qualified REIT
generally is not taxed at the corporate level on income it currently distributes
to its stockholders, so long as it distributes at least 95% of its real estate
investment trust taxable income. See "Federal Income Tax Considerations --
Taxation of the Company." The Company expects to have qualified as a REIT in its
taxable year ended December 31, 1995, but no assurance can be given that it did
so qualify or that it will continue to qualify in the future. In this regard,
based on certain representations and assumptions, the Company has received an
opinion of tax counsel to the Company ("Counsel") to the effect that the Company
qualified as a REIT for the taxable year ended December 31, 1995, that the
Company is organized in conformity with the requirements for qualification as a
REIT, and that the Company's proposed method of operation will enable it to meet
the requirements for qualification as a REIT for federal income tax purposes.
Qualification as a REIT, however, involves the application of highly technical
and complex Code provisions as to which there are only limited judicial and
administrative interpretations. Certain facts and circumstances which may be
wholly or partially beyond the Company's control may affect its ability to
qualify on an ongoing basis as a REIT. In addition, no assurance can be given
that future legislation, new regulations, administrative interpretations or
court decisions will not significantly change the tax laws (or the application
thereof) with respect to qualification as a REIT for federal
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income tax purposes or the federal income tax consequences of such
qualification. The opinion of Counsel is not binding on the Internal Revenue
Service ("IRS") or the courts.
Risks Relating to the Secured Equipment Leases. In order to qualify as a REIT
for federal income tax purposes, not more than 25% of the Company's total assets
may be represented by personal property, or loans secured by personal property
on certain testing dates. In addition, loans secured by personal property made
to each borrower must represent less than 5% of the Company's total assets on
such testing dates. Counsel is of the opinion, based on certain assumptions,
that the Secured Equipment Leases will be treated as loans secured by personal
property for federal income tax purposes. The Company believes that the value of
the Secured Equipment Leases together with any personal property owned by the
Company, will in the aggregate represent less than 25% of the Company's total
assets and that the value of the Secured Equipment Leases entered into with any
particular lessee will represent less than 5% of the Company's total assets.
Counsel has relied on the representations of the Company regarding such values
in rendering its opinion as to the qualification of the Company as a REIT. If
the Company fails to satisfy the 25% test or the 5% test either at the time of
the offering or on any subsequent testing date, the Company will fail to qualify
(or cease to qualify, as the case may be) as a REIT for federal income tax
purposes. In addition, if, contrary to the opinion of Counsel, the Secured
Equipment Leases are not treated as loans, but are instead treated as leases for
federal income tax purposes, income from the Secured Equipment Leases will
generally not satisfy either the 95% or the 75% gross income tests for REIT
qualification. See "Federal Income Tax Considerations -- Taxation of the
Company,"and "-- Characterization of the Secured Equipment Leases."
Effect of REIT Disqualification. If, in any taxable year, the Company were to
fail to qualify as a REIT for federal income tax purposes, it would not be
allowed a deduction for dividends to stockholders in computing taxable income
and would be subject to federal income tax (including any applicable alternative
minimum tax) on its taxable income at regular corporate rates. In addition,
unless entitled to relief under certain statutory provisions, the Company would
be disqualified from treatment as a REIT for federal income tax purposes for the
four taxable years following the year during which REIT qualification is lost.
The additional tax liability resulting from the failure to so qualify would
significantly reduce the amount of funds available to make Distributions to
stockholders. Distributions to stockholders generally would be taxable as
ordinary income to the extent of current and accumulated earnings and profits
and, subject to certain limitations, would be eligible for the corporate
dividends received deduction. Although the Company intends to operate in a
manner designed to permit it to qualify as a REIT for federal income tax
purposes, it is possible that future economic, market, legal, tax, or other
events or circumstances could cause it to fail to so qualify. See "Federal
Income Tax Considerations -- Taxation of the Company."
Effect of Distribution Requirements. The Company may be required, under certain
circumstances, to accrue as income for tax purposes interest, rent and other
items treated as earned for tax purposes but not yet received. In addition, the
Company may be required not to accrue as expenses for tax purposes certain items
which actually have been paid or certain of the Company's deductions might be
disallowed by the Service. In any such event, the Company could have taxable
income in excess of cash available for distribution. If the Company has taxable
income in excess of cash available for distribution, the Company could be
required to borrow funds or liquidate investments on unfavorable terms in order
to meet the distribution requirement applicable to a REIT. See "Federal Income
Tax Considerations -- Taxation of the Company -- Distribution Requirements."
Restrictions on Maximum Share Ownership. In order for the Company to qualify as
a REIT, no more than 50% of the value of the outstanding equity securities may
be owned, directly or indirectly (applying certain attribution rules), by five
or fewer individuals (or certain entities) at any time during the last half of
the Company's taxable year. To ensure that the Company will not fail to qualify
as a REIT under this test, the Company's Articles of Incorporation include
certain provisions restricting the accumulation of Shares. These restrictions
may (i) discourage a change of control of the Company; (ii) deter individuals
and entities from making tender offers for Shares, which offers may be
attractive to stockholders; or (iii) limit the opportunity for stockholders to
receive a premium for their Shares in the event a stockholder is making
purchases of Shares in order to acquire a block of Shares.
Other Tax Liabilities. Even if the Company qualifies as a REIT for federal
income tax purposes, it may be subject to certain federal, state and local taxes
on its income and property. See "Federal Income Tax Considera- tions -- State
and Local Taxes."
Changes in Tax Laws. The discussions of the federal income tax aspects of the
offering are based on current law, including the Code, the Regulations issued
thereunder, certain administrative interpretations thereof,
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and court decisions. Consequently, future events that modify or otherwise affect
those provisions may result in treatment for federal income tax purposes of the
Company and the stockholders that is materially and adversely different from
that described in this Prospectus, both for taxable years arising before and
after such events. There is no assurance that future legislation and
administrative interpretations will not be retroactive in effect.
SUITABILITY STANDARDS AND HOW TO SUBSCRIBE
SUITABILITY STANDARDS
The Shares offered hereby are suitable only as a long-term investment for
persons of adequate financial means who have no need for liquidity in this
investment. Initially, there is not expected to be any public market for the
Shares, which means that it may be difficult to sell Shares. See "Summary of the
Articles of Incorporation and Bylaws -- Restrictions on Ownership" for a
description of the transfer requirements. As a result, the Company has
established suitability standards which require investors to have either (i) a
net worth (exclusive of home, furnishings, and personal automobiles) of at least
$45,000 and an annual gross income of at least $45,000, or (ii) a net worth
(exclusive of home, furnishings, and personal automobiles) of at least $150,000.
Iowa, Maine, Missouri, New Hampshire, North Carolina, Pennsylvania and
Tennessee have established suitability standards different from those
established by the Company, and Shares will be sold only to investors in those
states who meet the special suitability standards set forth below.
IOWA, MISSOURI, NORTH CAROLINA AND TENNESSEE -- The investor has either (i) a
net worth (exclusive of home, furnishings, and personal automobiles) of at least
$60,000 and an annual gross income of at least $60,000, or (ii) a net worth
(exclusive of home, furnishings, and personal automobiles) of at least $225,000.
MAINE -- The investor has either (i) a net worth (exclusive of home,
furnishings, and personal automobiles) of at least $50,000 and an annual gross
income of at least $50,000, or (ii) a net worth (exclusive of home, furnishings,
and personal automobiles) of at least $200,000.
NEW HAMPSHIRE -- The investor has either (i) a net worth (exclusive of home,
furnishings, and personal automobiles) of at least $125,000 and an annual gross
income of at least $50,000, or (ii) a net worth (exclusive of home, furnishings,
and personal automobiles) of at least $250,000.
PENNSYLVANIA -- The investor has (i) a net worth (exclusive of home,
furnishings, and personal automobiles) of at least ten times the investor's
investment in the Company, and (ii) either (a) a net worth (exclusive of home,
furnishings, and personal automobiles) of at least $45,000 and an annual gross
income of at least $45,000, or (b) a net worth (exclusive of home, furnishings,
and personal automobiles) of at least $150,000. Because the minimum offering of
Shares of the Company is less than $16,500,000, Pennsylvania investors are
cautioned to evaluate carefully the Company's ability to fully accomplish its
stated objectives and to inquire as to the current dollar volume of the
Company's subscription proceeds.
The foregoing suitability standards must be met by the investor who purchases
the Shares. If the investment is being made for a fiduciary account (such as an
IRA, Keogh Plan, or corporate pension or profit-sharing plan), the beneficiary,
the fiduciary account, or any donor or grantor that is the fiduciary of the
account who directly or indirectly supplies the investment funds must meet such
suitability standards.
In addition, under the laws of certain states, investors may transfer their
Shares only to persons who meet similar standards, and the Company may require
certain assurances that such standards are met. Investors should read carefully
the requirements in connection with resales of Shares as set forth in the
Articles of Incorporation and as summarized under "Summary of the Articles of
Incorporation and Bylaws -- Restrictions of Ownership."
In purchasing Shares, custodians or trustees of employee pension benefit plans
or IRAs may be subject to the fiduciary duties imposed by the Employee
Retirement Income Security Act of 1974 ("ERISA") or other applicable laws and to
the prohibited transaction rules prescribed by ERISA and related provisions of
the Code. See "Federal Income Tax Considerations -- Retirement Plan
Stockholders." In addition, prior to purchasing Shares, the trustee or custodian
of an employee pension benefit plan or an IRA should determine that such an
investment would be permissible under the governing instruments of such plan or
account and applicable law. For
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information regarding "unrelated business taxable income," see "Federal Income
Tax Considerations -- Taxation of Stockholders -- Tax-Exempt Stockholders."
In order to insure adherence to the suitability standards described above,
requisite suitability standards must be met, as set forth in the Subscription
Agreement in one of the forms attached hereto as Exhibit D. In addition,
Soliciting Dealers who sell Shares have the responsibility to make every
reasonable effort to determine that the purchase of Shares is a suitable and
appropriate investment for an investor. In making this determination, the
Soliciting Dealers will rely on relevant information provided by the investor,
including information as to the investor's age, investment objectives,
investment experience, income, net worth, financial situation, other
investments, and any other pertinent information. See "The Offering --
Subscription Procedures." Executed Subscription Agreements will be maintained in
the Company's records for six years.
HOW TO SUBSCRIBE
An investor who meets the suitability standards described above may subscribe
for Shares by completing and executing the Subscription Agreement and delivering
it to a Soliciting Dealer, together with a check for the full purchase price of
the Shares subscribed for, payable to "SouthTrust Estate & Trust Company, Inc.,
Escrow Agent." See "The Offering -- Subscription Procedures." Certain Soliciting
Dealers who have "net capital," as defined in the applicable federal securities
regulations, of $250,000 or more may instruct their customers to make their
checks for Shares subscribed for payable directly to the Soliciting Dealer. Care
should be taken to ensure that the Subscription Agreement is filled out
correctly and completely. Partnerships, individual fiduciaries signing on behalf
of trusts, estates, and in other capacities, and persons signing on behalf of
corporations and corporate trustees may be required to obtain additional
documents from Soliciting Dealers. Any subscription may be rejected by the
Company in whole or in part, regardless of whether the subscriber meets the
minimum suitability standards.
Certain Soliciting Dealers may permit investors who meet the suitability
standards described above to subscribe for Shares by telephonic order to the
Soliciting Dealer. This procedure may not be available in certain states. See
"The Offering -- Subscription Procedures" and "The Offering -- Plan of
Distribution."
A minimum investment of 250 Shares ($2,500) is required. IRAs, Keogh plans, and
pension plans must make a minimum investment of at least 100 Shares ($1,000),
except for Iowa tax-exempt investors who must make a minimum investment of 250
Shares ($2,500). For Minnesota investors only, IRAs and qualified plans must
make a minimum investment of 200 Shares ($2,000). In addition, Nebraska, New
York, and North Carolina investors must make a minimum investment of 500 Shares
($5,000). Following an initial subscription for at least the required minimum
investment, any investor may make additional purchases in increments of one
Share. Maine investors, however, may not make additional purchases in amounts
less than the applicable minimum investment except with respect to Shares
purchased pursuant to the Reinvestment Plan. See "The Offering -- General," "The
Offering -- Subscription Procedures," and "Summary of Reinvestment Plan."
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ESTIMATED USE OF PROCEEDS
The table set forth below summarizes certain information relating to the
anticipated use of offering proceeds by the Company, assuming that 15,000,000
Shares (which assumes that the Managing Dealer exercises its option, if the
offering is oversubscribed, to sell an additional 5,000,000 Shares) are sold
(5,775,926 Shares had been sold as of April 9, 1996, excluding 12,815 Shares
issued pursuant to the Reinvestment Plan). The Company estimates that 84% (if
$150,000,000 or more is raised) of Gross Proceeds will be available for the
purchase of Properties and the making of Mortgage Loans, and approximately 9% of
Gross Proceeds will be paid in fees and expenses to Affiliates of the Company
for their services. While the estimated use of proceeds set forth in the table
below is believed to be reasonable, this table should be viewed only as an
estimate of the use of proceeds that may be achieved.
Maximum Offering(1)(2)
----------------------
Amount Percent
------- -------
GROSS PROCEEDS TO THE COMPANY (3)..................... $150,000,000 100.0%
Less:
Selling Commissions to CNL
Securities Corp. (3)............................ 11,250,000 7.5%
Marketing Support and Due Diligence
Expense Reimbursement Fee to
CNL Securities Corp. (3)........................ 750,000 0.5%
Organizational and Offering Expenses (4)........... 4,500,000 3.0%
------------ ------
NET PROCEEDS TO THE COMPANY........................... 133,500,000 89.0%
Less:
Acquisition Fees to the Advisor (5) ............... 6,750,000 4.5%
Acquisition Expenses (6)........................... 750,000 0.5%
Initial Working Capital Reserve ................... (7)
------------ ------
CASH PAYMENT FOR PURCHASE OF PROPERTIES
AND MAKING OF MORTGAGE LOANS BY THE COMPANY (8) ... $126,000,000 84.0%
============ ======
- --------------------------------------------
FOOTNOTES:
(1) Excludes the purchase of 20,000 Shares by the Advisor in exchange for its
$200,000 investment in the Company. The Advisor may, but is not required
to, purchase additional Shares of the Company. Also excludes 1,500,000
Shares that may be sold pursuant to the Reinvestment Plan.
(2) Offering proceeds will exceed $100,000,000 only if the Managing Dealer
exercises its option to sell an additional 5,000,000 Shares if the
offering is oversubscribed.
(3) Gross Proceeds of the offering are calculated as if all Shares are sold at
$10.00 per Share and do not take into account any reduction in Selling
Commissions. See "The Offering -- Plan of Distribution" for a description
of the circumstances under which Selling Commissions may be reduced,
including commission discounts available for purchases by registered
representatives or principals of the Managing Dealer or Soliciting
Dealers, certain Directors and officers and certain investment advisers.
Selling Commissions are calculated assuming that reduced commissions are
not paid in connection with the purchase of any Shares. The Shares are
being offered to the public through CNL Securities Corp., which will
receive Selling Commissions of 7.5% on all sales of Shares and will act as
Managing Dealer. The Managing Dealer is an Affiliate of the Advisor. Other
broker-dealers may be engaged as Soliciting Dealers to sell Shares and
reallowed Selling Commissions of up to 7% with respect to Shares which
they sell. In addition, all or a portion of the marketing support and due
diligence expense reimbursement fee may be reallowed to certain Soliciting
Dealers for expenses incurred by them in selling the Shares, including
reimbursement for bona fide expenses incurred in connection with due
diligence activities. See "The Offering -- Plan of Distribution" for a
more complete description of this fee.
(4) Organizational and Offering Expenses include legal, accounting, printing,
escrow, filing, registration, qualification, and other expenses of the
organization of the Company and the offering of the Shares, but exclude
Selling Commissions and the marketing support and due diligence expense
reimbursement fee. The Advisor will pay all Organizational and Offering
Expenses which exceed 3% of Gross Proceeds.
(5) Acquisition Fees include all fees and commissions paid by the Company to
any person or entity in connection with the selection or acquisition of
any Property, including Development/Construction Management Fees to
Affiliates, Construction Financing Fees to Affiliates, and other
Acquisition Fees to Affiliates or nonaffiliates. Acquisition Fees do not
include Acquisition Expenses.
(6) Represents that portion of Acquisition Expenses that are neither
reimbursed to the Company nor included in the purchase price of the
Properties, and on which rent is not received, but does not include
certain Acquisition Expenses associated with Property acquisitions that
are part of the purchase price of the Properties, that are included in the
basis of the Properties, and on which rent is received. Acquisition
Expenses include any and all expenses incurred by the Company, the
Advisor, or any Affiliate of the Advisor in connection with the selection
or acquisition of any Property, whether or not acquired, including,
without limitation, legal fees and expenses, travel and communication
expenses, costs of appraisals, nonrefundable option payments on property
not acquired, accounting fees and expenses, taxes, and title insurance,
but exclude Acquisition Fees. The portion of Acquisition Expenses that is
attributable to the seller of the Properties and part of the purchase
price of the Properties is anticipated to range between 1% and 2% of Gross
Proceeds.
(7) Because leases will be on a "triple-net" basis, it is not anticipated that
a permanent reserve for maintenance and repairs will be established.
However, to the extent that the Company has insufficient funds for such
purposes, the Advisor may contribute to the Company an aggregate amount of
up to 1% of the net offering proceeds available to the Company for
maintenance and repairs. The Advisor also may, but is not required to,
establish reserves from offering proceeds, operating funds, and the
available proceeds of any Sales of Properties.
(8) Offering proceeds designated for investment in Properties or the making of
Mortgage Loans temporarily may be invested in short-term, highly liquid
investments with appropriate safety of principal.
-19-
<PAGE>
MANAGEMENT COMPENSATION
The table below summarizes the types, recipients, methods of
computation, and estimated amounts of all compensation, fees, and distributions
to be paid directly or indirectly by the Company to the Advisor and its
Affiliates, exclusive of any distributions to which the Advisor or its
Affiliates may be entitled by reason of their purchase and ownership of Shares.
See "The Advisor and the Advisory Agreement." For information concerning
compensation to the Directors, see "Management."
A maximum of 10,000,000 Shares ($100,000,000) may be sold; however, if
the Managing Dealer exercises its option (in the event the offering is
oversubscribed) to sell an additional 5,000,000 shares, a maximum of 15,000,000
Shares ($150,000,000) may be sold. An additional 1,500,000 Shares ($15,000,000)
may be sold to stockholders who receive a copy of this Prospectus and who
purchase Shares through the Reinvestment Plan.
The following arrangements for compensation and fees to the Advisor and
its Affiliates were not determined by arm's-length negotiations. See "Conflicts
of Interest." There is no item of compensation and no fee that can be paid to
the Advisor or its Affiliates under more than one category.
-20-
<PAGE>
<TABLE>
<CAPTION>
Type of
Compensation Estimated
and Recipient Method of Computation Maximum Amount
Organizational Stage
<S> <C>
Selling Selling Commissions of 7.5% per Share on all Shares sold, subject to $11,250,000 if 15,000,000 Shares
Commissions to reduction under certain circumstances as described in "The are sold; $12,375,000 if
Managing Offering Plan of Distribution." Soliciting Dealers may be 16,500,000 Shares (including
Dealer and reallowed Selling Commissions of up to 7% with respect to Shares they 1,500,000 Shares offered pursuant
Soliciting sell. to the Reinvestment Plan) are
Dealers sold. $2,884,062 at December 31,
1995, $2,682,303 of which was
reallowed to unaffiliated
Soliciting Dealers.
Marketing Expense allowance of 0.5% of Gross Proceeds to the Managing Dealer, $750,000 if 15,000,000 Shares are
support and all or a portion of which may be reallowed to Soliciting Dealers. sold; $825,000 if 16,500,000
due diligence The Managing Dealer will pay all sums attributable to bona fide due Shares (including 1,500,000 Shares
expense diligence expenses from this fee. offered pursuant to the Reinvest-
reimbursement ment Plan) are sold. $192,271 at
fee to December 31, 1995.
Managing
Dealer and
Soliciting
Dealers
Reimbursement Actual expenses incurred, except that the Advisor will pay all such Total amount is not determinable
to the Advisor expenses in excess of 3% of Gross Proceeds. at this time, but will not exceed
and its 3% of Gross Proceeds. $4,500,000
Affiliates for if 15,000,000 Shares are sold;
Organizational $4,950,000 if 16,500,000 Shares
and Offering (including 1,500,000 Shares
Expenses offered pursuant to the Reinvest-
ment Plan) are sold. As of
December 31, 1995, Affiliates had
incurred $2,546,011 in
Organizational and Offering Expenses
on behalf of the Company.
Acquisition Stage
Acquisition 4.5% of Gross Proceeds from the sale of Shares, payable to the $6,750,000 if 15,000,000 Shares
Fees to the Advisor as Acquisition Fees, plus reimbursement to the Advisor and are sold; $7,425,000 if 16,500,000
Advisor and its Affiliates for expenses actually incurred. The Acquisition Fee Shares (including 1,500,000 Shares
reimbursement shall be reduced to the extent that, and if necessary to limit, the offered pursuant to the Reinvest-
of Acquisition total compensation paid to all persons involved in the acquisition of ment Plan) are sold. $1,730,437
Expenses to any Property to the amount customarily charged in arms-length at December 31, 1995.
the Advisor transactions by other persons or entities rendering similar services
and its as an ongoing public activity in the same geographical location and The total amount of Acquisition
Affiliates for comparable types of Properties, and to the extent that other Expenses, which are based on a
acquisition fees, finder's fees, real estate commissions, or other number of factors, including the
similar fees or commissions are paid by any person in connection with purchase price of the Properties,
the transaction. are not determinable at this time.
As of December 31, 1995,
Affiliates had incurred $131,629
in Acquisition Expenses on behalf
of the Company.
Development/Con- In connection with the acquisition of Properties that have been The total amount of this fee will
struction constructed or renovated by Affiliates, subject in each case to the depend on the number of Properties
Management approval of a majority of the Board of Directors including a majority purchased from developers that are
Fees to of the Independent Directors, the Company will incur Affiliates of the Company, the
Affiliates Development/Construction Management Fees of generally 5% to 10% of cost of construction or renovation
the cost of constructing or renovating a Property, payable to of such Properties and the
Affiliates of the Company as Acquisition Fees. Such fees will be percentage amount of each Develop-
included in the purchase price of Properties purchased from ment/Construction Management Fee.
developers that are Affiliates of the Company. See "Business - Site No amounts had been paid or
Selection and Acquisition of Properties." accrued at December 31, 1995.
-21-
<PAGE>
<CAPTION>
Type of
Compensation Estimated
and Recipient Method of Computation Maximum Amount
<S> <C>
Construction In connection with the acquisition of Properties from affiliated or The total amount of this fee will
Financing Fees unaffiliated developers, subject in each case to the approval of a depend on the number of Properties
to Affiliates majority of the Board of Directors including a majority of the for which Affiliates of the
Independent Directors, to whom Affiliates of the Company have Company provide construction
provided construction financing, the Company will incur Construction financing, the amount and duration
Financing Fees, payable to Affiliates of the Company as Acquisition of such loans and the amount of
Fees. Such fees will be in an amount equal to generally 1% to 2% of each Construction Financing Fee.
the total amount of each loan plus the difference between the No amounts had been paid or
Affiliate-lender's cost of funds and the amount of interest charged accrued at December 31, 1995.
to the developer, with such difference determined by applying an
annual percentage rate of generally 1.5% to 3% throughout the
duration of the loan to the outstanding amount of the loan. Such
fees will be included in the purchase price of Properties purchased
from developers that receive such loans. See "Business - Site
Selection and Acquisition of Properties."
The total of all Acquisition Fees (including Development/Construction
Management Fees to Affiliates and Construction Financing Fees to
Affiliates described above, but excluding Development/Construction
Management Fees paid to any person or entity not affiliated with the
Advisor in connection with the actual development and construction of
any Property) and Acquisition Expenses shall be reasonable and shall
not exceed an amount equal to 6% of the Real Estate Asset Value of a
Property, or in the case of a Mortgage Loan, 6% of the funds
advanced, unless a majority of the Board of Directors, including a
majority of the Independent Directors, not otherwise interested in
the transaction approves fees in excess of these limits subject to a
determination that the transaction is commercially competitive, fair
and reasonable to the Company.
Operational Stage
Asset A monthly Asset Management Fee in an amount equal to one-twelfth of Total amount is not determinable
Management Fee .60% of the Company's Real Estate Asset Value as of the end of the at this time. The amount of the
to the Advisor preceding month. Specifically, Real Estate Asset Value equals the Asset Management Fee will depend
amount invested in the Properties wholly owned by the Company, upon, among other things, the cost
determined on the basis of cost, plus, in the case of Properties of the Properties. As of December
owned by any Joint Venture or partnership in which the Company is a 31, 1995, the Company had incurred
co-venturer or partner, the portion of the cost of such Properties $27,950 in asset management fees.
paid by the Company, exclusive of Acquisition Fees and Expenses. The
Asset 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 Asset Manage-
ment 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.
Mortgage A monthly Mortgage Management Fee in an amount equal to one-twelfth Total amount is not determinable
Management Fee of .60% of the total principal amount of the Mortgage Loans as of the at this time. The amount of the
end of the preceding month. Mortgage Management Fee will
depend upon, among other things,
the amount and the duration of the
Mortgage Loans. No amounts had
been paid or accrued at December
31, 1995.
-22-
<PAGE>
<CAPTION>
Type of
Compensation Estimated
and Recipient Method of Computation Maximum Amount
<S> <C>
Reimbursement Operating Expenses (which, in general, are those expenses relating to Total amount is not determinable
to the Advisor administration of the Company on an ongoing basis) will be reimbursed at this time. As of December 31,
and Affiliates by the Company. To the extent that Operating Expenses payable or 1995, Affiliates had incurred
for operating reimbursable by the Company, in any four consecutive fiscal quarters $54,234 in Operating Expenses on
expenses (the "Expense Year"), exceed (the "Excess Amount") the greater of behalf of the Company.
2% of Average Invested Assets or 25% of Net Income (the "2%/25%
Guidelines") and the Independent Directors determine that such
excess expenses were justified based on unusual nonrecurring factors
which they deem sufficient, the Excess Amount may be carried over and
included in Operating Expenses in subsequent Expense Years, and
reimbursed to the Advisor in one or more of such years, but only to
the extent such reimbursement would not cause the Company's Operating
Expenses to exceed the 2%/25% Guidelines in any Expense Year. Within
60 days after the end of any fiscal quarter of the Company for which
total Operating Expenses (for the Expense Year) exceed the 2%/25%
Guidelines, there shall be sent to the stockholders a written
disclosure of such fact, together with an explanation of the factors
the Independent Directors considered in arriving at the conclusion
that such excess expenses were justified.
Soliciting An annual fee of .20% of Invested Capital on December 31 of each Total amount is not determinable
Dealer year, commencing on December 31 of the year following the year in at this time. Until such time as
Servicing Fee which the offering terminates, generally payable to the Managing Properties are sold, the estimated
to Managing Dealer, which in turn may reallow all or a portion of such fee to amounts payable to the Managing
Dealer Soliciting Dealers whose clients hold Shares on such date. The Dealer for each of the first three
Company has determined, however, that the Company may pay the years following year of
Soliciting Dealer Servicing Fee directly to any Soliciting Dealer termination of the offering are
exempt from registration as a broker-dealer and whose clients held expected to be $300,000 if
Shares on such date. In general, Invested Capital is the amount of 15,000,000 Shares are sold; and
cash paid by the stockholders to the Company for their Shares, $330,000 if 16,500,000 Shares
reduced by certain prior Distributions to the stockholders from the (including 1,500,000 Shares
Sale of one or more Properties or Secured Equipment Leases. The offered pursuant to the
Soliciting Dealer Servicing Fee will terminate as of the beginning of Reinvestment Plan) are sold. No
any year in which the Company is liquidated or in which Listing amounts had been paid or accrued
occurs, provided, however, that any previously accrued but unpaid at December 31, 1995.
portion of the Soliciting Dealer Servicing Fee may be paid in such
year or any subsequent year.
Deferred, A deferred, subordinated real estate disposition fee, payable upon Total amount is not determinable
subordinated Sale of one or more Properties, in an amount equal to the lesser of at this time. The amount of this
real estate (i) one-half of a Competitive Real Estate Commission, or (ii) 3% of fee, if it becomes payable, will
disposition the sales price of such Property or Properties. Payment of such fee depend upon the price at which
fee payable to shall be made only if the Advisor provides a substantial amount of Properties are sold. No amounts
the Advisor services in connection with the Sale of a Property or Properties and had been paid or accrued at
from a Sale or shall be subordinated to receipt by the stockholders of Distributions December 31, 1995.
Sales of a equalto the sum of (i) their aggregate Stockholders' 8% Return and
Property not (ii) their aggregate Invested Capital. If, at the time of a Sale,
in liquidation payment of the disposition fee is deferred because the subordination
of the Company conditions have not been satisfied, then the disposition fee shall be
paid at such later time as the subordination conditions are
satisfied. 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 the
amount equal to the product of the total number of Shares outstanding
and the average closing price of the Shares over a period, beginning
180 days after Listing, of 30 days during which the Shares are
traded.
-23-
<PAGE>
<CAPTION>
Type of
Compensation Estimated
and Recipient Method of Computation Maximum Amount
<S> <C>
Subordinated At such time, if any, as Listing occurs, the Advisor shall be paid Total amount is not determinable
Incentive Fee the Subordinated Incentive Fee in an amount equal to 10% of the at this time. No amounts had been
payable to the amount by which (i) the market value of the Company (as defined paid or accrued at December 31,
Advisor at below) plus the total Distributions made to stockholders from the 1995.
such time, if Company's inception until the date of Listing exceeds (ii) the sum of
any, as (A) 100% of Invested Capital and (B) the total Distributions required
Listing occurs to be made to the stockholders in order to pay the Stockholders' 8%
Return from inception through the date the market value is
determined. For purposes of calculating the Subordinated Incentive
Fee, the market value of the Company shall be the average closing
price or average of bid and asked price, as the case may be, over a
period of 30 days during which the Shares are traded with such period
beginning 180 days after Listing. The Subordinated Incentive Fee
will be reduced by the amount of any prior payment to the Advisor of
a deferred, subordinated share of Net Sales Proceeds from a Sale or
Sales of Property or Secured Equipment Lease.
Deferred, A deferred, subordinated share equal to 10% of Net Sales Proceeds Total amount is not determinable
subordinated from a Sale or Sales of a Property or Secured Equipment Lease at this time. No amounts had been
share of Net remaining after receipt by the stockholders of Distributions equal to paid or accrued at December 31,
Sales Proceeds the sum of (i) the Stockholders' 8% Return and (ii) 100% of Invested 1995.
from a Sale or Capital. Following Listing, no share of Net Sales Proceeds will be
Sales of a paid to the Advisor.
Property or
Secured
Equipment
Lease not in
liquidation of
the Company
payable to the
Advisor
Secured A fee paid to the Advisor out of the proceeds of the Loan for Total amount is not determinable
Equipment negotiating Secured Equipment Leases and supervising the Secured at this time. No amounts had been
Lease Ser- Equipment Lease program equal to 2% of the purchase price of the paid or accrued at December 31,
vicing Fee to Equipment subject to each Secured Equipment Lease and paid upon 1995.
the Advisor entering into such lease.
Reimbursement Repayment by the Company of actual expenses incurred. Total amounts not determinable at
to the Advisor this time. No amounts had been
and Affiliates paid or accrued at December 31,
for Mortgage 1995.
Loan and
Secured
Equipment
Lease
Servicing ex-
penses
Liquidation Stage
Deferred, A deferred, subordinated real estate disposition fee, payable upon Total amount is not determinable
subordinated Sale of one or more Properties, in an amount equal to the lesser of at this time. The amount of this
real estate (i) one-half of a Competitive Real Estate Commission, or (ii) 3% of fee, if it becomes payable, will
disposition the sales price of such Property or Properties. Payment of such fee depend upon the price at which
fee payable to shall be made only if the Advisor provides a substantial amount of Properties are sold.
the Advisor services in connection with the Sale of a Property or Properties and
from a Sale or shall be subordinated to receipt by the stockholders of Distributions
Sales in equal to the sum of (i) their aggregate Stockholders' 8% Return and
liquidation of (ii) their aggregate Invested Capital. If, at the time of a Sale,
the Company payment of the disposition fee is deferred because the subordination
conditions have not been satisfied, then the disposition fee shall be
paid at such later time as the subordination conditions are
satisfied.
-24-
<PAGE>
<CAPTION>
Type of
Compensation Estimated
and Recipient Method of Computation Maximum Amount
<S> <C>
Deferred, A deferred, ubordinated share equal to 10% of Net Sales Proceeds Total amount is not determinable
subordinated from a Sale or Sales of a Property or Secured Equipment Lease at this time.
share of Net remaining after receipt by the stockholders of Distributions equal to
Sales Proceeds the sum of (i) the Stockholders' 8% Return and (ii) 100% of Invested
from a Sale or Capital. Following Listing, no share of Net Sales Proceeds will be
Sales of a paid to the Advisor.
Property or
Secured
Equipment
Lease in
liquidation of
the Company
payable to the
Advisor
</TABLE>
-25-
CONFLICTS OF INTEREST
The Company will be subject to various conflicts of interest arising
out of its relationship to the Advisor and its Affiliates, as described below.
The following chart indicates the relationship between the Advisor and
those Affiliates that will provide services to the Company.
-------------------------- ---------------------
| CNL AMERICAN PROPERTIES | | |
| FUND, INC. | | CNL Group, Inc. |
| (the Company) | | |
-------------------------- ---------------------
| |
| |
(Advisory Agreement) | 100%
| |
| ---------------------------------
| | |
| | |
------------------------------ --------------------------
| CNL FUND ADVISORS, INC. | | CNL Securities Corp. |
| (Advisor to Company) | | (Managing Dealer) |
------------------------------ --------------------------
PRIOR AND FUTURE PROGRAMS
In the past, Affiliates of the Advisor have organized over 100 other
real estate investments, currently have other real estate holdings, and in the
future expect to form, offer interests in, and manage other real estate programs
in addition to the Company, and make additional real estate investments. Some of
these (including 17 public partnerships) involve and will involve Affiliates of
the Advisor in the ownership, operation, leasing, and management of fast-food,
family-style and casual dining, including restaurants that may be suitable for
the Company.
Certain of these affiliated public or private real estate programs
invest or may invest solely in fast-food, casual dining, and family-style
restaurants, may purchase properties concurrently with the Company and may lease
fast-food, casual dining, and family-style restaurant properties to operators
who also lease or operate certain of the Company's Properties. These properties,
if located in the vicinity of, or adjacent to, Properties acquired by the
Company may affect the Properties' gross revenues. Additionally, such other
programs may offer financing to the same or similar entities as those targeted
by the Company, thereby affecting the Company's Secured Equipment Lease program.
Such conflicts between the Company and affiliated programs may affect the value
of the Company's investments as well as its Net Income. The Company believes
that the Advisor has established guidelines to minimize such conflicts. See
"Certain Conflict Resolution Procedures" below.
An Affiliate of the Advisor currently is purchasing properties for a
private program that was organized to purchase, lease and/or finance fast-food
and family-style restaurant facilities, including furniture, fixtures, equipment
and start-up costs associated therewith. Such program generally will purchase
restaurant properties or an interest therein only when furniture, fixtures,
equipment and start-up costs also will be supplied by the program. It is not
expected that the financing offered by such program will be segregable and,
therefore, the program will not compete with the Company for lessees. If the
equipment arrangement offered by such program becomes segregable, a conflict
could arise between such program and the Company for lessees.
ACQUISITION OF PROPERTIES
Affiliates of the Advisor regularly have opportunities to acquire
restaurant properties of a type suitable for acquisition by the Company as a
result of their existing relationships and past experience with various
fast-food, family-style and casual dining restaurant chains and their
franchisees. See "Business -- General." A purchaser
-26-
<PAGE>
who wishes to acquire one or more of these properties must do so within a
relatively short period of time, occasionally at a time when the Company (due
to insufficient funds, for example) may be unable to make the acquisition.
In an effort to address these situations and preserve the acquisition
opportunities for the Company (and other entities with which the Advisor or its
Affiliates are affiliated), Affiliates of the Advisor maintain lines of credit
which enable them to acquire restaurant properties on an interim basis.
Typically, no more than ten to 15 restaurant properties are temporarily owned by
Affiliates of the Advisor on this interim basis at any particular time. These
restaurant properties generally will be purchased from Affiliates of the
Advisor, at their cost, by one or more existing or future public or private
programs formed by Affiliates of the Advisor.
The Advisor could experience potential conflicts of interest in
connection with the negotiation of the purchase price and other terms of the
acquisition of a Property, as well as the terms of the lease of a Property, due
to its relationship with its Affiliates and the ongoing business relationship of
its Affiliates with operators of Restaurant Chains.
The Advisor or its Affiliates also may be subject to potential
conflicts of interest at such time as the Company wishes to acquire a property
that also would be suitable for acquisition by an Affiliate of CNL. Affiliates
of the Advisor serve as Directors of the Company and, in this capacity, have a
fiduciary obligation to act in the best interest of the stockholders of the
Company and, as general partners or directors of CNL Affiliates, to act in the
best interests of the stockholders in other programs with investments that may
be similar to those of the Company and will use their best efforts to assure
that the Company will be treated as favorably as any such other program. See
"Management -- Fiduciary Responsibility of the Board of Directors." In addition,
the Company has developed procedures to resolve potential conflicts of interest
in the allocation of properties between the Company and certain of its
Affiliates. See "Certain Conflict Resolution Procedures" below. The Company will
supplement this Prospectus during the offering period to disclose the
acquisition of a Property at such time as the Advisor believes that a reasonable
probability exists that the Company will acquire the Property, including an
acquisition from the Advisor or its Affiliates. See "Business - Property
Acquisitions" for a description of the Properties that have been acquired by the
Company and the status of negotiations for additional Properties.
SALES OF PROPERTIES
A conflict also could arise in connection with the Advisor's
determination as to whether or not to sell a Property, since the interests of
the Advisor and the stockholders may differ as a result of their distinct
financial and tax positions and the compensation to which the Advisor or its
Affiliates may be entitled upon the Sale of a Property. See "Compensation of the
Advisor," below for a description of these compensation arrangements. In order
to resolve this potential conflict, the Board of Directors will be required to
approve each Sale of a Property. In the unlikely event that the Company and
another CNL program attempted to sell similar properties at the same time, a
conflict could arise since the two programs potentially could compete with each
other for a suitable purchaser. In order to resolve this potential conflict, the
Advisor has agreed not to approve the sale of any of the Company's Properties
contemporaneously with the sale of a property owned by another CNL program if
the two properties are part of the same Restaurant Chain and are within a
three-mile radius of each other, unless the Advisor and the principals of the
other CNL program are able to locate a suitable purchaser for each property.
JOINT INVESTMENT WITH AN AFFILIATED PROGRAM
The Company may invest in Joint Ventures with another program sponsored
by the Advisor or its Affiliates if a majority of the Directors, including a
majority of the Independent Directors, not otherwise interested in the
transaction, determine that the investment in the Joint Venture is fair and
reasonable to the Company and on substantially the same terms and conditions as
those to be received by the co-venturer or co-venturers.
COMPETITION FOR MANAGEMENT TIME
The officers and directors of the Advisor and certain Directors and
officers of the Company currently are engaged, and in the future will engage, in
the management of other business entities and properties and in other business
activities. They will devote only as much of their time to the business of the
Company as they, in their judgment, determine is reasonably required, which will
be substantially less than their full time. These officers and Directors of the
Company and officers and directors of the Advisor may experience conflicts of
interest in allocating
-27-
<PAGE>
management time, services, and functions among the Company and the various
partnerships, stockholder programs (public or private), and any other business
ventures in which any of them are or may become involved.
COMPENSATION OF THE ADVISOR
The Advisor has been and will be engaged to perform various services
for the Company and has and will receive fees and compensation for such
services. None of the agreements for such services were the result of arm's-
length negotiations. All such agreements, including the Advisory Agreement,
require approval by a majority of the Board of Directors, including a majority
of the Independent Directors, not otherwise interested in such transactions, as
being fair and reasonable to the Company and on terms and conditions no less
favorable than those which could be obtained from unaffiliated entities. The
timing and nature of fees and compensation to the Advisor could create a
conflict between the interests of the Advisor and those of the stockholders. A
transaction involving the purchase, lease, and sale of any Property, or the
entering into of a Mortgage Loan or a Secured Equipment Lease by the Company may
result in the immediate realization by the Advisor and its Affiliates of
substantial commissions, fees, compensation, and other income. Although the
Advisory Agreement authorizes the Advisor to take primary responsibility for all
decisions relating to any such transaction, the Board of Directors must approve
all of the Company's acquisitions and Sales of Properties and the entering into
and Sales of Mortgage Loans or Secured Equipment Leases. Potential conflicts may
arise in connection with the determination by the Advisor on behalf of the
Company of whether to hold or sell a Property, Mortgage Loan, or Secured
Equipment Lease as such determination could impact the timing and amount of fees
payable to the Advisor. See "The Advisor and the Advisory Agreement."
RELATIONSHIP WITH MANAGING DEALER
The Managing Dealer is CNL Securities Corp., an Affiliate of the
Company. Certain of the officers and Directors of the Company are also officers,
directors, and registered principals of the Managing Dealer. This relationship
may create conflicts in connection with the fulfillment by the Managing Dealer
of its due diligence obligations under the federal securities laws. Although the
Managing Dealer will examine the information in the Prospectus for accuracy and
completeness, the Managing Dealer is an Affiliate of the Company and will not
make an independent review of the Company and the offering. Accordingly, the
investors do not have the benefit of such independent review. Certain of the
Soliciting Dealers have made, or are expected to make, their own independent due
diligence investigations. The Managing Dealer is not prohibited from acting in
any capacity in connection with the offer and sale of securities offered by
entities that may have some or all investment objectives similar to those of the
Company and is expected to participate in other offerings sponsored by one or
more of the officers or Directors of the Company.
LEGAL REPRESENTATION
Shaw, Pittman, Potts & Trowbridge, which serves as securities and tax
counsel to the Company in this offering, also serves as securities and tax
counsel for certain of its Affiliates, including other real estate programs, in
connection with other matters. In addition, certain members of the firm of Shaw,
Pittman, Potts & Trowbridge have invested as limited partners in prior programs
sponsored by Affiliates of the Advisor in aggregate amounts which do not exceed
one percent of the amounts sold by any of these programs, and members of the
firm also may invest in the Company. Neither the Company nor the stockholders
will have separate counsel. In the event any controversy arises following the
termination of this offering in which the interests of the Company appear to be
in conflict with those of the Advisor or its Affiliates, other counsel may be
retained for one or both parties.
CERTAIN CONFLICT RESOLUTION PROCEDURES
In order to reduce or eliminate certain potential conflicts of
interest, the Articles of Incorporation contain a number of restrictions
relating to (i) transactions between the Company and the Advisor or its
Affiliates, (ii) certain future offerings, and (iii) allocation of restaurant
properties and Secured Equipment Leases among certain affiliated entities. These
restrictions include, among others, the following:
1. No goods or services will be provided by the Advisor or its
Affiliates to the Company except for transactions in which the Advisor or its
Affiliates provide goods or services to the Company in accordance with the
Articles of Incorporation which provides that a majority of the Directors
(including a majority of the Independent Directors) not otherwise interested in
such transactions must approve such transactions as fair and reasonable to the
Company and on terms and conditions not less favorable to the Company than those
available from unaffiliated third
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parties and not less favorable than those available from the Advisor or its
Affiliates in transactions with unaffiliated third parties.
2. The Company will not purchase or lease Properties in which the
Advisor or its Affiliates has an interest without the determination, by a
majority of the Directors (including a majority of the Independent Directors)
not otherwise interested in such transaction, that such transaction is
competitive and commercially reasonable to the Company and at a price to the
Company no greater than the cost of the asset to the Advisor or its Affiliate
unless there is substantial justification for any amount that exceeds such cost
and such excess amount is determined to be reasonable. In no event shall the
Company acquire any such asset at an amount in excess of its appraised value.
The Company will not sell or lease Properties to the Advisor or its Affiliates
unless a majority of the Directors (including a majority of the Independent
Directors) not interested in the transaction determine the transaction is fair
and reasonable to the Company.
3. The Company will not make any loans to Affiliates. The Advisor and
its Affiliates will not make loans to the Company, or to Joint Ventures in which
the Company is a co-venturer, for the purchase of Properties. Any loans to the
Company by the Advisor or its Affiliates for other purposes must be approved by
a majority of the Directors (including a majority of the Independent Directors)
not otherwise interested in such transaction as fair, competitive, and
commercially reasonable, and no less favorable to the Company than comparable
loans between unaffiliated parties. It is anticipated that the Advisor or its
Affiliates shall be entitled to reimbursement, at cost, for actual expenses
incurred by the Advisor or its Affiliates on behalf of the Company or Joint
Ventures in which the Company is a co-venturer, subject to the 2%/25% Guidelines
(2% of Average Invested Assets or 25% of Net Income) described under "The
Advisor and the Advisory Agreement -- The Advisory Agreement."
4. Until completion of this offering, the Advisor and its Affiliates
will not offer or sell interests in any subsequently formed public program that
has investment objectives and structure similar to those of the Company and that
intends to (i) invest, on a cash and/or leveraged basis, in a diversified
portfolio of restaurant properties (either existing properties or properties
upon which restaurants are to be constructed) to be leased on a "triple-net"
basis to operators of national and regional fast-food, family-style, and casual
dining Restaurant Chains, and (ii) offer Secured Equipment Leases. The Advisor
and its Affiliates also will not purchase property or offer a Mortgage Loan or
Secured Equipment Lease for any such subsequently formed public program that has
investment objectives and structure similar to the Company and that intends to
invest on a cash and/or leveraged basis primarily in a diversified portfolio of
restaurant properties (either existing properties or properties upon which
restaurants are to be constructed) to be leased on a "triple-net" basis to
operators of national and regional fast-food, family-style, and casual dining
Restaurant Chains until substantially all (generally, 80%) of the funds
available for investment (Net Offering Proceeds) by the Company have been
invested or committed to investment. (For purposes of the preceding sentence
only, funds are deemed to have been committed to investment to the extent
written agreements in principle or letters of understanding are executed and in
effect at any time, whether or not any such investment is consummated, and also
to the extent any funds have been reserved to make contingent payments in
connection with any Property, whether or not any such payments are made.)
Affiliates of the Advisor are currently purchasing restaurant facilities,
including furniture, fixtures and equipment, and incurring related costs for
public and private programs, which have investment objectives that are not
identical, and a structure not similar to, those of the Company, but which make
investments that include "triple-net" leases of fast-food, family-style, and
casual dining restaurant properties. The Advisor or its Affiliates currently and
in the future may offer interests in one or more public or private programs
organized to purchase and lease fast-food, family-style, and casual dining
restaurants on a "triple-net" basis.
5. The Board of Directors and the Advisor have agreed that, in the
event that an investment opportunity becomes available which is suitable for
both the Company and a public or private entity with which the Advisor or its
Affiliates are affiliated, for which both entities have sufficient uninvested
funds, then the entity which has had the longest period of time elapse since it
was offered an investment opportunity will first be offered the investment
opportunity. An investment opportunity will not be considered suitable for a
program if the requirements of Item 4 above could not be satisfied if the
program were to make the investment. In determining whether or not an investment
opportunity is suitable for more than one program, the Board of Directors and
the Advisor will examine such factors, among others, as the cash requirements of
each program, the effect of the acquisition both on diversification of each
program's investments by types of restaurants and geographic area, and on
diversification of the tenants of its properties (which also may affect the need
for one of the programs to prepare or produce audited financial statements for a
property or a tenant), the anticipated cash flow of each program, the size of
the investment, the amount of funds available to each program, and the length of
time such funds have been available for investment. If a subsequent development,
such as a delay in the closing of a property or a delay in the construction of a
property, causes any such investment, in the opinion of the Advisor, to be more
appropriate for
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an entity other than the entity which committed to make the investment, however,
the Advisor has the right to agree that the other entity affiliated with the
Advisor or its Affiliates may make the investment. The Advisor and certain other
Affiliates of the Company are affiliated with CNL Income Fund XVII, Ltd., a
public program, and CNL Income & Growth Fund VII, Ltd., a private program,
offerings of securities for both of which are ongoing. As of December 31, 1995,
CNL Income Fund XVII, Ltd. had approximately $4,000,000 available for investment
and CNL Income & Growth Fund VII, Ltd. had approximately $4,400,000 available
for investment.
SUMMARY OF REINVESTMENT PLAN
The Company has adopted the Reinvestment Plan pursuant to which
stockholders may elect to have the full amount of their cash Distributions from
the Company reinvested in additional Shares of the Company. Each prospective
investor who wishes to participate in the Reinvestment Plan should consult with
such investor's Soliciting Dealer as to the Soliciting Dealer's position
regarding participation in the Reinvestment Plan. The following discussion
summarizes the principal terms of the Reinvestment Plan. The Reinvestment Plan
is attached hereto as Exhibit A.
GENERAL
An independent agent (the "Reinvestment Agent"), which currently is MMS
Escrow and Transfer Agency, Inc., will act on behalf of the participants in the
Reinvestment Plan (the "Participants"). Prior to the time that the offering
terminates, the Reinvestment Agent will invest all Distributions attributable to
Shares owned by Participants in Shares of the Company at the public offering
price per Share, which is $10.00 per Share. Thereafter, and until Listing, the
price per Share will be determined by (i) quarterly appraisal updates performed
by the Company based on a review of the existing appraisal and lease of each
Property, focusing on a re-examination of the capitalization rate applied to the
rental stream to be derived from that Property; and (ii) a review of the
outstanding Mortgage Loans and Secured Equipment Leases focusing on a
determination of present value by a re-examination of the capitalization rate
applied to the stream of payments due under the terms of each Mortgage Loan and
Secured Equipment Lease. The capitalization rate used by the Company and, as a
result, the price per Share paid by Participants in the Reinvestment Plan prior
to Listing will be determined by the Advisor in its sole discretion. The factors
that the Advisor will use to determine the capitalization rate include (i) its
experience in selecting, acquiring and managing restaurant properties similar to
the Properties; (ii) an examination of the conditions in the market; and (iii)
capitalization rates in use by private appraisers, to the extent that the
Advisor deems such factors appropriate, as well as any other factors that the
Advisor deems relevant or appropriate in making its determination. The Company's
internal accountants then convert the most recent quarterly balance sheet of the
Company from a "GAAP" balance sheet to a "fair market value" balance sheet.
Based on the "fair market value" balance sheet, the internal accountants then
assume a sale of the Company's assets and the liquidation of the Company in
accordance with its constitutive documents and applicable law and compute the
appropriate method of distributing the cash available after payment of
reasonable liquidation expenses, including closing costs typically associated
with the sale of assets and shared by the buyer and seller, and the creation of
reasonable reserves to provide for the payment of any contingent liabilities.
All Shares available for purchase under the Reinvestment Plan either are
registered pursuant to this Prospectus or will be registered under the
Securities Act of 1933 through a separate prospectus relating solely to the
Reinvestment Plan. Until this offering has terminated, Shares will be available
for purchase out of the additional 1,500,000 Shares registered with the
Securities and Exchange Commission (the "Commission") in connection with this
offering. See "The Offering -- Plan of Distribution." After the offering has
terminated, Shares will be available from any additional Shares (not expected to
exceed 1,500,000 Shares at any one time) which the Company elects to register
with the Commission for the Reinvestment Plan.
Stockholders who have received a copy of this Prospectus and
participate in this offering can elect to participate in and purchase Shares
through the Reinvestment Plan at any time and would not need to receive a
separate prospectus relating solely to the Reinvestment Plan. A person who
becomes a stockholder otherwise than by participating in this offering may
purchase Shares through the Reinvestment Plan only after receipt of a separate
prospectus relating solely to the Reinvestment Plan.
After the termination of the offering, the price per Share purchased
pursuant to the Reinvestment Plan shall be the fair market value of the Shares
based on quarterly appraisal updates of the Company's assets until such time, if
any, as Listing occurs. Upon Listing, the Shares to be acquired for the
Reinvestment Plan may be acquired either through such market or directly from
the Company pursuant to a registration statement relating to the Reinvestment
Plan, in either case at a per-Share price equal to the then-prevailing market
price on the national securities exchange
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or over-the-counter market on which the Shares are listed at the date of
purchase. The Company is unable to predict the effect which such a proposed
listing would have on the price of the Shares acquired through the Reinvestment
Plan.
INVESTMENT OF DISTRIBUTIONS
Distributions will be used by the Reinvestment Agent, promptly
following the payment date with respect to such Distributions, to purchase
Shares on behalf of the Participants from the Company. All such Distributions
shall be invested in Shares within 30 days after such payment date. Any
Distributions not so invested will be returned to Participants.
At this time, Participants will not have the option to make voluntary
contributions to the Reinvestment Plan to purchase Shares in excess of the
amount of Shares that can be purchased with their Distributions. The Board of
Directors reserves the right, however, to amend the Reinvestment Plan in the
future to permit voluntary contributions to the Reinvestment Plan by
Participants, to the extent consistent with the Company's objective of
qualifying as a REIT.
PARTICIPANT ACCOUNTS, FEES, AND ALLOCATION OF SHARES
For each Participant, the Reinvestment Agent will maintain a record
which shall reflect for each fiscal quarter the Distributions received by the
Reinvestment Agent on behalf of such Participant. The Company shall be
responsible for all administrative charges and expenses charged by the
Reinvestment Agent. Any interest earned on such Distributions will be paid to
the Company to defray certain costs relating to the Reinvestment Plan. The
administrative charge for each fiscal quarter will be the lesser of 5% of the
amount reinvested for the Participant or $2.50, with a minimum charge of $0.50.
The maximum annual charge is $10.00.
The Reinvestment Agent will use the aggregate amount of Distributions
to all Participants for each fiscal quarter to purchase Shares for the
Participants. If the aggregate amount of Distributions to Participants exceeds
the amount required to purchase all Shares then available for purchase, the
Reinvestment Agent will purchase all available Shares and will return all
remaining Distributions to the Participants within 30 days after the date such
Distributions are made. The purchased Shares will be allocated among the
Participants based on the portion of the aggregate Distributions received by the
Reinvestment Agent on behalf of each Participant, as reflected in the records
maintained by the Reinvestment Agent. The ownership of the Shares purchased
pursuant to the Reinvestment Plan shall be reflected on the books of the
Company.
Subject to the provisions of the Articles of Incorporation relating to
certain restrictions on and the effective dates of transfer, Shares acquired
pursuant to the Reinvestment Plan will entitle the Participant to the same
rights and to be treated in the same manner as those purchased by the
Participants in the offering. Accordingly, the Company will pay the Managing
Dealer Selling Commissions of 7.5% (subject to reduction under the circumstances
provided under "The Offering -- Plan of Distribution"), a marketing support and
due diligence fee of .5%, and Acquisition Fees of 4.5% of the purchase price of
the Shares sold pursuant to the Reinvestment Plan until the termination of the
offering. Thereafter, Acquisition Fees will be paid by the Company only in the
event that proceeds of the sale of Shares are used to acquire Properties. As a
result, aggregate fees payable to Affiliates of the Company will total between
8.0% and 12.5% of the proceeds of reinvested Distributions, up to 7.5% of which
may be reallowed to Soliciting Dealers.
The allocation of Shares among Participants may result in the ownership
of fractional Shares, computed to four decimal places.
REPORTS TO PARTICIPANTS
Within 60 days after the end of each fiscal quarter, the Reinvestment
Agent will mail to each Participant a statement of account describing, as to
such Participant, the Distributions reinvested during the quarter, the number of
Shares purchased during the quarter, the per Share purchase price for such
Shares, the total administrative charge paid by the Company on behalf of each
Participant (see "Participant Accounts, Fees, and Allocation of Shares" above),
and the total number of Shares purchased on behalf of the Participant pursuant
to the Reinvestment Plan. Until such time, if any, as Listing occurs, the
statement of account also will report the most recent fair market value of the
Shares, determined as described above. See "General" above.
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Tax information for income earned on Shares under the Reinvestment Plan
for the calendar year will be sent to each participant by the Company or the
Reinvestment Agent.
ELECTION TO PARTICIPATE OR TERMINATE PARTICIPATION
Stockholders of the Company who purchase Shares in this offering may
become Participants in the Reinvestment Plan by making a written election to
participate on their Subscription Agreements at the time they subscribe for
Shares. Any other stockholder who receives a copy of this Prospectus or a
separate prospectus relating solely to the Reinvestment Plan and who has not
previously elected to participate in the Reinvestment Plan may so elect at any
time by written notice to the Board of Directors of such stockholder's desire to
participate in the Reinvestment Plan. Participation in the Reinvestment Plan
will commence with the next Distribution made after receipt of the Participant's
notice, provided it is received at least ten days prior to the record date for
such Distribution. Subject to the preceding sentence, the election to
participate in the Reinvestment Plan will apply to all Distributions
attributable to the fiscal quarter in which the stockholder made such written
election to participate in the Reinvestment Plan and to all fiscal quarters
thereafter, whether made (i) upon subscription or subsequently for stockholders
who participate in this offering, or (ii) upon receipt of a separate prospectus
relating solely to the Reinvestment Plan for stockholders who do not participate
in this offering. Participants will be able to terminate their participation in
the Reinvestment Plan at any time without penalty by delivering ten days'
written notice to the Board of Directors.
A Participant who chooses to terminate participation in the
Reinvestment Plan must terminate his or her entire participation in the
Reinvestment Plan and will not be allowed to terminate in part. If a Participant
terminates his or her participation the Reinvestment Agent will send him or her
a check in payment for any fractional Shares in his or her account based on the
then market price of the Shares and the record books of the Company will be
revised to reflect the ownership of records of his or her whole Shares. There
are no fees associated with a Participant's terminating his or her interest in
the Reinvestment Plan. A Participant in the Reinvestment Plan who terminates his
or her interest in the Reinvestment Plan will be allowed to participate in the
Reinvestment Plan again by notifying the Reinvestment Agent and completing any
required forms.
The Board of Directors reserves the right to prohibit Qualified Plans
from participating in the Reinvestment Plan if such participation would cause
the underlying assets of the Company to constitute "plan assets" of Qualified
Plans. See "The Offering -- ERISA Considerations."
FEDERAL INCOME TAX CONSIDERATIONS
Stockholders subject to federal taxation who elect to participate in
the Reinvestment Plan will incur a tax liability for Distributions allocated to
them even though they have elected not to receive their Distributions in cash
but rather to have their Distributions held pursuant to the Reinvestment Plan.
Specifically, stockholders will be treated as if they have received the
Distribution from the Company and then applied such Distribution to purchase
Shares in the Reinvestment Plan. A stockholder designating a Distribution for
reinvestment will be taxed on the amount of such Distribution as ordinary income
to the extent such Distribution is from current or accumulated earnings and
profits, unless the Company has designated all or a portion of the Distribution
as a capital gain dividend. In such case, such designated portion of the
Distribution will be taxed as long-term capital gain.
AMENDMENTS AND TERMINATION
The Company reserves the right to renew, extend, or amend any aspect of
the Reinvestment Plan without the consent of stockholders, provided that notice
of the amendment is sent to Participants at least 30 days prior to the effective
date thereof. The Company also reserves the right to terminate the Reinvestment
Plan for any reason at any time by ten days' prior written notice of termination
to all Participants.
REDEMPTION OF SHARES
After the termination of the offering and prior to such time, if any,
as Listing occurs, any stockholder (other than the Advisor) may present all or
any portion equal to at least 25% of such stockholder's Shares to the Company
for redemption at any time, in accordance with the procedures outlined herein.
At such time, the Company may, at its option, subject to the conditions
described below, redeem such Shares presented for redemption for cash to the
extent it has sufficient net proceeds ("Reinvestment Proceeds") from the sale of
Shares
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under the Reinvestment Plan. There is no assurance that there will be
Reinvestment Proceeds available for redemption and, accordingly, a stockholder's
Shares may not be redeemed. The full amount of Reinvestment Proceeds
attributable to any quarter will be used to redeem Shares presented for
redemption during such quarter. If the full amount of Reinvestment Proceeds
available for any given quarter exceeds the amount necessary for such
redemptions, the remaining amount shall be held for subsequent redemptions
unless such amount is sufficient to acquire an additional Property (directly or
through a Joint Venture). In that event, the Company may use all or a portion of
such amount to acquire one or more additional Properties, or to make one or more
additional Mortgage Loans, provided that the Company (or, if applicable, the
Joint Venture) enters into a binding contract to purchase such Property or
Properties, or enter into such Mortgage Loan or Mortgage Loans, prior to payment
of the next Distribution and the Company's receipt of requests for redemption of
Shares. If the full amount of Reinvestment Proceeds for any given quarter is
insufficient to fund all of the requested redemptions, the Company will redeem
the Shares presented for redemption in order of receipt.
A stockholder (other than a resident of Nebraska) who wishes to have
his or her Shares redeemed must mail or deliver a written request on a form
provided by the Company and executed by the stockholder, its trustee or
authorized agent, to the Company. Nebraska stockholders must deliver the same
type of request to a broker-dealer registered in Nebraska and must have his or
her Shares redeemed through such broker-dealer, who will communicate directly
with the Company. Within 30 days following the Company's receipt of the
stockholder's request, the Company will forward to such stockholder the
documents necessary to effect the redemption, including any signature guarantee
the Company may require. The Company will effect such redemption for the
calendar quarter provided that the Company receives the properly completed
redemption documents relating to the Shares to be redeemed from the stockholder
at least one calendar month prior to the last day of the current calendar
quarter and has sufficient Reinvestment Proceeds to redeem such Shares. The
effective date of any redemption will be the last date during a quarter during
which the Company receives the properly completed redemption documents. As a
result, the Company anticipates that, assuming sufficient Reinvestment Proceeds,
the effective date of redemptions will be no later than thirty days after the
quarterly determination of the availability of Reinvestment Proceeds.
Upon the Company's receipt of notice for redemption of Shares, the
redemption price will be on such other terms as the Reinvestment Agent shall
determine. It is not anticipated that there will be a market for the Shares
before Listing occurs (although liquidity is not assured thereby). The
redemption plan will terminate, and the Company no longer shall accept Shares
for redemption, if and when Listing occurs. See "Risk Factors -- Investment
Risks -- Lack of Liquidity of Shares." Accordingly, in determining the "market
price" of the Shares for this purpose, it is expected that the purchase price
for Shares purchased from stockholders will be determined by reference to the
following factors, as well as any others deemed relevant or appropriate by the
Reinvestment Agent: (i) the price at which Shares have been purchased from
stockholders, either pursuant to the Reinvestment Plan or outside of the
Reinvestment Plan (to the extent the Company has information regarding the
prices paid for Shares purchased outside the Reinvestment Plan), (ii) the annual
statement of Share valuation provided to certain stockholders (see "Reports to
Stockholders"), and (iii) the price at which stockholders are willing to sell
their Shares. Shares purchased during any particular period of time therefore
may be purchased at varying prices. The Board of Directors will announce any
price adjustment and the time period of its effectiveness as part of its regular
communications with stockholders. Any Shares acquired pursuant to a redemption
will be retired and no longer available for issuance by the Company.
A stockholder may present fewer than all his or her Shares to the
Company for redemption, provided, however, that (i) the minimum number of Shares
which must be presented for redemption shall be at least 25% of his or her
Shares, and (ii) if such stockholder retains any Shares, he or she must retain
at least 250 Shares (100 Shares for an IRA, Keogh Plan or pension plan).
The Directors, in their sole discretion, may amend or suspend the
redemption plan at any time they determine that such amendment or suspension is
in the best interest of the Company. The Directors may suspend the redemption of
Shares if (i) they determine, in their sole discretion, that such redemption
impairs the capital or the operations of the Company; (ii) they determine, in
their sole discretion, that an emergency makes such redemption not reasonably
practical; (iii) any governmental or regulatory agency with jurisdiction over
the Company so demands for the protection of the stockholders; (iv) they
determine, in their sole discretion, that such redemption would be unlawful; or
(v) they determine, in their sole discretion, that such redemption, when
considered with all other redemptions, sales, assignments, transfers and
exchanges of Shares in the Company, could cause direct or indirect ownership of
Shares of the Company to become concentrated to an extent which would prevent
the Company from qualifying as a REIT under the Code. For a discussion of the
tax treatment of such redemptions, see "Federal Income Tax Considerations --
Taxation of Stockholders."
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BUSINESS
GENERAL
The Company intends to purchase existing fast-food, family-style, and
casual dining restaurant Properties, including land and buildings, as well as
Properties upon which such restaurants are to be constructed, the land
underlying the restaurant building with the building owned by the tenant or a
third party, and the building only with the land owned by a third party. The
Company may provide financing (the "Mortgage Loans") for the purchase of
buildings, generally by tenants that lease the underlying land from the Company.
To a lesser extent, the Company also intends to offer furniture, fixture and
equipment ("Equipment") financing to operators of Restaurant Chains pursuant to
which the Company will finance, through direct financing leases, the Equipment
(collectively, the "Secured Equipment Leases.")
The Properties, which typically will be freestanding and will be
located across the United States, will be leased on a "triple-net" basis to
creditworthy operators of the Restaurant Chains to be selected by the Advisor
and approved by the Board of Directors. Each Property acquisition and Mortgage
Loan commitment by the Company will be submitted to the Board of Directors for
approval. Properties purchased by the Company are expected to be leased under
arrangements requiring base annual rent equal to a specified percentage of the
Company's cost of purchasing a particular Property, with automatic rent
increases, as well as percentage rent based on gross sales. See "Description
of Leases -- Computation of Lease Payments," below.
It is expected that the Company will invest in Properties of selected
Restaurant Chains that are national and regional restaurant chains, primarily
fast-food, family-style, and casual dining chains. Fast-food restaurants feature
quality food and quick service, which often includes drive-through service, and
offer a variety of menu items such as hamburgers, steaks, seafood, chili, pizza,
pasta dishes, chicken, hot and cold sandwiches, and salads. Family- style
restaurants feature services that generally are associated with full-service
restaurants, such as full table service and cooked-to-order food, but at more
moderate prices. The casual dining (or dinner house) concept features a variety
of popular contemporary foods, full table service, moderate prices, and
surroundings that are appealing to families. The casual dining segment of the
restaurant industry, like the family-style segment, features services that
generally are associated with the full-service restaurant category. According to
forecasts appearing in the January 1, 1996 issue of Restaurants and
Institutions, it is projected that the casual dining segment of full-service
restaurants sales will experience 4.1% real growth in sales this year, with
sales predicted to reach $46 billion. The top 15 casual dining chains have a
total of 4,483 restaurants throughout the United States.
The restaurant industry is one of the largest industries in the United
States in volume of sales and number of employees (approximately 9 million
persons) and includes fast-food outlets, cafeterias, lunchrooms, convenience
stores, family-style restaurants, casual dining facilities, full-service
restaurants, and contract and industrial feeders. By the year 2000, food service
sales are expected to exceed $392 billion. Industry publications project that
restaurant industry sales will increase from $173.7 billion in 1985 to $313
billion in 1996. Restaurant industry sales for 1995 are projected to be $298
billion. In 1995, nominal growth, which is comprised of real growth and
inflationary growth, was 5.2% and is estimated to be 5.0% in 1996. Real growth
of the restaurant industry in 1995 was 2.3%, and industry analysts currently
estimate that the restaurant industry will achieve 2.4% real growth in 1995;
however, according to the National Restaurant Association, fast-food restaurants
should outpace the industry average for real growth, with a projected 6.7%
increase over 1995. Sales in this segment of the restaurant industry are
projected to be $100.2 billion for 1996.
The Company will invest in the fast-food, family-style, and casual
dining segments of the restaurant industry, the most rapidly growing segments in
recent years. According to the National Restaurant Association, 51% of adults
eat at a quick-service restaurant and 42% of adults patronize a
moderately-priced family restaurant at least once each week. In addition, the
National Restaurant Association indicates that Americans spend approximately 44
cents of every food dollar on dining away from home. Surveys published in
Restaurant Business indicate that families with children choose quick-service
restaurants four out of every five times they dine out. Additionally, according
to The Wall Street Journal (May 11, 1992), the average American spends $19,791
on fast-food in a lifetime. Further, according to Nation's Restaurant News, the
100 largest restaurant chains are posting an average of 7.38% growth in their
systemwide sales figures for 1995. Casual-theme dining concepts are among the
chains showing the strongest growth. In 1995, the sandwich segment is expected
to experience sales growth of 7.16% over 1994 figures, and, the casual dining
segment is expected to experience systemwide sales growth in 1995 of 12.01%,
compared to 14.8% in 1993. Management believes that the Company will have the
opportunity to participate in this growth through the ownership of Properties
leased to operators of the Restaurant Chains.
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The fast-food, family-style and casual dining segments of the
restaurant industry have demonstrated their ability to adapt to changes in
consumer preferences, such as health and dietary issues, decreases in the
disposable income of consumers and environmental awareness, through various
innovative techniques, including special value pricing and promotions, increased
advertising, menu changes featuring low-calorie, low-cholesterol menu items, and
new packaging and energy conservation techniques.
The table set forth below provides information with respect to
Restaurant Chains in which Affiliates of the Company (consisting of a public
REIT, 17 public partnerships and 7 private partnerships) have invested, as of
December 31, 1995:
<TABLE>
<CAPTION>
Aggregate
Dollars Invested by Percentage of Number of
Name Company Affiliates Dollars Invested Prior Programs
- ----- ------------------- ---------------- --------------
<S> <C>
Golden Corral $95,619,000 15.3% 22
Burger King 88,306,000 14.1% 22
Denny's 85,637,000 13.7% 19
Jack in the Box 59,652,000 9.5% 12
Hardee's 58,599,000 9.4% 13
Long John Silver's 32,029,000 5.1% 6
Shoney's 31,871,000 5.1% 11
Wendy's 24,593,000 3.9% 13
Checkers 21,263,000 3.4% 7
Perkins 16,311,000 2.6% 9
KFC 13,642,000 2.2% 10
TGI Friday's 13,918,000 2.2% 6
Pizza Hut 12,404,000 2.0% 7
Popeyes 9,357,000 1.5% 7
Taco Bell 6,428,000 1.0% 5
Ponderosa 3,210,000 0.5% 3
Captain D's 2,819,000 0.5% 4
</TABLE>
Management intends to structure the Company's investments to allow it
to participate, to the maximum extent possible, in any sales growth in these
industry segments, as reflected in the Properties that it owns. The Company
therefore intends to structure all of its leases with percentage rent
requirements which are based on gross sales of the particular restaurant. Gross
sales may increase even absent real growth because increases in the restaurant's
costs typically are passed on to the consumers through increased prices, and
increased prices are reflected in gross sales. In an effort to provide regular
cash flow to the Company, the Company intends to structure its leases to provide
a minimum level of rent, with automatic increases in the minimum rent, which is
payable regardless of the amount of gross sales at a particular Property. The
Company also will endeavor to maximize growth and minimize risks associated with
ownership and leasing of real estate that operates in these industry segments
through careful selection and screening of its tenants (as described in
"Standards for Investment" below) in order to reduce risks of default;
monitoring statistics relating to restaurant chains and continuing to develop
relationships in the industry in order to reduce certain risks associated with
investment in real estate; and acquisition of properties which will not be
encumbered prior to Listing. See "Standards for Investment" below for a
description of the standards which the Board of Directors will employ in
selecting Restaurant Chains and particular restaurant Properties within a
Restaurant Chain for investment.
Management expects to acquire Properties in part with a view to
diversification among Restaurant Chains and the geographic location of the
Properties. There are no restrictions on the geographic area or areas within the
United States in which Properties acquired by the Company may be located. It is
anticipated that the Properties acquired by the Company will be located in
various states and regions within the United States.
The Company believes that freestanding, "triple-net" leased restaurant
properties of the type in which the Company will invest are attractive to
tenants because freestanding properties typically offer high visibility to
passing traffic, ease of access from a busy thoroughfare, tenant control over
the site to set hours of operation and maintenance standards and distinctive
building designs conductive to customer name recognition.
-35-
<PAGE>
On March 5, 1996, the Company entered into a $15,000,000 line of credit
and security agreement (the "Loan"), the proceeds of which will be used to fund
Secured Equipment Leases to operators of Restaurant Chains and to pay the
Secured Equipment Lease Servicing Fee equal to 2% of the purchase price of the
Equipment subject to each Secured Equipment Lease. See "Business - Borrowings"
for a description of the Loan. The Secured Equipment Leases will consist
primarily of leases of equipment. The Company has neither identified any
prospective operators of Restaurant Chains that will participate in such
financing arrangements nor negotiated any specific terms of a Secured Equipment
Lease. The Company cannot predict terms and conditions of the Secured Equipment
Leases, although the Company expects that the Secured Equipment Leases will (i)
have lease terms that equal or exceed the useful life of the subject Equipment
(although such lease terms will not exceed 7 years), (ii) include an option for
the lessee to acquire the subject Equipment at the end of the lease term for a
nominal fee, and (iii) provide that the Company and the lessees will each treat
the Secured Equipment Leases as loans secured by personal property for federal
income tax purposes. See "Federal Income Tax Considerations -- Characterization
of Secured Equipment Leases." In addition, the Company expects that each of the
Secured Equipment Leases will be secured by the Equipment to which it relates.
Payments received from lessees under Secured Equipment Leases will be treated as
payments of principal and interest. All Secured Equipment Leases will be
negotiated by the Advisor and approved by the Board of Directors including a
majority of the Independent Directors.
As of April 9, 1996, the Company had acquired 48 Properties (including
21 Properties which consist of land and building, one Property through a joint
venture arrangement which consists of land and building, three Properties which
consist of building only, and 23 Properties which consist of land only), and had
initial commitments to acquire 12 additional Properties (including one Property
which is land and building, one Property which is building only, and 10
Properties which are land only). In connection with the acquisition of the 23
Properties which are land only, the Company has made a single Mortgage Loan
secured by the buildings and other improvements on such Properties. In
connection with the initial commitments with the ten Properties consisting of
land only, the Company anticipates providing mortgage financing to the tenant
which will be collateralized by the building improvements. If the Mortgage Loan
is executed, it is expected to be executed under substantially the same terms
described in "Business - Mortgage Loans." However, as of April 9, 1996, the
Company had not entered into any arrangements that create a reasonable
probability that the Company will enter into any Secured Equipment Lease.
Moreover, no Secured Equipment Lease lessees have been specifically identified.
The Company has undertaken to supplement this Prospectus during the
offering period to disclose the acquisition of Properties at such time as the
Board of Directors believes that a reasonable probability exists that any such
Property will be acquired by the Company. Based upon the experience and
acquisition methods of the Affiliates of the Company and the Advisor this
normally will occur, with regard to acquisition of Properties, as of the date on
which (i) a commitment letter is executed by a proposed lessee, (ii) a
satisfactory credit underwriting for the proposed lessee has been completed, and
(iii) a satisfactory site inspection has been completed. The initial disclosure
of any proposed acquisition, however, cannot be relied upon as an assurance that
the Company ultimately will consummate such proposed acquisition or that the
information provided concerning the proposed acquisition will not change between
the date of such supplement and the actual purchase or extension of financing.
Acquisition of a restaurant Property generally involves an investment
in land and building of approximately $400,000 to $1,250,000, although higher or
lower figures for individual Properties are possible. The Company estimates that
it will acquire at least 140 to 160 Properties, based on an estimated average
purchase price of $800,000 to $900,000 per Property, if the maximum of
15,000,000 Shares is sold. Management has estimated the average purchase price
of a Property based on its past experience in acquiring similar properties and
in light of current market conditions. In certain cases, the Company may become
a co-venturer in a Joint Venture that will own the Property. In each such case,
the Company's cost to purchase an interest in such Property will be less than
the total purchase price and the Company therefore will be able to acquire
interests in a greater number of Properties. Management estimates that
approximately 30% to 50% of the Company's investment in a Property generally
will be for the cost of land, and 50% to 70% generally will be for the cost of
the building. See "Joint Venture Arrangements" below and "Risk Factors --
Investment Risks -- Possible Lack of Diversification."
Although management cannot estimate the number of Mortgage Loans that
may be entered into, management currently expects to invest approximately 7% to
10% of Gross Proceeds of the offering, assuming the maximum of 15,000,000 Shares
is sold, in Mortgage Loans.
Although management cannot estimate the number of Secured Equipment
Leases that may be entered into, it expects to invest an amount equal to 10% of
the Gross Proceeds of the offering in Secured Equipment Leases and management
has undertaken to ensure that the total value of all Secured Equipment Leases
will not exceed 25% of
-36-
<PAGE>
the Company's total assets, and that Secured Equipment Leases to a single
lessee, in the aggregate, will not exceed 5% of total assets.
PROPERTY ACQUISITIONS
From inception through April 9, 1996, the Company undertook
negotiations to acquire certain properties, of which 61 properties were
considered to be reasonably probable for acquisition. These 61 properties were
four Denny's properties (one in each of Shawnee, Oklahoma, Grand Rapids,
Michigan, and Fort Worth, and Pasadena, Texas); eight Golden Corral properties
(one in each of Carlsbad, New Mexico, Tampa, Florida, Dover, Delaware, Columbus,
Ohio and Fort Worth, Corsicana, Universal City, and Cleburne, Texas); two Jack
in the Box properties (one in each of Los Angeles, California and Houston,
Texas); two Kenny Rogers Roasters properties (one in each of Franklin, Tennessee
and Grand Rapids, Michigan); four TGI Friday's properties (one in each of Orange
and Hamden, Connecticut, and Hazlet and Marlboro, New Jersey); three Boston
Market properties (one in each of Grand Island, Nebraska, Dubuque, Iowa and
Chanhassen, Minnesota); four Burger King properties (one in each of Oak Lawn,
Burbank, and Indian Head Park, Illinois, and Highland, Indiana), one Wendy's
Property (in Knoxville, Tennessee), and 33 Pizza Hut Properties (one in each of
Adrian, Lambertville and Monroe, Michigan, Bedford, Bowling Green, East
Cleveland, Euclid, Fairview Park, Defiance, Mayfield Heights, Middleburg
Heights, North Olmstead, Norwalk, Sandusky, Seven Hills, Strongsville, and
Marietta, Ohio, three in Cleveland, and four in Toledo, Ohio, and one in each of
Beaver, Bluefield, Huntington, Hurricane, Milton, Parkersburg, and Ronceverte,
West Virginia, and two in Beckley, West Virginia).
Between June 30, 1995 and April 9, 1996, the Company acquired 48 of the
61 properties, including 21 Properties which consist of land and building, one
Property through a joint venture arrangement which consists of land and
building, three Properties consisting of building only and 23 Properties
consisting of land only. These 48 Properties are the two Jack in the Box
Properties in Los Angeles, California, and Houston, Texas; three of the TGI
Friday's Properties in Orange, Connecticut, and Marlboro and Hazlet, New Jersey;
the eight Golden Corral Properties (in Cleburne, Universal City, Corsicana and
Fort Worth, Texas, Dover, Delaware, Carlsbad, New Mexico, Tampa, Florida, and
Columbus, Ohio); the two Kenny Rogers Roasters Properties (in Grand Rapids,
Michigan, and Franklin, Tennessee); three of the Denny's Properties (in
Pasadena, Texas, Shawnee, Oklahoma, and Grand Rapids, Michigan); the three
Boston Market Properties (in Grand Island, Nebraska, Dubuque, Iowa, and
Chanhassen, Minnesota); four of the Burger King Properties (in Oak Lawn,
Burbank, and Indian Head Park, Illinois, and Highland, Indiana); and 23 of the
Pizza Hut Properties (one in each of Adrian, Lambertville and Monroe, Michigan,
and Bedford, Bowling Green, East Cleveland, Euclid, Fairview Park, Defiance,
Mayfield Heights, Middleburg Heights, North Olmstead, Norwalk, Sandusky, Seven
Hills, and Strongsville, Ohio, three in Cleveland, Ohio, and four in Toledo,
Ohio) (hereinafter referred to as the "23 Pizza Hut Properties"). The Jack in
the Box Property in Los Angeles, California, the Golden Corral Properties in
Cleburne and Universal City, Texas, Carlsbad, New Mexico, and Columbus, Ohio,
the Kenny Rogers Roasters Properties in Grand Rapids, Michigan, and Franklin,
Tennessee, and the Denny's Properties in Pasadena, Texas, Shawnee, Oklahoma, and
Grand Rapids, Michigan, were acquired from Affiliates of the Company. The
Affiliates had purchased and temporarily held title to these Properties to
facilitate their acquisition by the Company. The Properties were acquired by the
Company for an aggregate purchase price of approximately $7,443,000 from
Affiliates of the Company. Each Property, with the exception of the Jack in the
Box in Los Angeles, California, was acquired at a cost equal to the cost of the
Property to the Affiliate (including carrying costs) due to the fact that these
amounts were less than each Property's appraised value. The Jack in the Box in
Los Angeles, California, was acquired by the Company at a cost computed by
capitalizing projected cash flows of the Property, resulting in a purchase price
that was less than either the cost to the Affiliate (including carrying costs)
or the Property's appraised value.
In addition, one of these 48 Properties, the Golden Corral Property in
Tampa, Florida, was acquired pursuant to a joint venture arrangement between the
Company and an unaffiliated entity.
In connection with the purchase of 25 of these 48 Properties, the
Company or the joint venture, as lessor, entered into long-term lease agreements
with unaffiliated lessees. The general terms of the lease agreements are
described in the section of the Prospectus entitled "Business - Description of
Property Leases." In connection with the acquisition of the buildings relating
to the TGI Friday's Properties in Orange, Connecticut, and Marlboro and Hazlet,
New Jersey, the Company has also entered into tri-party agreements with the
owner of the land and the ground lessee. The tri-party agreements provide that
the ground lessee is responsible for all obligations under the ground lease and
provides certain rights to the Company relating to the maintenance of its
interest in the buildings in the event of a default by the lessee under the
terms of the ground leases.
-37-
<PAGE>
For Properties that are or were to be constructed or renovated, the
Company or the joint venture has entered into development and indemnification
and put agreements with the lessees. The general terms of these agreements are
described in the section of the Prospectus entitled "Business - Site Selection
and Acquisition of Properties - Construction and Renovation."
In connection with the 23 Pizza Hut Properties, the Company acquired
the land and is leasing these 23 parcels to the lessee, Castle Hill Holdings V,
L.L.C. ("Castle Hill"), pursuant to a master lease agreement (the "Master Lease
Agreement"). Castle Hill has subleased the 23 Pizza Hut Properties to one of its
affiliates, Midland Foods Services, L.L.C., which is the operator of the
restaurants. The general terms of the Master Lease Agreement are similar to
those described in the section of the Prospectus entitled "Business -
Description of Property Leases." 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 23 Pizza Hut Properties. In connection with the
acquisition of the 23 Pizza Hut Properties, the Company provided mortgage
financing of $8,475,000 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 23 Pizza Hut Properties. The Master Mortgage Note
bears interest at a rate of 10.75% per annum and principal and interest are due
in equal monthly installments over 20 years starting March 1, 1996. The Master
Mortgage Note equals approximately 87 percent of the appraised value of the
related buildings. Management believes that, due to the fact that the Company
owns the underlying land relating to the 23 Pizza Hut Properties and due to
other underwriting criteria, the Company has sufficient collateral for the
Master Mortgage Note.
One of the 61 properties the Company undertook negotiations to acquire,
the Denny's property in Fort Worth, Texas, was no longer considered reasonably
probable for acquisition by the Company, as of November 17, 1995. A delay in the
closing of this property caused the investment in such property to be more
appropriate for an Affiliate of the Company, which therefore purchased such
property. The acquisition of this property by the Affiliate was in accordance
with the conflict resolution procedures of the Company and the Affiliate. See
"Conflicts of Interest - Certain Conflict Resolution Procedures."
As of April 9, 1996, the Company had initial commitments to acquire 12
properties, including one Wendy's property which is land and building, one TGI
Friday's property which is a building only and 10 Pizza Hut properties which are
land 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
12 of these properties are expected to be entered into on substantially the same
terms described in the Prospectus in the section entitled "Business -
Description of Property Leases," except as described below.
In connection with the TGI Friday's property in Hamden, Connecticut,
the Company anticipates owning only the building and not the underlying land.
However, the Company anticipates entering into a tri-party agreement with the
ground lessee and the owner of the land in order to provide the Company with
certain rights with respect to the land on which the building is located.
In connection with the ten Pizza Hut properties, the Company
anticipates acquiring the land and leasing it to the tenant, Castle Hill,
pursuant to a master lease agreement for these ten properties. The tenant is
expected to own the buildings for these ten Pizza Hut properties. In connection
therewith, the Company anticipates providing mortgage financing to the tenant
which will be collateralized by the building improvements. If the mortgage note
is executed, it is expected to be executed under substantially the same terms
described in "Business -Mortgage Loans."
Set forth below are summarized terms expected to apply to the leases of
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.
-38-
<PAGE>
<TABLE>
<CAPTION>
Lease Term and
Property Renewal Options Minimum Annual Rent Percentage Rent Option to Purchase
<S> <C>
Pizza Hut (1)(3) 20 years; two ten- 11% of the None at any time
Beaver, WV year renewal options Company's total after the
Land only cost to purchase seventh year
the land;
increases by 10%
after the fifth
and tenth lease
years and 12%
after the
fifteenth lease
year (2)
Pizza Hut (1)(3) 20 years; two ten- 11% of the None at any time
Beckley, WV (#1) year renewal options Company's total after the
Land only cost to purchase seventh year
the land;increases
by 10% after the
fifth and tenth
lease years and 12%
after the
fifteenth lease
year (2)
Pizza Hut (1)(3) 20 years; two ten- 11% of the None at any time
Beckley, WV (#2) year renewal options Company's total after the
Land only cost to purchase seventh year
the land;
increases by 10%
after the fifth
and tenth lease
years and 12%after the
fifteenth lease
year (2)
Pizza Hut (1)(3) 20 years; two ten- 11% of the None at any time
Bluefield, WV year renewal options Company's total after the
Land only cost to purchase seventh year
the land;
increases by 10%
after the fifth
and tenth lease
years and 12%
after the
fifteenth lease
year (2)
Pizza Hut (1)(3) 20 years; two ten- 11% of the None at any time
Huntington, WV year renewal options Company's total after the
Land only cost to purchase seventh year
the land;
increases by 10%
after the fifth
and tenth lease
years and 12%
after the
fifteenth lease
year (2)
-57-
<PAGE>
<CAPTION>
Lease Term and
Property Renewal Options Minimum Annual Rent Percentage Rent Option to Purchase
<S> <C>
Pizza Hut (1)(3) 20 years; two ten- 11% of the None at any time
Hurricane, WV year renewal options Company's total after the
Land only cost to purchase seventh year
the land;
increases by 10%
after the fifth
and tenth lease
years and 12%
after the
fifteenth lease
year (2)
Pizza Hut (1)(3) 20 years; two ten- 11% of the None at any time
Milton, WV year renewal options Company's total after the
Land only cost to purchase seventh year
the land;increases
by 10% after the
fifth and tenth
lease years and 12%
after the
fifteenth lease
year (2)
Pizza Hut (1)(3) 20 years; two ten- 11% of the None at any time
Parkersburg, WV year renewal options Company's total after the
Land only cost to purchase seventh year
the land;
increases by 10%
after the fifth
and tenth lease
years and 12%
after the fifteenth
lease year (2)
Pizza Hut (1)(3) 20 years; two ten- 11% of the None at any time
Ronceverte, WV year renewal options Company's total after the
Land only cost to purchase seventh year
the land;
increases by 10%
after the fifth
and tenth lease
years and 12%
after the
fifteenth lease
year (2)
Pizza Hut (1)(3) 20 years; two ten- 11% of the None at any time
Marietta, OH year renewal options Company's total after the
Land only cost to purchase seventh year
the land;
increases by 10%
after the fifth
and tenth lease
years and 12%
after the
fifteenth lease
year (2)
-60-
<PAGE>
<CAPTION>
Lease Term and
Property Renewal Options Minimum Annual Rent Percentage Rent Option to Purchase
<S> <C>
TGI Friday's (5) 12 years 15.043% of Total None at any time
Hamden, CT Cost; increases by after the third
Restaurant to be 10% after the lease year (6)
constructed fifth lease year
and after every
five years
thereafter during
the lease term (4)
Wendy's 20 years 10.25% of Total for each lease at any time
Knoxville, TN Cost; increases to year, (i) 6% of after the
Restaurant to be 10.76% of Total annual gross seventh lease
constructed Cost during the sales minus (ii) year
fourth through the minimum
sixth lease years, annual rent for
increases to such lease year
11.95% of Total
Cost during the
seventh through
tenth lease years,
increases to
12.70% of Total
Cost during the
eleventh through
fifteenth lease
years and
increases to
13.97% of Total
Cost during the
sixteenth through
twentieth lease
years (4)
</TABLE>
FOOTNOTES:
(1) The lease relating to this property is a land lease only. The Company
anticipates entering into a master mortgage note receivable collateralized
by the Beaver, Beckley #1, Beckley #2, Bluefield, Huntington, Hurricane,
Milton, Parkersburg and Ronceverte, West Virginia, and Marietta, Ohio
building improvements.
(2) If the lessee exercises one or both of its renewal options, minimum annual
rent will increaseby 12% after the expiration of the original lease term
and after five years thereafter duringany subsequent lease term.
(3) The Company anticipates entering into a master lease agreement for the
Beaver, Beckley #1, Beckley #2, Bluefield, Huntington, Hurricane, Milton,
Parkersburg, and Ronceverte, West Virginia, and the Marietta, Ohio
properties.
(4) The "Total Cost" is equal to the sum of (i) the purchase price of the
property, (ii) closing costs, and (iii) actual development costs incurred
under the development agreement, and in the case of the TGI Friday's
Property in Hamden, Connecticut, (iv) "constructing financing costs" during
the development period.
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<PAGE>
(5) The Company anticipates owning the building only for this property. The
Company will not ownthe underlying land; although, the Company anticipates
entering into a tri-party agreement withthe 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.
(6) If the lessee exercises its purchase option after the third lease year and
before the eleventh lease year, the purchase price to be paid by the lessee
shall be equal to the net present value of the monthly lease rental
payments for the remainder of the lease term (including previous and
scheduled rent increases) discounted at the lesser of (i) 11% per annum, or
(ii) the then- current annual yield on 7-year Treasury securities plus
4.5%, plus the full amount of any late fees, default interest, enforcement
costs or other sums otherwise due or payable by the lessee under the lease.
If the lessee exercises its option after the tenth lease year, the purchase
price to be paid by the lessee shall be equal to the net present value of
the monthly lease payments for the remainder of the lease term (based,
however, for purposes hereof on the initial monthly installment amount of
annual rental and not including previous and scheduled increases)
discounted at 11% per annum, plus the full amount of any late fees, default
interest, enforcement costs or other sums otherwise due or payable by the
lessee under the lease.
-65-
<PAGE>
The following table sets forth the location of the 48 Properties acquired
by the Company, from June 30, 1995, through April 9, 1996, including the 23
Pizza Hut Properties in which the Company acquired the land only and the three
TGI Friday's Properties in which the Companyacquired the building only, a
description of the competition, and a summary of the principal terms of the
acquisition and lease of each Property.
-66-
<PAGE>
PROPERTY ACQUISITIONS
From Inception through April 9, 1996
<TABLE>
<CAPTION>
Lease Expira-
Purchase Date tion and
Property Location and Competition Price (1) Acquired Renewal Options
<S> <C>
Jack in the Box (23) $1,130,401 6/30/95 7/2011; four five-
(the "Los Angeles Property") (excluding year renewal
Existing restaurant closing costs) options
The Los Angeles Property
is located at the northwest
corner of 30th Street and
Figueroa Street in Los Angeles,
Los Angeles County, California,
in an area of mixed residential,
retail, office, and industrial
development. Other fast-food
and family-style restaurants
located in proximity to the Los
Angeles Property include a
Jack in the Box, a KFC, an Arby's,
a Carl's Jr. Hamburger, an
El Pollo Loco, a Little Caesar's Pizza,
and several local restaurants.
TGI Friday's (21) (4) 7/19/95 11/2007
(the "Orange Property") (4)
Restaurant to be constructed
The Orange Property is located
at the southeast quadrant of the intersection of
Lambert Road and Boston Post Road in Orange,
New Haven County, Connecticut, in an area of
primarily retail, commercial, office,
industrial, and residential development.
Other fast-food and family-style restaurants
located in proximity to the Orange Property
include an Arby's, a Wendy's, a Subway
Sandwich Shop, a Kenny Rogers Roasters, and
several local restaurants.
<CAPTION>
Minimum Option
Property Location and Competition Annual Rent (2) Percentage Rent To Purchase
<S> <C>
Jack in the Box (23) $114,756; increases for each lease Not applicable
(the "Los Angeles Property") by 10% after the year, 5% of
Existing restaurant fifth lease year and annual gross
after every five sales, less the
The Los Angeles Property years thereafter minimum annual
is located at the northwest during the lease term rent payable in
corner of 30th Street and that lease year (3)
Figueroa Street in Los Angeles,
Los Angeles County, California,
in an area of mixed residential,
retail, office, and industrial
development. Other fast-food
and family-style restaurants
located in proximity to the Los
Angeles Property include a
Jack in the Box, a KFC, an Arby's,
a Carl's Jr. Hamburger, an
El Pollo Loco, a Little Caesar's Pizza,
and several local restaurants.
TGI Friday's (21) 15.0427% of Total None at any time
(the "Orange Property") Cost; increases by after the
Restaurant to be constructed 10% after the fifth third lease
lease year and after year (6)
The Orange Property is located every five years
at the southeast quadrant of the intersection of thereafter during the
Lambert Road and Boston Post Road in Orange, lease term (5)
New Haven County, Connecticut, in an area of
primarily retail, commercial, office,
industrial, and residential development.
Other fast-food and family-style restaurants
located in proximity to the Orange Property
include an Arby's, a Wendy's, a Subway
Sandwich Shop, a Kenny Rogers Roasters, and
several local restaurants.
-69-
<PAGE>
<CAPTION>
Lease Expira-
Purchase Date tion and
Property Location and Competition Price (1) Acquired Renewal Options
<S> <C>
Golden Corral (22) $926,370 8/04/95 8/2015; two five-
(the "Dover Property") (excluding year renewal
Restaurant to be constructed closing and options
development
The Dover Property is located at the southeast costs) (4)
quadrant of the intersection of U.S. Highway
13 and Townsend Boulevard in Dover, Kent
County, Delaware, in an area of mixed retail,
commercial, and residential development.
Other fast-food and family-style restaurants
located in proximity to the Dover Property
include a Ponderosa, a Pizza Hut, a Hooters, a
Taco Bell, a Burger King, an Arby's, an Olive
Garden, a McDonald's, a Lone Star Steakhouse,
a Friendly's, a KFC, a Chi Chi's, a Red
Lobster, and a TGI Friday's.
Golden Corral (7) $298,786 8/04/95 12/2010; four five-
(the "Cleburne Property") (excluding year renewal
Restaurant to be constructed closing and options
development
The Cleburne Property is located on the costs) (4)
southwest quadrant of West Henderson Street
and Colonial Drive in Cleburne, Johnson
County, Texas, in an area of mixed retail,
commercial, residential, and professional
development. Other fast-food and family-style
restaurants located in proximity to the
Cleburne Property are a Subway Sandwich Shop,
a Little Caesar's Pizza, a Burger King, a Long
John Silver's, a KFC, a Whataburger, a Dairy
Queen, a Pizza Hut, a Taco Bell, a Jack in the
Box, and several local restaurants.
<CAPTION>
Minimum Option
Property Location and Competition Annual Rent (2) Percentage Rent To Purchase
<S> <C>
Golden Corral (22) 11.25% of Total Cost; (12) at any time
(the "Dover Property") increases by 12% after the
Restaurant to be constructed after the fifteenth seventh lease
lease year (5) year
The Dover Property is located at the southeast
quadrant of the intersection of U.S. Highway
13 and Townsend Boulevard in Dover, Kent
County, Delaware, in an area of mixed retail,
commercial, and residential development.
Other fast-food and family-style restaurants
located in proximity to the Dover Property
include a Ponderosa, a Pizza Hut, a Hooters, a
Taco Bell, a Burger King, an Arby's, an Olive
Garden, a McDonald's, a Lone Star Steakhouse,
a Friendly's, a KFC, a Chi Chi's, a Red
Lobster, and a TGI Friday's.
Golden Corral (7) 10.75% of Total Cost for each lease (8)
(the "Cleburne Property") (5)(11) year, 5% of the
Restaurant to be constructed amount by which
annual gross
The Cleburne Property is located on the sales exceed
southwest quadrant of West Henderson Street $1,975,989
and Colonial Drive in Cleburne, Johnson (3)(9)
County, Texas, in an area of mixed retail,
commercial, residential, and professional
development. Other fast-food and family-style
restaurants located in proximity to the
Cleburne Property are a Subway Sandwich Shop,
a Little Caesar's Pizza, a Burger King, a Long
John Silver's, a KFC, a Whataburger, a Dairy
Queen, a Pizza Hut, a Taco Bell, a Jack in the
Box, and several local restaurants.
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<PAGE>
<CAPTION>
Lease Expira-
Purchase Date tion and
Property Location and Competition Price (1) Acquired Renewal Options
<S> <C>
Kenny Rogers Roasters (14) $834,897 8/04/95 5/2015; two five-
(the "Grand Rapids #1 Property") (excluding year renewal
Existing restaurant closing costs) options
(10)
The Grand Rapids #1 Property is located just
east of the intersection of Leonard Street,
N.E. and Fuller Avenue, N.E., in Grand Rapids,
Kent County, Michigan, in an area of mixed
retail and residential development. Other
fast-food and family-style restaurants located
in proximity to the Grand Rapids #1 Property
include a McDonald's and several local
restaurants.
Golden Corral (7) $297,292 8/04/95 12/2010; four five-
(the "Universal City Property") (excluding year renewal
Restaurant to be constructed closing and options
development
The Universal City Property is located on the costs) (4)
southeast quadrant of Pat Booker Road and
Coronado Boulevard, in Universal City, Bexar
County, Texas, in an area of mixed retail,
commercial, residential, and professional
development. Other fast-food and family-style
restaurants located in proximity to the
Universal City Property include a Pizza Hut, a
Long John Silver's, a Little Caesar's Pizza,
an Arby's, a McDonald's, a Subway Sandwich
Shop, a Rally's, a Wendy's, a Taco Bell, a
Dunkin Donuts, a Church's Fried Chicken, a
Jack in the Box, and several local
restaurants.
<CAPTION>
Minimum Option
Property Location and Competition Annual Rent (2) Percentage Rent To Purchase
<S> <C>
Kenny Rogers Roasters (14) $89,751; increases by for each lease at any time
(the "Grand Rapids #1 Property") 12% after the seventh year, 5% of after the
Existing restaurant lease year and after annual gross seventh lease
every seven years sales, less the year
The Grand Rapids #1 Property is located just there-after during minimum annual
east of the intersection of Leonard Street, the lease term rent payable in
N.E. and Fuller Avenue, N.E., in Grand Rapids, that lease year
Kent County, Michigan, in an area of mixed (3)
retail and residential development. Other
fast-food and family-style restaurants located
in proximity to the Grand Rapids #1 Property
include a McDonald's and several local
restaurants.
Golden Corral (7) 10.75% of Total for each lease (8)
(the "Universal City Property") Cost (5)(11) year, 5% of the
Restaurant to be constructed amount by
which annual
The Universal City Property is located on the gross sales
southeast quadrant of Pat Booker Road and exceed
Coronado Boulevard, in Universal City, Bexar $2,012,585
County, Texas, in an area of mixed retail, (3)(9)
commercial, residential, and professional
development. Other fast-food and family-style
restaurants located in proximity to the
Universal City Property include a Pizza Hut, a
Long John Silver's, a Little Caesar's Pizza,
an Arby's, a McDonald's, a Subway Sandwich
Shop, a Rally's, a Wendy's, a Taco Bell, a
Dunkin Donuts, a Church's Fried Chicken, a
Jack in the Box, and several local
restaurants.
<CAPTION> Lease Expira-
Purchase Date tion and
Property Location and Competition Price (1) Acquired Renewal Options
Golden Corral (7) $327,733 8/18/95 6/2010; four five-
(the "Carlsbad Property") (excluding year renewal
Restaurant to be constructed closing and options
development
The Carlsbad Property is located on the west costs)(4)
side of South Canal Street in Carlsbad, Eddy
County, New Mexico, in an area of mixed retail
and commercial development. Other fast-food
and family-style restaurants located in
proximity to the Carlsbad Property include a
Pizza Hut, a Jerry's Restaurant, a Dairy
Queen, a McDonald's, a Wendy's, and several
local restaurants.
Kenny Rogers Roasters (14) $950,361 8/18/95 5/2015; two five-
(the "Franklin Property") (excluding year renewal
closing costs) options
The Franklin Property is located at the (10)
southeast quadrant of the intersection of
Moores Road and Galleria Boulevard in
Franklin, Williamson County, Tennessee, in an
area of mixed retail, commercial, office, and
residential development. Other fast-food and
family-style restaurants located in proximity
to the Franklin Property include a Red
Lobster, an Outback Steakhouse, a McDonald's,
a Chili's, a Subway Sandwich Shop, a Taco
Bell, and several local restaurants.
<CAPTION>
Minimum Option
Property Location and Competition Annual Rent (2) Percentage Rent To Purchase
<S> <C>
Golden Corral (7) 10.75% of Total Cost for each lease (8)
(the "Carlsbad Property") (5)(11) year, 5% of the
Restaurant to be constructed amount by which
annual gross
The Carlsbad Property is located on the west sales exceed
side of South Canal Street in Carlsbad, Eddy $1,973,815
County, New Mexico, in an area of mixed retail (3)
and commercial development. Other fast-food
and family-style restaurants located in
proximity to the Carlsbad Property include a
Pizza Hut, a Jerry's Restaurant, a Dairy
Queen, a McDonald's, a Wendy's, and several
local restaurants.
Kenny Rogers Roasters (14) $102,164; increases for each lease at any time
(the "Franklin Property") by 12% after the year, 5% of after the
seventh lease year annual gross seventh lease
The Franklin Property is located at the and after every sales, less the year
southeast quadrant of the intersection of seven years minimum
Moores Road and Galleria Boulevard in thereafter during the annual rent
Franklin, Williamson County, Tennessee, in an lease term payable in that
area of mixed retail, commercial, office, and lease year (3)
residential development. Other fast-food and
family-style restaurants located in proximity
to the Franklin Property include a Red
Lobster, an Outback Steakhouse, a McDonald's,
a Chili's, a Subway Sandwich Shop, a Taco
Bell, and several local restaurants.
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<PAGE>
<CAPTION> Lease Expira-
Purchase Date tion and
Property Location and Competition Price (1) Acquired Renewal Options
<S> <C>
Golden Corral (13) $845,588 8/15/95 8/2010; two five-
(the "Tampa Property") (excluding year renewal
Restaurant to be constructed closing and options
development
The Tampa Property is located on the south costs) (4)
side of West Hillsborough Avenue in Tampa,
Hillsborough County, Florida, in an area of
mixed retail, commercial, residential, and
professional development. Other fast-food and
family-style restaurants located in proximity
to the Tampa Property include a Pizza Hut, a
Checkers, a Village Inn, a Taco Bell, a Burger
King, an Arby's, a Chili's, a Kenny Rogers
Roasters, a Wendy's, a KFC, a McDonald's, a
Shoney's, a Subway Sandwich Shop, a Hardee's,
and several local restaurants.
Golden Corral (7) $1,061,625 8/18/95 8/2010; four five-
(the "Corsicana Property") (excluding year renewal
Existing restaurant closing costs) options
The Corsicana Property is located on the
southwest corner of South 44th Street and West
7th Avenue in Corsicana, Navarro County,
Texas, in an area of mixed retail, commercial,
and residential development. Other fast-food
and family-style restaurants located in
proximity to the Corsicana Property include a
Long John Silver's, a Jack in the Box, a Sonic
Drive-In, a Taco Bell, a Pizza Hut, a Burger
King, a Church's Fried Chicken, a KFC, a
Subway Sandwich Shop, and several local
restaurants.
<PAGE>
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<CAPTION>
Minimum Option
Property Location and Competition Annual Rent (2) Percentage Rent To Purchase
<S> <C>
Golden Corral (13) 11.50% of Total for each lease during the
(the "Tampa Property") Cost; increases by year, 5% of eighth and
Restaurant to be constructed 8% after the fifth annual gross ninth lease
lease year and after sales, less the years only (8)
The Tampa Property is located on the south every five years minimum annual
side of West Hillsborough Avenue in Tampa, thereafter during rent payable in
Hillsborough County, Florida, in an area of the lease term (5) that lease year
mixed retail, commercial, residential, and (3)
professional development. Other fast-food and
family-style restaurants located in proximity
to the Tampa Property include a Pizza Hut, a
Checkers, a Village Inn, a Taco Bell, a Burger
King, an Arby's, a Chili's, a Kenny Rogers
Roasters, a Wendy's, a KFC, a McDonald's, a
Shoney's, a Subway Sandwich Shop, a Hardee's,
and several local restaurants.
Golden Corral (7) $114,125(11) for each lease (8)
(the "Corsicana Property") year renewal year, 5% of the
Existing restaurant options amount by which
annual gross
The Corsicana Property is located on the sales exceed
southwest corner of South 44th Street and West $1,962,078 (3)
7th Avenue in Corsicana, Navarro County,
Texas, in an area of mixed retail, commercial,
and residential development. Other fast-food
and family-style restaurants located in
proximity to the Corsicana Property include a
Long John Silver's, a Jack in the Box, a Sonic
Drive-In, a Taco Bell, a Pizza Hut, a Burger
King, a Church's Fried Chicken, a KFC, a
Subway Sandwich Shop, and several local
restaurants.
<PAGE>
<CAPTION>
Lease Expira-
Purchase Date tion and
Property Location and Competition Price (1) Acquired Renewal Options
<S> <C>
Golden Corral (7) $1,458,638 8/18/95 8/2010; four five-
(the "Fort Worth Property") (excluding year renewal
Existing restaurant closing costs) options
The Fort Worth Property is located on the
southeast corner of South Hulen Street and
Bayside Drive in Fort Worth, Tarrant County,
Texas, in an area of mixed retail, commercial,
residential, and professional development.
Other fast-food and family-style restaurants
located in proximity to the Fort Worth
Property include a Pizza Hut, a Denny's, a
Whataburger, a KFC, a Chili's, a Red Lobster,
a Bennigan's, a McDonald's, an Olive Garden,
and several local restaurants.
Denny's (15) $664,335 9/06/95 8/2015; two five-
(the "Pasadena Property") (excluding year renewal
Restaurant to be renovated (17) closing and options
renovation
The Pasadena Property is located on the costs) (4)
northwest quadrant of Spencer Highway and
Watters Road in Pasadena, Harris County,
Texas, in an area of mixed retail, commer-
cial, and professional development. Other
fast-food and family-style restaurants located
in proximity to the Pasadena Property include
a Black-Eyed Pea, a Burger King, a Dairy
Queen, a Golden Corral, an International House
of Pancakes, a KFC, a Long John Silver's, a
McDonald's, a Pizza Hut, a Popeye's, a Red
Lobster, a Ryan's Steakhouse, and several
local restaurants.
<CAPTION>
Minimum Option
Property Location and Competition Annual Rent (2) Percentage Rent To Purchase
<S> <C>
Golden Corral (7) $156,804 (11) for each lease (8)
(the "Fort Worth Property") year, 5% of the
Existing restaurant amount by which
annual gross
The Fort Worth Property is located on the sales exceed
southeast corner of South Hulen Street and $1,458,638 (3)
Bayside Drive in Fort Worth, Tarrant County,
Texas, in an area of mixed retail, commercial,
residential, and professional development.
Other fast-food and family-style restaurants
located in proximity to the Fort Worth
Property include a Pizza Hut, a Denny's, a
Whataburger, a KFC, a Chili's, a Red Lobster,
a Bennigan's, a McDonald's, an Olive Garden,
and several local restaurants.
Denny's (15) 11% of Total Cost; for each lease during the
(the "Pasadena Property") increases by 8% after year, 5% of eighth, tenth,
Restaurant to be renovated (17) the fifth lease year annual gross and twelfth
and 10% after the sales, less the lease years
The Pasadena Property is located on the tenth lease year and minimum annual only
northwest quadrant of Spencer Highway and after every five rent payable in
Watters Road in Pasadena, Harris County, years thereafter that lease year
Texas, in an area of mixed retail, commer- during the lease term (3)
cial, and professional development. Other (5)
fast-food and family-style restaurants located
in proximity to the Pasadena Property include
a Black-Eyed Pea, a Burger King, a Dairy
Queen, a Golden Corral, an International House
of Pancakes, a KFC, a Long John Silver's, a
McDonald's, a Pizza Hut, a Popeye's, a Red
Lobster, a Ryan's Steakhouse, and several
local restaurants.
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<PAGE>
<CAPTION>
Lease Expira-
Purchase Date tion and
Property Location and Competition Price (1) Acquired Renewal Options
<S> <C>
Denny's (15) $839,930 9/06/95 8/2015; two five-
(the "Shawnee Property") (excluding year renewal
Restaurant to be renovated (17) closing and options
renovation
The Shawnee Property is located on the east costs) (4)
side of N. Harrison Street approximately
mile north of Interstate 40 in Shawnee,
Pottawatomie County, Oklahoma, in an area of
mixed retail, commercial, industrial, and
residential development. Other fast-food and
family-style restaurants located in proximity
to the Shawnee Property include a McDonald's.
Boston Market (16) $837,656 9/19/95 9/2010; three five-
(the "Grand Island Property") (excluding year renewal
Existing restaurant closing costs) options
The Grand Island Property is located at the
northwest corner of the intersection of West
State Street and Lawrence Lane in Grand
Island, Hall County, Nebraska, in an area of
mixed retail, commercial, and residential
development. Other fast-food and family-style
restaurants located in proximity to the Grand
Island Property include an Arby's, a Little
Caesar's Pizza, a Burger King, a Pizza Hut, a
McDonald's, a Taco Bell, a Subway Sandwich
Shop, a KFC, a Red Lobster, a Wendy's, and
several local restaurants.
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<PAGE>
<CAPTION>
Minimum Option
Property Location and Competition Annual Rent (2) Percentage Rent To Purchase
<S> <C>
Denny's (15) 11% of Total Cost; for each lease during the
(the "Shawnee Property") increases by 8% year, 5% of eighth, tenth,
Restaurant to be renovated (17) after the fifth lease annual gross and twelfth
year and 10% after sales, less the lease years
The Shawnee Property is located on the east the tenth lease year minimum only
side of N. Harrison Street approximately and after every five annual rent
mile north of Interstate 40 in Shawnee, years thereafter payable in that
Pottawatomie County, Oklahoma, in an area of during the lease lease year (3)
mixed retail, commercial, industrial, and term (5)
residential development. Other fast-food and
family-style restaurants located in proximity
to the Shawnee Property include a McDonald's.
Boston Market (16) $90,048; increases for each lease at any time
(the "Grand Island Property") by 10% after the year, 4% of after the fifth
Existing restaurant fifth lease year and annual gross lease year
after every five sales, less the
The Grand Island Property is located at the years thereafter minimum
northwest corner of the intersection of West during the lease annual rent
State Street and Lawrence Lane in Grand term payable in that
Island, Hall County, Nebraska, in an area of lease year, not
mixed retail, commercial, and residential to exceed
development. Other fast-food and family-style $10,000 (3)
restaurants located in proximity to the Grand
Island Property include an Arby's, a Little
Caesar's Pizza, a Burger King, a Pizza Hut, a
McDonald's, a Taco Bell, a Subway Sandwich
Shop, a KFC, a Red Lobster, a Wendy's, and
several local restaurants.
<CAPTION>
Lease Expira-
Purchase Date tion and
Property Location and Competition Price (1) Acquired Renewal Options
<S> <C>
Boston Market (16) $969,159 10/04/95 10/2010; three
(the "Dubuque Property") (excluding five-year renewal
Existing restaurant closing costs) options
The Dubuque Property is located at the
southwest corner of John F. Kennedy Road and
Hillcrest on the west side of Dubuque, Dubuque
County, Iowa, in an area of primarily retail
and residential development. Other than fast-
food and family-style restaurants located in
proximity to the Dubuque Property include a
Ponderosa, a Subway Sandwich Shop, a
McDonald's, a KFC, a Godfather's Pizza, a
Burger King, a Wendy's, a Pizza Hut, a Dairy
Queen, a Village Inn, an Arby's, a Little
Caesar's Pizza, a Long John Silver's, a
Hardee's, and several local restaurants.
Boston Market (16) $972,187 11/07/95 11/2010; three
(the "Chanhassen Property") (excluding five-year renewal
Existing restaurant closing costs) options
The Chanhassen Property is located on the
southeast corner of West 78th Street or Powers
Boulevard, Chanhassen, Carver County,
Minnesota, in an area of mixed commercial,
office, and residential development. Other
fast-food and family-style restaurants located
in proximity to the Chanhassen Property
include a Subway Sandwich Shop, a Wendy's, and
several local restaurants.
<CAPTION>
Minimum Option
Property Location and Competition Annual Rent (2) Percentage Rent To Purchase
<S> <C>
Boston Market (16) $104,185; increases for each lease at any time
(the "Dubuque Property") by 10% after the year, 4% of after the
Existing restaurant fifth lease year and annual gross fifth lease
after every five sales, less the year
The Dubuque Property is located at the years thereafter minimum annual
southwest corner of John F. Kennedy Road and during the lease term rent payable in
Hillcrest on the west side of Dubuque, Dubuque that lease year,
County, Iowa, in an area of primarily retail not to exceed
and residential development. Other than fast- $10,000 (3)
food and family-style restaurants located in
proximity to the Dubuque Property include a
Ponderosa, a Subway Sandwich Shop, a
McDonald's, a KFC, a Godfather's Pizza, a
Burger King, a Wendy's, a Pizza Hut, a Dairy
Queen, a Village Inn, an Arby's, a Little
Caesar's Pizza, a Long John Silver's, a
Hardee's, and several local restaurants.
Boston Market (16) $104,510; increases for each lease at any time
(the "Chanhassen Property") by 10% after the year, 4% of after the
Existing restaurant fifth lease year and annual gross fifth lease
after every five sales, less the year
The Chanhassen Property is located on the years thereafter minimum annual
southeast corner of West 78th Street or Powers during the lease term rent payable in
Boulevard, Chanhassen, Carver County, that lease year,
Minnesota, in an area of mixed commercial, not to exceed
office, and residential development. Other $10,000 (3)
fast-food and family-style restaurants located
in proximity to the Chanhassen Property
include a Subway Sandwich Shop, a Wendy's, and
several local restaurants.
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<CAPTION>
Purchase Date Lease Expiration and
Property Location and Competition Price (1) Acquired Renewal Options
<S> <C>
Golden Corral (22) $1,278,876 11/07/95 7/2015; two five-
(the "Columbus Property") (excluding year renewal
Restaurant to be constructed closing and options
development
The Columbus Property is located on the costs)(4)
northeast quadrant of Dublin-Ganville Road and
Sawmill Road, in Columbus, Franklin County,
Ohio, in an area of mixed retail commercial,
and residential development. Other fast-food
and family-style restaurants located in
proximity to the Columbus Property include a
Chili's, a Pizza Hut, a Ryan's Steak House, a
Chuck E. Cheese Pizza, two Wendy's, a Rax, a
Kenny Rogers Roasters, a Boston Market, a Red
Lobster, a KFC, a Longhorn Steakhouse, a Bob
Evan's, an Olive Garden, a McDonald's, a Taco
Bell, and several local restaurants.
Jack in the Box (23) $503,198 11/21/95 11/2013; four five-
(the "Houston Property") (excluding year renewal
Restaurant to be constructed closing and options
development
The Houston Property is located at the costs) (4)
southwest corner of the intersection of
Hammerly Boulevard and the southbound Frontage
Road of the Sam Houston Parkway in Houston,
Harris County, Texas, in an area of mixed
retail commercial, industrial, and residential
development. Other fast-food and family-style
restaurants located in proximity to the
Houston Property include a McDonald's Express,
a KFC, a Chili's, a Grandy's, and a local
restaurant.
<CAPTION>
Minimum Option
Property Location and Competition Annual Rent (2) Percentage Rent To Purchase
<S> <C>
Golden Corral (22) 11.25% of Total Cost; (12) at any time
(the "Columbus Property") increases by 12% after the
Restaurant to be constructed after the fifteenth seventh lease
lease year (5) year
The Columbus Property is located on the
northeast quadrant of Dublin-Ganville Road and
Sawmill Road, in Columbus, Franklin County,
Ohio, in an area of mixed retail commercial,
and residential development. Other fast-food
and family-style restaurants located in
proximity to the Columbus Property include a
Chili's, a Pizza Hut, a Ryan's Steak House, a
Chuck E. Cheese Pizza, two Wendy's, a Rax, a
Kenny Rogers Roasters, a Boston Market, a Red
Lobster, a KFC, a Longhorn Steakhouse, a Bob
Evan's, an Olive Garden, a McDonald's, a Taco
Bell, and several local restaurants.
Jack in the Box (23) 10.75% of Total Cost; for each lease at any time
(the "Houston Property") increases by 10% year, 5% of after the
Restaurant to be constructed after the fifth lease annual gross seventh lease
year and after every sales, less the year
The Houston Property is located at the five years thereafter minimum annual
southwest corner of the intersection of during the lease term rent payable in
Hammerly Boulevard and the southbound Frontage (5) that lease year
Road of the Sam Houston Parkway in Houston, (3)
Harris County, Texas, in an area of mixed
retail commercial, industrial, and residential
development. Other fast-food and family-style
restaurants located in proximity to the
Houston Property include a McDonald's Express,
a KFC, a Chili's, a Grandy's, and a local
restaurant.
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<CAPTION>
Lease Expira-
Purchase Date tion and
Property Location and Competition Price (1) Acquired Renewal Options
<S> <C>
20 Pizza Hut Properties - Land only - (18)(20) $3,760,883 01/22/96 02/2016; two ten-
located in Adrian, Michigan (the "Adrian (excluding year renewal
Property"), Lambertville, Michigan (the closing costs) options
"Lambertville Property"), Monroe, Michigan
(the "Monroe Property"), Bedford, Ohio (the
"Bedford Property"), Bowling Green, Ohio
(the "Bowling Green Property"), Cleveland,
Ohio (the "Cleveland #1 Property"),
Cleveland, Ohio (the "Cleveland #2
Property"), Cleveland, Ohio (the "Cleveland
#3 Property"), Defiance, Ohio (the "Defiance
Property"), East Cleveland, Ohio (the "East
Cleveland Property"), Euclid, Ohio (the
"Euclid Property"), Fairview Park, Ohio (the
"Fairview Park Property"), Middleburg
Heights (Cleveland), Ohio (the "Middleburg
Heights Property"), North Olmstead, Ohio (the
"North Olmstead Property"), Norwalk, Ohio
(the "Norwalk Property"), Sandusky, Ohio
(the "Sandusky Property"), Seven Hills
(Cleveland), Ohio (the "Seven Hills
Property") and Toledo, Ohio (the "Toledo #2
Property," the "Toledo #3 Property," and
the "Toledo #4 Property").
The Adrian Property is located on the
southeast corner of South Main Street and
Baker Street in Adrian, Lenawee County,
Michigan, in an area of mixed retail,
commercial, and residential development.
Other fast-food and family-style restaurants
located in proximity to the Adrian Property
include a Subway Sandwich Shop, a Long John
Silver's, a Red Lobster, a Bob Evans, a
McDonald's, a Burger King, an Applebee's, a
Taco Bell, a KFC, and an Arby's
<CAPTION>
Minimum Option
Property Location and Competition Annual Rent (2) Percentage Rent To Purchase
<S> <C>
20 Pizza Hut Properties - Land only - (18)(20) $413,697; increases None at any time
located in Adrian, Michigan (the "Adrian by 10% after the after the
Property"), Lambertville, Michigan (the fifth and tenth lease seventh lease
"Lambertville Property"), Monroe, Michigan years and 12% after year
(the "Monroe Property"), Bedford, Ohio (the the fifteenth lease
"Bedford Property"), Bowling Green, Ohio year (19)
(the "Bowling Green Property"), Cleveland,
Ohio (the "Cleveland #1 Property"),
Cleveland, Ohio (the "Cleveland #2
Property"), Cleveland, Ohio (the "Cleveland
#3 Property"), Defiance, Ohio (the "Defiance
Property"), East Cleveland, Ohio (the "East
Cleveland Property"), Euclid, Ohio (the
"Euclid Property"), Fairview Park, Ohio (the
"Fairview Park Property"), Middleburg
Heights (Cleveland), Ohio (the "Middleburg
Heights Property"), North Olmstead, Ohio (the
"North Olmstead Property"), Norwalk, Ohio
(the "Norwalk Property"), Sandusky, Ohio
(the "Sandusky Property"), Seven Hills
(Cleveland), Ohio (the "Seven Hills
Property") and Toledo, Ohio (the "Toledo #2
Property," the "Toledo #3 Property," and
the "Toledo #4 Property").
The Adrian Property is located on the
southeast corner of South Main Street and
Baker Street in Adrian, Lenawee County,
Michigan, in an area of mixed retail,
commercial, and residential development.
Other fast-food and family-style restaurants
located in proximity to the Adrian Property
include a Subway Sandwich Shop, a Long John
Silver's, a Red Lobster, a Bob Evans, a
McDonald's, a Burger King, an Applebee's, a
Taco Bell, a KFC, and an Arby's
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<CAPTION>
Lease Expira-
Purchase Date tion and Minimum Option
Property Location and Competition Price (1) Acquired Renewal Options Annual Rent Percentage Rent To Purchase
<S> <C>
The Lambertville Property is located at the
southeast corner of Summerfield Road and Secor
Road in Lambertville, Monroe County, Michigan,
in an area of mixed retail, commercial, and
residential development. Other fast-food and
family-style restaurants located in proximity
to the Lambertville Property include a Burger
King, a McDonald's, a Subway Sandwich Shop,
and several local restaurants.
The Monroe Property is located at the west
side of Telegraph Road in Monroe County,
Michigan, in an area of mixed retail,
commercial, and residential development.
Other fast-food and family-style restaurants
located in proximity to the Monroe Property
include a Taco Bell, a Hungry Howie's, a
Burger King, a McDonald's, a Wendy's, an
Arby's, a Ruby Tuesday, and several local
restaurants.
The Bedford Property is located at the north
quadrant of Rockside Road in Bedford, Cuyahoga
County, Ohio, in an area of mixed retail,
commercial, and residential development.
Other fast-food and family-style restaurants
located in proximity to the Bedford Property
include a Burger King, a KFC, a Wendy's, and a
Taco Bell.
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<CAPTION>
Lease Expira-
Purchase Date tion and Minimum Option
Property Location and Competition Price (1) Acquired Renewal Options Annual Rent Percentage Rent To Purchase
<S> <C>
The Bowling Green Property is located at the
northeast corner of South Main Street and
Gypsy Lane in Bowling Green, Wood County,
Ohio, in an area of mixed retail, commercial,
and residential development. Other fast-food
and family-style restaurants located in
proximity to the Bowling Green Property
include a McDonald's, a Wendy's, a Burger
King, a Big Boy, a Rally's, a KFC, and several
local restaurants.
The Cleveland #1 Property is located on the
north side of Lake Shore Boulevard east of the
intersection of East 159th Street, Cleveland,
Cuyahoga County, Ohio, in an area of mixed
retail, commercial, and residential development.
Other fast-food and family-style
restaurants located in proximity to the
Cleveland #1 Property include a KFC, a Burger
King, and a McDonald's.
The Cleveland #2 Property is located on Euclid
Avenue near Booth Hospital and Lakeview
Cemetery in Cleveland, Cuyahoga County, Ohio,
in an area of mixed retail, commercial, and
residential development. Other fast-food and
family-style restaurants located in proximity
to the Cleveland #2 Property include a KFC, a
Popeye's, and a Burger King.
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<PAGE>
<CAPTION>
Lease Expira-
Purchase Date tion and Minimum Option
Property Location and Competition Price (1) Acquired Renewal Options Annual Rent Percentage Rent To Purchase
<S> <C>
The Cleveland #3 Property is located on the
southeast corner of West 117th Street and
Detroit Avenue in Cleveland, Cuyahoga County,
Ohio, in an area of mixed retail, commercial,
and residential development. Other fast-food
and family-style restaurants located in
proximity to the Cleveland #3 Property include
an Arby's, a McDonald's, a Rally's, a Subway
Sandwich Shop, a Wendy's, a Burger King, a
Taco Bell, a KFC, and several local
restaurants.
The Defiance Property is located on the east
side of North Clinton Street in Defiance,
Defiance County, Ohio, in an area of mixed
retail, commercial, and residential development.
Other fast-food and family-style
restaurants located in proximity to the
Defiance Property include a Bob Evans, a
Friendly's, a McDonald's, a Ponderosa, a
Subway Sandwich Shop, a Burger King, a KFC,
and a Pizza Hut.
The East Cleveland Property is located at the
northwest side of Euclid Avenue in East
Cleveland, Cuyahoga County, Ohio, in an area
of mixed retail, commercial, and residential
development. Other fast-food and family-style
restaurants located in proximity to the East
Cleveland Property include a Rally's, a
Wendy's, a McDonald's, and a Burger King.
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<PAGE>
<CAPTION>
Lease Expira-
Purchase Date tion and Minimum Option
Property Location and Competition Price (1) Acquired Renewal Options Annual Rent Percentage Rent To Purchase
<S> <C>
The Euclid Property is located at the
southeast side of Euclid Avenue in Euclid,
Cuyahoga County, Ohio, in an area of mixed
retail, commercial, and residential
development. Other fast-food and family-style
restaurants located in proximity to the Euclid
Property include a McDonald's, a Denny's, a
Wendy's, a Taco Bell, an Arby's, a Long John
Silver's, and a Red Lobster.
The Fairview Park Property is located on the
south side of Center Ridge Road in Fairview
Park, Cuyahoga County, Ohio, in an area of
mixed retail, commercial, and residential
development. Other fast-food and family-style
restaurants located in proximity to the
Fairview Park Property include a Boston
Market, a McDonald's, a Burger King, a
Friendly's, an Applebee's, and a Longhorn
Steaks Restaurant & Saloon.
The Middleburg Heights Property is located at
the south side of Bagley Road in Middleburg
Heights, Cuyahoga County, Ohio, in an area of
mixed retail, commercial, and residential
development. Other fast-food and family-style
restaurants located in proximity to the
Middleburg Heights Property include a Dunkin
Donuts, a Bob Evans, a Golden Corral, a
McDonald's, a Friendly's, a Burger King, a
Ponderosa, and a Perkins.
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<PAGE>
<CAPTION>
Lease Expira-
Purchase Date tion and Minimum Option
Property Location and Competition Price (1) Acquired Renewal Options Annual Rent Percentage Rent To Purchase
<S> <C>
The North Olmstead Property is located on the
southwest corner of Lorain Road and Decker
Road in North Olmstead, Cuyahoga County, Ohio,
in an area of mixed retail, commercial, and
residential development. Other fast-food and
family-style restaurants located in proximity
to the North Olmstead Property include a
McDonald's, a Rally's, a Boston Market, a
Blimpie's, an Arby's, an Olive Garden, a Chi-
Chi's, and a Tony Roma's.
The Norwalk Property is located at the
northeast corner of Milan Street and Willard
Street in Norwalk, Huron County, Ohio, in an
area of mixed retail and residential
development. Other fast-food and family-style
restaurants located in proximity to the
Norwalk Property include a Wendy's, a Long
John Silver's, a Taco Bell, a McDonald's, a
KFC, a Bob Evans, a Burger King, and a
Ponderosa.
The Sandusky Property is located on the
northeast side of Milan Road in Sandusky, Erie
County, Ohio, in an area of mixed retail,
commercial, and residential development.
Other fast-food and family-style restaurants
located in proximity to the Sandusky Property
include a Wendy's, a Chi-Chi's, a Red Lobster,
a Burger King, a Kenny Rogers Roasters, a
Ponderosa, an Arby's, a Bob Evans, a
McDonald's, a Big Boy, an Applebee's, and a
local restaurant.
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<PAGE>
<CAPTION>
Lease Expira-
Purchase Date tion and Minimum Option
Property Location and Competition Price (1) Acquired Renewal Options Annual Rent Percentage Rent To Purchase
<S> <C>
The Seven Hills Property is located at the
northeast corner of Broadway Road and Mabel
Avenue in Seven Hills, Cuyahoga County, Ohio,
in an area of mixed retail, commercial, and
residential development. Other fast-food and
family-style restaurants located in proximity
to the Seven Hills Property include a Taco
Bell, a Boston Market, a KFC, a McDonald's, a
Ponderosa, a Burger King, and a Wendy's.
The Toledo #2 Property is located at the north
side of Monroe Street in Toledo, Lucas County,
Ohio, in an area of mixed retail, commercial,
and residential development. Other fast-food
and family-style restaurants located in
proximity to the Toledo #2 Property include a
Lone Star Steak House, an Olive Garden, a
Chuck E. Cheese, a Denny's, a Kenny Rogers
Roasters, a Burger King, a Subway Sandwich
Shop, an Outback Steakhouse, a Red Lobster, a
Taco Bell, and several local restaurants.
The Toledo #3 Property is located at the west
side of Secor Road in Toledo, Lucas County,
Ohio, in an area of mixed retail, commercial,
and residential development. Other fast-food
and family-style restaurants located in
proximity to the Toledo #3 Property include a
Burger King, a KFC, a Boston Market, a Long
John Silver's, a McDonald's, a Denny's, and a
Big Boy.
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<PAGE>
<CAPTION>
Lease Expira- Option
Purchase Date tion and Minimum To
Property Location and Competition Price (1) Acquired Renewal Options Annual Rent(2) Percentage Rent Purchase
<S> <C>
The Toledo #4 Property is located at the north
side of East Manhattan Boulevard in Toledo,
Lucas County, Ohio, in an area of mixed
retail, commercial, and residential
development. Other fast-food and family-style
restaurants located in proximity to the Toledo
#4 Property include a McDonald's, a Wendy's,
an Arby's, a Papa John's, and several local
restaurants.
TGI Friday's (21) (4) 02/06/96 7/2008; two 15.0427% of Total None at any time
(the "Marlboro Property") (4) five-yearl Cost; increases by after the
Restaurant to be constructed renewal options 10% after the fifth third lease
lease year and after year (6)
The Marlboro Property is located at the every five years
northeast quadrant of the intersection of thereafter during the
Route 9 and Union Hill Road in Marlboro, lease term (5)
Monmouth County, New Jersey, in an area of
mixed retail, commercial, and residential
development. Other fast-food and family-style
restaurants located in proximity to the
Marlboro Property include a McDonald's and
several local restaurants.
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<PAGE>
<CAPTION>
Lease Expira- Option
Purchase Date tion and Minimum To
Property Location and Competition Price (1) Acquired Renewal Options Annual Rent(2) Percentage Rent Purchase
<S> <C>
TGI Friday's (21) (4) 3/06/96 3/2008; two 14.954% of Total None at any time
(the "Hazlet Property") (4) five-year Cost; increases by after the
Restaurant to be constructed renewal 10% after the fifth third lease
options lease year and after year (6)
The Hazlet Property is located at the every five years
southwest quadrant of the intersection of thereafter during the
Route 35 and Bethany Road in Hazlet, Monmouth lease term (5)
County, New Jersey, in an area of primarily
retail, commercial, and residential
development. Other fast-food and family-style
restaurants located in proximity to the Hazlet
Property include a Friendly's and several
local restaurants.
Denny's (15) $820,625 03/19/96 9/2015; two $97,952; increases by (25) during the
(the "Grand Rapids #2 Property") (excluding five-year 15% after the fifth eighth lease
Existing restaurant closing costs) renewal every five years year only
options thereafter during the
The Grand Rapids #2 Property is located on the lease term
north side of Michigan Street, between Fuller
and Balls Avenues, Grand Rapids, Kent County,
Michigan, in an area of primarily retail,
commercial, and residential development.
Other fast-food and family-style restaurants
located in proximity to the Grand Rapids #2
Property include a Wendy's, a Checkers, a
Subway, a Burger King, and a local restaurant.
-86-
<PAGE>
<CAPTION>
Lease Expira- Option
Purchase Date tion and Minimum To
Property Location and Competition Price (1) Acquired Renewal Options Annual Rent(2) Percentage Rent Purchase
<S> <C>
Burger King (24) $1,088,500 03/20/96 7/20 16; two 10.75% of Total for each lease None
(the "Oak Lawn Property") (excluding five-year Cost (5) year, 8.5% of
Restaurant to be constructed closing and renewal options annual gross
development sales, less the
The Oak Lawn Property is located on the costs) minimum annual
northeast section of the Village of Oak Lawn, rent payable in
Cook County, Illinois, in an area of primarily that lease year
retail, commercial, and residential
development. Other fast-food and family-style
restaurants located in proximity to the Oak
Lawn Property include a Wendy's, a KFC, a
Popeye's, a White Castle, a Boston Market, a
McDonald's, a Denny's, a Domino's Pizza, a
Long John Silver's, a Taco Bell, and several
local restaurants.
Burger King (24) $515,000 03/20/96 7/2016; two 10.75% of for each lease None
(the "Burbank Property") (excluding five-year Total Cost (5) year, 8.5% of
Restaurant to be constructed closing and renewal options annual gross
development sales, less the
The Burbank Property is located on the costs) minimum annual
southwest section of the City of Burbank, Cook rent payable in
County, Illinois, in an area of primarily that lease year
retail, commercial, and residential
development. Other fast-food and family-style
restaurants located in proximity to the
Burbank Property include a McDonald's, a
Subway, a Taco Bell, a KFC, and several local
restaurants.
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<PAGE>
<CAPTION>
Lease Expira- Option
Purchase Date tion and Minimum Percentage To
Property Location and Competition Price (1) Acquired Renewal Options Annual Rent(2) Rent Purchase
<S> <C>
Three Pizza Hut Properties - $489,117 4/03/96 02/2016; two $53,803; increases by None at any time
Land only - (18) (20) located in Mayfield (excluding ten-year 10% after the fifth after the
Heights, Ohio (the "Mayfield Heights closing renewal and tenth lease years seventh lease
Property"), Toledo, Ohio (the "Toledo #1 costs) options and 12% after the year
Property"), and Strongsville, Ohio (the fifteenth lease year
"Strongsville Property") (19)
The Mayfield Heights Property is located on
the southwest corner of Mayfield Road and
Longwood Drive in Mayfield Heights, Cuyahoga
County, Ohio, in an area of primarily retail,
commercial, and residential development.
Other fast-food and family-style restaurants
located in proximity to the Mayfield Heights
Property include a Big Boy, an Applebee's, an
Outback Steakhouse, a Burger King, and a McDonald's.
The Toledo #1 Property is located at the east
side of South Detroit Avenue in Toledo, Lucas
County, Ohio, in an area of primarily retail,
commercial, institutional, and residential
development. Other fast-food and family-style
restaurants located in proximity to the Toledo
#1 Property include a McDonald's.
The Strongsville Property is located at the
east side of Pearl Road south of State Road 82
in Strongsville, Cuyahoga County, Ohio, in an
area of primarily retail, commercial, and
residential development. Other fast-food and
family-style restaurants located in proximity
to the Strongsville Property include a McDonald's,
a Boston Market, a Taco Bell, a Burger King, a
TGI Friday's, and a Ground Round.
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<PAGE>
<CAPTION>
Lease Expira- Option
Purchase Date tion and Minimum Percentage To
Property Location and Competition Price (1) Acquired Renewal Options Annual Rent(2) Rent Purchase
<S> <C>
Burger King (24) $670,517 4/03/96 08/2016; two 10.75% of Total for each lease None
(the "Indian Head Park Property") (excluding five-year renewal Cost (5) year, 8.5% of
Restaurant to be constructed closing and options annual gross
development sales, less the
The Indian Head Park Property is located on costs) (4) minimum annual
the northwest side of Joliet Road, southwest rent payable in
of Willow Springs Road, in Indian Head, Cook that lease year
County, Illinois, in an area of primarily
residential development. Other fast-food and
family-style restaurants located in proximity
to the Indian Head Park Property include a
Wendy's, a Taco Bell, and a McDonald's.
Burger King (24) $685,953 4/03/96 08/2016; two- 10.75% of Total for each lease None
(the "Highland Property") (excluding five year renewal Cost (5) year, 8.5% of
Restaurant to be constructed closing and options annual gross
development sales, less the
costs) (4) minimum annual
rent payable in
The Highland Property is located within the that lease year
Highland Town Center, in Highland, Lake
County, Indiana, in an area of primarily
residential development. Other fast-food and
family-style restaurants located in proximity
to the Highland Property include a Wendy's, an
Arby's, and a McDonald's.
</TABLE>
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<PAGE>
FOOTNOTES:
(1) The estimated federal income tax basis of the depreciable portion (the
building portion) of each of the Properties acquired is set forth
below:
<TABLE>
<CAPTION>
Property Federal Tax Basis Property Federal Tax Basis
<S> <C>
Los Angeles Property $ 603,000 Grand Island Property $ 645,000
Orange Property 1,374,000 Dubuque Property 664,000
Dover Property 916,000 Chanhassen Property 640,000
Cleburne Property 766,000 Columbus Property 975,000
Grand Rapids #1 Property 599,000 Houston Property 534,000
Universal City Property 791,000 Marlboro Property 1,360,000
Carlsbad Property 741,000 Hazlet Property 1,312,000
Franklin Property 443,000 Grand Rapids #2 Property 548,000
Tampa Property 1,408,000 Oak Lawn Property 869,000
Corsicana Property 754,000 Burbank Property 633,000
Fort Worth Property 898,000 Indian Head Park Property 756,000
Pasadena Property 504,000 Highland Property 632,000
Shawnee Property 624,000
</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 Orange,
Marlboro, and Hazlet Properties, minimum annual rent will become due
and payable on the earlier of (a) the later of (i) the date the
restaurant opens for business to the public, (ii) the date the
certificate of occupancy for the restaurant is issued, and (iii) the
date the tenant received its final funding from the Company under the
development agreement; or (b) 150 days after execution of the lease.
For the Dover, Cleburne, Carlsbad, Tampa, Universal City and Columbus
Properties, minimum annual rent will become due and payable on the
earlier of (i) the date the restaurant opens for business to the
public, (ii) the date the certificate of occupancy for the restaurant
is issued, or (iii) 180 days after the execution of the lease. For the
Houston Property, minimum annual rent will become due and payable on
the earlier of (i) the date the restaurant opens for business to the
public or (ii) 180 days after the execution of the lease. For the Oak
Lawn, Burbank, Indian Head Park and Highland Properties, minimum annual
rent will become due and payable on the earlier of (i) the date the
certificate of occupancy for the restaurant is issued, (ii) the date
the restaurant opens for business to the public, or (iii) 120 days
after execution of the lease.
(3) Percentage rent shall be calculated on a calendar year basis (January 1
to December 31).
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<PAGE>
(4) The Company accepted an assignment of an interest in the ground lease
relating to the Orange, Marlboro, and Hazlet Properties effective July
19, 1995, February 6, 1996, and March 6, 1996, respectively, in
consideration of its funding of certain preliminary development costs
and its agreement to fund remaining development costs not in excess of
the amount specified below. The development agreements for the
Properties which are to be constructed 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 (if applicable), development costs (if
applicable), and closing and acquisition costs) is not expected to, but
may, exceed the amounts set forth below:
<TABLE>
<CAPTION>
Estimated
Property Maximum Cost Estimated Final Completion Date
<S> <C>
Orange Property $1,275,000 Opened for business October 30, 1995
Dover Property 1,963,901 Opened for business December 16, 1995
Cleburne Property 1,169,389 Opened for business October 19, 1995
Universal City Property 1,189,815 Opened for business September 15, 1995
Carlsbad Property 1,210,903 Opened for business September 5, 1995
Tampa Property 1,750,000 Opened for business February 5, 1996
Pasadena Property 955,287 May 8, 1996
Shawnee Property 1,139,053 Opened for business December 21, 1995
Columbus Property 2,033,037 Opened for business November 28, 1995
Houston Property 1,064,679 Opened for business March 3, 1996
Marlboro Property 1,306,900 July 7, 1996
Hazlet Property 1,330,000 August 3, 1996
Oak Lawn Property 2,009,163 July 18, 1996
Burbank Property 1,171,116 July 18, 1996
Indian Head Park Property 1,272,727 August 1, 1996
Highland Property 1,213,636 August 1, 1996
</TABLE>
(5) The "Total Cost" is equal to the sum of (i) the purchase price of the
Property, (ii) closing costs, and (iii) actual development costs
incurred under the development agreement, and in the case of the Tampa,
Columbus, Houston, Marlboro, and Hazlet Properties, (iv) "construction
financing costs" during the development period.
(6) If the lessee exercises its purchase option after the third lease year
and before the eleventh lease year, the purchase price to be paid by
the lessee shall be equal to the net present value of the monthly lease
rental payments for the remainder of the lease term (including previous
and scheduled rent increases) discounted at the lesser of (i) 11% per
annum, or (ii) the then-current annual yield on 7-year Treasury
securities plus 4.5%, plus the full amount of any late fees, default
interest, enforcement costs or other sums otherwise due or payable by
the lessee under the lease. If the lessee exercises its option after
the tenth lease year, the purchase price to be paid by the lessee shall
be equal to the net present value of the monthly lease payments for the
remainder of the lease term (based, however, for purposes hereof on the
initial monthly installment amount of annual rental and not including
previous and scheduled increases) discounted at 11% per annum, plus the
full amount of any late fees, default interest, enforcement costs or
other sums otherwise due or payable by the lessee under the lease.
(7) The lessee of the Cleburne, Universal City, Carlsbad, Corsicana and
Fort Worth Properties is the same unaffiliated lessee.
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<PAGE>
(8) If the Property is not producing percentage rent and the lessee
determines, in good faith, that the restaurant has become uneconomic
and unsuitable, in the case of the Cleburne, Universal City, Carlsbad,
Fort Worth, and Corsicana Properties the lessee may elect:
(A) During the first through seventh and again during the tenth through
15th lease years:
(i) to purchase the Property for a purchase price, net of
closing costs, equal to the greater of (a) the then
fair-market value of the Property as determined by an
independent appraisal, or (b) 100% of the Company's original
cost for the Property if the Company is successful in
effectuating the lessee's purchase through a tax-free
"like-kind" exchange, or 120% of the Company's original cost
for the Property if a tax-free, "like-kind" exchange is not
effectuated; or
(ii) to sublet the Property as described in the section of the
Prospectus entitled "Description of Property Leases -
Assignment and Sublease," and in the case of a sublease that
requires the consent of the Company, the minimum annual rent
will increase by 15% on the first day of the fifth year of the
sublease and the first day of each fifth lease year
thereafter; or
(iii) to substitute the Property for another Golden Corral
restaurant property on terms similar to those described in the
section of the Prospectus entitled "Description of Property
Leases - Substitution of Properties" for Golden Corral
restaurant properties.
(B) During the eighth and ninth lease year, to close the
restaurant upon 60 days' prior written notice to the Company
and continue to meet all of its obligations under the lease
until such time as the lessee finds a new lessee or a
purchaser for the Property. If the Property is sold pursuant
to this provision, the lessee shall reimburse to the Company
100% of any deficiency between the sale price and The
Company's original cost for the Property up to $200,000, plus
one-half of any deficiency over $400,000. The Company will
bear 100% of any deficiency between the sale price and the
Company's original cost for the Property over $200,000 up to
$400,000, plus one-half of any deficiency over $400,000.
If the lessee and the Company enter into more than three
Golden Corral leases, then the option to close the restaurant
will apply to the first three Golden Corral leases (the "Three
Leases"). The lessee may only exercise the option to close
with respect to any two of such Three Leases. At such time as
the lessee has exercised its rights to close the restaurant
with respect to any two of the Three Leases, its right with
respect to the third lease will automatically terminate.
In the case of the Tampa Property the lessee may elect:
(A) During the first through seventh and again during the tenth through
15th lease years:
(i) to purchase the Property for a purchase price, net of
closing costs, equal to the greater of (a) the then
fair-market value of the Property as determined by an
independent appraisal, or (b) 100% of the Company's original
cost for the Property if the Company is successful in
effectuating the lessee's purchase through a tax-free
"like-kind" exchange, or 120% of the Company's original cost
for the Property if a tax-free, "like-kind" exchange is not
effectuated; or
(ii) to sublet the Property as described in the section of
the Prospectus entitled "Description of Property Leases -
Assignment and Sublease;" or
(iii) to substitute the Property for another Golden Corral
restaurant property on terms similar to those described in the
section of the Prospectus entitled "Description of Property
Leases - Substitution of Properties" for Golden Corral
restaurant properties.
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<PAGE>
(9) The percentage rent may be adjusted in the event the lessee incurs
remodeling costs in order either to make structural improvements that
increase the interior floor area of the restaurant or to make
alterations that materially change the restaurant concept and/or the
operating system. The adjustment will relieve the lessee of paying
percentage rent on up to $268,750 of gross sales, but the adjustment
shall take into account only actual remodeling costs not in excess of
$150,000.
(10) The Company paid 85% of the total cost for the property, and the
remaining 15% of the cost was paid by the lessee, but the Company will
hold undivided title to the property. Upon the sale of the property,
the Company will pay the lessee 15% of any net sales proceeds available
in excess of the Company's cost to purchase the property.
In the event of an exercise of the lessee's option to purchase the
property, the purchase price shall equal the greater of: (i) fair
market value of the Company's effective 85% interest in the property as
of the option exercise date; or (ii) the purchase price paid by the
Company for the property (not including the amount paid by the lessee),
plus 15%.
(11) If the lessee elects to renew the lease after the initial 15-year term,
then beginning with the commencement of the first extension term of the
lease, and continuing throughout any subsequent extension terms, the
lessee shall be obligated to pay the Company minimum monthly rent equal
to the greater of (i) 115% of the monthly minimum annual rent payable
during the last month of the initial term of the lease, or (ii) 1/12th
of the total of the minimum annual rent payable during the initial term
plus the percentage rent during the 12-month period immediately
preceding the first day of such extension term. In addition, if the
lessee enters into a sublease of the Property prior to the 11th lease
year with any person other than a franchisee, licensee, or other
affiliate of the lessee, then the minimum annual rent shall increase by
15% every five years after commencement of the sublease. Minimum annual
rent does not increase in connection with any assignment of the lease.
(12) Following the date the restaurant opens for business, the tenant shall
pay as additional rent, percentage rent equal to six percent of the
amount by which the tenant's gross sales exceed annual rent divided by
five percent.
(13) The Company acquired an interest in CNL/Corral South Joint Venture, a
general partnership between the Company and an unaffiliated
co-venturer. Based upon anticipated development costs for the Property,
the Company expects to own a 76% interest in the CNL/Corral South Joint
Venture upon completion of construction.
(14) The lessee of the Grand Rapids #1 and Franklin Properties is the same
unaffiliated lessee.
(15) The lessee of the Pasadena, Shawnee and Grand Rapids #2 Properties is
the same unaffiliated lessee.
(16) The lessee of the Dubuque, Chanhassen and Grand Island Properties is
the same unaffiliated lessee.
(17) Minimum annual rent for each of the Pasadena and Shawnee Properties
became payable on the effective date of the lease. In accordance with
the lease agreement, these Properties are being converted from Kettles
restaurants to Denny's restaurants. Renovation of the Properties is
expected to be completed within 150 days of the effective date of the
lease. In connection therewith, the Company has agreed to pay
renovation costs of $250,000 for each Property up to the amounts as
described in Note 4 above. The Pasadena and Shawnee Properties are
expected to remain operational during renovations. Upon completion of
the renovations and payment of costs by the Company, base rental income
will be adjusted upward in accordance with the lease agreement.
(18) The lease relating to this Property is a land lease only. The Company
entered into a Mortgage Loan evidenced by the Master Mortgage Note for
$8,475,000 collateralized by building improvements. The Master Mortgage
Note bears interest at a rate of 10.75% per annum and principal and
interest will be collected in equal monthly installments over 20 years
beginning in March 1996.
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<PAGE>
(19) If the lessee exercises one or both of its renewal options, minimum
annual rent will increase by 12% after the expiration of the original
lease term and after five years thereafter during any subsequent lease
term.
(20) The Company entered into a master lease agreement for the Adrian,
Lambertville, Monroe, Bedford, Bowling Green, East Cleveland, Defiance,
Euclid, Fairview Park, Mayfield Heights, Middleburg Heights, North
Olmstead, Norwalk, Sandusky, Seven Hills, Strongsville, Cleveland #1,
Cleveland #2, Cleveland #3, Toledo #1, Toledo #2, Toledo #3 and Toledo
#4 Properties.
(21) The lessee of the Orange, Marlboro and Hazlet Properties is the same
unaffiliated lessee.
(22) The lessee of the Dover and Columbus Properties is the same
unaffiliated lessee.
(23) The lessee of the Los Angeles and Houston Properties is the same
unaffiliated lessee.
(24) The lessee of the Oak Lawn, Burbank, Indian Head Park and Highland
Properties is the same unaffiliated lessee.
(25) Within 20 days after the expiration of the first 24 full calendar
months of the lease (the "Base Period") (as defined in the Lease), the
lessee must pay to the Company 5% of the amount by which gross sales
for the last 12 months of the Base Period exceed four times the average
quarterly gross sales for the Base Period (the "Base Figure"). After
the expiration of the Base Period and continuing each Lease Year
thereafter during the term of the Lease, lessee must pay percentage
rent equal to: (i) one-fourth of the initial minimum annual rental
(without adjustment) plus 5% of the amount by which gross sales for the
then-ended calendar quarter exceeds the Base Figure; minus (ii)
one-fourth of the minimum annual rent (as adjusted).
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SITE SELECTION AND ACQUISITION OF PROPERTIES
General. It is anticipated that the Restaurant Chains selected by the
Advisor, and as approved by the Board of Directors, will have full-time staffs
engaged in site selection and evaluation. All new sites must be approved by the
Restaurant Chains. The Restaurant Chains generally conduct or require the
submission of studies which typically include such factors as traffic patterns,
population trends, commercial and industrial development, office and
institutional development, residential development, per capita or household
median income, per capita or household median age, and other factors. The
Restaurant Chains also will review and approve all proposed tenants and
restaurant sites. The Restaurant Chains or the operators are expected to make
their site evaluations and analyses, as well as financial information regarding
proposed tenants, available to the Company.
The Board of Directors, on behalf of the Company, will elect to
purchase and lease Properties based principally on an examination and evaluation
by the Advisor of the potential value of the site, the financial condition and
business history of the proposed tenant, the demographics of the area in which
the restaurant Property is located or to be located, the proposed purchase price
and proposed lease terms, geographic and market diversification, and potential
sales expected to be generated by the restaurant. In addition, the potential
tenant must meet at least the minimum standards established by a Restaurant
Chain for its operators. The Advisor also will perform an independent break-even
analysis of the potential profitability of a restaurant property using
historical data and other data developed by the Company and provided by the
Restaurant Chains.
Although the Restaurant Chains that are selected by the Advisor will
have approved each tenant and each Property, the Board of Directors will
exercise its own judgment as to, and will be solely responsible for, the
ultimate selection of both tenants and Properties. Therefore, some of the
properties approved by a Restaurant Chain may not be purchased by the Company.
In each Property acquisition, it is anticipated that the Advisor will
negotiate the lease agreement with the tenant. In certain instances, the Advisor
may negotiate an assignment of an existing lease, in which case the terms of the
lease may vary substantially from the Company's standard lease terms, if the
Board of Directors, based on the recommendation of the Advisor, determines that
the terms of an acquisition and lease of a Property, taken as a whole, are
favorable to the Company. It is expected that the structure of the long-term
"triple-net" lease agreements, which provide for monthly rental payments and
automatic increases in base rent at specified times during the lease terms, plus
a percentage of gross restaurant sales, will increase the value of the
Properties and provide an inflation hedge. See "Description of Leases" below for
a discussion of the anticipated terms of the Company's leases. In connection
with a Property acquisition, in the event the tenant does not enter into a
Secured Equipment Lease with the Company, the tenant will provide at its own
expense all Equipment (such as deep fryers, grills, refrigerators, and freezers)
necessary to operate the Company's Property as a restaurant. Generally, a tenant
either pays cash or obtains a loan from a third party to purchase such items. If
the tenant obtains such a loan, the tenant will own this personal property
subject to the tenant's obligations under its loan. In the experience of the
Affiliates of the Company and the Advisor, there may be rare circumstances in
which a tenant defaults under such a loan, in which event the lender may attempt
to remove the personal property from the building, resulting in the Property
becoming inoperable as a restaurant until new Equipment can be purchased and
installed. In order to prevent repossession of this personal property by the
lender, and only on an interim basis in order to preserve the value of a
Property, the Company may elect (but only to the extent consistent with the
Company's objective of qualifying as a REIT) to use Company reserves to purchase
this personal property from the lender, generally at a discount for the
remaining unpaid balance under the tenant's loan. The Company then would expect,
consistent with the Company's objective of qualifying as a REIT, to resell the
personal property to a new tenant in connection with the transfer of the lease
to that tenant.
Some lease agreements will be negotiated to provide the tenant with the
opportunity to purchase the Property under certain conditions, generally either
at a price not less than fair market value (determined by appraisal or
otherwise) or through a right of first refusal to purchase the Property. In
either case, the lease agreements will provide that the tenant may exercise
these rights only to the extent consistent with the Company's objective of
qualifying as a REIT. See "Sale of Properties, Mortgage Loans, and Secured
Equipment Leases" below and "Federal Income Tax Considerations --
Characterization of Leases."
The purchase of each Property will be supported by an appraisal of the
real estate prepared by an independent appraiser. The Advisor, however, will
rely on its own independent analysis and not on such appraisals in determining
whether or not to recommend the Company to acquire a particular Property. The
purchase price of each such Property, plus any Acquisition Fees paid by the
Company in connection with such purchase, will not
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exceed the Property's appraised value. (In connection with the acquisition of a
Property which is to be constructed or renovated, the comparison of the purchase
price and the appraised value of such Property ordinarily will be based on the
"when constructed" price and value of such Property.) It should be noted that
appraisals are estimates of value and should not be relied upon as measures of
true worth or realizable value. Each appraisal will be maintained in the
Company's records for at least five years and will be available for inspection
and duplication by any stockholder.
The titles to Properties purchased by the Company will be insured by
appropriate title insurance policies and/or abstract opinions consistent with
normal practices in the jurisdictions in which the Properties are located.
Construction and Renovation. In some cases, construction or renovation
will be required after the purchase contract has been entered into, but before
the total purchase price has been paid. In connection with the acquisition of
Properties that are to be constructed or renovated and as to which the Company
will own both the land and the building or building only, the Company generally
will enter into a development agreement with the tenant pursuant to which the
Company will advance funds to the tenant to meet construction or renovation
costs as they are incurred. The tenant will act as the project developer, will
enter into all construction contracts, and will arrange for and coordinate all
aspects of the construction or renovation of the restaurant improvements. The
tenant will be responsible for the construction or renovation of the restaurant
improvements, although it may employ co-developers or sub-agents in fulfilling
its responsibilities under the development agreement. All general contractors
performing work in connection with such restaurant improvements must provide a
payment and performance bond or other satisfactory form of guarantee of
performance. All construction and renovation will be performed or supervised by
persons or entities acceptable to the Advisor and the Board of Directors. The
Company will be obligated, as construction or renovation costs are incurred, to
make the remaining payments due as part of the purchase price for the
Properties, provided that the construction or renovation conforms to definitive
plans, specifications, and costs approved by the Advisor and the Board of
Directors and embodied in the construction contract.
Under the terms of the development agreement, the Company generally
will advance its funds on a monthly basis to meet construction draw requests of
the tenant. The Company, in general, only will advance its funds to meet the
tenant's draw requests upon receipt of an inspection report and a certification
of draw requests from an inspecting architect or engineer suitable to the
Company, and the Company may retain a portion of any advance until satisfactory
completion of the project. The certification must be supported by color
photographs showing the construction work completed as of the date of
inspection. The total amount of the funds advanced to the tenant (including the
purchase price of the land plus closing costs and certain other costs) generally
will not exceed the maximum amount specified in the development agreement. Such
maximum amount will be based on the Company's estimate of the costs of such
construction or renovation. Initially, the calculation of minimum annual rent
will be based on such estimated amount; however, once the actual cost is known,
the minimum annual rent will be increased or reduced accordingly and the Company
or the tenant, as the case may be, will promptly refund or remit to the other an
amount equal to any excess rent paid or any underpayment of rent due.
In certain cases in which the Company intends to purchase a Property
upon completion of construction or renovation of that Property, the Company may
permit the proposed tenant to arrange for a bank or another lender to provide
construction financing to the tenant. In such cases, the lender may seek
assurance from the Company that it has sufficient funds to pay to the tenant the
full purchase price of the Property upon completion of the construction or
renovation. In the event that the Company segregates funds as assurance to the
lender of its ability to purchase the Property, the funds will remain the
property of the Company, and the lender will have no rights with respect to such
funds upon any default by the tenant under the development agreement or under
the loan agreement with such lender, or if the closing of the purchase of the
Property by the Company does not occur for any reason.
Affiliates of the Company may provide construction financing to the
developer of a Property. The purchase price paid by the Company for such a
Property, subject to the approval of a majority of the Board of Directors
including a majority of the Independent Directors, will include a Construction
Financing Fee in an amount equal to generally 1% to 2% of the total loan amount
plus the difference between the Affiliate's cost of funds and the amount of
interest charged to the developer with such difference determined by applying an
annual percentage rate of generally 1.5% to 3.0% throughout the duration of the
loan to the outstanding balance of the loan. The Construction Financing Fee will
also be included in the calculation of base rent.
In addition, the Company may purchase from an Affiliate of the Company
a Property that has been constructed or renovated by the Affiliate. In such
instances, the purchase price paid by the Company, subject to
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the approval of a majority of the Board of Directors including a majority of the
Independent Directors, will include a Development/Construction Management Fee
generally equal to 5% to 10% of the Affiliate's cost of constructing or
renovating the Property. The Development/Construction Management Fees charged by
Affiliates of the Company are negotiated with the tenants and management
believes such fees are at or below the market rates for comparable construction
and renovation services when contracted from third parties. The Property will be
sold to the Company with the lease in place. The Development/Construction
Management Fee is included in the cost of the Property and, therefore, will be
included in the calculation of base rent.
Under the development agreement, the tenant generally will be obligated
to complete the construction or renovation of the restaurant improvements within
120 to 150 days from the date of the development agreement. If the construction
or renovation is not completed within that time and the tenant fails to remedy
this default within 10 days after notice from the Company, the Company will have
the option to grant the tenant additional time to complete the construction, to
take over construction or renovation of the restaurant improvements, or to
terminate the development agreement and require the tenant to purchase the
Property at a price equal to the sum of (i) the Company's purchase price of the
land, including all fees, costs, and expenses paid by the Company in connection
with its purchase of the land, (ii) all fees, costs, and expenses disbursed by
the Company pursuant to the development agreement for construction of the
restaurant improvements, and (iii) the Company's "construction financing costs."
The "construction financing costs" of the Company is an amount equal to a
return, at the annual percentage rate used in calculating the minimum annual
rent under the lease, on all Company payments and disbursements described in
clauses (i) and (ii) above.
The Company also generally will enter into an indemnification and put
agreement (the "Indemnity Agreement") with the tenant and any guarantor of the
obligations of the tenant under the lease in connection with the acquisition of
Properties to be constructed or renovated. The Indemnity Agreement will provide
for certain additional rights to the Company unless certain conditions are met.
In general, these conditions are (i) the tenant's acquisition of all permits,
approvals, and consents necessary to permit commencement of construction or
renovation of the restaurant within a specified period of time after the date of
the Indemnity Agreement (normally, 60 days), or (ii) the completion of
construction or renovation of the restaurant as evidenced by the issuance of a
certificate of occupancy, within a specified period of time (generally, 120 to
150 days) after the date of the Indemnity Agreement. If such conditions are not
met, the Company will have the right to grant the tenant additional time to
satisfy the conditions or to require the tenant to purchase the Property from
the Company at a purchase price equal to the total amount disbursed by the
Company in connection with the acquisition and construction or renovation of the
Property (including closing costs), plus an amount equal to the return described
in item (iii) of the preceding paragraph. Failure of the tenant to purchase the
Property from the Company upon demand by the Company under the circumstances
specified above will entitle the Company to declare the tenant in default under
the lease and to declare each guarantor in default under any guarantee of the
tenant's obligations to the Company.
In certain situations where construction or renovation is required for
a restaurant Property, the Company will pay a negotiated maximum amount upon
completion of construction or renovation rather than providing financing to the
tenant, with such amount to be based on the tenant's actual costs of such
construction or renovation.
In all situations where construction or renovation of a restaurant
Property is required, the Company also will have the right to review the
tenant's books, records, and agreements during and following completion of
construction to verify actual costs.
Interim Acquisitions. The Affiliates of the Company and the Advisor
regularly have opportunities to acquire restaurant properties of a type suitable
for acquisition by the Company as a result of their existing relationships and
past experience with various Restaurant Chains and restaurant operators. See
"General" above. These acquisitions often must be made within a relatively short
period of time, occasionally at a time when the Company may be unable to make
the acquisition. In an effort to address these situations and preserve the
acquisition opportunities of the Company (and other entities with which the
Company is affiliated), the Advisor and its Affiliates maintain lines of credit
which enable them to acquire these restaurant properties on an interim basis and
temporarily own them for the purpose of facilitating their acquisition by the
Company (or other entities with which the Company is affiliated). At such time
as a Property acquired on an interim basis is determined to be suitable for
acquisition by the Company, the interim owner of the Property will sell its
interest in the Property to the Company at a price equal to the lesser of its
cost (which includes carrying costs and, in instances in which an Affiliate of
the Company has provided real estate brokerage services in connection with the
initial purchase of the Property, indirectly includes fees paid to an Affiliate
of the Company) to purchase such interest in the Property or the Property's
appraised value, provided that a majority of Directors, including a majority of
the Independent Directors, determine that the acquisition is fair and reasonable
to the Company. See "Conflicts of Interest --
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Certain Conflict Resolution Procedures." Appraisals of Properties acquired from
such interim owners will be obtained in all cases.
Acquisition Services. Acquisition services performed by the Advisor may
include, but are not limited to, site selection and/or approval; review and
selection of tenants and negotiation of lease agreements and related documents;
monitoring Property acquisitions; and the processing of all final documents
and/or procedures to complete the acquisition of Properties and the commencement
of tenant occupancy and lease payments.
The Company will pay the Advisor an Acquisition Fee not to exceed 4.5%
of the Gross Proceeds from the sale of Shares. See "Management Compensation."
The total of all Acquisition Fees (including Development/Construction Management
Fees to Affiliates and Construction Financing Fees to Affiliates described in
"Management Compensation" and any other Acquisition Fees to Affiliates or
nonaffiliates, but excluding development/management fees paid to any person or
entity not affiliated with the Advisor in connection with the actual development
and construction of any Property) and Acquisition Expenses shall be reasonable
and shall not exceed an amount equal to 6% of the Real Estate Asset Value of a
Property, or in the case of a Mortgage Loan, 6% of the funds advanced, unless a
majority of the Board of Directors, including a majority of the Independent
Directors, not otherwise interested in the transaction approves fees in excess
of these limits subject to a determination that the transaction is commercially
competitive, fair and reasonable to the Company. The total of all Acquisition
Fees payable to all persons or entities will not exceed the compensation
customarily charged in arm's-length transactions by others rendering similar
services as an ongoing activity in the same geographical location and for
comparable property.
The Advisor engages counsel to perform legal services, and such counsel
also may provide legal services to the Company in connection with the
acquisition of Properties. The legal fees payable to such counsel by the Company
will not exceed those generally charged for similar services.
STANDARDS FOR INVESTMENT IN PROPERTIES
Selection of Restaurant Chains. The selection of Restaurant Chains by
the Advisor, as approved by the Board of Directors, will be based on an
evaluation of the operations of restaurants in the Restaurant Chain, the number
of restaurants operated throughout the Restaurant Chain's system, the
relationship of average restaurant gross sales to the average capital costs of a
restaurant, the Restaurant Chain's relative competitive position among the same
type of restaurants offering similar types of food, name recognition, and market
penetration. The Restaurant Chains will not be affiliated with the Advisor, the
Company or an Affiliate.
Selection of Properties and Tenants. In making investments in
Properties, the Advisor will consider relevant real property and financial
factors, including the condition, use, and location of the Property,
income-producing capacity, the prospects for long-term appreciation, the
relative success of the Restaurant Chain in the geographic area in which the
Property is located, and the management capability and financial condition of
the tenant. The Company will obtain an independent appraisal for each Property
it purchases. In selecting tenants, the Advisor will consider the prior
experience of the tenant in the restaurant industry, the net worth of the
tenant, past operating results of other restaurants currently or previously
operated by the tenant, and the tenant's prior experience in managing
restaurants within a particular Restaurant Chain.
In selecting specific Properties within a particular Restaurant Chain
and in selecting lessees for the Company's Properties, the Advisor, as approved
by the Board of Directors, will apply the following minimum standards.
1. Each Property will be in what the Advisor believes is a prime
business location.
2. Base (or minimum) annual rent will provide a specified minimum
return on the Company's cost of purchasing and, if applicable, developing the
Property, and the lease typically also will provide for automatic increases in
base rent at specified times during the lease term and for payment of percentage
rent based on gross restaurant sales.
3. The initial lease term typically will be at least 15 to 20
years.
4. The Company will reserve the right to approve or reject any
tenant and restaurant site selected by a Restaurant Chain.
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5. In evaluating prospective tenants, the Company will examine, among
other factors, the tenant's ranking in its market segment, trends in per store
sales, overall changes in consumer preferences, and the tenant's ability to
adapt to changes in market and competitive conditions, the tenant's historical
financial performance, and its current financial condition.
6. In general, the Company will not acquire a Property, if, as a
result, more than 25% of its Gross Proceeds would be invested in Properties of a
single Restaurant Chain or if more than 30% of its Gross Proceeds would be
invested in Properties in a single state.
DESCRIPTION OF PROPERTIES
Based on the 48 Properties that the Company had purchased as of April
9, 1996, and on past experience and knowledge of the fast-food, family-style,
and casual dining restaurant industry, the Advisor expects that any Properties
purchased by the Company will conform generally to the following specifications
of size, cost, and type of land and buildings. These specifications may vary
substantially if the Company invests in any full-service restaurant Properties.
Land. Lot sizes generally range from 25,000 to 60,000 square feet
depending upon building size and local demographic factors. Restaurants located
on land within shopping centers will be freestanding and may be located on
smaller parcels if sufficient common parking is available. Restaurant sites
purchased by the Company will be in locations zoned for commercial use which
have been reviewed for traffic patterns and volume of traffic. There is
substantial competition for quality sites; accordingly, land costs may be high
and are generally expected to range from $150,000 to $500,000, although the cost
of the land for particular Properties may be higher or lower in some cases.
Buildings. Either before or after construction or renovation, the
restaurant Properties to be acquired by the Company will be one of a Restaurant
Chain's approved designs. Prior to purchase of all restaurant Properties, other
than those purchased prior to completion of construction, the Company will
receive a copy of the certificate of occupancy issued by the local building
inspector or other governmental authority which permits the use of the Property
as a restaurant, and shall receive a certificate from the Restaurant Chain to
the effect that (i) the Property is operational and (ii) the Property and the
tenant are in compliance with all of the Restaurant Chain's requirements,
including, but not limited to, building plans and specifications approved by the
Restaurant Chain. The Company also will receive a certificate of occupancy for
each restaurant for which construction has not been completed at the time of
purchase, prior to the Company's payment of the final installment of the
purchase price for the restaurant Property.
The restaurant buildings generally will be rectangular and constructed
from various combinations of stucco, steel, wood, brick, and tile. Building
sizes generally will range from 2,500 to 6,000 square feet, with the larger
restaurants having greater seating and equipment areas. Building and site
preparation costs vary depending upon the size of the building and the site and
the area in which the restaurant Property is located. It is estimated that
building and site preparation costs generally will range from $250,000 to
$750,000 for each restaurant Property.
Generally, Properties to be acquired by the Company will consist of
both land and building, although in a number of cases the Company may acquire
only the land underlying the restaurant building with the building owned by the
tenant or a third party, and also may acquire the building only with the land
owned by a third party. See "Business - Property Acquisitions" for a description
of the 48 Properties owned by the Company as of April 9, 1996, 23 of which
consist of land only, three of which consist of building only, 21 of which
consist of land and building, and one of which was acquired through a joint
venture arrangement and consists of land and building. In general, the
Properties will be freestanding and surrounded by paved parking areas. Buildings
are suitable for conversion to various uses, although modifications will be
required prior to use for other than restaurant operations.
A tenant generally will be required by the lease agreement to make such
capital expenditures as may be reasonably necessary to refurbish restaurant
buildings, premises, signs, and equipment so as to comply with the tenant's
obligations under the franchise agreement to reflect the current commercial
image of its Restaurant Chain. These capital expenditures will be paid by the
tenant during the term of the lease.
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DESCRIPTION OF PROPERTY LEASES
The terms and conditions of any lease entered into by the Company with
regard to a restaurant Property may vary from those described below. The Advisor
in all cases will use its best efforts to obtain terms at least as favorable as
those described below. If the Board of Directors determines, based on the
recommendation of the Advisor, that the terms of an acquisition and lease of a
Property, taken as a whole, are favorable to the Company, the Board of Directors
may, in its sole discretion, cause the Company to enter into leases with terms
which are substantially different than the terms described below, but only to
the extent consistent with the Company's objective of qualifying as a REIT. In
making such determination, the Advisor will consider such factors as the type
and location of the restaurant, the creditworthiness of the tenant, the purchase
price of the Property, the prior performance of the tenant, and the prior
business experience of management of the Company and the Company's Affiliates
with a Restaurant Chain or restaurant operator.
General. In general, the leases are expected to be "triple-net" leases,
which means that the tenants will be required to pay for all repairs,
maintenance, property taxes, utilities, and insurance. The tenants also will be
required to pay for special assessments, sales and use taxes, and the cost of
any renovations permitted under the leases. The Company will be the lessor under
each lease except in certain circumstances in which it may be a party to a Joint
Venture which will own the Property. In those cases, the Joint Venture, rather
than the Company, will be the lessor, and all references in this section to the
Company as lessor therefore should be read accordingly. See "Joint Venture
Arrangements" below.
Term of Leases. It presently is anticipated that restaurant Properties
will be leased on a "triple-net" basis for an initial term of either 15 or 20
years with up to five, five-year renewal options. The minimum rental payment
under the renewal option generally is expected to be greater than that due for
the final lease year of the initial term of the lease. Upon termination of the
lease, the tenant will surrender possession of the Property to the Company,
together with any improvements made to the Property during the term of the
lease, except that for Properties in which the Company owns only the land
underlying the building, the tenant may in certain cases retain ownership of the
building.
Computation of Lease Payments. During the initial term of the lease,
the tenant will pay the Company, as lessor, minimum annual rent equal to a
specified percentage of the Company's cost of purchasing the Property.
Typically, the leases provide for automatic increases in the minimum annual rent
at predetermined intervals during the term of the lease. In the case of
acquisition of Properties that are to be constructed or renovated pursuant to a
development agreement, the Company's costs of purchasing the Property will
include the purchase price of the land, including all fees, costs, and expenses
paid by the Company in connection with its purchase of the land, and all fees,
costs, and expenses disbursed by the Company for construction of restaurant
improvements. See "Site Selection and Acquisition of Properties -- Construction
and Renovation" above.
In addition to minimum annual rent, the tenant will pay the Company
"percentage rent." Percentage rent is computed as a percentage of the restaurant
gross sales at a particular Property. The leases generally will provide that
percentage rent will commence in the first lease year in which gross sales
exceed a specified amount. Certain leases, however, may provide that percentage
rent is to be paid quarterly beginning at the end of the first two years of the
lease and each succeeding quarter thereafter to the extent the restaurant gross
sales in that quarter exceed the average quarterly gross sales during the first
two lease years. The leases also generally will provide that the tenant will
receive a credit against percentage rent for the amount of the escalations in
the minimum annual rent due under the lease. Gross sales include sales of all
products and services of the restaurant, excluding sales taxes, tips paid to
serving people, and sales from vending machines.
In the case of Properties in which the Company owns only the building,
the Company will structure its leases to have recovered its investment in the
building by the expiration of the lease.
Assignment and Sublease. In general, it is expected that no lease may
be assigned or subleased without the Company's prior written consent (which may
not be unreasonably withheld) except to a tenant's corporate franchisor,
corporate affiliate or subsidiary, a successor by merger or acquisition, or, in
certain cases, another franchisee, if such assignee or subtenant agrees to
operate the same type of restaurant on the premises, but only to the extent
consistent with the Company's objective of qualifying as a REIT. The leases set
forth certain factors (such as the financial condition of the proposed tenant or
subtenant) that are deemed to be a reasonable basis for the Company's refusal to
consent to an assignment or sublease. In addition, the Company may refuse to
permit any assignment or sublease that would jeopardize the Company's continued
qualification as a REIT. The original tenant
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generally will remain fully liable, however, for the performance of all tenant
obligations under the lease following any such assignment or sublease unless the
Company agrees in writing to release the original tenant from its lease
obligations.
Alterations to Premises. A tenant generally will have the right,
without the prior consent of the Company and at the tenant's own expense, to
make certain immaterial structural modifications to the restaurant building and
improvements (with a cost of up to $10,000) or, with the Company's prior written
consent and at the tenant's own expense, to make material structural
modifications that may include demolishing and rebuilding the restaurant. Under
certain leases, the tenant, at its own expense, may make any type of alterations
to the leased premises without the Company's consent but must provide the
Company with plans of any proposed structural modifications at least 30 days
before construction of the alterations commences. Certain leases may require the
tenant to post a payment and performance bond for any structural alterations
with a cost in excess of a certain amount.
Right of Tenant to Purchase. It is anticipated that if the Company
wishes at any time to sell a Property pursuant to a bona fide offer from a third
party, the tenant of that Property will have the right to purchase the Property
for the same price, and on the same terms and conditions, as contained in the
offer. In certain cases, the tenant also may have a right to purchase the
Property seven to 20 years after commencement of the lease at a purchase price
equal to the greater of (i) the Property's appraised value at the time of the
tenant's purchase, or (ii) a specified amount, generally equal to the Company's
purchase price of the Property, plus a predetermined percentage (generally, 15%
to 20%) of such purchase price. See "Federal Income Tax Considerations --
Characterization of Leases."
Substitution of Properties. Under certain leases, the tenant, at its
own expense, is entitled to operate another form of approved restaurant on the
Property as long as such approved restaurant has an operating history which
reflects an ability to generate gross sales and potential sales growth equal to
or greater than that experienced by the tenant in operating the original
restaurant.
In addition, it is anticipated that certain leases will provide the
tenant with the right, to the extent consistent with the Company's objective of
qualifying as a REIT, to offer the substitution of another national or regional
fast-food, family-style, or casual dining restaurant property selected by the
tenant in the event that (i) the Property that is the subject of the lease is
not producing percentage rent pursuant to the terms of the lease, and (ii) the
tenant determines that the Property has become uneconomic (other than as a
result of an insured casualty loss or condemnation) for the tenant's continued
use and occupancy in its business operation and the tenant's board of directors
has determined to close and discontinue use of the Property. The tenant's
determination that a Property has become uneconomic is to be made in good faith
based on the tenant's reasonable business judgment after comparing the results
of operations of the Property to the results of operations at the majority of
other properties then operated by the tenant. If either of these events occurs,
the tenant will have the right to offer the Company the opportunity to exchange
the Property for another national or regional fast-food, family-style, or casual
dining restaurant property (the "Substituted Property") with a total cost for
land and improvements thereon (including overhead, construction interest, and
other related charges) equal to or greater than the cost of the Property to the
Company.
Generally, the Company will have 30 days following receipt of the
tenant's offer for exchange of the Property to accept or reject such offer. In
the event that the Company requests an appraisal of the Substituted Property, it
will have at least ten days following receipt of the appraisal to accept or
reject the offer. If the Company accepts such offer, (i) the Substituted
Property will be exchanged for the Property in a transaction designed and
intended to qualify as a "like-kind exchange" within the meaning of section 1031
of the Code with respect to the Company and (ii) the lease of the Property will
be amended to (a) provide for minimum rent in an amount equal to the sum
determined by multiplying the cost of the Substituted Property by the Property
lease rate and (b) provide for the number of five-year lease renewal options
sufficient to permit the tenant, at its option, to continue its occupancy of the
Substituted Property for up to 35 years from the date on which the exchange is
made. The Company will pay the tenant the excess, if any, of the cost of the
Substituted Property over the cost of the Property. If the substitution does not
take place within a specified period of time after the tenant makes the offer to
exchange the Property for the Substituted Property, either party thereafter will
have the right not to proceed with the substitution. If the Company rejects the
Substituted Property offered by the tenant, the tenant is generally required to
offer at least three additional alternative properties for the Company's
acceptance or rejection. If the Company rejects all Substituted Properties
offered to it pursuant to the lease, or otherwise fails or refuses to consummate
a substitution for any reason other than the tenant's failure to fulfill the
conditions precedent to the
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exchange, then the tenant will be entitled to terminate the lease on the date
scheduled for such exchange by purchasing the Property from the Company for a
price equal to the then-fair market value of the Property.
Neither the tenant nor any of its subsidiaries, licensees,
concessionaires, or sublicensees or any other affiliate will be permitted to use
the original Property as a restaurant of the same type and style for at least
one year after the closing of the original Property. In addition, in the event
the tenant or any of its affiliates sells the Property within twelve months
after the Company acquires the Substituted Property, the Company will receive,
to the extent consistent with its objective of qualifying as a REIT, from the
proceeds of the sale the amount by which the selling price exceeds the cost of
the Property to the Company.
Special Conditions. Certain leases may provide that the lessee will not
be permitted to own or operate, directly or indirectly, another Property of the
same or similar type as the leased Property that is or will be located within a
specified distance of the leased Property.
Insurance, Taxes, Maintenance, and Repairs. All of the leases are
expected to require that the tenant pay all taxes and assessments, maintenance,
repair, utility, and insurance costs applicable to the real estate and permanent
improvements. Tenants will be required to maintain all Properties in good order
and repair.
Tenants generally will be required, under the terms of the leases, to
maintain, for the benefit of the Company and the tenant, casualty insurance in
an amount not less than the full replacement value of the building and other
permanent improvements (or a percent of such value in the case of certain
leases, but in no case less than 90%), as well as liability insurance, generally
in an amount not less than $2,000,000 for each location and event. All tenants,
other than those tenants with a substantial net worth, generally also will be
required to obtain "rental value" or "business interruption" insurance to cover
losses due to the occurrence of an insured event for a specified period,
generally six to twelve months. In general, no lease will be entered into
unless, in the opinion of the Advisor, as approved by the Board of Directors,
the insurance required by the lease adequately insures the Property.
The tenants generally will be required to maintain the Property and
repair any damage to the Property, except damage occurring during the last 24 to
48 months of the lease term (as extended), which in the opinion of the tenant
renders the Property unsuitable for occupancy, in which case the tenant will
have the right instead to pay the insurance proceeds to the Company and
terminate the lease.
The tenant generally will be required to repair the Property in the
event that less than a material portion of the Property (for example, more than
20% of the building or more than 40% of the land) is taken for public or
quasi-public use. The Company's leases generally will provide that, in the event
of any condemnation of the Property that does not give rise to an option to
terminate the lease or in the event of any condemnation which does give rise to
an option to terminate the lease and the tenant elects not to terminate, the
Company will remit to the tenant the award from such condemnation and the tenant
will be required to repair and restore the Property. To the extent that the
award exceeds the estimated costs of restoring or repairing the Property, the
tenant is required to deposit such excess amount with the Company. Until a
specified time (generally, ten days) after the tenant has restored the premises
and all improvements thereon to the same condition as existed immediately prior
to such condemnation insofar as is reasonably possible, a "just and
proportionate" amount of the minimum annual rent will be abated from the date of
such condemnation. In addition, the minimum annual rent will be reduced in
proportion to the reduction in the then rental value of the premises or the fair
market value of the premises after the condemnation in comparison with the
rental value or fair market value prior to such condemnation.
Events of Default. The leases generally are expected to provide that
the following events, among others, will constitute a default under the lease:
(i) the insolvency or bankruptcy of the tenant, provided that the tenant may
have the right, under certain circumstances, to cure such default, (ii) the
failure of the tenant to make timely payment of rent or other charges due and
payable under the lease, if such failure continues for a specified period of
time (generally, five to 30 days) after notice from the Company of such failure,
(iii) the failure of the tenant to comply with any of its other obligations
under the lease (for example, the discontinuance of operations of the leased
Property) if such failure continues for a specified period of time (generally,
ten to 45 days), (iv) a default under or termination of the franchise agreement
between the tenant and its franchisor, (v) in cases where the Company enters
into a development agreement relating to the construction or renovation of a
restaurant, a default under the development agreement or the Indemnity Agreement
or the failure to establish the minimum annual rent at the end of the
development period, and (vi) in cases where the Company has entered into other
leases with the same tenant, a default under such lease.
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Upon default by the tenant, the Company generally will have the right
under the lease and under most state laws to evict the tenant, re-lease the
Property to others, and hold the tenant responsible for any deficiency in the
minimum lease payments. Similarly, if the Company determined not to re-lease the
Property, it could sell the Property. (Unless required to do so by the lease or
its investment objectives, however, the Company does not intend to sell any
Property prior to five to ten years after the commencement of the lease on such
Property. See "Right of Tenant to Purchase" above.) In the event that a lease
requires the tenant to make a security deposit (which it is anticipated normally
would be equal to two months' base rent), the Company will have the right under
the lease to apply the security deposit, upon default by the tenant, towards any
payments due from the defaulting tenant. In general, the tenant will remain
liable for all amounts due under the lease to the extent not paid from a
security deposit or by a new tenant.
In the event that a tenant defaults under a lease with the Company, the
Company either will attempt to locate a replacement restaurant operator
acceptable to the Restaurant Chain involved or will discontinue operation of the
restaurant. In lieu of obtaining a replacement restaurant operator, some
Restaurant Chains may have the option and may elect to operate the restaurants
themselves. The Company will have no obligation to operate the restaurants, and
no Restaurant Chain will be obligated to permit the Company or a replacement
restaurant operator to operate the restaurants.
JOINT VENTURE ARRANGEMENTS
The Company may enter into a Joint Venture to own and operate a
Property with various unaffiliated persons or entities or with another program
formed by the principals of the Company or the Advisor or their Affiliates, if a
majority of the Directors, including a majority of the Independent Directors,
not otherwise interested in the transaction determine that the investment in the
Joint Venture is fair and reasonable to the Company and on substantially the
same terms and conditions as those to be received by the co-venturer or
co-venturers. The Company may take more or less than a 50% interest in any Joint
Venture, subject to obtaining the requisite approval of the Directors. See "Risk
Factors -- Real Estate and Financing Risks -- Risks of Joint Investment in
Properties."
Under the terms of each Joint Venture agreement, the Company and each
joint venture partner will be jointly and severally liable for all debts,
obligations, and other liabilities of the Joint Venture, and the Company and
each joint venture partner will have the power to bind each other with any
actions they take within the scope of the Joint Venture's business. In addition,
it is expected that the Advisor or its Affiliates will be entitled to
reimbursement, at cost, for actual expenses incurred by the Advisor or its
Affiliates on behalf of the Company. Joint Ventures entered into to purchase and
hold a Property for investment generally will have an initial term of 15 to 20
years (generally the same term as the initial term of the lease for the Property
in which the Joint Venture invests), and, after the expiration of the initial
term, will continue in existence from year to year unless terminated at the
option of either joint venturer or unless terminated by an event of dissolution.
Events of dissolution will include the bankruptcy, insolvency, or termination of
any co-venturer, sale of the Property owned by the Joint Venture, mutual
agreement of the Company and its joint venture partner to dissolve the Joint
Venture, and the expiration of the term of the Joint Venture. The Joint Venture
agreement typically will restrict each venturer's ability to sell, transfer, or
assign its joint venture interest without first offering it for sale to its
co-venturer. In addition, in any Joint Venture with another program sponsored by
the Advisor or its Affiliates, where such arrangements are entered into for the
purpose of purchasing and holding Properties for investment, in the event that
one party desires to sell the Property and the other party does not desire to
sell, either party will have the right to trigger dissolution of the Joint
Venture by sending a notice to the other party. The notice will establish the
price and terms for the sale or purchase of the other party's interest in the
Joint Venture to the other party. The Joint Venture agreement will grant the
receiving party the right to elect either to purchase the other party's interest
on the terms set forth in the notice or to sell its own interest on such terms.
The following paragraphs describe the allocations and distributions
under the expected terms of the joint venture agreement for any Joint Venture in
which the Company and its co-venturer each have a 50% ownership interest. In any
other case, the allocations and distributions are expected to be similar to
those described below, except that allocations and distributions which are
described below as being made 50% to each co-venturer will instead be made in
proportion to each co-venturer's respective ownership interest.
Under the terms of each joint venture agreement, operating profits and
losses generally will be allocated 50% to each co-venturer. Profits from the
sale or other disposition of Joint Venture property first will be allocated to
any co-venturers with negative capital account balances in proportion to such
balances until such capital accounts
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equal zero, and thereafter 50% to each co-venturer. Similarly, losses from the
sale or other disposition of Joint Venture property first will be allocated to
joint venture partners with positive capital account balances in proportion to
such balances until such capital accounts equal zero, and thereafter 50% to each
co-venturer. Notwithstanding any other provisions in the Joint Venture
agreement, income, gain, loss, and deductions with respect to any contributed
property will be shared in a manner which takes into account the variation
between the basis of such property and its fair market value at the time of
contribution in accordance with section 704(c) of the Code.
Net cash flow from operations of the Joint Venture will be distributed
50% to each joint venture partner. Any liquidation proceeds, after paying joint
venture debts and liabilities and funding reserves for contingent liabilities,
will be distributed first to the joint venture partners with positive capital
account balances in proportion to such balances until such balances equal zero,
and thereafter 50% to each joint venture partner.
In order that the allocations of Joint Venture income, gain, loss, and
deduction provided in Joint Venture agreements may be respected for federal
income tax purposes, it is expected that any Joint Venture agreement (i) will
contain a "qualified income offset" provision, (ii) will prohibit allocations of
loss or deductions to the extent such allocation would cause or increase an
"Adjusted Capital Account Deficit," and (iii) will require (a) that capital
accounts be maintained for each joint venture partner in a manner which complies
with Treasury Regulation ss.1.704-1(b)(2)(iv) and (b) that distributions of
proceeds from the liquidation of a partner's interest in the Joint Venture
(whether or not in connection with the liquidation of the Joint Venture) be made
in accordance with the partner's positive capital account balance. See "Federal
Income Tax Considerations -- Investment in Joint Ventures."
Prior to entering into any Joint Venture arrangement with any
unaffiliated co-venturer (or the principals of any unaffiliated co-venturer),
the Company will confirm that such person or entity has demonstrated to the
satisfaction of the Company that requisite financial qualifications are met.
MORTGAGE LOANS
The Company has provided and intends to continue to provide Mortgage
Loans to operators of the Restaurant Chains, or their affiliates, to enable them
to acquire the building and improvements on real property. Generally in these
cases, the Company will acquire the underlying land and will enter into a
long-term ground lease for the Property with the borrower as the tenant. The
Mortgage Loan will be secured by the building and improvements on the land.
Management believes that the criteria for investing in the Mortgage Loans are
substantially the same as those involved in the Company's investments in
Properties consisting of buildings only; therefore, the Company will use the
same underwriting criteria as described above in "Business - Standards for
Investment in Properties."
Generally, management believes the economic effects of these
transactions are substantially the same as those of the leases. The borrower
will be responsible for all of the expenses of owning the building and
improvements, as with the "triple-net" leases, including expenses for insurance
and repairs and maintenance. Management expects the Mortgage Loans will be fully
amortizing loans over a period of 15 to 20 years (generally, the same term as
the initial term of the Property leases), with payments of principal and
interest due monthly. In addition, management expects the interest rate charged
under the terms of the Mortgage Loan will be fixed over the term of the loan and
generally will be comparable to, or slightly lower than, lease rates charged to
tenants for the Properties.
Management also believes that the combined leasing and financing
structure provides the benefit of allowing the Company to receive, on a fixed
income basis, the return of its initial investment in each financed building,
which is generally a depreciating asset, plus interest. At the same time, the
Company retains ownership of the underlying land, which is generally an
appreciating asset, thus providing an opportunity for a capital gain on the sale
of the land. In such cases, in which the borrower is also the tenant under a
Property lease for the underlying land, if the borrower does not elect to
exercise its purchase option to acquire the Property under the terms of the
lease, the building and improvements on the Property will revert to the Company
at the end of term of the lease, including any renewal periods. If the borrower
does elect to exercise its purchase option as the tenant of the underlying land,
the Company will generally have the option of selling the Property at the
greater of fair market value or cost plus a specified percentage.
The Company will not make or invest in Mortgage Loans unless an
appraisal is obtained concerning the property that secures the Mortgage Loan.
Mortgage indebtedness on any property shall not exceed such property's
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appraised value. In cases in which the majority of the Independent Directors so
determine, and in all cases in which the Mortgage Loan involves the Advisor,
Directors, or Affiliates, such appraisal must be obtained from an independent
expert concerning the underlying property. Such appraisal shall be maintained in
the Company's records for at least five years, and shall be available for
inspection and duplication by any stockholder. In addition to the appraisal, a
mortgagee's or owner's title insurance policy or commitment as to the priority
of the mortgage or condition of the title must be obtained.
In addition, the Company will not make or invest in Mortgage Loans on
any one property if the aggregate amount of all mortgage loans outstanding on
the property, including the loans of the Company, would exceed an amount equal
to 85% of the appraised value of the property as determined by appraisal unless
substantial justification exists because of the presence of other underwriting
criteria. For purposes of this limitation, the aggregate amount of all mortgage
loans outstanding on the property, including the loans of the Company, shall
include all interest (excluding contingent participation in income and/or
appreciation in value of the mortgaged property), the current payment of which
may be deferred pursuant to the terms of such loans, to the extent that deferred
interest on each loan exceeds 5% per annum of the principal balance of the loan.
Further, the Company will not make or invest in any Mortgage Loans that
are subordinate to any mortgage, other indebtedness or equity interest of the
Advisor, the Directors, or their Affiliates.
MANAGEMENT SERVICES
The Advisor will provide management services relating to the Company,
the Properties, the Mortgage Loans, and the Secured Equipment Lease program
pursuant to an Advisory Agreement between it and the Company. Under this
agreement, the Advisor will be responsible for assisting the Company in
negotiating leases, Mortgage Loans, and Secured Equipment Leases, collecting
rental, Mortgage Loan and Secured Equipment Lease payments, inspecting the
Properties and the tenants' books and records, and responding to tenant
inquiries and notices. The Advisor also will provide information to the Company
about the status of the leases, the Properties, the Mortgage Loans, the Loan and
the Secured Equipment Leases. In exchange for these services, the Advisor will
be entitled to receive certain fees from the Company. For supervision of the
Properties, the Advisor will receive the Asset Management Fee, which, generally,
is payable monthly in an amount equal to one-twelfth of .60% of Real Estate
Asset Value as of the end of the preceding month. For supervision of the
Mortgage Loans, the Advisor will receive the Mortgage Management Fee, which is
payable monthly in an amount equal to one-twelfth of .60% of the total principal
amount of the Mortgage Loans as of the end of the preceding month. For
negotiating Secured Equipment Leases and supervising the Secured Equipment Lease
program, the Advisor will receive, upon entering into each lease, a Secured
Equipment Lease Servicing Fee, payable out of the proceeds of the Loan, equal to
2% of the purchase price of the Equipment subject to each Secured Equipment
Lease. See "Management Compensation."
BORROWING
On March 5, 1996, the Company entered into a line of credit and
security agreement 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. Generally, advances under the
Loan will be fully amortizing term loans repayable in terms equal to the
duration of the Secured Equipment Leases, but in no event greater than 72
months. In addition, advances for short-term needs (to acquire equipment to be
leased under Secured Equipment Leases) may be requested in an aggregate amount
which does not exceed the Revolving Sublimit (defined in the Loan as $1,000,000)
and such advances may be repaid and readvanced; provided, however, that advances
made pursuant to the Revolving Sublimit shall be converted to term loans the
earlier of (i) the end of each 60 day period following the closing date (defined
in the Loan as March 5, 1996), or (ii) when the aggregate amount outstanding
equals or exceeds $1,000,000. Interest on advances made pursuant to the
Revolving Sublimit shall be paid monthly in arrears. In addition, principal
amounts under advances pursuant to the Revolving Sublimit, if not sooner paid or
converted into term loans, shall be paid, together with any unpaid interest
relating to such advances, to the bank on March 5, 1998. Generally, all advances
under the Loan will bear interest at either (i) a rate per annum equal to 215
basis points above the Reserve Adjusted LIBOR Rate (as defined in the Loan) or
(ii) a rate per annum equal to the bank's prime rate, whichever the Company
selects at the time advances are made. As a condition of obtaining the Loan, the
Company agreed to grant to the bank a first security interest in the Secured
Equipment Leases. In connection with the Loan, the Company incurred a commitment
fee, legal fees and closing costs of approximately $53,500 relating to the Loan.
As of April 9, 1996, $53,500 had been advanced under the Loan to fund the
commitment fee, legal fees and closing costs related to the Loan. The Company
intends to limit advances under the Loan to 10% of Gross Proceeds of the
offering.
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The Company, or Joint Venture in which the Company becomes a joint
venturer, will initially acquire Properties without borrowing. The Board of
Directors does not anticipate that the Company will borrow funds, other than the
Loan or for the purpose of preserving its status as a REIT. For example, the
Company may borrow to the extent necessary to permit the Company to make
Distributions required in order to enable the Company to qualify as a REIT for
federal income tax purposes; however, the Company will not borrow for the
purpose of returning capital to the stockholders unless necessary to eliminate
corporate-level tax to the Company. Until Listing occurs, the Company will not
encumber Properties in connection with any borrowing. If Listing occurs,
however, the Board of Directors may elect to cause the Company to borrow funds
in connection with the purchase of additional Properties or for other Company
purposes and to encumber any or all of the Company's Properties in connection
with any such borrowing. The aggregate borrowing of the Company, secured and
unsecured, shall be reasonable in relation to Net Assets of the Company and
shall be reviewed by the Board of Directors at least quarterly. The Board of
Directors anticipates that the aggregate amount of any borrowing will not exceed
50% of Real Estate Asset Value, although the maximum amount of borrowing in
relation to Net Assets, in the absence of a satisfactory showing that a higher
level of borrowing is appropriate, shall not exceed 300% of Net Assets (an
amount which the Company anticipates will correspond to approximately 75% of
Real Estate Asset Value). Any excess in borrowing over such 300% level shall
occur only with approval by a majority of the Independent Directors and will be
disclosed and explained to stockholders in the first quarterly report of the
Company prepared after such approval occurs.
SALE OF PROPERTIES, MORTGAGE LOANS, AND SECURED EQUIPMENT LEASES
For the first five to ten years after the commencement of the offering,
the Company intends, to the extent consistent with the Company's objective of
qualifying as a REIT, to reinvest in additional Properties or Mortgage Loans any
proceeds of the Sale of a Property or a Mortgage Loan that are not required to
be distributed to stockholders in order to preserve the Company's REIT status
for federal income tax purposes. Similarly, and to the extent consistent with
REIT qualification, the Company plans to use the proceeds of the Sale of a
Secured Equipment Lease to fund additional Secured Equipment Leases, or to
reduce its outstanding indebtedness on the Loan. At or prior to the end of such
ten-year period, the Company intends to provide stockholders of the Company with
liquidity of their investment, either in whole or in part, through Listing
(although liquidity cannot be assured thereby) or by commencing orderly sales of
the Company's assets. If Listing occurs, the Company intends to reinvest in
additional Properties, Mortgage Loans, and Secured Equipment Leases any Net
Sales Proceeds not required to be distributed to stockholders in order to
preserve the Company's status as a REIT. If Listing does not occur within ten
years after the commencement of the offering, the Company thereafter will
undertake the orderly liquidation of the Company and the Sale of the Company's
assets and will distribute any Net Sales Proceeds to stockholders. In addition,
the Company will not sell any assets if such Sale would not be consistent with
the Company's objective of qualifying as a REIT.
In deciding the precise timing and terms of Property Sales, the Advisor
will consider factors such as national and local market conditions, potential
capital appreciation, cash flows, and federal income tax considerations. The
terms of certain leases, however, may require the Company to sell a Property at
an earlier time if the tenant exercises its option to purchase a Property after
a specified portion of the lease term has elapsed. See "Business -- Description
of Leases -- Right of Tenant to Purchase." The Company will have no obligation
to sell all or any portion of a Property at any particular time, except as may
be required under property or joint venture purchase options granted to certain
tenants. In connection with Sales of Properties by the Company, purchase money
obligations may be taken by the Company as part payment of the sales price. The
terms of payment will be affected by custom in the area in which the Property is
located and by prevailing economic conditions. When a purchase money obligation
is accepted in lieu of cash upon the Sale of a Property, the Company will
continue to have a mortgage on the Property and the proceeds of the Sale will be
realized over a period of years rather than at closing of the Sale.
The Company does not anticipate selling the Secured Equipment Leases
prior to expiration of the lease term, except in the event that the Company
undertakes orderly liquidation of its assets. In addition, the Company does not
anticipate selling any Mortgage Loans prior to the expiration of the loan term,
except in the event (i) the Company owns the Property (land only) underlying the
building improvements which secure the Mortgage Loan and the Sale of the
Property occurs, or (ii) the Company undertakes an orderly Sale of its assets.
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FRANCHISE REGULATION
Many states regulate the franchise or license relationship between a
tenant/franchisee and a Restaurant Chain. The Company will not be an Affiliate
of any Restaurant Chain, and is not currently aware of any states in which the
relationship between the Company as lessor and the tenant will be subjected to
those regulations, but it will comply with such regulations in the future, if so
required. Restaurant Chains which franchise their operations are subject to
regulation by the Federal Trade Commission.
COMPETITION
The fast-food, family-style, and casual dining restaurant business is
characterized by intense competition. The operators of the restaurants located
on the Properties will compete with independently owned restaurants, restaurants
which are part of local or regional chains, and restaurants in other well-known
national chains, including those offering different types of food and service.
Many successful fast-food, family-style, and casual dining restaurants
are located in "eating islands," which are areas to which people tend to return
frequently and within which they can diversify their eating habits, because in
many cases local competition may enhance the restaurant's success instead of
detracting from it. Fast-food, family-style, and casual dining restaurants
frequently experience better operating results when there are other restaurants
in the same area.
The Company will be in competition with other persons and entities both
to locate suitable Properties to acquire and to locate purchasers for its
Properties. The Company also will compete with other financing sources such as
banks, mortgage lenders, and sale/leaseback companies for suitable Properties,
tenants, and Equipment tenants.
REGULATION OF MORTGAGE LOANS AND SECURED EQUIPMENT LEASES
The Mortgage Loans and Secured Equipment Lease program may be subject
to regulation by federal, state and local authorities and subject to various
laws and judicial and administrative decisions imposing various requirements and
restrictions, including among other things, regulating credit granting
activities, establishing maximum interest rates and finance charges, requiring
disclosures to customers, governing secured transactions and setting collection,
repossession, claims handling procedures and other trade practices. In addition,
certain states may have enacted legislation requiring the licensing of mortgage
bankers or other lenders and these requirements may affect the Company's ability
to effectuate its Mortgage Loans and Secured Equipment Lease program.
Commencement of operations into these or other jurisdictions may be dependent
upon a finding of financial responsibility, character and fitness of the
Company. The Company may determine not to make Mortgage Loans or operate Secured
Equipment Lease program in any jurisdiction in which it believes the Company has
not complied in all material respects with applicable requirements.
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 Restaurant Chains. In addition, the Company may provide
Mortgage Loans for the purchase of buildings, generally by tenants that lease
the underlying land from the Company. To a lesser extent, the Company intends to
offer Secured Equipment Leases to operators of Restaurant Chains. Secured
Equipment Leases will be funded from the proceeds of the Loan, in an amount up
to 10% of Gross Proceeds from the offering, which the Company has obtained.
The Company's primary investment objectives are to preserve, protect,
and enhance the Company's assets while (i) making distributions commencing in
the initial year of Company operations; (ii) obtaining fixed income through the
receipt of base rent, and increasing the Company's income (and distributions)
and providing protection against inflation through automatic increases in base
rent and receipt of percentage rent, and obtaining fixed income
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through the receipt of payments from Secured Equipment Leases; (iii) qualifying
as a REIT for federal income tax purposes; and (iv) providing stockholders of
the Company with liquidity of their investment within five to ten years after
commencement of the offering, either in whole or in part, through (a) listing of
the shares on a national securities exchange or over-the-counter market
("Listing"), or (b) the commencement of orderly sales of the Company's assets,
and distribution of the proceeds thereof (outside the ordinary course of
business and consistent with its objective of qualifying as a REIT).
Pursuant to the registration statement of which this Prospectus is a
part, the Company registered for sale an aggregate of $165,000,000 of Shares of
common stock (16,500,000 Shares at $10 per Share). The offering of Shares of the
Company commenced in April 1995. Currently, the Company is in the offering
stage. The offering of Shares of the Company will terminate no later than March
29, 1997, in states that permit the extension of the offering period for a
second year.
As of December 31, 1995, the Company owned 18 Properties (including one
Property through a joint venture arrangement and one consisting of building
only), four of which were under construction or renovation at December 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
During the period May 2, 1994 (date of inception) through December 31,
1994, the Company received initial capital contributions of $200,000 for 20,000
shares of common stock from the Advisor.
In April 1995, the Company commenced an offering of its Shares of
common stock. As of December 31, 1995, the Company had received subscription
proceeds of $38,454,158 (3,845,416 Shares) from the offering, including $50,790
(5,079 Shares) through the Reinvestment Plan.
As of December 31, 1995, net proceeds to the Company from its offering
of Shares and capital contributions from the Advisor after deduction of
Organizational and Offering Expenses, totalled $32,250,487. As of December 31,
1995, approximately $24,000,000 had been used to invest, or committed for
investment, in 18 Properties (two of which were undeveloped land on which a
restaurant was being constructed and two of which were being renovated),
including one Property owned by a Joint Venture and one Property consisting of
building only, and to pay Acquisition Fees to the Advisor totalling $1,730,437
and certain Acquisition Expenses. The Company acquired nine of the 18 Properties
from Affiliates for purchase prices totalling approximately $6,621,000. 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. The
Company expects to use Net Offering Proceeds from the sale of 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, as described
above. 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.
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 once construction is completed. 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 $3,214,700, of
which approximately $1,760,000 in land and other costs had been incurred as of
December 31, 1995. The buildings under construction as of December 31, 1995,
are expected to be operational by May 1996. In connection with the purchase of
each Property, the Company, as lessor, entered into a long-term lease agreement.
In addition, in connection with the acquisition of two Properties
during the year ended December 31, 1995, the Company has committed to fund an
aggregate amount of $500,000 for the renovation of the Properties. As of
December 31, 1995, the Company had incurred approximately $234,000 in such
costs. Upon the completion of the renovation of the Properties and the payment
of such by the Company, the base rent due under the terms of the lease will be
adjusted upward. The renovations are expected to be completed by May 1996.
During the period January 1, 1996 through April 9, 1996, the Company
acquired 30 additional Properties (two Properties consisting of building only,
which are to be constructed, five Properties consisting of land and
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building, four of which are to be constructed, and 23 Properties consisting of
land only) for cash at a total cost of approximately $8,031,000, excluding
development costs, Acquisition Fees and certain Acquisition Expenses. With
regard to the 23 Properties consisting of land only, the Company is leasing the
parcels to a single lessee pursuant to a Master Lease Agreement. The lessee owns
the buildings located on the 23 Properties. In connection therewith, the Company
provided a Mortgage Loan in the amount of $8,475,000 to the lessee pursuant to a
Master Mortgage Note which is collateralized by the building improvements of the
23 Properties. The Master Mortgage Note bears interest at a rate of 10.75% per
annum and principal and interest will be collected in equal monthly installments
over 20 years starting March 1, 1996.
The Company presently is negotiating to acquire additional Properties,
but as of April 9, 1996, had not acquired any such Properties.
As of April 9, 1996, the Company had received subscription proceeds of
$57,887,405 (5,788,741 Shares) from 3,440 stockholders, including $128,151
(12,815 Shares) issued pursuant to the Reinvestment Plan. As of April 9, 1996,
the Company had invested, or committed for investment, a total of approximately
$46,200,000 of such proceeds in Properties, in providing mortgage financing to
the tenant of the 23 Properties consisting of land only through a Mortgage Loan,
and to pay Acquisition Fees and Acquisition Expenses, leaving approximately
$4,200,000 in Net Offering Proceeds available for investment in Properties and
Mortgage Loans. As of April 9, 1996, the Company had incurred $2,604,933 in
Acquisition Fees due to the Advisor.
On March 5, 1996, the Company entered into a line of credit and
security agreement 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. Generally, advances under the
Loan will be fully amortizing term loans repayable in terms equal to the
duration of the Secured Equipment Leases, but in no event greater than 72
months. In addition, advances for short-term needs (to acquire equipment to be
leased under Secured Equipment Leases) may be requested in an aggregate amount
which does not exceed the Revolving Sublimit (defined in the Loan as $1,000,000)
and such advances may be repaid and readvanced; provided, however, that advances
made pursuant to the Revolving Sublimit shall be converted to term loans the
earlier of (i) the end of each 60 day period following the closing date (defined
in the Loan as March 5, 1996), or (ii) when the aggregate amount outstanding
equals or exceeds $1,000,000. Interest on advances made pursuant to the
Revolving Sublimit shall be paid monthly in arrears. In addition, principal
amounts under advances pursuant to the Revolving Sublimit, if not sooner paid or
converted into term loans, shall be paid, together with any unpaid interest
relating to such advances, to the bank on March 5, 1998. Generally, all advances
under the Loan will bear interest at either (i) a rate per annum equal to 215
basis points above the Reserve Adjusted LIBOR Rate (as defined in the Loan) or
(ii) a rate per annum equal to the bank's prime rate, whichever the Company
selects at the time advances are made. As a condition of obtaining the Loan, the
Company agreed to grant to the bank a first security interest in the Secured
Equipment Leases. In connection with the Loan, the Company incurred a commitment
fee, legal fees and closing costs of approximately $53,500 relating to the Loan.
As of April 9, 1996, $53,500 had been advanced under the Loan to fund the
commitment fee, legal fees and closing costs related to the Loan. The Company
intends to limit advances under the Loan to 10% of Gross Proceeds of the
offering.
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, by
the Company, all 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 December 31,
1995, the Company had $11,508,445 invested in such short-term investments as
compared to $945 at December 31, 1994. The increase in the amount invested in
short-term investments reflects subscription proceeds derived from the sale of
Shares during the year ended December 31, 1995. 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 organization
and offering and acquisition costs, to pay Distributions to stockholders, to
meet Company expenses and, in management's discretion, to create cash reserves.
During the year ended December 31, 1995 and the period May 2, 1994
(date of inception) through December 31, 1994, Affiliates of the Company
incurred on behalf of the Company $2,084,145 and $461,866, respectively, for
certain Organizational and Offering Expenses. In addition, during the year ended
December 31,
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1995, Affiliates of the Company incurred on behalf of the Company $131,629 for
certain Acquisition Expenses and $54,234 for certain Operating Expenses. As of
December 31, 1995, the Company owed the Advisor $108,316 for such amounts and
accounting and administrative expenses. In addition, as of December 31, 1995,
the Company owed the Advisor $45,118 and $9,108 for Acquisition Fees and Asset
Management Fees, respectively. As of February 7, 1996, the Company had
reimbursed all such amounts. The Advisor has agreed to pay or reimburse to the
Company all Organizational and Offering Expenses in excess of three percent of
gross offering proceeds. Amounts payable to unrelated parties increased to
$1,148,425 at December 31, 1995, from $424,324 at December 31, 1994, primarily
as a result of the accrual of construction costs incurred and unpaid as of
December 31, 1995.
During the year ended December 31, 1995, the Company generated cash
from operations (which includes cash received from tenants and interest
received, less cash paid for operating expenses) of $498,459. Based on current
and anticipated future cash from operations the Company declared Distributions
to the stockholders of $638,618 during the year ended December 31, 1995. No
Distributions were paid or declared for the period May 2, 1994 (date of
inception) through December 31, 1994. In January, February, and March 1996, the
Company declared Distributions to its stockholders totalling $225,354, $255,649,
and $287,805, respectively, which were paid March 29, 1996. In addition, on
April 1, 1996, the Company declared Distributions to its stockholders totalling
$323,748 payable in June 1996. For the year ended December 31, 1995, 59.82% of
the Distributions received by stockholders were considered to be ordinary income
and 40.18% were considered a return of capital for federal income tax purposes.
However, no amounts distributed or to be distributed to the stockholders as of
April 9, 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.
Management believes that the Properties are adequately covered by
insurance. During 1995, 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. Accordingly, management
believes that any anticipated decrease in the Company's liquidity in 1996, due
to its investment of available Net Offering Proceeds in Properties, will not
have an adverse effect on the Company's operations. During the operational
stage, management believes that the leases will generate cash flow in excess of
Operating Expenses. Since the leases are expected generally to have an initial
term of 15 to 20 years, with two or more five-year renewal options, and provide
for specified percentage rent in addition to the annual base rent and, in
certain cases, increases in the base rent or the percentage rent at specified
times during the terms of the leases, it is anticipated that rental income will
increase over time.
Due to anticipated low Operating Expenses, rental income expected to be
obtained from Properties after they are acquired, and the fact that as of April
9, 1996, no amounts had been borrowed under the Loan for Secured Equipment
Leases and that the Company had not entered into any Secured Equipment Leases,
management does not believe that working capital reserves will be 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
No significant operations commenced until the Company received the
minimum offering proceeds of $1,500,000 on June 1, 1995.
As of December 31, 1995, the Company had purchased 18 Properties,
including one which is owned through a joint venture and one Property consisting
of building only, and entered into lease agreements relating to these
Properties. The leases provide for minimum base annual rental payments (payable
in monthly installments) ranging from approximately $89,800 to $215,900. In
addition, the leases generally 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. For a further description of the
Company's leases and Properties owned as of December 31, 1995, and leases for
Properties acquired during the period January 1, 1996 through April 9, 1996, see
"Business - Property Acquisitions" above.
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During the year ended December 31, 1995, the Company and its
consolidated joint venture, CNL/Corral South Joint Venture, earned a total of
$539,776 in rental income from operating leases, earned income from the direct
financing lease and contingent rental income from 16 Properties (excluding two
Properties under construction as of December 31, 1995). Because the Company did
not commence significant operations until it received the minimum offering
proceeds on June 1, 1995, and has not yet acquired all of its Properties,
revenues for the year ended December 31, 1995, represent only a portion of
revenues which the Company is expected to earn during a full year in which the
Company's Properties are operational.
During the year ended December 31, 1995, five of the Company's lessees,
Golden Corral Corporation, Northstar Restaurants, Inc., Foodmaker, Inc.,
Roasters Corp. and Denwest Restaurant Corp., each contributed more than ten
percent of the Company's total rental income. Golden Corral Corporation is the
lessee under leases relating to six restaurants, Northstar Restaurants, Inc. is
the lessee under leases relating to three restaurants, Foodmaker, Inc. is the
lessee under a lease relating to one restaurant, Roasters Corp. is the lessee
under leases relating to two restaurants and Denwest Restaurant Corp. is the
lessee under leases relating to two restaurants. In addition, five of the
Restaurant Chains, Golden Corral Family Steakhouse, Kenny Rogers' Roasters,
Boston Market, Jack in the Box and Denny's, each accounted for more than ten
percent of the Company's total rental income during 1995. Because the Company
did not commence operations or purchase its first Property until June 1995, the
foregoing information regarding the lessees and Restaurant Chains which
contributed a significant amount of the Company's total rental income during the
year ended December 31, 1995, may or may not be representative of the lessees
and Restaurant Chains which will account for more than ten percent of the
Company's rental income during 1996 and subsequent years. Because the Company
has not completed its acquisition of Properties as yet, it is not possible to
determine which lessees or Restaurant Chains will contribute more than ten
percent of the Company's rental income during 1996 and subsequent years. In the
event that certain lessees or Restaurant Chains contribute more than ten percent
of the Company's rental income in the current and future years, any failure of
such lessees or Restaurants Chains could materially affect the Company's income.
During the year ended December 31, 1995, the Company also earned
$119,355 in interest income from investments in money market accounts or other
short-term, highly liquid investments. Interest income is expected to increase
as the Company invests subscription proceeds in highly liquid investments
pending the acquisition of Properties. However, 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 $290,276 for the year ended December 31, 1995. Operating expenses,
including depreciation and amortization expense, also represent only a portion
of operating expenses which the Company is expected to incur during a full year
in which the Company's Properties are operational. The dollar amount of
operating expenses is expected to increase as the Company acquires additional
Properties.
The Company has made the election under Section 856(c) of the Internal
Revenue Code of 1986, as amended (the "Code"), to be taxed as a REIT under the
Code beginning with its taxable year ended December 31, 1995. As a REIT for
federal income tax purposes, the Company generally will not be subject to
federal income tax on income that it distributes to its stockholders. If the
Company fails to qualify as a REIT in any taxable year, it will be subject to
federal income tax on its taxable income at regular corporate rates and will not
permitted to qualify for treatment as a REIT for federal income tax purposes for
four years following the year during which qualification is lost. Such an event
could materially affect the Company's income. However, the Company believes that
it is organized and operates in such a manner as to qualify for treatment as a
REIT for the year ended December 31, 1995. In addition, the Company intends to
continue to operate the Company so as to remain qualified as a REIT for federal
income tax purposes.
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. The
Statement, which is effective for fiscal years beginning after December 15,
1995, requires that an entity review long-lived assets and certain identifiable
intangibles, to be held and used, for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable. The Company will adopt this standard in 1996. Adoption of this
standard currently would not have had a material effect on the Company's
financial position or results of operations.
All of the Company's leases as of December 31, 1995, are triple-net
leases and contain provisions that management believes will mitigate the adverse
effect of inflation. Such provisions include clauses requiring the
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payment of percentage rent based on certain restaurant sales above a specified
level and/or automatic increases in base rent at specified times during the term
of the lease. Management expects that increases in restaurant sales volumes due
to inflation and real sales growth should result in an increase in rental income
over time. Continued inflation also may cause capital appreciation of the
Company's Properties. Inflation and changing prices, however, also may have an
adverse impact on the operating margins of the restaurants and on potential
capital appreciation of the Properties.
MANAGEMENT
GENERAL
The Company will operate under the direction of the Board of Directors,
the members of which are accountable to the Company as fiduciaries. As required
by applicable regulations, a majority of the Independent Directors and a
majority of the Directors have reviewed and ratified the Articles of
Incorporation and have adopted the Bylaws.
The Company currently has five Directors; it may have no fewer than
three Directors and no more than 15. Directors will be elected annually, and
each Director will hold office until the next annual meeting of stockholders or
until his successor has been duly elected and qualified. There is no limit on
the number of times that a Director may be elected to office. Although the
number of Directors may be increased or decreased as discussed above, a decrease
shall not have the effect of shortening the term of any incumbent Director.
Any Director may resign at any time and may be removed with or without
cause by the stockholders upon the affirmative vote of at least a majority of
all the Shares outstanding and entitled to vote at a meeting called for this
purpose. The notice of such meeting shall indicate that the purpose, or one of
the purposes, of such meeting is to determine if a Director shall be removed.
FIDUCIARY RESPONSIBILITY OF THE BOARD OF DIRECTORS
The Board of Directors will be responsible for the management and
control of the affairs of the Company; however, the Board of Directors will
retain the Advisor to manage the Company's day-to-day affairs and the
acquisition and disposition of investments, subject to the supervision of the
Board of Directors.
The Directors are not required to devote all of their time to the
Company and are only required to devote such of their time to the affairs of the
Company as their duties require. The Board of Directors will meet quarterly in
person or by telephone, or more frequently if necessary. It is not expected that
the Directors will be required to devote a substantial portion of their time to
discharge their duties as directors. Consequently, in the exercise of their
fiduciary responsibilities, the Directors will rely heavily on the Advisor. In
this regard, the Advisor, in addition to the Directors, will have a fiduciary
duty to the Company.
The Directors will monitor the administrative procedures, investment
operations, and performance of the Company and the Advisor to assure that such
policies are in the best interest of the stockholders and are fulfilled. Until
modified by the Directors, the Company will follow the policies on investments
set forth in this Prospectus. See "Investment Objectives and Policies."
The Independent Directors are responsible for reviewing the fees and
expenses of the Company at least annually or with sufficient frequency to
determine that the total fees and expenses of the Company are reasonable in
light of the Company's investment performance, Net Assets, Net Income, and the
fees and expenses of other comparable unaffiliated real estate investment
trusts. This determination shall be reflected in the minutes of the meetings of
the Board of Directors. For purposes of this determination, Net Assets are the
Company's total assets (other than intangibles), calculated at cost before
deducting depreciation or other non-cash reserves, less total liabilities, and
computed at least quarterly on a basis consistently applied. Such determination
will be reflected in the minutes of the meetings of the Board of Directors. In
addition, a majority of the Independent Directors and a majority of Directors
not otherwise interested in the transaction must approve each transaction with
the Advisor or its Affiliates. The Board of Directors also will be responsible
for reviewing and evaluating the performance of the Advisor before entering into
or renewing an advisory agreement. The Independent Directors shall determine
from time to time and at least annually that compensation to be paid to the
Advisor is reasonable in relation to the nature and quality of services to be
performed and shall supervise the performance of the Advisor and the
compensation
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paid to it by the Company to determine that the provisions of the Advisory
Agreement are being carried out. Specifically, the Independent Directors will
consider factors such as the amount of the fee paid to the Advisor in relation
to the size, composition and performance of the Company's investments, the
success of the Advisor in generating appropriate investment opportunities, rates
charged to other comparable REITs and other investors by advisors performing
similar services, additional revenues realized by the Advisor and its Affiliates
through their relationship with the Company, whether paid by the Company or by
others with whom the Company does business, the quality and extent of service
and advice furnished by the Advisor, the performance of the investment portfolio
of the Company and the quality of the portfolio of the Company relative to the
investments generated by the Advisor for its own account. Such review and
evaluation will be reflected in the minutes of the meetings of the Board of
Directors. The Board of Directors shall determine that any successor Advisor
possesses sufficient qualifications to (i) perform the advisory function for the
Company and (ii) justify the compensation provided for in its contract with the
Company.
The liability of the officers and Directors while serving in such
capacity is limited in accordance with the Articles of Incorporation and
applicable law. See "Summary of the Articles of Incorporation and Bylaws --
Limitation of Director and Officer Liability."
DIRECTORS AND EXECUTIVE OFFICERS
The Directors and executive officers of the Company are listed below:
<TABLE>
<CAPTION>
Name Age Position with the Company
<S> <C>
James M. Seneff, Jr. 49 Director, Chairman of the Board, and Chief Executive Officer
Robert A. Bourne 49 Director and President
G. Richard Hostetter 56 Independent Director
J. Joseph Kruse 63 Independent Director
Richard C. Huseman 57 Independent Director
John T. Walker 37 Chief Operating Officer and Executive Vice President
Jeanne A. Wall 37 Executive Vice President
Lynn E. Rose 47 Secretary and Treasurer
Edgar J. McDougall 48 Executive Vice President
</TABLE>
James M. Seneff, Jr. Director, Chairman of the Board, and Chief
Executive Officer. Mr. Seneff currently holds the position of Chairman of the
Board, Chief Executive Officer and director of CNL Fund Advisors, Inc., the
advisor to the Company. Mr. Seneff is a principal stockholder of CNL Group,
Inc., a diversified real estate company, and has served as its Chairman of the
Board of Directors, director, and Chief Executive Officer since its formation in
1980. CNL Group, Inc. is the parent company of CNL Securities Corp., which is
acting as the Managing Dealer in this offering, CNL Investment Company and CNL
Fund Advisors, Inc. Mr. Seneff has been a director and registered principal of
CNL Securities Corp. since its formation in 1979. Mr. Seneff also has held the
position of President and a director of CNL Management Company, a registered
investment advisor, since its formation in 1976, has served as Chief Executive
Officer and Chairman of the Board of CNL Investment Company, and Chief Executive
Officer and Chairman of the Board of Commercial Net Lease Realty, Inc. since
1992, has served as Chief Executive Officer and Chairman of the Board of CNL
Realty Advisors, Inc. since its inception in 1991, and has held the position of
Chief Executive Officer and a director of CNL Institutional Advisors, Inc., a
registered investment advisor, since its inception in 1990. Mr. Seneff
previously served on the State of Florida Commission on Ethics and is a former
member and past Chairman of the Florida Investment Advisory Council, which
recommends to the Florida Board of Administration investments for various
Florida employee retirement funds. The Florida Board of Administration,
Florida's principal investment advisory and money management agency, oversees
the investment of more than $40 billion of retirement funds. Since 1971, Mr.
Seneff has been active in the acquisition, development, and management of real
estate projects and, directly or through an affiliated entity, has served as a
general partner or joint venturer in approximately 100 real estate ventures
involved in the financing, acquisition, construction, and rental of restaurants,
office buildings, apartment complexes, hotels, and other real estate. Included
in these 100 real estate ventures are approximately 57 privately offered real
estate limited partnerships with investment objectives similar to one or more of
the Company's investment objectives, in which Mr. Seneff, directly or through an
affiliated entity, serves or has served as a general partner. Mr. Seneff
received his degree in Business Administration from Florida State University in
1968.
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Robert A. Bourne. Director and President. Mr. Bourne currently holds
the position of President and director of CNL Fund Advisors, Inc., the advisor
to the Company. 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 President, Chief Investment Officer and a director of CNL
Institutional Advisors, Inc., a registered investment advisor. 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
Secretary and Treasurer 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 approximately 100 real estate ventures involved in
the financing, acquisition, construction, and rental of restaurants, office
buildings, apartment complexes, hotels, and other real estate. Included in these
100 real estate ventures are approximately 57 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.
G. Richard Hostetter, Esq. Independent Director. Mr. Hostetter was a
senior partner at the law firm of Miller and Martin from 1966 through 1989. In
this capacity, he has served for more than 20 years as counsel for various
corporate real estate groups, fast-food companies and public companies,
including The Krystal Company, resulting in his extensive participation in
transactions involving the sale, lease, and sale/leaseback of approximately 250
restaurant units. Mr. Hostetter graduated from the University of Georgia and
received his J.D. from Emory Law School in 1966. He is licensed to practice law
in Tennessee and Georgia. From 1989 to date, Mr. Hostetter has served as
President and General Counsel of Mills, Ragland & Hostetter, Inc., a holding
company involved in corporate acquisitions, in which he also is a general and
limited partner.
J. Joseph Kruse. Independent Director. From 1993 to the present, Mr.
Kruse has been President and Chief Executive Officer of Kruse & Co., Inc., a
merchant banking company engaged in real estate. Formerly, Mr. Kruse was a
Senior Vice President with Textron, Inc. for twenty years, and then served as
Senior Vice President at G. William Miller & Co., a firm founded by the former
Chairman of the Federal Reserve Board and the Treasury Secretary. Mr. Kruse was
responsible for evaluations of commercial real estate and retail shopping mall
projects and continues to serve of counsel to the firm. Mr. Kruse received a
Bachelors of Education degree from the University of Florida in 1957 and a
Masters of Science in Administration in 1958.
Richard C. Huseman. Independent Director. Mr. Huseman is presently a
professor in the College of Business, and from 1990 through 1995, served as the
Dean of the College of Business Administration of the University of Central
Florida. He has served as a consultant in the area of managerial strategies to
a number of Fortune 500 corporations, including IBM, AT&T, and 3M, as well as to
several branches of the U.S. government, including the U.S. Department of Health
and Human Services, the U.S. Department of Justice, and the Internal Revenue
Service. Mr. Huseman received a B.A. from Greenville College in 1961 and an
M.A. and a Ph.D. from the University of Illinois in 1963 and 1965, respectively.
John T. Walker. Chief Operating Officer and Executive Vice President.
Mr. Walker joined CNL Group, Inc. in September 1994, as Senior Vice President,
responsible for Research and Development. He currently serves as the Chief
Operating Officer and Executive Vice President of CNL Fund Advisors, Inc., the
advisor to the Company. From May 1992 to May 1994, he was Executive Vice
President for Finance and Administration and Chief Financial Officer of Z Music,
Inc., a television network which was subsequently acquired by Gaylord
Entertainment, where he was responsible for overall financial and administrative
management and planning. From January 1990 through April 1992, Mr. Walker was
Chief Financial Officer of the First Baptist Church in Orlando, Florida. From
April 1984 through December 1989, he was a partner in the accounting firm of
Chastang, Ferrell & Walker, P.A., where he was the partner in charge of audit
and consulting services, and from 1981 to 1984, Mr. Walker was a Senior
Consultant/Audit Senior at Price Waterhouse. Mr. Walker is a Cum Laude graduate
of Wake Forest University with a B.S. in Accountancy and is a Certified Public
Accountant.
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Jeanne A. Wall. Executive Vice President. Ms. Wall serves as
Executive Vice President of CNL Fund Advisors, Inc., the advisor to the Company.
Ms. Wall has served as Chief Operating Officer of CNL Investment Company and of
CNL Securities Corp. since November 1994 and previously served as Executive Vice
President of CNL Investment Company since January 1991. In 1984, Ms. Wall
joined CNL Securities Corp. as its Partnership Administrator. In 1985, Ms. Wall
became Vice President of CNL Securities Corp. and, in 1987, she became a Senior
Vice President of CNL Securities Corp. In this capacity, Ms. Wall serves as
national marketing director and oversees the national marketing plan for the CNL
investment programs. In addition, Ms. Wall oversees partnership administration
and investor services for programs offered through participating brokers. Ms.
Wall also has served as Senior Vice President of CNL Institutional Advisors,
Inc., a registered investment advisor, from 1990 to 1993, as Vice President of
CNL Realty Advisors, Inc. since its inception in 1991; and as Vice President of
Commercial Net Lease Realty, Inc. since 1992. Ms. Wall holds a B.A. in Business
Administration from Linfield College and is a registered principal of CNL
Securities Corp. Ms. Wall currently serves as a trustee on the Board of the
Investment Program Association and on the Direct Participation Program committee
for the National Association of Securities Dealers.
Lynn E. Rose. Secretary and Treasurer. Ms. Rose serves as Secretary
and Treasurer of CNL Fund Advisors, Inc., the advisor to the Company. Ms. Rose,
a certified public accountant, has served as Chief Financial Officer and
Secretary of CNL Group, Inc. since December 1993, and served as Controller and
Secretary of CNL Group, Inc. from 1987 until December 1993. She has served as
Chief Operating Officer of CNL Corporate Services, Inc. since November 1994.
Ms. Rose also has served as Chief Financial Officer of CNL Institutional
Advisors, Inc. since its inception in 1990, as a director of CNL Realty
Advisors, Inc. since its inception in 1991, and as Secretary and 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. In addition, Ms. Rose oversees the management information
services, administration, legal compliance, accounting, tenant compliance, and
reporting for over 200 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.
Edgar J. McDougall. Executive Vice President. Mr. McDougall currently
serves as Executive Vice President of CNL Fund Advisors, Inc., the advisor to
the Company and has served as Executive Vice President of CNL Group, Inc. since
August 1990. Mr. McDougall joined CNL Group, Inc. in May 1990 as Senior Vice
President--Strategic Planning. Mr. McDougall also serves as Chief Operating
Officer of CNL Institutional Advisors, Inc. In addition, Mr. McDougall has
served as Vice President of CNL Realty Advisors, Inc. since its inception in
1991 and Vice President of Commercial Net Lease Realty, Inc. since 1992. Prior
to joining CNL in 1990, Mr. McDougall served as President of Colony Land
Company, in Orlando, Florida, beginning in November 1987. From 1985 to 1987,
Mr. McDougall served as the Sales Manager of the Orlando office of Coldwell
Banker Commercial Real Estate, a diversified real estate company involved in the
sale and leasing of commercial properties. Mr. McDougall holds a Doctor of
Philosophy degree in Business Administration from the University of Florida.
INDEPENDENT DIRECTORS
Under the Articles of Incorporation, a majority of the Board of
Directors must consist of Independent Directors, except for a period of 90 days
after the death, removal or resignation of an Independent Director. The
Independent Directors shall nominate replacements for vacancies amongst the
Independent Director positions. An Independent Director may not, directly or
indirectly (including through a member of his immediately family), own any
interest in, be employed by, have any present business or professional
relationship with, or serve as an officer or director of, the Advisor or its
Affiliates. Except to carry out the responsibilities of a Director, an
Independent Director may not perform material services for the Company.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has a standing Audit Committee, the members of which are
selected by the full Board of Directors each year. The Audit Committee makes
recommendations to the Board of Directors in accordance with those of the
independent accountants of the Company. The Board of Directors shall review with
such accounting firm the scope of the audit and the results of the audit upon
its completion.
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At such time, if any, as the Shares are listed on a national securities
exchange or over-the-counter market, the Company will form a Compensation
Committee, the members of which will be selected by the full Board of Directors
each year.
At least a majority of the members of each committee of the Company's
Board of Directors must be Independent Directors.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Each Director is entitled to receive $6,000 annually for serving on the
Board of Directors, as well as fees of $750 per meeting attended ($375 for each
telephonic meeting in which the Director participates), including committee
meetings. No executive officer or Director of the Company has received a bonus
from the Company. The Company will not pay any compensation to the officers and
Directors of the Company who also serve as officers and directors of the
Advisor.
MANAGEMENT COMPENSATION
For a description of the types, recipients, methods of computation, and
estimated amounts of all compensation, fees, and distributions to be paid
directly or indirectly by the Company to the Advisor, Managing Dealer, and their
Affiliates, see "Management Compensation."
THE ADVISOR AND THE ADVISORY AGREEMENT
THE ADVISOR
CNL Fund Advisors, Inc. is a Florida corporation organized in March,
1994 to provide management, advisory and administrative services to the Company.
The Company entered into the Advisory Agreement with the Advisor effective April
19, 1995. CNL Fund Advisors, Inc., as Advisor, has a fiduciary responsibility to
the Company and the stockholders.
The directors and officers of the Advisor are as follows:
<TABLE>
<S> <C>
James M. Seneff, Jr. ............. Chairman of the Board, Chief Executive Officer, and Director
Robert A. Bourne ................. President and Director
John T. Walker ................... Chief Operating Officer and Executive Vice President
Edgar J. McDougall ............... Executive Vice President
Lynn E. Rose ..................... Secretary, Treasurer and Director
Jeanne A. Wall ................... Executive Vice President
</TABLE>
The backgrounds of these individuals are described above under
"Management--Directors and Officers."
The Advisor employs personnel, in addition to the directors and
executive officers listed above, who have extensive experience in selecting and
managing restaurant properties similar to the Properties.
The Advisor currently owns 20,000 Shares. The Advisor may not sell
these Shares while the Advisory Agreement is in effect, although the Advisor may
transfer such Shares to Affiliates. Neither the Advisor, a Director, or any
Affiliate may vote or consent on matters submitted to the stockholders regarding
removal of, or any transaction between the Company and the Advisor, Directors,
or an Affiliate. In determining the requisite percentage in interest of Shares
necessary to approve a matter on which the Advisor, Directors, and any Affiliate
may not vote or consent, any Shares owned by any of them will not be included.
THE ADVISORY AGREEMENT
Under the terms of the Advisory Agreement, the Advisor has
responsibility for the day-to-day operations of the Company, administers the
Company's bookkeeping and accounting functions, serves as the Company's
consultant in connection with policy decisions to be made by the Board of
Directors, manages the Company's Properties and Mortgage Loans, administers the
Company's Secured Equipment Lease program and renders other
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services as the Board of Directors deems appropriate. The Advisor is subject to
the supervision of the Company's Board of Directors and has only such functions
as are delegated to it.
The Company will reimburse the Advisor for all of the costs it incurs
in connection with the services it provides to the Company, including, but not
limited to: (i) Organizational and Offering Expenses, which are defined to
include expenses attributable to preparing the documents relating to this
offering, the formation and organization of the Company, qualification of the
Shares for sale in the states, escrow arrangements, filing fees and expenses
attributable to selling the Shares, (ii) Selling Commissions, advertising
expenses, expense reimbursements, and legal and accounting fees, (iii) the
actual cost of goods and materials used by the Company and obtained from
entities not affiliated with the Advisor, including brokerage fees paid in
connection with the purchase and sale of securities, (iv) administrative
services (including personnel costs; provided, however that no reimbursement
shall be made for costs of personnel to the extent that such personnel perform
services in transactions for which the Advisor receives a separate fee), (v)
Acquisition Expenses, which are defined to include expenses related to the
selection and acquisition of Properties, at the lesser of actual cost or 90% of
the competitive rate charged by unaffiliated persons providing similar goods and
services in the same geographic location, and (vi) expenses related to
negotiating and servicing the Mortgage Loans and Secured Equipment Leases.
The Company shall not reimburse the Advisor at the end of any fiscal
quarter Operating Expenses that, in the four consecutive fiscal quarters then
ended (the "Expense Year") exceed (the "Excess Amount") the greater of 2% of
Average Invested Assets or 25% of Net Income (the "2%/25% Guidelines") for such
year. Any Excess Amount paid to the Advisor during a fiscal quarter shall be
repaid to the Company. If there is an Excess Amount in any Expense Year and the
Independent Directors determine that such excess was justified, based on unusual
and nonrecurring factors which they deem sufficient, the Excess Amount may be
carried over and included in Operating Expenses in subsequent Expense Years, and
reimbursed to the Advisor in one or more of such years, provided that Operating
Expenses in any Expense Year, including any Excess Amount to be paid to the
Advisor, shall not exceed the 2%/25% Guidelines. Within 60 days after the end of
any fiscal quarter of the Company for which total Operating Expenses for the
Expense Year exceed the 2%/25% Guidelines, there shall be sent to the
stockholders a written disclosure of such fact, together with an explanation of
the factors the Independent Directors considered in determining that such excess
expenses were justified. Such determination shall be reflected in the minutes of
the meetings of the Board of Directors.
The Company will not reimburse the Advisor or its Affiliates for
services for which the Advisor or its Affiliates are entitled to compensation in
the form of a separate fee.
Pursuant to the Advisory Agreement, the Advisor is entitled to receive
certain fees and reimbursements, as listed in "Management -- Management
Compensation." The Subordinated Incentive Fee payable to the Advisor under
certain circumstances if Listing occurs may be paid, at the option of the
Company, in cash, in Shares, by delivery of a promissory note payable to the
Advisor, or by any combination thereof. In the event the Subordinated Incentive
Fee is paid to the Advisor following Listing, no Performance Fee, as described
below, will be paid to the Advisor under the Advisory Agreement nor will any
share of Net Sales Proceeds be paid to the Advisor. The Acquisition Fees payable
to the Advisor in connection with the selection or acquisition of any Property
shall be reduced to the extent that, and if necessary to limit, the total
compensation paid to all persons involved in the acquisition of such Property to
the amount customarily charged in arm's-length transactions by other persons or
entities rendering similar services as an ongoing public activity in the same
geographical location and for comparable types of Properties, and to the extent
that other acquisition fees, finder's fees, real estate commissions, or other
similar fees or commissions are paid by any person in connection with the
transaction.
If the Advisor or a CNL Affiliate performs services that are outside of
the scope of the Advisory Agreement, compensation is at such rates and in such
amounts as are agreed to by the Advisor and the Independent Directors of the
Company.
Further, if Listing occurs, the Company automatically will become a
perpetual life entity. At such time, the Company and the Advisor will negotiate
in good faith a fee structure appropriate for an entity with a perpetual life,
subject to approval by a majority of the Independent Directors. In negotiating a
new fee structure, the Independent Directors shall consider all of the factors
they deem relevant. These are expected to include, but will not necessarily be
limited to: (i) the amount of the advisory fee in relation to the asset value,
composition, and profitability of the Company's portfolio; (ii) the success of
the Advisor in generating opportunities that meet the investment objectives of
the Company; (iii) the rates charged to other REITs and to investors other than
REITs by advisors that perform the same or similar services; (iv) additional
revenues realized by the Advisor and its Affiliates through their relationship
with the Company, including loan administration, underwriting or broker
commissions,
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servicing, engineering, inspection and other fees, whether paid by the Company
or by others with whom the Company does business; (v) the quality and extent of
service and advice furnished by the Advisor; (vi) the performance of the
investment portfolio of the Company, including income, conservation or
appreciation of capital, and number and frequency of problem investments; and
(vii) the quality of the Property, Mortgage Loan, and Secured Equipment Lease
portfolio of the Company in relationship to the investments generated by the
Advisor for its own account. The Board of Directors, including a majority of the
Independent Directors, may not approve a new fee structure that, in its
judgment, is more favorable to the Advisor than the current fee structure.
The Advisory Agreement, which was entered into by the Company with the
unanimous approval of the Board of Directors, including the Independent
Directors, expires one year after the date of execution, on April 19, 1996,
subject to successive one-year renewals upon mutual consent of the parties. In
the event that a new Advisor is retained, the previous Advisor will cooperate
with the Company and the Directors in effecting an orderly transition of the
advisory functions. The Board of Directors (including a majority of the
Independent Directors) shall approve a successor Advisor only upon a
determination that the Advisor possesses sufficient qualifications to perform
the advisory functions for the Company and that the compensation to be received
by the new Advisor pursuant to the new Advisory Agreement is justified.
The Advisory Agreement may be terminated without cause or penalty by
either party, or by the mutual consent of the parties (by a majority of the
Independent Directors of the Company or a majority of the directors of the
Advisor, as the case may be), upon 60 days' prior written notice. At that time,
the Advisor shall be entitled to receive the Performance Fee if performance
standards satisfactory to a majority of the Board of Directors, including a
majority of the Independent Directors, when compared to (a) the performance of
the Advisor in comparison with its performance for other entities, and (b) the
performance of other advisors for similar entities, have been met. If Listing
has not occurred, the Performance Fee, if any, shall equal 10% of the amount, if
any, by which (i) the appraised value of the Properties and Secured Equipment
Leases on the date of termination of the Advisory Agreement (the "Termination
Date"), less the amount of all indebtedness secured by Properties and Secured
Equipment Leases, plus the total Distributions made to stockholders from the
Company's inception through the Termination Date, exceeds (ii) Invested Capital
plus an amount equal to the Stockholders' 8% Return from inception through the
Termination Date. The Advisor shall be entitled to receive all accrued but
unpaid compensation and expense reimbursements in cash within 30 days of the
Termination Date. All other amounts payable to the Advisor in the event of a
termination shall be evidenced by a promissory note and shall be payable from
time to time. The Performance Fee shall be paid in 12 equal quarterly
installments without interest on the unpaid balance, provided, however, that no
payment will be made in any quarter in which such payment would jeopardize the
Company's REIT status, in which case any such payment or payments will be
delayed until the next quarter in which payment would not jeopardize REIT
status. Notwithstanding the preceding sentence, any amounts which may be deemed
payable at the date the obligation to pay the Performance Fee is incurred which
relate to the appreciation of the Company's Properties shall be an amount which
provides compensation to the terminated Advisor only for that portion of the
holding period for the respective Properties during which such terminated
Advisor provided services to the Company. If Listing occurs, the Performance
Fee, if any, payable thereafter will be as negotiated between the Company and
the Advisor. The Advisor shall not be entitled to payment of the Performance Fee
in the event the Advisory Agreement is terminated because of failure of the
Company and the Advisor to establish a fee structure appropriate for a
perpetual-life entity at such time, if any, as the Shares become listed on a
national securities exchange or over-the-counter market. The Performance Fee, to
the extent payable at the time of Listing, will not be paid in the event that
the Subordinated Incentive Fee is paid.
The Advisor has the right to assign the Advisory Agreement to an
Affiliate subject to approval by the Independent Directors of the Company. The
Company has the right to assign the Advisory Agreement to any successor to all
of its assets, rights, and obligations.
The Advisor will not be liable to the Company or its stockholders or
others, except by reason of acts constituting bad faith, fraud, misconduct, or
negligence, and will not be responsible for any action of the Board of Directors
in following or declining to follow any advice or recommendation given by it.
The Company has agreed to indemnify the Advisor with respect to acts or
omissions of the Advisor undertaken in good faith, in accordance with the
foregoing standards and pursuant to the authority set forth in the Advisory
Agreement. Any indemnification made to the Advisor may be made only out of the
net assets of the Company and not from stockholders.
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PRIOR PERFORMANCE INFORMATION
The information presented in this section represents the historical
experience of certain real estate programs organized by certain officers and
directors of the Advisor. INVESTORS IN THE COMPANY SHOULD NOT ASSUME THAT THEY
WILL EXPERIENCE RETURNS, IF ANY, COMPARABLE TO THOSE EXPERIENCED BY INVESTORS IN
SUCH PRIOR REAL ESTATE PROGRAMS. INVESTORS WHO PURCHASE SHARES IN THE COMPANY
WILL NOT THEREBY ACQUIRE ANY OWNERSHIP INTEREST IN ANY PARTNERSHIPS TO WHICH THE
FOLLOWING INFORMATION RELATES.
Two Directors of the Company, Robert A. Bourne and James M. Seneff,
Jr., individually or with others have served as general partners of 78 and 79
real estate limited partnerships, respectively, including the 17 publicly
offered CNL Income Fund partnerships, which purchased properties similar to
those to be acquired by the Company, listed in the table below. None of these
limited partnerships has been audited by the IRS. Of course, there is no
guarantee that the Company will not be audited. Based on an analysis of the
operating results of the prior partnerships, the general partners of these
partnerships believe that each of such partnerships has met or is meeting its
principal investment objectives in a timely manner.
CNL Realty Corporation, which was organized as a Florida corporation in
November 1985 and whose sole stockholders are Messrs. Bourne and Seneff,
currently serves as the corporate general partner with Messrs. Bourne and Seneff
as individual general partners of 17 CNL Income Fund limited partnerships, all
of which were organized to invest in fast-food and family-style restaurant
properties similar to those that the Company intends to acquire and have
investment objectives similar to those of the Company. As of December 31, 1995,
these 17 partnerships had raised a total of $555,706,921 from a total of 46,266
investors, and had invested in 628 fast-food or family-style restaurant
properties.
As of December 31, 1995, offerings by 16 of the 17 CNL public
partnerships had been completed and these public partnerships had made
annualized cash distributions to limited partners in amounts equal to from 4.5%
to ten percent of invested capital. An average of approximately 7.4% (ranging
from zero to 21.6%) of the cumulative cash distributions to limited partners
from these partnerships constituted cash distributions that exceeded accumulated
net income on a GAAP basis, primarily as the result of depreciation deductions.
Accumulated net income includes deductions for depreciation and amortization
expense and income from certain non-cash items. The partnerships do not treat
these amounts, which are presented as a "return of capital on a GAAP basis" in
Table III of the Prior Performance Tables included in Exhibit C, as a return of
capital for any other purpose. Certain additional information relating to the
offerings and investment history of the 17 public partnerships is set forth
below.
<TABLE>
<CAPTION>
Date 90% of Net
Number of Proceeds Fully
Maximum Limited Invested or
Name of Offering Partnership Committed to
Partnership Amount (1) Date Closed Units Sold Investment (2)
- ----------- ---------- ----------- ---------- --------------
<S> <C>
CNL Income $15,000,000 December 31, 1986 30,000 December 1986
Fund, Ltd. (30,000 Units)
CNL Income $25,000,000 August 21, 1987 50,000 November 1987
Fund II, Ltd. (50,000 Units)
CNL Income $25,000,000 April 29, 1988 50,000 June 1988
Fund III, Ltd. (50,000 Units)
CNL Income $30,000,000 December 6, 1988 60,000 February 1989
Fund IV, Ltd. (60,000 Units)
CNL Income $25,000,000 June 7, 1989 50,000 December 1989
Fund V, Ltd. (50,000 Units)
CNL Income $35,000,000 January 19, 1990 70,000 May 1990
Fund VI, Ltd. (70,000 Units)
</TABLE>
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<TABLE>
<CAPTION>
Date 90% of Net
Number of Proceeds Fully
Maximum Limited Invested or
Name of Offering Partnership Committed to
Partnership Amount (1) Date Closed Units Sold Investment (2)
- ----------- ---------- ----------- ---------- --------------
<S> <C>
CNL Income $30,000,000 August 1, 1990 30,000,000 January 1991
Fund VII, Ltd. (30,000,000 Units)
CNL Income $35,000,000 March 7, 1991 35,000,000 September 1991
Fund VIII, Ltd. (35,000,000 Units)
CNL Income $35,000,000 September 6, 1991 3,500,000 November 1991
Fund IX, Ltd. (3,500,000 Units)
CNL Income $40,000,000 March 18, 1992 4,000,000 June 1992
Fund X, Ltd. (4,000,000 Units)
CNL Income $40,000,000 September 28, 1992 4,000,000 September 1992
Fund XI, Ltd. (4,000,000 Units)
CNL Income $45,000,000 March 15, 1993 4,500,000 July 1993
Fund XII, Ltd. (4,500,000 Units)
CNL Income $40,000,000 August 26, 1993 4,000,000 August 1993
Fund XIII, Ltd. (4,000,000 Units)
CNL Income $45,000,000 February 22, 1994 4,500,000 May 1994
Fund XIV, Ltd. (4,500,000 Units)
CNL Income $40,000,000 September 1, 1994 4,000,000 December 1994
Fund XV, Ltd. (4,000,000 Units)
CNL Income $45,000,000 June 12, 1995 4,500,000 August 1995
Fund XVI, Ltd. (4,500,000 Units)
CNL Income $30,000,000 (3) (3) (3)
Fund XVII, Ltd. (3,000,000 Units)
</TABLE>
- ------------------------------------
(1) The amount stated includes the exercise by the general partners of each
partnership of their option to increase by $5,000,000 the maximum size of
the offering of CNL Income Fund, Ltd., CNL Income Fund II, Ltd., CNL
Income Fund III, Ltd., CNL Income Fund IV, Ltd., CNL Income Fund VI, Ltd.,
CNL Income Fund VIII, Ltd., CNL Income Fund X, Ltd., CNL Income Fund XII,
Ltd., CNL Income Fund XIV, Ltd., and CNL Income Fund XVI, Ltd.
(2) For a description of the property acquisitions by these limited
partnerships during the last nine years, see the table set forth on the
following page.
(3) As of December 31, 1995, CNL Income Fund XVII, Ltd. which is offering a
maximum of 3,000,000 limited partnership units ($30,000,000), had received
subscriptions totalling $5,696,921 (569,692 units). As of such date, CNL
Income Fund XVII, Ltd. had purchased one property.
As of December 31, 1995, Mr. Seneff and Mr. Bourne, directly or through
affiliated entities, also had served as joint general partners of 61 nonpublic
real estate limited partnerships. The offerings of 59 of these 61 nonpublic
limited partnerships had terminated as of December 31, 1995. These 59
partnerships raised a total of $143,794,266 from approximately 3,600 investors,
and purchased, directly or through participation in a joint venture or limited
partnership, interests in a total of 186 projects as of December 31, 1995. These
186 projects consist of 19 apartment projects (comprising 13% of the total
amount raised by all 59 partnerships), 13 office buildings (comprising 6% of the
total amount raised by all 59 partnerships), 140 fast-food or family-style
restaurant property and business investments (comprising 68% of the total amount
raised by all 59 partnerships), one condominium development (comprising .5% of
the total amount raised by all 59 partnerships), four hotels/motels (comprising
6% of the total amount raised by all 59 partnerships), seven commercial/retail
properties (comprising 6% of the total amount raised by all 59 partnerships),
and two tracts of undeveloped land (comprising .5% of the total amount
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raised by all 59 partnerships). The offering of the remaining two nonpublic
limited partnerships (offerings aggregating $16,650,000) had raised $7,450,000
from 169 investors (approximately 45% of the total offering amount) as of
December 31, 1995.
Mr. Bourne also has served, without Mr. Seneff, as a general partner of
one additional nonpublic real estate limited partnership program which raised a
total of $600,000 from 13 investors and purchased, through participation in a
limited partnership, one apartment building located in Georgia with a purchase
price of $1,712,000.
Mr. Seneff also has served, without Mr. Bourne, as a general partner of
two additional nonpublic real estate limited partnerships which raised a total
of $240,000 from 12 investors and purchased two office buildings with an
aggregate purchase price of $928,390. Both of the office buildings are located
in Florida.
Of the 78 real estate limited partnerships whose offerings had closed
as of December 31, 1995 (including 16 of the 17 CNL Income Fund limited
partnerships) in which Mr. Seneff and/or Mr. Bourne serve or have served as
general partners in the past ten years, 33 invested in restaurant properties
leased on a "triple-net" basis, including six which also invested in franchised
restaurant businesses (accounting for approximately 93% of the total amount
raised by all 78 real estate limited partnerships).
The following table sets forth summary information, as of December 31,
1995 regarding property acquisitions during the nine preceding years by the 17
limited partnerships that, either individually or through a joint venture or
partnership arrangement, acquired restaurant properties and that have investment
objectives similar to those of the Company.
<TABLE>
<CAPTION>
Name of Type of Method of Type of
Partnership Property Location Financing Program
<S> <C>
CNL Income 20 fast-food or AL, AZ, CA, FL, All cash Public
Fund, Ltd. family-style GA, LA, MD, OK,
restaurants TX, VA
CNL Income 43 fast-food or AL, AZ, CO, FL, All cash Public
Fund II, Ltd. family-style GA, IL, IN, LA,
restaurants MI, MN, MO, NC,
NM, OH, TX, WY
CNL Income 32 fast-food or AZ, CA, FL, GA, All cash Public
Fund III, Ltd. family-style IA, IL, IN, KS,
restaurants KY, MD, MI, MN,
MO, NE, OK, TX
CNL Income 41 fast-food or AL, DC, FL, GA, All cash Public
Fund IV, Ltd. family-style IL, IN, KS, MA,
restaurants MD, MI, MS, OH,
PA, TN, TX, VA
CNL Income 30 fast-food or FL, GA, IL, IN, All cash Public
Fund V, Ltd. family-style MI, NH, NY, OH,
restaurants SC, TN, TX, UT,
WA
CNL Income 45 fast-food or AR, AZ, FL, IN, All cash Public
Fund VI, Ltd. family-style MA, MI, MN, NC,
restaurants NE, NM, NY, OH,
OK, PA, TN, TX,
VA, WY
</TABLE>
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<TABLE>
<CAPTION>
Name of Type of Method of Type of
Partnership Property Location Financing Program
<S> <C>
CNL Income 45 fast-food or AZ, CO, FL, GA, All cash Public
Fund VII, Ltd. family-style IN, LA, MI, MN,
restaurants OH, SC, TN, TX,
UT, WA
CNL Income 39 fast-food or AZ, FL, IN, LA, All cash Public
Fund VIII, Ltd. family-style MI, MN, NC, NY,
restaurants OH, TN, TX, VA
CNL Income 41 fast-food or AL, FL, GA, IL, All cash Public
Fund IX, Ltd. family-style IN, LA, MI, MN,
restaurants MS, NC, NH, NY,
OH, SC, TN, TX
CNL Income 47 fast-food or AL, CA, CO, FL, All cash Public
Fund X, Ltd. family-style ID, IL, LA, MI,
restaurants MO, MT, NC, NH,
NM, NY, OH, PA,
SC, TN, TX
CNL Income 39 fast-food or AL, AZ, CA, CO, All cash Public
Fund XI, Ltd. family-style CT, FL, KS, LA,
restaurants MA, MI, MS, NC,
NH, NM, OH, OK,
PA, SC, TX, VA,
WA
CNL Income 48 fast-food or AL, AZ, CA, FL, All cash Public
Fund XII, Ltd. family-style GA, LA, MO, MS,
restaurants NC, NM, OH, SC,
TN, TX, WA
CNL Income 48 fast-food or AL, AR, AZ, CA, All cash Public
Fund XIII, Ltd. family-style CO, FL, GA, IN,
restaurants KS, LA, MD, NC,
OH, PA, SC, TN,
TX, VA
CNL Income 56 fast-food or AL, AZ, CO, FL, All cash Public
Fund XIV, Ltd. family-style GA, KS, LA, MO,
restaurants MS, NC, NJ, NV,
OH, SC, TN, TX,
VA
CNL Income 47 fast-food or CA, FL, GA, KS, All cash Public
Fund XV, Ltd. family-style KY, MO, MS, NC,
restaurants NJ, NM, OH, OK,
PA, SC, TN, TX,
VA
CNL Income 41 fast-food or AZ, CA, CO, DC, All cash Public
Fund XVI, Ltd. family-style FL, GA, ID, IN,
restaurants KS, MN, MO, NC,
NM, NV, OH, TN,
TX, UT, WI
CNL Income (1) (1) All cash Public
Fund XVII, Ltd.
</TABLE>
- ------------------------------------
(1) As of December 31, 1995, CNL Income Fund XVII, Ltd. had acquired one
property.
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--------------------------------------------
A more detailed description of the acquisitions by real estate limited
partnerships sponsored by Messrs. Bourne and Seneff is set forth in prior
performance Table VI, included as Exhibit 99 to Part II of the registration
statement filed with the Securities and Exchange Commission for this offering. A
copy of Table VI is available to stockholders from the Company upon request,
free of charge. In addition, upon request to the Company, the Company will
provide, without charge, a copy of the most recent Annual Report on Form 10-K
filed with the Securities and Exchange Commission for CNL Income Fund, Ltd., CNL
Income Fund II, Ltd., CNL Income Fund III, Ltd., CNL Income Fund IV, Ltd., CNL
Income Fund V, Ltd., CNL Income Fund VI, Ltd., CNL Income Fund VII, Ltd., CNL
Income Fund VIII, Ltd., CNL Income Fund IX, Ltd., CNL Income Fund X, Ltd., CNL
Income Fund XI, Ltd., CNL Income Fund XII, Ltd., CNL Income Fund XIII, Ltd., CNL
Income Fund XIV, Ltd., CNL Income Fund XV, Ltd., CNL Income Fund XVI, Ltd., and
CNL Income Fund XVII, Ltd., as well as a copy, for a reasonable fee, of the
exhibits filed with such reports.
In order to provide potential purchasers of Shares in the Company with
information to enable them to evaluate the prior experience of the Messrs.
Seneff and Bourne as general partners of real estate limited partnerships,
including those set forth in the foregoing table, certain financial and other
information concerning those limited partnerships with investment objectives
similar to one or more of the Company's investment objectives in which Messrs.
Seneff and Bourne are general partners is provided in the Prior Performance
Tables included as Exhibit C. Information about the 16 previous public
partnerships is included therein. Potential stockholders are encouraged to
examine the Prior Performance Tables attached as Exhibit C (in Table III), which
include information as to the operating results of these prior partnerships, for
more detailed information concerning the experience of Messrs. Seneff and
Bourne.
INVESTMENT OBJECTIVES AND POLICIES
GENERAL
The Company's primary investment objectives are to preserve, protect,
and enhance the Company's assets while (i) making Distributions commencing in
the initial year of Company operations; (ii) obtaining fixed income through the
receipt of base rent, and increasing the Company's income (and Distributions)
and providing protection against inflation through automatic increases in base
rent and receipt of percentage rent, and obtaining fixed income through the
receipt of payments on Secured Equipment Leases; (iii) qualifying and remaining
qualified as a REIT for federal income tax purposes; and (iv) providing
stockholders of the Company with liquidity of their investment, either in whole
or in part, within five to ten years after commencement of the offering, through
(a) the Listing of the Shares of the Company, or, (b) if Listing does not occur
within ten years after commencement of the offering, the commencement of orderly
Sales of the Company's assets, outside the ordinary course of business and
consistent with its objective of qualifying as a REIT, and distribution of the
proceeds thereof. The sheltering from tax of income from other sources is not an
objective of the Company. If the Company is successful in achieving its
investment and operating objectives, the stockholders (other than tax-exempt
entities) are likely to recognize taxable income in each year. While there is no
order of priority intended in the listing of the Company's objectives,
stockholders should realize that the ability of the Company to meet these
objectives may be severely handicapped by any lack of diversification of the
Company's investments and the terms of the leases.
The Company intends to meet its objectives through its investment
policies of (i) purchasing carefully selected, well-located Properties and
leasing them on a "triple-net" basis (which means that the tenant will be
responsible for paying the cost of all repairs, maintenance, property taxes, and
insurance) to creditworthy operators of Restaurant Chains under leases requiring
the tenant to pay both base annual rental (including automatic increases in base
rent) and percentage rent based on gross restaurant sales, and (ii) offering
Mortgage Loans and Secured Equipment Leases to operators of Restaurant Chains.
In accordance with its investment policies, the Company intends to
invest its assets in Properties whose tenants are franchisors or franchisees of
one of the Restaurant Chains to be selected by the Company, based upon
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recommendations by the Advisor. Although there is no limit on the number of
restaurants of a particular Restaurant Chain which the Company may acquire, the
Company currently does not expect to invest more than 25% of the Gross Proceeds
in Properties of any one Restaurant Chain or to invest more than 30% of the
Gross Proceeds in Properties located in any one state. Potential Mortgage Loan
borrowers and Secured Equipment Lease lessees will similarly be operators of
Restaurant Chains selected by the Company, following the Advisor's
recommendations. The Company has undertaken to ensure that the value of all
Secured Equipment Leases, in the aggregate, will not exceed 25% of the Company's
total assets, while Secured Equipment Leases to any single lessee, in the
aggregate, will not exceed 5% of the Company's total assets. It is intended that
investments will be made in Properties, Mortgage Loans, and Secured Equipment
Leases in various locations in an attempt to achieve diversification and thereby
minimize the effect of changes in local economic conditions and certain other
risks. The extent of such diversification, however, depends in part upon the
amount raised in the offering. See "Estimated Use of Proceeds" and "Risk Factors
- -- Investment Risks -- Possible Lack of Diversification." For a more complete
description of the manner in which the structure of the Company's business,
including its investment policies, will facilitate the Company's ability to meet
its investment objectives, See "Business."
The investment objectives of the Company may not be changed without the
approval of stockholders owning a majority of the shares of outstanding Common
Stock. The Bylaws of the Company require the Independent Directors to review the
Company's investment policies at least annually to determine that the policies
are in the best interests of the stockholders. The determination shall be set
forth in the minutes of the Board of Directors along with the basis for such
determination. The Directors (including a majority of the Independent Directors)
have the right, without a stockholder vote, to alter the Company's investment
policies but only to the extent consistent with the Company's investment
objectives and investment limitations. See "Certain Investment Limitations,"
below.
CERTAIN INVESTMENT LIMITATIONS
In addition to other investment restrictions imposed by the Directors
from time to time, consistent with the Company's objective of qualifying as a
REIT, the Articles of Incorporation or the Bylaws provide for the following
limitations on the Company's investments.
1. Not more than 10% of the Company's total assets shall be invested in
unimproved real property or mortgage loans on unimproved real property. For
purposes of this paragraph, "unimproved real property" does not include any
Property under construction, under contract for development or planned for
development within one year.
2. The Company shall not invest in commodities or commodity future
contracts. This limitation is not intended to apply to interest rate futures,
when used solely for hedging purposes.
3. The Company shall not invest in or make mortgage loans unless an
appraisal is obtained concerning the underlying property. Mortgage indebtedness
on any property shall not exceed such property's appraised value. In cases in
which the majority of Independent Directors so determine, and in all cases in
which the mortgage loan involves the Advisor, Directors, or Affiliates, such
appraisal must be obtained from an independent expert concerning the underlying
property. Such appraisal shall be maintained in the Company's records for at
least five years, and shall be available for inspection and duplication by any
stockholder. In addition to the appraisal, a mortgagee's or owner's title
insurance policy or commitment as to the priority of the mortgage or condition
of the title must be obtained. The Company may not invest in real estate
contracts of sale otherwise known as land sale contracts.
4. The Company may not make or invest in mortgage loans, including
construction loans, on any one Property if the aggregate amount of all mortgage
loans outstanding on the Property, including the loans of the Company, would
exceed an amount equal to 85% of the appraised value of the Property as
determined by appraisal unless substantial justification exists because of the
presence of other underwriting criteria. For purposes of this subsection, the
"aggregate amount of all mortgage loans outstanding on the Property, including
the loans of the Company" shall include all interest (excluding contingent
participation in income and/or appreciation in value of the mortgaged property),
the current payment of which may be deferred pursuant to the terms of such
loans, to the extent that deferred interest on each loan exceeds 5% per annum of
the principal balance of the loan.
5. The Company may not make or invest in any mortgage loans that are
subordinate to any mortgage, other indebtedness or equity interest of the
Advisor, the Directors, or their Affiliates.
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6. The Company will not invest in equity securities unless a majority
of the Directors (including a majority of Independent Directors) not otherwise
interested in such transaction approve the transaction as being fair,
competitive, and commercially reasonable and determine that the transaction will
not jeopardize the Company's ability to qualify and remain qualified as a REIT.
Investments in entities affiliated with the Advisor, a Director, the Company, or
Affiliates thereof are subject to the restrictions on joint venture investments.
In addition, the Company shall not invest in any security of any entity holding
investments or engage in activities prohibited by the Company's Articles of
Incorporation.
7. The Company will not issue (i) equity securities redeemable solely
at the option of the holder (except that stockholders may offer their Shares to
the Company as described under "Redemption of Shares,"; (ii) debt securities
unless the historical debt service coverage (in the most recently completed
fiscal year), as adjusted for known charges, is sufficient to service that
higher level of debt properly; (iii) Shares on a deferred payment basis or under
similar arrangements; (iv) non-voting or assessable securities; or (v) options,
warrants, or similar evidences of a right to buy its securities (collectively,
"Options") unless (1) issued to all of its stockholders ratably, (2) as part of
a financing arrangement, or (3) as part of a stock option plan available to
Directors, officers, or employees of the Company or the Advisor. Options may not
be issued to the Advisor, Directors or any Affiliate thereof except on the same
terms as such Options are sold to the general public. Options may be issued to
persons other than the Advisor, Directors or any Affiliate thereof but not at
exercise prices less than the fair market value of the underlying securities on
the date of grant and not for consideration that in the judgment of the
Independent Directors has a market value less than the value of such Option on
the date of grant. Options issuable to the Advisor, Directors or any Affiliate
thereof shall not exceed 10% of the outstanding Shares on the date of grant.
8. A majority of the Directors shall authorize the consideration to be
paid for each Property, based on the fair market value of the Property. If a
majority of the Independent Directors determine, or if the Property is acquired
from the Advisor, a Director, or Affiliates thereof, such fair market value
shall be determined by a qualified independent real estate appraiser selected by
the Independent Directors.
9. The Company will not engage in underwriting or the agency
distribution of securities issued by others or in trading, as compared to
investment activities.
10. The Company will not invest in real estate contracts of sale unless
such contracts of sale are in recordable form and appropriately recorded in the
chain of title.
11. The Company will not invest in any foreign currency or bullion or
engage in short sales.
12. The Company will not issue senior securities except notes to banks
and other lenders and preferred shares.
13. The Company will not make loans to the Advisor or its Affiliates.
14. The Company will not operate so as to be classified as an
"investment company" under the Investment Company Act of 1940, as amended.
15. The Company will not make any investment that the Company believes
will be inconsistent with its objective of qualifying as a REIT.
The foregoing limitations may not be modified or eliminated without the
approval of a majority of the shares of outstanding Common Stock.
DISTRIBUTION POLICY
GENERAL
In order to qualify as a REIT for federal income tax purposes, among
other things, the Company must make distributions each taxable year (not
including any return of capital for federal income tax purposes) equal to at
least 95% of its real estate investment trust taxable income, although the Board
of Directors, in its discretion, may increase that percentage as it deems
appropriate. See "Federal Income Tax Considerations -- Taxation of the Company
- -- Distribution Requirements." The declaration of Distributions is within the
discretion of the Board of
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Directors and depends upon the Company's distributable funds, current and
projected cash requirements, tax considerations and other factors.
DISTRIBUTIONS
The Company intends to make regular Distributions to stockholders. The
payment of Distributions commenced in July 1995. Distributions will be made to
those stockholders who are stockholders as of the record date selected by the
Directors. Distributions will be declared monthly and paid on a quarterly basis
during the offering period and declared and paid quarterly thereafter. The
Company is required to distribute annually at least 95% of its real estate
investment trust taxable income to maintain its objective of qualifying as a
REIT. Generally, income distributed will not be taxable to the Company under
federal income tax laws if the Company complies with the provisions relating to
qualification as a REIT. If the cash available to the Company is insufficient to
pay such Distributions, the Company may obtain the necessary funds by borrowing,
issuing new securities, or selling assets. These methods of obtaining funds
could affect future Distributions by increasing operating costs. To the extent
that Distributions to stockholders exceed earnings and profits, such amounts
constitute a return capital for federal income tax purposes, although such
Distributions will not reduce stockholders' aggregate Invested Capital. For the
year ended December 31, 1995, the Company declared and paid Distributions
totalling $638,618. For the year ended December 31, 1995, 59.82% of such amounts
were characterized as ordinary income and 40.18% were characterized as return of
capital for federal income tax purposes. Due to the fact that the Company had
not acquired all of its Properties and was still in its offering period as of
December 31, 1995, the characterization of Distributions for federal income tax
purposes is not necessarily considered by management to be representative of the
characterization of Distributions in future years.
Distributions will be made at the discretion of the Directors,
depending primarily on net cash from operations (which includes cash received
from tenants except to the extent that such cash represents a return of
principal in regard to the lease of a Property consisting of building only,
distributions from joint ventures, and interest income from lessees of Equipment
and borrowers under Mortgage Loans, less expenses paid) and the general
financial condition of the Company, subject to the obligation of the Directors
to cause the Company to qualify and remain qualified as a REIT for federal
income tax purposes. The Company intends to increase Distributions in accordance
with increases in net cash from operations.
SUMMARY OF THE
ARTICLES OF INCORPORATION AND BYLAWS
GENERAL
The Company is organized as a corporation under the laws of the State
of Maryland. As a Maryland corporation, the Company is governed by the Maryland
General Corporation Law. Maryland corporate law deals with a variety of matters
regarding Maryland corporations, including liabilities of the Company,
stockholders, directors, and officers, the amendment of the Articles of
Incorporation, and mergers of a Maryland corporation with other entities. Since
many matters are not addressed by Maryland corporate law, it is customary for a
Maryland corporation to address these matters through provisions in its Articles
of Incorporation.
The Articles of Incorporation and the Bylaws of the Company contain
certain provisions that could make it more difficult to acquire control of the
Company by means of a tender offer, a proxy contest, or otherwise. These
provisions are expected to discourage certain types of coercive takeover
practices and inadequate takeover bids and to encourage persons seeking to
acquire control of the Company to negotiate first with its Board of Directors.
The Company believes that these provisions increase the likelihood that
proposals initially will be on more attractive terms than would be the case in
their absence and facilitate negotiations which may result in improvement of the
terms of an initial offer.
The Articles of Incorporation also permit Listing by the Board of
Directors after completion or termination of the offering.
The discussion set forth below does not purport to be complete and is
subject to and qualified in its entirety by reference to the Maryland General
Corporation Law, the guidelines for REITs published by the North American
Securities Administrators Association, the Company's Articles of Incorporation,
and its Bylaws.
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DESCRIPTION OF CAPITAL STOCK
The Company has authorized a total of 46,000,000 shares of capital
stock, consisting of 20,000,000 shares of Common Stock, $.01 par value per
share, 3,000,000 shares of Preferred Stock ("Preferred Stock"), and 23,000,000
additional shares of excess stock ("Excess Shares"), $.01 par value per share.
Of the 23,000,000 Excess Shares, 20,000,000 are issuable in exchange for Common
Stock and 3,000,000 are issuable in exchange for Preferred Stock as described
below at "-- Restriction of Ownership." As of April 9, 1996, the Company had
5,788,741 shares of Common Stock outstanding (including 20,000 issued to the
Advisor prior to the commencement of this offering and 12,815 Shares issued
pursuant to the Reinvestment Plan) and no Preferred Stock or Excess Shares
outstanding. The Company will not issue share certificates. Each stockholder's
investment will be recorded on the books of the Company, and information
concerning the restrictions and rights attributable to Shares (whether in
connection with an initial issuance or a transfer) will be sent to the
stockholder receiving Shares in connection with an issuance or transfer. A
stockholder wishing to transfer his or her Shares will be required to send only
an executed form to the Company, and the Company will provide the required form
upon a stockholder's request. The executed form and any other required
documentation must be received by the Company at least one calendar month prior
to the last date of the current quarter. Subject to restrictions in the Articles
of Incorporation, transfers of Shares shall be effective, and the transferee of
the Shares will be recognized as the holder of such Shares as of the first day
of the following quarter on which the Company receives properly executed
documentation. Stockholders who are residents of New York may not transfer fewer
than 250 shares at any time.
Stockholders have no preemptive rights to purchase or subscribe for
securities that the Company may issue subsequently. Each Share is entitled to
one vote per Share, and Shares do not have cumulative voting rights. The
Stockholders are entitled to Distributions in such amounts as may be declared by
the Board of Directors from time to time out of funds legally available for such
payments and, in the event of liquidation, to share ratably in any assets of the
Company remaining after payment in full of all creditors.
All of the Shares offered hereby will be fully paid and nonassessable
when issued.
The Articles of Incorporation authorize the Board of Directors to
designate and issue from time to time one or more classes or series of Preferred
Shares without stockholder approval. The Board of Directors may determine the
relative rights, preferences, and privileges of each class or series of
Preferred Stock so issued. Because the Board of Directors has the power to
establish the preferences and rights of each class or series of Preferred Stock,
it may afford the holders of any series or class of Preferred Stock preferences,
powers, and rights senior to the rights of holders of Common Stock; however, the
voting rights for each share of Preferred Stock shall not exceed voting rights
which bear the same relationship to the voting rights of the Shares as the
consideration paid to the Company for each share of Preferred Stock bears to the
book value of the Shares on the date that such Preferred Stock is issued. The
issuance of Preferred Stock could have the effect of delaying or preventing a
change in control of the Company. The Board of Directors has no present plans to
issue any Preferred Stock.
For a description of the characteristics of the Excess Shares, which
differ from Common Stock and Preferred Stock in a number of respects, including
voting and economic rights, see "Restriction of Ownership," below.
BOARD OF DIRECTORS
The Articles of Incorporation provide that the number of Directors of
the Company cannot be less than three nor more than 15. A majority of the Board
of Directors will be Independent Directors. See "Management -- Independent
Directors." Each Director, other than a Director elected to fill the unexpired
term of another Director, will be elected at each annual meeting or at any
special meeting of the stockholders called for that purpose, by a majority of
the shares of Common Stock outstanding and entitled to vote. Independent
Directors will nominate replacements for vacancies among the Independent
Directors. Under the Articles of Incorporation, the term of office for each
Director will be one year, expiring each annual meeting of stockholders;
however, nothing in the Articles of Incorporation prohibits a director from
being reelected by the stockholders. The Directors may not (a) amend the
Articles of Incorporation, except for amendments which do not adversely affect
the rights, preferences and privileges of stockholders; (b) sell all or
substantially all of the Company's assets other than in the ordinary course of
business or in connection with liquidation and dissolution; (c) cause the merger
or other reorganization of the Company; or (d) dissolve or liquidate the
Company, other than before the initial investment in property. The Directors may
establish such committees as they deem appropriate (provided that the majority
of the members of each committee are Independent Directors).
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STOCKHOLDER MEETINGS
An annual meeting will be held for the purpose of electing Directors
and for the transaction of such other business as may come before the meeting,
and will be held not less than 30 days after delivery of the annual report.
Under the Company's Bylaws, a special meeting of stockholders may be called by
the chief executive officer, a majority of the Directors, or a majority of the
Independent Directors. Special meetings of the stockholders also shall be called
by an officer of the Company upon the written request of stockholders holding in
the aggregate not less than 10% of the outstanding Common Stock entitled to vote
at such meeting. Upon receipt of such a written request, either in person or by
mail, stating the purpose or purposes of the meeting, the Company shall provide
all stockholders, within ten days of receipt of the written request, written
notice, either in person or by mail, of a meeting and its purpose. Such meeting
will be held not less than fifteen nor more than sixty days after distribution
of the notice, at a time and place specified in the request, or if none is
specified, at a time and place convenient to stockholders.
At any meeting of stockholders, each stockholder is entitled to one
vote per share of Common Stock owned of record on the applicable record date. In
general, the presence in person or by proxy of a majority of the shares of
Common Stock shall constitute a quorum, and the majority vote of the
stockholders will be binding on all the stockholders of the Company.
ADVANCE NOTICE FOR STOCKHOLDER NOMINATIONS FOR
DIRECTORS AND PROPOSALS OF NEW BUSINESS
The Bylaws of the Company require notice at least 60 days and not more
than 90 days before the anniversary of the prior annual meeting of stockholders
in order for a stockholder to (a) nominate a Director, or (b) propose new
business other than pursuant to the notice of the meeting or by or on behalf of
the Directors. The Bylaws contain a similar notice requirement in connection
with nominations for Directors at a special meeting of stockholders called for
the purpose of electing one or more Directors. Accordingly, failure to comply
with the notice provisions will make stockholders unable to nominate Directors
or propose new business.
AMENDMENTS TO THE ARTICLES OF INCORPORATION
Pursuant to the Company's Articles of Incorporation, the Directors can
amend the Articles of Incorporation by a two-thirds majority from time to time
if necessary in order to qualify initially or in order to continue to qualify as
a REIT. Except as set forth above, the Articles of Incorporation may be amended
only by the affirmative vote of a majority, and, in some cases a two-thirds
majority, of the shares of Common Stock outstanding and entitled to vote. The
stockholders may vote to amend the Articles of Incorporation, terminate or
dissolve the Company or remove one or more Directors without necessity for
concurrence by the Board of Directors.
MERGERS, COMBINATIONS, AND SALE OF ASSETS
A merger, combination, sale, or other disposition of all or
substantially all of the Company's assets other than in the ordinary course of
business must be approved by the Directors and a majority of the shares of
Common Stock outstanding and entitled to vote. In addition, any such transaction
involving an Affiliate of the Company or the Advisor also must be approved by a
majority of the Directors (including a majority of the Independent Directors)
not otherwise interested in such transaction as fair and reasonable to the
Company and on terms and conditions not less favorable to the Company than those
available from unaffiliated third parties.
TERMINATION OF THE COMPANY AND REIT STATUS
The Articles of Incorporation provide for the voluntary termination and
dissolution of the Company by the affirmative vote of a majority of the shares
of Common Stock outstanding and entitled to vote at a meeting called for that
purpose. In addition, the Articles of Incorporation permits the stockholders to
terminate the status of the Company as a REIT under the Code only by a
"supermajority" vote of two-thirds of the shares of Common Stock outstanding and
entitled to vote.
Under the Articles of Incorporation, the Company automatically will
terminate and dissolve on December 31, 2005, unless Listing occurs, in which
event the Company automatically will become a perpetual life entity.
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RESTRICTION OF OWNERSHIP
To qualify as a REIT under the Code (i) not more than 50% of the value
of the REIT's outstanding stock may be owned, directly or indirectly (applying
certain attribution rules), by five or fewer individuals (as defined in the Code
to include certain entities) during the last half of a taxable year, (ii) the
REIT's stock must be beneficially owned (without reference to any attribution
rules) by 100 or more persons during at least 335 days of a taxable year of 12
months or during a proportionate part of a shorter taxable year; and (iii)
certain other requirements must be satisfied. See "Federal Income Tax
Considerations -- Taxation of the Company."
To ensure that the Company satisfies these requirements, the Articles
of Incorporation restrict the direct or indirect ownership (applying certain
attribution rules) of shares of Common Stock and Preferred Stock by any Person
(as defined in the Articles of Incorporation) to no more than 9.8% of the
outstanding shares of such Common Stock or 9.8% of any series of Preferred
Shares (the "Ownership Limit"). However, the Articles of Incorporation provide
that this Ownership Limit may be modified, either entirely or with respect to
one or more Persons, by a vote of a majority of the Directors, if such
modification does not jeopardize the Company's status as a REIT. As a condition
of such modification, the Board of Directors may require opinions of counsel
satisfactory to it and/or an undertaking from the applicant with respect to
preserving the status of the Company as a REIT.
It is the responsibility of each Person (as defined in the Articles of
Incorporation) owning (or deemed to own) more than 5% of the outstanding shares
of Common Stock or any series of outstanding Preferred Stock to give the Company
written notice of such ownership. In addition, to the extent deemed necessary by
the Directors, the Company can demand that each stockholder disclose to the
Company in writing all information regarding the Beneficial and Constructive
Ownership (as such terms are defined in the Articles of Incorporation) of the
Common Stock and Preferred Stock.
If the ownership, transfer or acquisition of shares of Common or
Preferred Stock, or change in capital structure of the Company or other event or
transaction would result in (i) any Person owning (applying certain attribution
rules) Common Stock or Preferred Stock in excess of the Ownership Limit, (ii)
fewer than 100 Persons owning the Common Stock and Preferred Stock, (iii) the
Company being "closely held" within the meaning of section 856(h) of the Code,
or (iv) the Company failing any of the gross income requirements of section
856(c) of the Code or otherwise failing to qualify as a REIT, then the
ownership, transfer, or acquisition, or change in capital structure or other
event or transaction that would have such effect will be void as to the
purported transferee or owner, and the purported transferee or owner will not
have or acquire any rights to the Common Stock and/or Preferred Stock, as the
case may be, to the extent required to avoid such a result. Common Stock or
Preferred Stock owned, transferred or proposed to be transferred in excess of
the Ownership Limit or which would otherwise jeopardize the Company's status as
a REIT will automatically be converted to Excess Shares. A holder of Excess
Shares is not entitled to Distributions, voting rights, and other benefits with
respect to such shares except for the right to payment of the purchase price for
the shares (or, in the case of a devise or gift or similar event which results
in the issuance of Excess Shares, the fair market value at the time of such
devise or gift or event) and the right to certain distributions upon
liquidation. Any Distribution paid to a proposed transferee or holder of Excess
Shares shall be repaid to the Company upon demand. Excess Shares shall be
subject to repurchase by the Company at its election. The purchase price of any
Excess Shares shall be equal to the lesser of (a) the price paid in such
purported transaction (or, in the case of a devise or gift or similar event
resulting in the issuance of Excess Shares, the fair market value at the time of
such devise or gift or event), or (b) the fair market value of such Shares on
the date on which the Company or its designee determines to exercise its
repurchase right. If the foregoing transfer restrictions are determined to be
void or invalid by virtue of any legal decision, statute, rule or regulation,
then the purported transferee of any Excess Shares may be deemed, at the option
of the Company, to have acted as an agent on behalf of the Company in acquiring
such Excess Shares and to hold such Excess Shares on behalf of the Company.
For purposes of the Articles of Incorporation, the term "Person" shall
mean an individual, corporation, partnership, estate, trust (including a trust
qualified under Section 401(a) or 501(c)(17) of the Code), a portion of a trust
permanently set aside to be used exclusively for the purposes described in
Section 642(c) of the Code, association, private foundation within the meaning
of Section 509(a) of the Code, joint stock company or other entity, or a group
as that term is used for purposes of Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended; but does not include (i) CNL Fund Advisors, Inc.,
during the period ending on December 31, 1995, or (ii) an underwriter which
participated in a public offering of Shares for a period of sixty (60) days
following the purchase by such underwriter of Shares therein, provided that the
foregoing exclusions shall apply only if the ownership of such Shares by CNL
Fund Advisors, Inc. or an underwriter would not cause the Company to fail to
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qualify as a REIT by reason of being "closely held" within the meaning of
Section 856(a) of the code or otherwise cause the Company to fail to qualify as
a REIT.
RESPONSIBILITY OF DIRECTORS
Directors serve in a fiduciary capacity and shall have a fiduciary duty
to the stockholders of the Company, which duty shall include a duty to supervise
the relationship of the Company with the Advisor. See "Management -- Fiduciary
Responsibilities of the Board of Directors."
LIMITATION OF LIABILITY AND INDEMNIFICATION
Pursuant to Maryland corporate law and the Company's Articles of
Incorporation, the Company is required to indemnify and hold harmless a present
or former Director, officer, Advisor, or Affiliate and may indemnify and hold
harmless a present or former employee or agent of the Company (the "Indemnitee")
against any or all losses or liabilities reasonably incurred by the Indemnitee
in connection with or by reason of any act or omission performed or omitted to
be performed on behalf of the Company while a Director, officer, Advisor,
Affiliate, employee, or agent and in such capacity, provided, that the
Indemnitee has determined, in good faith, that the act or omission which caused
the loss or liability was in the best interests of the Company. The Company will
not indemnify or hold harmless the Indemnitee if: (i) the loss or liability was
the result of negligence or misconduct, or if the Indemnitee is an Independent
Director, the loss or liability was the result of gross negligence or willful
misconduct, (ii) the act or omission was material to the loss or liability and
was committed in bad faith or was the result of active or deliberate dishonesty,
(iii) the Indemnitee actually received an improper personal benefit in money,
property, or services, (iv) in the case of any criminal proceeding, the
Indemnitee had reasonable cause to believe that the act or omission was
unlawful, or (v) in a proceeding by or in the right of the Company, the
Indemnitee shall have been adjudged to be liable to the Company. In addition,
the Company will not provide indemnification for any loss or liability arising
from an alleged violation of federal or state securities laws unless one or more
of the following conditions are met: (i) there has been a successful
adjudication on the merits of each count involving alleged securities law
violations as to the particular Indemnitee; (ii) such claims have been dismissed
with prejudice on the merits by a court of competent jurisdiction as to the
particular Indemnitee; or (iii) a court of competent jurisdiction approves a
settlement of the claims against a particular Indemnitee and finds that
indemnification of the settlement and the related costs should be made, and the
court considering the request for indemnification has been advised of the
position of the Securities and Exchange Commission and of the published position
of any state securities regulatory authority in which securities of the Company
were offered or sold as to indemnification for violations of securities laws.
Pursuant to its Articles of Incorporation, the Company is required to pay or
reimburse reasonable expenses incurred by a present or former Director, officer,
Advisor or Affiliate and may pay or reimburse reasonable expenses incurred by
any other Indemnitee in advance of final disposition of a proceeding if the
following are satisfied: (i) the Indemnitee was made a party to the proceeding
by reasons of his or her service as a Director, officer, Advisor, Affiliate,
employee or agent of the Company, (ii) the Indemnitee provides the Company with
written affirmation of his or her good faith belief that he or she has met the
standard of conduct necessary for indemnification by the Company as authorized
by the Articles of Incorporation, (iii) the Indemnitee provides the Company with
a written agreement to repay the amount paid or reimbursed by the Company,
together with the applicable legal rate of interest thereon, if it is ultimately
determined that the Indemnitee did not comply with the requisite standard of
conduct, and (iv) the legal proceeding was initiated by a third party who is not
a stockholder or, if by a stockholder of the Company acting in his or her
capacity as such, a court of competent jurisdiction approves such advancement.
The Company's Articles of Incorporation further provide that any
indemnification, payment, or reimbursement of the expenses permitted by the
Articles of Incorporation will be furnished in accordance with the procedures in
Section 2-418 of the Maryland General Corporation Law.
Any indemnification may be paid only out of Net Assets of the Company,
and no portion may be recoverable from the stockholders.
There are certain defenses under Maryland law available to the
Directors, officers and the Advisor in the event of a stockholder action against
them. One such defense is the "business judgment rule." A Director, officer or
the Advisor can argue that he or she performed the action giving rise to the
stockholder's action in good faith and in a manner he or she reasonably believed
to be in the best interests of the Company, and with such care as an ordinarily
prudent person in a like position would have used under similar circumstances.
The Directors, officers and the Advisor are also entitled to rely on
information, opinions, reports or records prepared by experts (including
accountants, consultants, counsel, etc.) who were selected with reasonable care.
However, the Directors, officers
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and the Advisor may not invoke the business judgment rule to further limit the
rights of the stockholders to access records as provided in the Articles of
Incorporation.
The Company has entered into indemnification agreements with each of
the Company's officers and Directors. The indemnification agreements require,
among other things, that the Company indemnify its officers and Directors to the
fullest extent permitted by law, and advance to the officers and Directors all
related expenses, subject to reimbursement if it is subsequently determined that
indemnification is not permitted. In accordance with this agreement, the Company
must indemnify and advance all expenses reasonably incurred by officers and
Directors seeking to enforce their rights under the indemnification agreements.
The Company also must cover officers and Directors under the Company's
directors' and officers' liability insurance. Although these indemnification
agreements offer substantially the same scope of coverage afforded by the
indemnification provisions in the Articles of Incorporation and the Bylaws, it
provides greater assurance to Directors and officers that indemnification will
be available because these contracts cannot be modified unilaterally by the
Board of Directors or by the stockholders.
REMOVAL OF DIRECTORS
Under the Articles of Incorporation, a Director may resign or be
removed with or without cause by the affirmative vote of a majority of the
capital stock of the Company outstanding and entitled to vote.
INSPECTION OF BOOKS AND RECORDS
The Advisor will keep, or cause to be kept, on behalf of the Company,
full and true books of account on an accrual basis of accounting, in accordance
with generally accepted accounting principles. All of such books of account,
together with all other records of the Company, including a copy of the Articles
of Incorporation and any amendments thereto, will at all times be maintained at
the principal office of the Company, and will be open to inspection,
examination, and, for a reasonable charge, duplication upon reasonable notice
and during normal business hours by a stockholder or his agent.
As a part of its books and records, the Company will maintain at its
principal office an alphabetical list of names of stockholders, along with their
addresses and telephone numbers and the number of Shares held by each
stockholder. Such list shall be updated at least quarterly and shall be
available for inspection at the Company's home office by a stockholder or his or
her designated agent upon such stockholder's request. Such list also shall be
mailed to any stockholder requesting the list within 10 days of a request. The
Company may require the stockholder requesting the stockholder list to represent
that he or she will not make any commercial distribution of such list or the
information disclosed through such inspection. The Company may impose a
reasonable charge for expenses incurred in reproducing such list. The list may
not be sold or used for commercial purposes.
RESTRICTIONS ON "ROLL-UP" TRANSACTIONS
In connection with a proposed Roll-Up Transaction, which, in general
terms, is any transaction involving the acquisition, merger, conversion, or
consolidation, directly or indirectly, of the Company and the issuance of
securities of a Roll-Up Entity that would be created or would survive after the
successful completion of the Roll-Up Transaction, an appraisal of all Properties
shall be obtained from an Independent Expert. In order to qualify as an
Independent Expert for this purpose(s), the person or entity shall have no
material current or prior business or personal relationship with the Advisor or
Directors and shall be engaged to a substantial extent in the business of
rendering opinions regarding the value of assets of the type held by the
Company. The Properties shall be appraised on a consistent basis, and the
appraisal shall be based on the evaluation of all relevant information and shall
indicate the value of the Properties as of a date immediately prior to the
announcement of the proposed Roll-Up Transaction. The appraisal shall assume an
orderly liquidation of Properties over a 12-month period. The terms of the
engagement of such Independent Expert shall clearly state that the engagement is
for the benefit of the Company and the stockholders. A summary of the
independent appraisal, indicating all material assumptions underlying the
appraisal, shall be included in a report to stockholders in connection with a
proposed Roll-Up Transaction. In connection with a proposed Roll-Up Transaction
which has not been approved by at least two-thirds of the stockholders, the
person sponsoring the Roll-Up Transaction shall offer to stockholders who vote
against the proposal the choice of:
(i) accepting the securities of the Roll-Up Entity offered in the
proposed Roll-Up Transaction; or
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(ii) one of the following:
(A) remaining stockholders of the Company and preserving their
interests therein on the same terms and conditions as existed
previously; or
(B) receiving cash in an amount equal to the stockholder's pro
rata share of the appraised value of the net assets of the Company.
The Company is prohibited from participating in any proposed Roll-Up
Transaction:
(i) which would result in the stockholders having democracy rights in
the Roll-Up Entity that are less than those provided in the Company's Articles
of Incorporation, Sections 8.1, 8.2, 8.4, 8.5, 8.6 and 9.1 and described
elsewhere in this Prospectus, including rights with respect to the election and
removal of Directors, annual reports, annual and special meetings, amendment of
the Articles of Incorporation, and dissolution of the Company. (See "Description
of Capital Stock" and "Stockholder Meetings," above);
(ii) which includes provisions that would operate as a material
impediment to, or frustration of, the accumulation of shares by any purchaser of
the securities of the Roll-Up Entity (except to the minimum extent necessary to
preserve the tax status of the Roll-Up Entity), or which would limit the ability
of an investor to exercise the voting rights of its securities of the Roll-Up
Entity on the basis of the number of shares held by that investor;
(iii) in which investor's rights to access of records of the Roll-Up
Entity will be less than those provided in Sections 8.4 and 8.5 of the Company's
Articles of Incorporation and described in "Inspection of Books and Records,"
above; or
(iv) in which any of the costs of the Roll-Up Transaction would be
borne by the Company if the Roll-Up Transaction is not approved by the
stockholders.
FEDERAL INCOME TAX CONSIDERATIONS
INTRODUCTION
The following is a summary of the material federal income tax
consequences of the ownership of Shares of the Company, prepared by Shaw,
Pittman, Potts & Trowbridge, as Counsel. This discussion is based upon the laws,
regulations, and reported judicial and administrative rulings and decisions in
effect as of the date of this Prospectus, all of which are subject to change,
retroactively or prospectively, and to possibly differing interpretations. This
discussion does not purport to deal with the federal income or other tax
consequences applicable to all investors in light of their particular investment
or other circumstances, or to all categories of investors, some of whom may be
subject to special rules (including, for example, insurance companies,
tax-exempt organizations, financial institutions, broker-dealers, foreign
corporations and persons who are not citizens or residents of the United
States). No ruling on the federal, state or local tax considerations relevant to
the operation of the Company, or to the purchase, ownership or disposition of
the Shares, has been requested from the Internal Revenue Service (the "IRS" or
the "Service") or other tax authority. Counsel has rendered certain opinions
discussed herein and believes that if the Service were to challenge the
conclusions of Counsel, such conclusions should prevail in court. However,
opinions of counsel are not binding on the Service or on the courts, and no
assurance can be given that the conclusions reached by Counsel would be
sustained in court. Prospective investors should consult their own tax advisors
in determining the federal, state, local, foreign and other tax consequences to
them of the purchase, ownership and disposition of the Shares of the Company,
the tax treatment of a REIT and the effect of potential changes in applicable
tax laws.
TAXATION OF THE COMPANY
General. The Company has elected to be taxed as a REIT for federal
income tax purposes, as defined in Sections 856 through 860 of the Code,
commencing with its taxable year ending December 31, 1995. The Company believes
that it is organized and will operate in such a manner as to qualify as a REIT,
and the Company intends to continue to operate in such a manner, but no
assurance can be given that it will operate in a manner so as to qualify or
remain qualified as a REIT. The provisions of the Code pertaining to REITs are
highly technical and
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complex. Accordingly, this summary is qualified in its entirety by the
applicable Code sections, rules and regulations issued thereunder, and
administrative and judicial interpretations thereof.
If the Company qualifies for taxation as a REIT, it generally will not
be subject to federal corporate income tax on its net income that is currently
distributed to holders of Shares. This treatment substantially eliminates the
"double taxation" (at the corporate and stockholder levels) that generally
results from investment in a corporation. However, the Company will be subject
to federal income tax in the following circumstances. First, the Company will be
taxed at regular corporate rates on any undistributed real estate investment
trust taxable income, including undistributed net capital gains. Second, under
certain circumstances, the Company may be subject to the alternative minimum tax
on its items of tax preference. Third, if the Company has net income from
foreclosure property, it will be subject to tax on such income at the highest
corporate rate. Foreclosure property generally means real property (and any
personal property incident to such real property) which is acquired as a result
of a default either on a lease of such property or on indebtedness which such
property secured and with respect to which an appropriate election is made.
Fourth, if the Company has net income derived from prohibited transactions, such
income will be subject to a 100% tax. A prohibited transaction generally
includes a sale or other disposition of property (other than foreclosure
property) that is held primarily for sale to customers in the ordinary course of
business. Fifth, if the Company should fail to satisfy the 75% gross income test
or the 95% gross income test (as discussed below), but has nonetheless
maintained its qualification as a REIT because certain other requirements have
been met, it will be subject to a 100% tax on the net income attributable to the
greater of the amount by which the Company fails the 75% or 95% test. Sixth, if,
during each calendar year, the Company fails to distribute at least the sum of
(i) 85% of its real estate investment trust ordinary income for such year; (ii)
95% of its real estate investment trust capital gain net income for such year;
and (iii) any undistributed taxable income from prior periods, the Company will
be subject to a 4% excise tax on the excess of such required distribution over
the amounts actually distributed.
If the Company fails to qualify as a REIT for any taxable year and
certain relief provisions do not apply, the Company will be subject to federal
income tax (including alternative minimum tax) as an ordinary corporation on its
taxable income at regular corporate rates without any deduction or adjustment
for distributions to holders of Shares. To the extent that the Company would, as
a consequence, be subject to tax liability for any such taxable year, the amount
of cash available for satisfaction of its liabilities and for distribution to
holders of Shares would be reduced. Distributions made to holders of Shares
generally would be taxable as ordinary income to the extent of current and
accumulated earnings and profits and, subject to certain limitations, would be
eligible for the corporate dividends received deduction, but there can be no
assurance that any such Distributions would be made. The Company would not be
eligible to elect REIT status for the four taxable years after the taxable year
it failed to qualify as a REIT, unless its failure to qualify was due to
reasonable cause and not willful neglect and certain other requirements were
satisfied.
Opinion of Counsel. Based upon representations made by officers of the
Company with respect to relevant factual matters, upon the existing Code
provisions, rules and regulations promulgated thereunder and reported
administrative and judicial interpretations thereof, upon Counsel's independent
review of such documents as Counsel deemed relevant in the circumstances and
upon the assumption that the Company will operate in the manner described in
this Prospectus, Counsel has advised the Company that, in its opinion, the
Company qualified as a REIT under the Code for the taxable year ended December
31, 1995, the Company is organized in conformity with the requirements for
qualification as a REIT, and the Company's proposed method of operation will
enable it to meet the requirements for qualification as a REIT. It must be
emphasized, however, that the Company's ability to qualify and remain qualified
as a REIT is dependent upon actual operating results and future actions by and
events involving the Company and others, and no assurance can be given that the
actual results of the Company's operations and future actions and events will
enable the Company to satisfy in any given year the requirements for
qualification and taxation as a REIT.
Requirements for Qualification as a REIT. As discussed more fully
below, the Code defines a REIT as a corporation, trust or association (i) which
is managed by one or more trustees or directors; (ii) the beneficial ownership
of which is evidenced by transferable shares, or by transferable certificates of
beneficial interest; (iii) which would be taxable, but for Sections 856 through
860 of the Code, as a domestic corporation; (iv) which is neither a financial
institution nor an insurance company; (v) the beneficial ownership of which is
held (without reference to any rules of attribution) by 100 or more persons;
(vi) which is not closely held as defined in section 856(h) of the Code; and
(vii) which meets certain other tests regarding the nature of its assets and
income and the amount of its distributions.
In the case of a REIT which is a partner in a partnership, Treasury
Regulations provide that the REIT will be deemed to own its proportionate share
of the assets of the partnership and will be deemed to be entitled to the
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income of the partnership attributable to such share. In addition, the assets
and gross income (as defined in the Code) of the partnership attributed to the
REIT shall retain the same character as in the hands of the partnership for
purposes of Section 856 of the Code, including satisfying the gross income tests
and the asset tests described below. Thus, the Company's proportionate share of
the assets, liabilities and items of income of any Joint Venture, as described
in "Business -- Joint Venture Arrangements," will be treated as assets,
liabilities and items of income of the Company for purposes of applying the
asset and gross income tests described herein.
Ownership Tests. The ownership requirements for qualification as a REIT
are that (i) during the last half of each taxable year not more than 50% in
value of the REIT's outstanding shares may be owned, directly or indirectly
(applying certain attribution rules), by five or fewer individuals (or certain
entities as defined in the Code) and (ii) there must be at least 100
stockholders (without reference to any attribution rules) on at least 335 days
of such 12-month taxable year (or a proportionate number of days of a short
taxable year). These two requirements do not apply to the first taxable year for
which an election is made to be treated as a REIT. In order to meet these
requirements for subsequent taxable years, or to otherwise obtain, maintain, or
reestablish REIT status, the Articles of Incorporation generally prohibit any
person or entity from actually, constructively or beneficially acquiring or
owning (applying certain attribution rules) more than 9.8% of the outstanding
Common Stock or 9.8% of any series of outstanding Preferred Stock. Among other
provisions, the Articles of Incorporation empower the Board of Directors to
redeem, at its option, a sufficient number of Shares to bring the ownership of
Shares of the Company in conformity with these requirements or to assure
continued conformity with such requirements.
Under the Articles of Incorporation, each holder of Shares is required,
upon demand, to disclose to the Board of Directors in writing such information
with respect to actual, constructive or beneficial ownership of Shares of the
Company as the Board of Directors deems necessary to comply with provisions of
the Code applicable to the Company or the provisions of the Articles of
Incorporation, or the requirements of any other appropriate taxing authority.
Certain Treasury regulations govern the method by which the Company is required
to demonstrate compliance with these stock ownership requirements and the
failure to satisfy such regulations could cause the Company to fail to qualify
as a REIT. The Company has represented that it expects to meet these stock
ownership requirements for each taxable year and it will be able to demonstrate
its compliance with these requirements.
Asset Tests. At the end of each quarter of a REIT's taxable year, at
least 75% of the value of its total assets must consist of "real estate assets,"
cash and cash items (including receivables) and certain government securities.
The balance of a REIT's assets generally may be invested without restriction,
except that holdings of securities not within the 75% class of assets generally
must not, with respect to any issuer, exceed 5% of the value of the REIT's
assets or 10% of the issuer's outstanding voting securities. The term "real
estate assets" includes real property, interests in real property, leaseholds of
land or improvements thereon, and mortgages on the foregoing and any property
attributable to the temporary investment of new capital (but only if such
property is stock or a debt instrument and only for the one-year period
beginning on the date the REIT receives such capital). When a mortgage is
secured by both real property and other property, it is considered to constitute
a mortgage on real property to the extent of the fair market value of the real
property when the REIT is committed to make the loan (or, in the case of a
construction loan, the reasonably estimated cost of construction). Initially,
the bulk of the Company's assets will be real property. However, the Company
will also hold the Secured Equipment Leases. Counsel is of the opinion, based on
certain assumptions, that the Secured Equipment Leases will be treated as loans
secured by personal property for federal income tax purposes. See "Federal
Income Tax Considerations -- Characterization of the Secured Equipment Leases."
Therefore, the Secured Equipment Leases will not qualify as "real estate
assets." However, the Company has represented that at the end of each quarter
the value of the Secured Equipment Leases, together with any personal property
owned by the Company, will in the aggregate represent less than 25% of the
Company's total assets and that the value of the Secured Equipment Leases
entered into with any particular tenant will represent less than 5% of the
Company's total assets. No independent appraisals will be acquired to support
this representation, and Counsel, in rendering its opinion as to the
qualification of the Company as a REIT, is relying on the conclusions of the
Company and its senior management as to the relative values of its assets. There
can be no assurance however, that the IRS may not contend that either (i) the
value of the Secured Equipment Leases entered into with any particular tenant
represents more than 5% of the Company's total assets, or (ii) the value of the
Secured Equipment Leases, together with any personal property owned by the
Company, exceeds 25% of the Company's total assets.
As indicated in "Business -- Joint Venture Arrangements," the Company
may participate in Joint Ventures. If a Joint Venture were classified, for
federal income tax purposes, as an association taxable as a corporation rather
than as a partnership, the Company's ownership of a 10% or greater interest in
the Joint Venture would cause the Company to fail to meet the requirement that
it not own 10% or more of an issuer's voting securities. However, Counsel is of
the opinion, based on certain assumptions, that any Joint Ventures will
constitute
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partnerships for federal income tax purposes. See "Federal Income Tax
Considerations -- Investment in Joint Ventures."
Income Tests. A REIT also must meet three separate tests with respect
to its sources of gross income for each taxable year.
(a) The 75 Percent and 95 Percent Tests. In general, at least 75% of a
REIT's gross income for each taxable year must be from "rents from real
property," interest on obligations secured by mortgages on real property, gains
from the sale or other disposition of real property and certain other sources,
including "qualified temporary investment income." For these purposes,
"qualified temporary investment income" means any income (i) attributable to a
stock or debt instrument purchased with the proceeds received by the REIT in
exchange for stock (or certificates of beneficial interest) in such REIT (other
than amounts received pursuant to a dividend reinvestment plan) or in a public
offering of debt obligations with a maturity of at least five years and (ii)
received or accrued during the one-year period beginning on the date the REIT
receives such capital. In addition, a REIT must derive at least 95% of its gross
income for each taxable year from any combination of the items of income which
qualify under the 75% test, from dividends and interest, and from gains from the
sale, exchange or other disposition of certain stock and securities.
Initially, the bulk of the Company's income will be derived from rents
with respect to the Properties. Rents from Properties received by the Company
qualify as "rents from real property" in satisfying these two tests only if
several conditions are met. First, the rent must not be based in whole or in
part, directly or indirectly, on the income or profits of any person. An amount
received or accrued generally will not be excluded from the term "rents from
real property" solely by reason of being based on a fixed percentage or
percentages of receipts or sales. Second, the Code provides that rents received
from a tenant will not qualify as "rents from real property" if the REIT, or a
direct or indirect owner of 10% or more of the REIT owns, directly or
constructively, 10% or more of such tenant (a "Related Party Tenant"). Third, if
rent attributable to personal property leased in connection with a lease of real
property is greater than 15% of the total rent received under the lease, then
the portion of rent attributable to such personal property will not qualify as
"rents from real property." Finally, for rents to qualify as "rents from real
property," a REIT generally must not operate or manage the property or furnish
or render services to the tenants of such property, other than through an
independent contractor from whom the REIT derives no revenue, except that a REIT
may directly perform services which are "usually or customarily rendered" in
connection with the rental of space for occupancy, other than services which are
considered to be rendered to the occupant of the property.
The Company has represented that it will not (i) charge rent for any
Property that is based in whole or in part on the income or profits of any
person (except by reason of being based on a percentage or percentages of
receipts or sales, as described above); (ii) charge rent that will be
attributable to personal property in an amount greater than 15% of the total
rent received under the applicable lease; (iii) directly perform services
considered to be rendered to the occupant of a Property or which are not usually
or customarily furnished or rendered in connection with the rental of real
property; or (iv) enter into any lease with a Related Party Tenant.
Specifically, the Company expects that virtually all of its income will be
derived from leases of the type described in "Business -- Description of
Leases," and it does not expect such leases to generate income that would not
qualify as rents from real property for purposes of the 75% and 95% income
tests.
In addition, the Company will be paid interest on the Mortgage Loans.
If a Mortgage Loan is secured by both real property and other property, all the
interest on it will nevertheless qualify under the 75% gross income test if the
amount of the loan did not exceed the fair market value of the real property at
the time of the loan commitment. The Company anticipates this will always be the
case.
The Company will also receive payments under the terms of the Secured
Equipment Leases. Although the Secured Equipment Leases will be structured as
leases, Counsel is of the opinion that, subject to certain assumptions, they
will be treated as loans secured by personal property for federal income tax
purposes. See "Federal Income Tax Considerations -- Characterization of the
Secured Equipment Leases." If the Secured Equipment Leases are treated as loans
secured by personal property for federal income tax purposes then, the portion
of the payments under the terms of the Secured Equipment Leases that represent
interest, rather than a return of capital for federal income tax purposes, will
not satisfy the 75% gross income test (although it will satisfy the 95% gross
income test). The Company believes, however, that the aggregate amount of such
non-qualifying income will not cause the Company to exceed the limits on
non-qualifying income under the 75% gross income test.
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If, contrary to the opinion of Counsel, the Secured Equipment Leases
are treated as true leases, rather than as loans secured by personal property
for federal income tax purposes, the payments under the terms of the Secured
Equipment Leases would be treated as rents from personal property. Rents from
personal property will satisfy either the 75% or 95% gross income tests if they
are received in connection with a lease of real property and the rent
attributable to the personal property does not exceed 15% of the total rent
received from the tenant in connection with the lease. However, if rents
attributable to personal property exceed 15% of the total rent received from a
particular tenant, then the portion of the total rent attributable to personal
property will not satisfy either the 75% or 95% gross income tests.
If, notwithstanding the above, the Company fails to satisfy one or both
of the 75% or 95% tests for any taxable year, it may still qualify as a REIT if
(i) such failure is due to reasonable cause and not willful neglect; (ii) it
reports the nature and amount of each item of its income on a schedule attached
to its tax return for such year; and (iii) the reporting of any incorrect
information is not due to fraud with intent to evade tax. However, even if these
three requirements are met and the Company is not disqualified as a REIT, a
penalty tax would be imposed by reference to the amount by which the Company
failed the 75% or 95% test (whichever amount is greater).
(b) The 30 Percent Test. In addition to the 75% and 95% tests for each
taxable year, a REIT must derive less than 30% of its gross income from the sale
or other disposition of (i) real property held for less than four years (other
than foreclosure property or property involuntarily or compulsorily converted
through destruction, condemnation or similar events); (ii) stock or securities
held for less than one year; and (iii) property sold or otherwise disposed of in
a prohibited transaction. The Company has represented that it does not expect
that it will recognize gross income of a type, in an amount or at a time which
would cause it to fail the 30% test. As noted above, the Company plans, if
Listing does not occur within ten years after the commencement of this offering,
to commence with the orderly Sale of its Properties and distribute the proceeds
thereof. In the event of such a Sale of Properties, it is possible that income
derived from the Sale could be treated as income from prohibited transactions
and taken into account in applying the 30% gross income test. The Company
believes that at the time any of the Properties are sold none of the Properties
will be primarily held for sale to customers and that any sale of the Properties
will not be in the ordinary course of business. However, whether property is
held primarily for sale to customers in the ordinary course of business depends
on the facts and circumstances in effect from time to time, including those
related to a particular property. In addition, no assurance can be given that
the Company can (a) comply with certain safe-harbor provisions of the Code which
provide that certain sales do not constitute prohibited transactions or (b)
avoid owning property that may be characterized as property held primarily for
sale to customers in the ordinary course of business.
(c) The Impact of Default Under the Secured Equipment Leases. In
applying the gross income tests to the Company, it is necessary to consider the
impact that a default under one or more of the Secured Equipment Leases would
have on the Company's ability to satisfy such tests. A default under one or more
of the Secured Equipment Leases would result in the Company directly holding the
Equipment securing such leases for federal income tax purposes. In the event of
a default, the Company may choose to either lease or sell such Equipment.
However, any income resulting from a rental or sale of Equipment not
incidental to the rental or sale of real property would not qualify under the
75% and 95% gross income tests, and any income from a sale of such assets would
count as gain from the sale of assets for purposes of the 30% gross income test.
In addition, in certain circumstances, income derived from a sale or other
disposition of Equipment could be considered "net income from prohibited
transactions," subject to a 100% tax. The Company does not, however, anticipate
that its income from the rental or sale of Equipment would be material in any
taxable year.
Distribution Requirements. A REIT must distribute to its stockholders
for each taxable year ordinary income dividends in an amount equal to at least
(a) 95% of the sum of (i) its "real estate investment trust taxable income"
(before deduction of dividends paid and excluding any net capital gains) and
(ii) the excess of net income from foreclosure property over the tax on such
income, minus (b) certain excess non-cash income. Real estate investment trust
taxable income generally is the taxable income of a REIT computed as if it were
an ordinary corporation, with certain adjustments. Distributions must be made in
the taxable year to which they relate or, if declared before the timely filing
of the REIT's tax return for such year and paid not later than the first regular
dividend payment after such declaration, in the following taxable year.
The Company has represented that it intends to make Distributions to
stockholders that will be sufficient to meet the 95% distribution requirement.
Under some circumstances, however, it is possible that the Company may not have
sufficient funds from its operations to make cash Distributions to satisfy the
95% distribution requirement. For example, in the event of the default or
financial failure of one or more tenants or lessees, the
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Company might be required to continue to accrue rent for some period of time
under federal income tax principles even though the Company would not currently
be receiving the corresponding amounts of cash. Similarly, under federal income
tax principles, the Company might not be entitled to deduct certain expenses at
the time those expenses are incurred. In either case, the Company's cash
available for making Distributions might not be sufficient to satisfy the 95%
distribution requirement. If the cash available to the Company is insufficient,
the Company might raise cash in order to make the Distributions by borrowing
funds, issuing new securities or selling assets. If the Company ultimately were
unable to satisfy the 95% distribution requirement, it would fail to qualify as
a REIT and, as a result, would be subject to federal income tax as an ordinary
corporation without any deduction or adjustment for dividends paid to holders of
the Shares. If the Company fails to satisfy the 95% distribution requirement, as
a result of an adjustment to its tax returns by the Service, under certain
circumstances, it may be able to rectify its failure by paying a "deficiency
dividend" (plus a penalty and interest) within 90 days after such adjustment.
This deficiency dividend will be included in the Company's deductions for
dividends paid for the taxable year affected by such adjustment. However, the
deduction for a deficiency dividend will be denied, if any part of the
adjustment resulting in the deficiency is attributable to fraud with intent to
evade tax or to willful failure to timely file an income tax return.
TAXATION OF STOCKHOLDERS
Taxable Domestic Stockholders. For any taxable year in which the
Company qualifies as a REIT for federal income tax purposes, Distributions made
by the Company to its stockholders that are United States persons (generally,
any person other than a nonresident alien individual, a foreign trust or estate
or a foreign partnership or corporation) generally will be taxed as ordinary
income. Amounts received by such United States persons that are properly
designated as capital gain dividends by the Company generally will be taxed as
long-term capital gain, without regard to the period for which such person has
held its Shares, to the extent that they do not exceed the Company's actual net
capital gain for the taxable year. Corporate stockholders may be required to
treat up to 20% of certain capital gains dividends as ordinary income. Such
ordinary income and capital gain are not eligible for the dividends received
deduction allowed to corporations. Distributions to such United States persons
in excess of the Company's current or accumulated earnings and profits will be
considered first a tax-free return of capital for federal income tax purposes,
reducing the tax basis of each stockholder's Shares, and then, to the extent the
Distribution exceeds each stockholder's basis, a gain realized from the sale of
Shares. The Company will notify each stockholder as to the portions of each
Distribution which, in its judgment, constitute ordinary income, capital gain or
return of capital for federal income tax purposes. Any Distribution that is (i)
declared by the Company in October, November or December of any calendar year
and payable to stockholders of record on a specified date in such months and
(ii) actually paid by the Company in January of the following year, shall be
deemed to have been received by each stockholder on December 31 of such calendar
year and, as a result, will be includable in gross income of the stockholder for
the taxable year which includes such December 31. Stockholders who elect to
participate in the Reinvestment Plan will be treated as if they received a cash
Distribution from the Company and then applied such Distribution to purchase
Shares in the Reinvestment Plan. Stockholders may not deduct on their income tax
returns any net operating or net capital losses of the Company.
Upon the sale or other disposition of the Company's Shares, a
stockholder generally will recognize capital gain or loss equal to the
difference between the amount realized on the sale or other disposition and the
adjusted basis of the Shares involved in the transaction. Such gain or loss will
be long-term capital gain or loss if, at the time of sale or other disposition,
the Shares involved have been held for more than one year. In addition, if a
stockholder receives a capital gain dividend with respect to Shares which he has
held for six months or less at the time of sale or other disposition, any loss
recognized by the stockholder will be treated as long-term capital loss to the
extent of the amount of the capital gain dividend that was treated as long-term
capital gain.
Generally, the redemption of Shares by the Company will result in
recognition of ordinary income by the stockholder unless the stockholder
completely terminates or substantially reduces his or her interest in the
Company. A redemption of Shares for cash will be treated as a distribution that
is taxable as a dividend to the extent of the Company's current or accumulated
earnings and profits at the time of the redemption under Section 302 of the Code
unless the redemption (a) results in a "complete termination" of the
stockholder's interest in the Company under Section 302(b)(3) of the Code, (b)
is "substantially disproportionate" with respect to the stockholder under
Section 302(b)(2) of the Code, or (c) is "not essentially equivalent to a
dividend" with respect to the stockholder under Section 302(b)(1) of the Code.
Under Code Section 302(b)(2) a redemption is considered "substantially
disproportionate" if the percentage of the voting stock of the corporation owned
by a stockholder immediately after the redemption is less than eighty percent of
the percentage of the voting stock of the corporation owned by such stockholder
immediately before the redemption. In determining whether the redemption is not
treated as a dividend,
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Shares considered to be owned by a stockholder by reason of certain constructive
ownership rules set forth in Section 318 of the Code, as well as Shares actually
owned, must generally be taken into account. A distribution to a stockholder
will be "not essentially equivalent to a dividend" if its results in a
"meaningful reduction" in the stockholder's interest in the Company. The Service
has published a ruling indicating that a redemption which results in a reduction
in the proportionate interest in a corporation (taking into account the Section
318 constructive ownership rules) of a stockholder whose relative stock interest
is minimal (an interest of less than 1% should satisfy this requirement) and who
exercises no control over the corporation's affairs should be treated as being
"not essentially equivalent to a dividend."
If the redemption is not treated as a dividend, the redemption of the
Shares for cash will result in taxable gain or loss equal to the difference
between the amount of cash received and the stockholder's tax basis in the
Shares redeemed. Such gain or loss would be capital gain or loss if the Shares
were held as a capital asset and would be long-term capital gain or loss if the
holding period for the Shares exceeds one year.
The Company will report to its U.S. stockholders and the Service the
amount of dividends paid or treated as paid during each calendar year, and the
amount of tax withheld, if any. Under the backup withholding rules, a
stockholder may be subject to backup withholding at the rate of 31% with respect
to dividends paid unless such holder (a) is a corporation or comes within
certain other exempt categories and, when required, demonstrates this fact or
(b) provides a taxpayer identification number, certifies as to no loss of
exemption from backup withholding, and otherwise complies with applicable
requirements of the backup withholding rules. A stockholder that does not
provide the Company with a correct taxpayer identification number may also be
subject to penalties imposed by the Service. Any amount paid to the Service as
backup withholding will be creditable against the stockholder's income tax
liability. In addition, the Company may be required to withhold a portion of
capital gain dividends to any stockholders who fail to certify their non-foreign
status to the Company. See "Foreign Stockholders" below.
The state and local income tax treatment of the Company and its
stockholders may not conform to the federal income tax treatment described
above. As a result, stockholders should consult their own tax advisors for an
explanation of how other state and local tax laws would affect their investment
in Shares.
Tax-Exempt Stockholders. Dividends paid by the Company to a stockholder
that is a tax-exempt entity generally will not constitute "unrelated business
taxable income" ("UBTI") as defined in Section 512(a) of the Code, provided that
the tax-exempt entity has not financed the acquisition of its Shares with
"acquisition indebtedness" within the meaning of Section 524(c) of the Code and
the Shares are not otherwise used in an unrelated trade or business of the
tax-exempt entity.
Notwithstanding the foregoing, qualified trusts that hold more than 10%
(by value) of the shares of certain REITs may be required to treat a certain
percentage of such REIT's distributions as UBTI. This requirement will apply
only if (i) treating qualified trusts holding REIT shares as individuals would
result in a determination that the REIT is "closely held" within the meaning of
Section 856(h)(1) of the Code and (ii) the REIT is "predominantly held" by
qualified trusts. A REIT is predominantly held if either (i) a single qualified
trust holds more than 25% by value of the REIT interests or (ii) one or more
qualified trusts, each owning more than 10% by value of the REIT interests, hold
in the aggregate more than 50% of the REIT interests. The percentage of any REIT
dividend treated as UBTI is equal to the ratio of (a) the UBTI earned by the
REIT (treating the REIT as if it were a qualified trust and therefore subject to
tax on UBTI) to (b) the total gross income (less certain associated expenses) of
the REIT. A de minimis exception applies where the ratio set forth in the
preceding sentence is less than 5% for any year. For these purposes, a qualified
trust is any trust described in Section 401(a) of the Code and exempt from tax
under Section 501(a) of the Code. The restrictions on ownership of Shares in the
Articles of Incorporation will prevent application of the provisions treating a
portion of REIT distributions as UBTI to tax-exempt entities purchasing Shares
in the Company, absent a waiver of the restrictions by the Board of Directors.
See "Summary of the Articles of Incorporation and Bylaws -- Restriction of
Ownership."
Assuming that there is no waiver of the restrictions on ownership of
Shares in the Articles of Incorporation and that a tax-exempt stockholder does
not finance the acquisition of its Shares with "acquisition indebtedness" within
the meaning of Section 524(c) of the Code or otherwise use its Shares in an
unrelated trade or business, in the opinion of Counsel the distributions of the
Company with respect to such tax-exempt stockholder will not constitute UBTI.
The tax discussion of distributions by qualified retirement plans,
IRAs, Keogh plans and other tax-exempt entities is beyond the scope of this
discussion, and such entities should consult their tax adviser regarding such
questions.
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Foreign Stockholders. The rules governing United States federal income
taxation of nonresident alien individuals, foreign corporations, foreign
participants and other foreign stockholders (collectively, "Non-U.S.
Stockholders") are complex, and no attempt will be made herein to provide more
than a summary of such rules. The following discussion assumes that the income
from investment in the Shares will not be effectively connected with the
Non-U.S. Stockholders' conduct of a United States trade or business. Prospective
Non-U.S. Stockholders should consult with their own tax advisors to determine
the impact of federal, state and local laws with regard to an investment in
Shares, including any reporting requirements. Non-U.S. Stockholders will be
admitted as stockholders with the approval of the Advisor.
Dividends that are not attributable to gain from sales or exchanges by
the Company of United States real property interests and not designated by the
Company as capital gain dividends will be treated as ordinary income to the
extent that they are made out of current and accumulated earnings and profits of
the Company. Such dividends ordinarily will be subject to a withholding tax
equal to 30% of the gross amount of the dividend, unless an applicable tax
treaty reduces or eliminates that tax. The Company expects to withhold U.S.
income tax at the rate of 30% on the gross amount of any such dividends paid to
a Non-U.S. Stockholder unless (i) a lower treaty rate applies and the Non-U.S.
Stockholder has filed the required IRS Form 1001 with the Company or (ii) the
Non- U.S. Stockholder files an IRS Form 4224 with the Company claiming that the
dividend is effectively connected income. Dividends in excess of the Company's
current and accumulated earnings and profits will not be taxable to a
stockholder to the extent that such dividends paid do not exceed the adjusted
basis of the stockholder's Shares, but rather will reduce the adjusted basis of
such Shares. To the extent that dividends in excess of current and accumulated
earnings and profits exceed the adjusted basis of a Non-U.S. Stockholders'
Shares, such dividends will give rise to tax liability if the Non-U.S.
Stockholder would otherwise be subject to tax on any gain from the sale or
disposition of the Shares, as described below. If it cannot be determined at the
time a dividend is paid whether or not such dividend will be in excess of
current and accumulated earnings and profits, the dividends will be subject to
withholding at the rate of 30%. However, a Non-U.S. Stockholder may seek a
refund of such amounts from the IRS if it is subsequently determined that such
dividend was, in fact, in excess of the Company's current and accumulated
earnings and profits.
For any year in which the Company qualifies as a REIT, dividends that
are attributable to gain from sales or exchanges by the Company of United States
real property interests will be taxed to a Non-U.S. Stockholder under the
provisions of the Foreign Investment in Real Property Tax Act of 1980, as
amended ("FIRPTA"). Under FIRPTA, dividends attributable to gain from sales of
United States real property interests are taxed to a Non-U.S. Stockholder as if
such gain were effectively connected with a United States business. Non-U.S.
Stockholders would thus be taxed at the normal capital gain rates applicable to
U.S. Stockholders (subject to applicable alternative minimum tax and a special
alternative minimum tax in the case of nonresident alien individuals). Also,
dividends subject to FIRPTA may be subject to a 30% branch profits tax in the
hands of a foreign corporate stockholder not entitled to treaty exemption. The
Company is required by applicable Treasury Regulations to withhold 35% of any
distribution that could be designated by the Company as a capital gain dividend.
This amount is creditable against the Non-U.S. Stockholders' FIRPTA tax
liability.
Gain recognized by a Non-U.S. Stockholder upon a sale of Shares
generally will not be taxed under FIRPTA if the Company is a "domestically
controlled REIT," defined generally as a REIT in which at all times during a
specified testing period less than 50% in value of the stock was held directly
or indirectly by foreign persons. It is currently anticipated that the Company
will be a "domestically controlled REIT," and in such case the sale of Shares
would not be subject to taxation under FIRPTA. However, gain not subject to
FIRPTA nonetheless will be taxable to a Non-U.S. Stockholder if (i) investment
in the Shares is treated as "effectively connected" with the Non-U.S.
Stockholders' U.S. trade or business, in which case the Non-U.S. Stockholder
will be subject to the same treatment as U.S. Stockholders with respect to such
gain or (ii) the Non-U.S. Stockholder is a nonresident alien individual who was
present in the United States for 183 days or more during the taxable year and
either the individual has a "tax home" in the United States or the gain is
attributable to an office or other fixed place of business maintained by the
individual in the United States, in which case the nonresident alien individual
will be subject to a 30% tax on capital gains from sales of Shares. If the gain
on the sale of Shares were to be subject to taxation under FIRPTA, the Non-U.S.
Stockholder would be subject to the same treatment as U.S. Stockholders with
respect to such gain (subject to applicable alternative minimum tax and a
special alternative minimum tax in the case of nonresident alien individuals),
and the purchaser of the Shares would be required to withhold and remit to the
Service 10% of the purchase price.
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STATE AND LOCAL TAXES
The Company and its shareholders may be subject to state and local
taxes in various states and localities in which it or they transact business,
own property, or reside. The tax treatment of the Company and the shareholders
in such jurisdictions may differ from the federal income tax treatment described
above. Consequently, prospective shareholders should consult their own tax
advisors regarding the effect of state and local tax laws upon an investment in
the Common Stock of the Company.
CHARACTERIZATION OF PROPERTY LEASES
The Company will purchase both new and existing Properties and lease
them to franchisees or corporate franchisors pursuant to leases of the type
described in "Business -- Description of Property Leases." The ability of the
Company to claim certain tax benefits associated with ownership of the
Properties, such as depreciation, depends on a determination that the lease
transactions engaged in by the Company are true leases, under which the Company
is the owner of the leased Property for federal income tax purposes, rather than
a conditional sale of the Property or a financing transaction. A determination
by the Service that the Company is not the owner of the Properties for federal
income tax purposes could have substantial adverse consequences to the Company,
such as the denying of the Company's depreciation deductions. Moreover, a denial
of the Company's depreciation deductions could result in a determination that
the Company's Distributions to stockholders were insufficient to satisfy the 95%
distribution requirement for qualification as a REIT. However, as discussed
above, if the Company has sufficient cash, it may be able to remedy any past
failure to satisfy the distribution requirements by paying a "deficiency
dividend" (plus a penalty and interest). See "Distribution Requirements," above.
The characterization of transactions as leases, conditional sales, or
financings has been addressed in numerous cases. The courts have not identified
any one factor as being determinative of whether the lessor or the lessee of
property is to be treated as the owner. Judicial decisions and pronouncements of
the Service with respect to the characterization of transactions as either
leases, conditional sales, or financing transactions have made it clear that the
characterization of leases for tax purposes is a question which must be decided
on the basis of a weighing of many factors, and courts have reached different
conclusions even where characteristics of two lease transactions were
substantially similar.
While certain characteristics of the leases anticipated to be entered
into by the Company suggest the Company might not be the owner of the
Properties, such as the fact that such leases are "triple-net" leases, a
substantial number of other characteristics indicate the bona fide nature of
such leases and that the Company will be the owner of the Properties. For
example, under the types of leases described in "Business -- Description of
Leases," the Company will bear the risk of substantial loss in the value of the
Properties, since the Company will acquire its interests in the Properties with
an equity investment, rather than with nonrecourse indebtedness. Further, the
Company, rather than the tenant, will benefit from any appreciation in the
Properties, since the Company will have the right at any time to sell or
transfer its Properties, subject to the tenant's right to purchase the property
at a price not less than the Property's fair market value (determined by
appraisal or otherwise).
Other factors that are consistent with the ownership of the Properties
by the Company are (i) the tenants are liable for repairs and to return the
Properties in reasonably good condition; (ii) insurance proceeds generally are
to be used to restore the Properties and, to the extent not so used, belong to
the Company; (iii) the tenants agree to subordinate their interests in the
Properties to the lien of any first mortgage upon delivery of a nondisturbance
agreement and agree to attorn to the purchaser upon any foreclosure sale; and
(iv) based on the Company's representation that the Properties can reasonably be
expected to have at the end of their lease terms (generally a maximum of 30 to
40 years) a fair market value of at least 20% of the Company's cost and a
remaining useful life of at least 20% of their useful lives at the beginning of
the leases, the Company has not relinquished the Properties to the tenants for
their entire useful lives, but has retained a significant residual interest in
them. Moreover, the Company will not be primarily dependent upon tax benefits in
order to realize a reasonable return on its investments.
On the basis of the foregoing, assuming (i) the Company leases the
Properties on substantially the same terms and conditions described in "Business
- -- Description of Leases," and (ii) as is represented by the Company, the
residual value of the Properties remaining after the end of their lease terms
(including all renewal periods) may reasonably be expected to be at least 20% of
the Company's cost of such Properties, and the remaining useful lives of the
Properties after the end of their lease terms (including all renewal periods)
may reasonably be expected to be at least 20% of the Properties' useful lives at
the beginning of their lease terms, it is the opinion of Counsel that
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the Company will be treated as the owner of the Properties for federal income
tax purposes and will be entitled to claim depreciation and other tax benefits
associated with such ownership. Counsel's opinion that the Company will be
organized in conformity with the requirements for qualification as a REIT and
that its proposed method of operation will enable it to meet the requirements
for qualification as a REIT is based, in part, on the assumption that each of
the Company's Property leases will conform to the conditions outlined in clauses
(i) and (ii) of the preceding sentence.
CHARACTERIZATION OF SECURED EQUIPMENT LEASES
The Company will purchase Equipment and lease it to franchisees or
corporate franchisors pursuant to leases of the type described in "Business --
General." The ability of the Company to qualify as a REIT depends on a
determination that the Secured Equipment Leases are financing arrangements,
under which the lessees acquire ownership of the Equipment for federal income
tax purposes. If the Secured Equipment Leases are instead treated as true
leases, the Company may be unable to satisfy the income tests for REIT
qualification. See "Federal Income Tax Considerations -- Taxation of the Company
- -- Income Tests."
While certain characteristics of the Secured Equipment Leases to be
entered into by the Company suggest that the Company retains ownership of the
Equipment, such as the fact that the Secured Equipment Leases are structured as
leases, with the Company retaining title to the Equipment, a substantial number
of other characteristics indicate that the Secured Equipment Leases are
financing arrangements and that the lessees are the owners of the Equipment for
federal income tax purposes. For example, under the types of Secured Equipment
Leases described in "Business -- General," the lease term will equal or exceed
the useful life of the Equipment, and the lessee will have the option to
purchase the Equipment at the end of the lease term for a nominal sum. Moreover,
under the terms of the Secured Equipment Leases, the Company and the lessees
will each agree to treat the Secured Equipment Leases as loans secured by
personal property, rather than leases, for tax purposes.
On the basis of the foregoing, assuming (i) the Secured Equipment
Leases are made on substantially the same terms and conditions described in
"Business -- General," and (ii) as represented by the Company, each of the
Secured Equipment Leases will have a term that equals or exceeds the useful life
of the Equipment subject to the lease, it is the opinion of Counsel that the
Company will not be treated as the owner of the Equipment that is subject to the
Secured Equipment Leases for federal income tax purposes and that the Company
will be able to treat the Secured Equipment Leases as loans secured by personal
property. Counsel's opinion that the Company will be organized in conformity
with the requirements for qualification as a REIT is based, in part, on the
assumption that each of the Secured Equipment Leases will conform to the
conditions outlined in clauses (i) and (ii) of the preceding sentence.
INVESTMENT IN JOINT VENTURES
As indicated in "Business -- Joint Venture Arrangements," the Company
may participate in Joint Ventures which own and lease Properties. Assuming that
the Joint Ventures have the characteristics described in "Business -- Joint
Venture Arrangements," and are operated in the same manner that the Company
operates with respect to Properties that it owns directly, it is the opinion of
Counsel that (i) the Joint Ventures will be treated as partnerships, as defined
in Sections 7701(a)(2) and 761(a) of the Code and not as associations taxable as
corporations, and that the Company will be subject to tax as a partner pursuant
to Sections 701-761 of the Code and (ii) all material allocations to the Company
of income, gain, loss and deduction as provided in the Joint Venture agreements
and as discussed in the Prospectus will be respected under Section 704(b) of the
Code. The Company has represented that it will not become a participant in any
Joint Venture unless the Company has first obtained advice of Counsel that the
Joint Venture will constitute a partnership for federal income tax purposes and
that the allocations to the Company contained in the Joint Venture agreement
will be respected.
If, contrary to the opinion of Counsel, a Joint Venture were to be
treated as an association taxable as a corporation, the Company would be treated
as a stockholder for tax purposes and would not be treated as owning a pro rata
share of the Joint Venture's assets. In addition, the items of income and
deduction of the Joint Venture would not pass through to the Company. Instead,
the Joint Venture would be required to pay income tax at regular corporate tax
rates on its net income, and distributions to partners would constitute
dividends that would not be deductible in computing the Joint Venture's taxable
income. Moreover, a determination that a Joint Venture is taxable as a
corporation could cause the Company to fail to satisfy the asset tests for
qualification as a REIT. See "Asset Tests" and "Income Tests," above.
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REPORTS TO STOCKHOLDERS
The Company will furnish each stockholder with its audited annual
report within 120 days following the close of each fiscal year. These annual
reports will contain the following: (i) financial statements, including a
balance sheet, statement of operations, statement of stockholders' equity, and
statement of cash flows, prepared in accordance with generally accepted
accounting principals which are audited and reported on by independent certified
public accountants; (ii) the ratio of the costs of raising capital during the
period to the capital raised; (iii) the aggregate amount of advisory fees and
the aggregate amount of other fees paid to the Advisor and any Affiliate of the
Advisor by the Company and including fees or charges paid to the Advisor and any
Affiliate of the Advisor by third parties doing business with the Company; (iv)
the Operating Expenses of the Company, stated as a percentage of the Average
Invested Assets (the average of the aggregate book value of the assets of the
Company, for a specified period, invested, directly or indirectly, in equity
interests in and loans secured by real estate, before reserves for depreciation
or bad debts or other similar non-cash reserves, computed by taking the average
of such values at the end of each month during such period) and as a percentage
of its Net Income; (v) a report from the Independent Directors that the policies
being followed by the Company are in the best interest of its stockholders and
the basis for such determination; (vi) separately stated, full disclosure of all
material terms, factors and circumstances surrounding any and all transactions
involving the Company, Directors, Advisor and any Affiliate thereof occurring in
the year for which the annual report is made; and (vii) Distributions to the
stockholders for the period, identifying the source of such Distributions and if
such information is not available at the time of the distribution, a written
explanation of the relevant circumstances will accompany the Distributions (with
the statement as to the source of Distributions to be sent to stockholders not
later than 60 days after the end of the fiscal year in which the distribution
was made). Independent Directors shall be specifically charged with a duty to
examine and comment in the report on the fairness of such transactions.
Within 75 days following the close of each Company fiscal year, each
stockholder that is a Qualified Plan will be furnished with an annual statement
of Share valuation to enable it to file annual reports required by ERISA as they
relate to its investment in the Company. The statement will report an estimated
value of each Share of, prior to the termination of the offering, $10 per Share,
and after the termination of the offering, based on (i) the amount paid for
Shares presented for redemption during the quarter preceding the valuation date,
assuming adequate liquidity or (ii) the amount stockholders would receive from
the Net Sales Proceeds of the Properties and the Secured Equipment Leases if
such assets were sold at their values (determined by appraisal updates) as of
the close of the fiscal year and the Net Sales Proceeds were distributed in a
liquidation of the Company as described in this Prospectus. Each appraisal
update will be based on capitalization of income for the Property that is the
subject of the update unless the Company previously obtained an appraisal for
such Property within the nine-month period prior to the close of the relevant
fiscal year. The Company may elect to deliver such reports to all stockholders.
Stockholders will not be forwarded copies of appraisals or updates. In providing
such reports to stockholders, neither the Company nor its Affiliates thereby
make any warranty, guarantee, or representation that (i) the stockholders or the
Company, upon liquidation, will actually realize the estimated value per Share,
or (ii) the stockholders will realize the estimated net asset value if they
attempt to sell their Shares.
If the Company is required by the Securities Exchange Act of 1934, as
amended, to file quarterly reports with the Securities and Exchange Commission
on Form 10-Q, stockholders will be furnished with a summary of the information
contained in each such report within 60 days after the end of each fiscal
quarter. Such summary information generally will include a balance sheet, a
quarterly statement of income, and a statement of cash flows, and any other
pertinent information regarding the Company and its activities during the
quarter. Stockholders also may receive a copy of any Form 10-Q upon request to
the Company. If the Company is not subject to this filing requirement,
stockholders will be furnished with a semi-annual report within 60 days after
each six-month period containing information similar to that contained in the
quarterly report but applicable to such six-month period.
Stockholders and their duly authorized representatives are entitled to
inspect and copy, at their expense, the books and records of the Company at all
times during regular business hours, upon reasonable prior notice to the
Company, at the location where such reports are kept by the Company.
Stockholders, upon request and at their expense, may obtain full information
regarding the financial condition of the Company, a copy of the Company's
federal, state, and local income tax returns for each fiscal year of the
Company, and, subject to certain confidentiality requirements, a list containing
the name, address, and Shares held by each stockholder.
The fiscal year of the Company will be the calendar year.
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The Company's federal tax return (and any applicable state income tax
returns) will be prepared by the accountants regularly retained by the Company.
Appropriate tax information will be submitted to the stockholders within 30 days
following the end of each fiscal year of the Company. A specific reconciliation
between GAAP and income tax information will not be provided to the
stockholders; however, such reconciling information will be available in the
office of the Company for inspection and review by any interested stockholder.
THE OFFERING
As of April 9, 1996, the Company had received aggregate subscription
proceeds of $57,887,405 (5,788,741 Shares) from 3,440 stockholders, including
$128,151 (12,815 Shares) issued pursuant to the Reinvestment Plan. As of April
9, 1996, the Company had invested or committed for investment approximately
$46,200,000 of such proceeds in 48 Properties (including 21 Properties which
consist of land and building, one Property through a joint venture arrangement
which consists of land and building, three Properties which consist of building
only, and 23 Properties which consist of land only), in providing a Mortgage
Loan to the tenant of the 23 Properties consisting of land only, and to pay
Acquisition Fees and miscellaneous Acquisition Expenses, leaving approximately
$4,200,000 in offering proceeds available for investment in Properties and
making Mortgage Loans. As of April 9, 1996, the Company had incurred $2,604,933
in Acquisition Fees to the Advisor.
GENERAL
A maximum of 10,000,000 Shares ($100,000,000) are being offered at a
purchase price of $10.00 each. The maximum offering is subject to increase to
15,000,000 Shares ($150,000,000) at the option of the Managing Dealer if the
offering is oversubscribed. In addition, the Company has registered an
additional 1,500,000 Shares ($15,000,000) available only to stockholders who
receive a copy of this Prospectus and who elect to participate in the
Reinvestment Plan. Any participation in such plan by a person who becomes a
stockholder otherwise than by participating in this offering will require
solicitation under a separate prospectus. See "Summary of Reinvestment Plan."
A minimum investment of 250 Shares ($2,500) is required. IRAs, Keogh
plans, and pension plans must make a minimum investment of at least 100 Shares
($1,000), except for Iowa tax-exempt investors who must make a minimum
investment of 250 Shares ($2,500). For Minnesota investors only, IRAs and
qualified plans must make a minimum investment of 200 Shares ($2,000). In
addition, Nebraska, New York, and North Carolina investors must make a minimum
investment of 500 Shares ($5,000). Any investor who makes the required minimum
investment may purchase additional Shares in increments of one Share. Maine
investors, however, may not purchase additional Shares in amounts less than the
applicable minimum investment except at the time of the initial subscription or
with respect to Shares purchased pursuant to the Reinvestment Plan. See "The
Offering -- General," "The Offering -- Subscription Procedures," and "Summary of
Reinvestment Plan."
The Company has elected to extend the offering until a date no later
than March 29, 1997 (in states that permit such an extension).
PLAN OF DISTRIBUTION
The Shares are being offered to the public on a "best efforts" basis
(which means that no one is guaranteeing that any minimum amount will be sold)
through the Soliciting Dealers, who are members of the National Association of
Securities Dealers, Inc. (the "NASD") or other persons or entities exempt from
broker-dealer registration, and the Managing Dealer. The Soliciting Dealers will
use their best efforts during the offering period to find eligible persons who
desire to subscribe for the purchase of Shares from the Company. Both James M.
Seneff, Jr. and Robert A. Bourne are Affiliates and licensed principals of the
Managing Dealer, and the Advisor is an Affiliate of the Managing Dealer.
Prior to a subscriber's admission to the Company as a stockholder,
funds paid by such subscriber will be deposited in an interest-bearing escrow
account with SouthTrust Estate & Trust Company, Inc. The Company, within 30 days
after the date a subscriber is admitted to the Company, will pay to such
subscriber the interest (generally calculated on a daily basis) actually earned
on the funds of those subscribers whose funds have been held in escrow by such
bank for at least 20 days. Stockholders otherwise are not entitled to interest
earned on Company funds or to receive interest on their Invested Capital. See
"Escrow Arrangements" below.
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Subject to the provisions for reduced Selling Commissions described
below, the Company will pay the Managing Dealer an aggregate of 7.5% of the
Gross Proceeds as Selling Commissions. The Managing Dealer shall reallow fees of
up to 7% to the Soliciting Dealers with respect to Shares sold by them. In
addition, the Company will pay the Managing Dealer, as an expense allowance, a
marketing support and due diligence expense reimbursement fee equal to 0.5% of
Gross Proceeds. The Managing Dealer, in its sole discretion, may reallow to any
Soliciting Dealer all or any portion of this fee based on such factors as the
number of Shares sold by such Soliciting Dealer, the assistance, if any, of such
Soliciting Dealer in marketing the offering, and bona fide due diligence
expenses incurred. Stockholders who elect to participate in the Reinvestment
Plan will be charged Selling Commissions and the marketing support and due
diligence fee on Shares purchased for their accounts on the same basis as
investors who purchase Shares in the offering. See "Summary of Reinvestment
Plan."
A registered principal or representative of the Managing Dealer or a
Soliciting Dealer may purchase Shares net of 7% commissions, at a per Share
purchase price of $9.30. In addition, Soliciting Dealers, in their sole
discretion, may elect not to accept any Selling Commissions offered by the
Company for Shares that they sell. In that event, such Shares shall be sold to
the investor net of all Selling Commissions, at a per Share purchase price of
$9.30. In connection with the purchases of certain minimum numbers of Shares,
the amount of Selling Commissions otherwise payable to the Managing Dealer or a
Soliciting Dealer, shall be reduced in accordance with the following schedule:
<TABLE>
<CAPTION>
Dollar Amount Reallowed Commissions on Sales Per Share
of Shares Purchase Price -----------------------------------------
Purchased Per Share Percent Dollar Amount
--------------- -------------- -------- -------------
<S> <C>
$10 -- $249,990 $10.00 7.0% $0.70
$250,000 -- $499,990 $9.90 6.0% $0.60
$500,000 -- $999,990 $9.70 4.0% $0.40
$1,000,000 -- $1,499,990 $9.60 3.0% $0.30
$1,500,000 or more $9.50 2.0% $0.20
</TABLE>
Subscriptions may be combined for the purpose of determining the volume
discounts in the case of subscriptions made by any "purchaser," provided all
such Shares are purchased through the same Soliciting Dealer or through the
Managing Dealer. The volume discount will be prorated among the separate
subscribers considered to be a single "purchaser." Shares purchased pursuant to
the Reinvestment Plan on behalf of a Participant in the Reinvestment Plan will
not be combined with other subscriptions for Shares by the investor in
determining the volume discount to which such investor may be entitled. See
"Summary of Reinvestment Plan." Further subscriptions for Shares will not be
combined for purposes of the volume discount in the case of subscriptions by any
"purchaser" who subscribes for additional Shares subsequent to the purchaser's
initial purchase of Shares.
Any request to combine more than one subscription must be made in
writing in a form satisfactory to the Company and must set forth the basis for
such request. Any such request will be subject to verification by the Managing
Dealer that all of such subscriptions were made by a single "purchaser." If a
"purchaser" does not reduce the per Share purchase price, the excess purchase
price over the discounted purchase price will be returned to the actual separate
subscribers for Shares.
For purposes of such volume discounts, "purchaser" includes (i) an
individual, his or her spouse, and their children under the age of 21, who
purchase the Shares for his or her or their own accounts, and all pension or
trust funds established by each such individual; (ii) a corporation,
partnership, association, joint-stock company, trust fund, or any organized
group of persons, whether incorporated or not (provided that the entities
described in this clause (ii) must have been in existence for at least six
months before purchasing the Shares and must have formed such group for a
purpose other than to purchase the Shares at a discount); (iii) an employee's
trust, pension, profit-sharing, or other employee benefit plan qualified under
Section 401 of the Code; and (iv) all pension, trust, or other funds maintained
by a given bank. In addition, the Company, in its sole discretion, may aggregate
and combine separate subscriptions for Shares received during the offering
period from (i) the Managing Dealer or the same Soliciting Dealer, (ii)
investors whose accounts are managed by a single investment adviser registered
under the Investment Advisers Act of 1940, (iii) investors over whose accounts a
designated bank, insurance company, trust company, or other entity exercises
discretionary investment responsibility, or (iv) a single corporation,
partnership, trust association, or other organized group of persons, whether
incorporated or not, and whether such subscriptions are by or for the benefit of
such corporation, partnership, trust association, or group. Except as provided
in this paragraph, subscriptions will not be cumulated, combined, or aggregated.
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The Company or its Affiliates also may provide incentive items for
registered representatives of the Managing Dealer and the Soliciting Dealers,
which in no event shall exceed an aggregate of $100 per annum per participating
salesperson. In the event other incentives are provided to registered
representatives of the Managing Dealer or the Soliciting Dealers, they will be
paid only in cash, and such payments will be made only to the Managing Dealer or
the Soliciting Dealers rather than to their registered representatives. Any such
sales incentive program must first have been submitted for review by the NASD,
and must comply with Article III, Section 44(c)(6)(B)(xi) of its Rules of Fair
Practice. Costs incurred in connection with such sales incentive programs, if
any, will be considered underwriting compensation. See "Estimated Use of
Proceeds."
A registered principal or representative of the Managing Dealer or a
Soliciting Dealer, employees, officers, and Directors of the Company, or
employees, officers, and directors of the Advisor, any of their Affiliates and
any Plan established exclusively for the benefit of such persons or entities may
purchase Shares net of 7% commissions, at a per Share purchase price of $9.30.
In addition, clients of an investment adviser registered under the Investment
Advisers Act of 1940, as amended, who have been advised by such adviser on an
ongoing basis regarding investments other than in the Company, and who are not
being charged by such adviser or its Affiliates, through the payment of
commissions or otherwise, for the advice rendered by such adviser in connection
with the purchase of the Shares, may purchase the Shares net of 7% commissions.
Any reduction in commissions will reduce the effective purchase price
per Share to the investor involved but will not alter the net proceeds payable
to the Company as a result of such sale. All investors will be deemed to have
contributed the same amount per Share to the Company whether or not the investor
receives a discount. Accordingly, for purposes of Dividends, investors who pay
reduced commissions will receive higher returns on their investments in the
Company as compared to investors who do not pay reduced commissions.
In connection with the sale of Shares, certain registered principals or
representatives of the Managing Dealer may perform wholesaling functions for
which they will receive compensation payable by the Managing Dealer in an
aggregate amount not in excess of one percent of Gross Proceeds. In addition,
the Advisor and its Affiliates, including the Managing Dealer and its registered
principals or representatives, may incur due diligence fees and other expenses,
including expenses related to sales seminars and wholesaling activities, a
portion of which may be paid by the Company.
The Managing Dealer and the Soliciting Dealers severally will indemnify
the Company and its officers and Directors, the Advisor and its officers and
directors and their Affiliates, against certain liabilities, including
liabilities under the Securities Act of 1933.
SUBSCRIPTION PROCEDURES
Procedures Applicable to All Subscriptions. In order to purchase
Shares, the subscriber must complete and execute the Subscription Agreement. Any
subscription for Shares must be accompanied by cash or check payable to
"SouthTrust Estate & Trust Company, Inc., Escrow Agent" or to the Company, in
the amount of $10.00 per Share. See "Escrow Arrangements" below. Certain
Soliciting Dealers who have "net capital," as defined in the applicable federal
securities regulations, of $250,000 or more may instruct their customers to make
their checks for Shares for which they have subscribed payable directly to the
Soliciting Dealer. In such case, the Soliciting Dealer will issue a check made
payable to the order of the Escrow Agent for the aggregate amount of the
subscription proceeds.
Each subscription will be accepted or rejected by the Company within 30
days after its receipt, and no sale of Shares shall be completed until at least
five business days after the date on which the subscriber receives a copy of
this Prospectus. If a subscription is rejected, the funds will be returned to
the subscriber within ten business days after the date of such rejection,
without interest and without deduction. A form of the Subscription Agreement is
set forth as Exhibit D to this Prospectus. The subscription price of each Share
is payable in full upon execution of the Subscription Agreement. A subscriber
whose subscription is accepted shall be sent a confirmation of his or her
purchase.
The Advisor and each Soliciting Dealer who sells Shares on behalf of
the Company have the responsibility to make every reasonable effort to determine
that the purchase of Shares is appropriate for an investor and that the
requisite suitability standards are met. See "Suitability Standards and How to
Subscribe -- Suitability Standards". In making this determination, the
Soliciting Dealers will rely on relevant information provided by the investor,
including information as to the investor's age, investment objectives,
investment experience, income, net worth,
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financial situation, other investments, and any other pertinent information.
Each investor should be aware that determining suitability is the responsibility
of the Soliciting Dealer.
Subscribers will be admitted as stockholders not later than the last
day of the calendar month following acceptance of their subscriptions.
Procedures Applicable to Non-Telephonic Orders. Each Soliciting Dealer
receiving a subscriber's check made payable solely to the bank escrow agent
(where, pursuant to such Soliciting Dealer's internal supervisory procedures,
internal supervisory review must be conducted at the same location at which
subscription documents and checks are received from subscribers), will deliver
such checks to the Managing Dealer no later than the close of business of the
first business day after receipt of the subscription documents by the Soliciting
Dealer except that, in any case in which the Soliciting Dealer maintains a
branch office, and, pursuant to a Soliciting Dealer's internal supervisory
procedures, final internal supervisory review is conducted at a different
location, the branch office shall transmit the subscription documents and check
to the Soliciting Dealer conducting such internal supervisory review by the
close of business on the first business day following their receipt by the
branch office and the Soliciting Dealer shall review the subscription documents
and subscriber's check to ensure their proper execution and form and, if they
are acceptable, transmit the check to the Managing Dealer by the close of
business on the first business day after the check is received by the Soliciting
Dealer. The Managing Dealer will transmit the check to the Escrow Agent by no
later than the close of business on the first business day after the check is
received from the Soliciting Dealer.
Procedures Applicable to Telephonic Orders. Certain Soliciting Dealers
may permit investors to subscribe for Shares by telephonic order to the
Soliciting Dealer. There are no additional fees associated with telephonic
orders. Subscribers who wish to subscribe for Shares by telephonic order to the
Soliciting Dealer may complete the telephonic order either by delivering a check
in the amount necessary to purchase the Shares to be covered by the subscription
agreement to the Soliciting Dealer or by authorizing the Soliciting Dealer to
pay the purchase price for the Shares to be covered by the subscription
agreement from funds available in an account maintained by the Soliciting Dealer
on behalf of the subscriber. A subscriber must specifically authorize the
registered representative and branch manager to execute the subscription
agreement on behalf of the subscriber and must already have made or agreed to
make payment for the Shares covered by the subscription agreement.
To the extent that customers of any Soliciting Dealer wish to subscribe
and pay for Shares with funds held by or to be deposited with those firms, then
such firms shall, subject to Rule 15c2-4 promulgated under the Securities
Exchange Act of 1934, either (i) upon receipt of an executed subscription
agreement or direction to execute a subscription agreement on behalf of a
customer, to forward the offering price for the Shares covered by the
subscription agreement on or before the close of business of the first business
day following receipt or execution of a subscription agreement by such firms to
the Managing Dealer (except that, in any case in which the Soliciting Dealer
maintains a branch office, and, pursuant to a Soliciting Dealer's internal
supervisory procedures, final internal supervisory review is conducted at a
different location, the branch office shall transmit the subscription documents
and subscriber's check to the Soliciting Dealer conducting such internal
supervisory review by the close of business on the first business day following
their receipt by the branch office and the Soliciting Dealer shall review the
subscription documents and subscriber's check to ensure their proper execution
and form and, if they are acceptable, transmit the check to the Managing Dealer
by the close of business on the first business day after the check is received
by the Soliciting Dealer), or (ii) to solicit indications of interest in which
event (a) such Soliciting Dealers must subsequently contact the customer
indicating interest to confirm the interest and give instructions to execute and
return a subscription agreement or to receive authorization to execute the
subscription agreement on the customer's behalf, (b) such Soliciting Dealers
must mail acknowledgments of receipt of orders to each customer confirming
interest on the business day following such confirmation, (c) such Soliciting
Dealers must debit accounts of such customers on the fifth business day (the
"debit date") following receipt of the confirmation referred to in (a), and (d)
such Soliciting Dealers must forward funds to the Managing Dealer in accordance
with the procedures and on the schedule set forth in clause (i) of this
sentence. If the procedure in (ii) is adopted, subscribers' funds are not
required to be in their accounts until the debit date. The Managing Dealer will
transmit the check to the Escrow Agent by no later than the close of business on
the first business day after the check is received from the Soliciting Dealer.
Investors, however, who are residents of Florida, Iowa, Maine,
Michigan, Minnesota, Mississippi, Missouri, Nebraska, New Mexico, North
Carolina, Ohio, Oregon, South Dakota, Tennessee, or Washington must complete and
sign the Subscription Agreement in order to subscribe for Shares and, therefore,
may not subscribe for Shares by telephone. Representatives of Soliciting Dealers
who accept telephonic orders will execute the
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Subscription Agreement on behalf of investors who place such orders. All
investors who telephonically subscribe for Shares will receive, with
confirmation of their subscription, a second copy of the Prospectus.
Residents of California, Oklahoma, and Texas who telephonically
subscribe for Shares will have the right to rescind such subscriptions within
ten days from receipt of the confirmation. Such investors who do not rescind
their subscriptions within such ten-day period shall be deemed to have assented
to all of the terms and conditions of the Subscription Agreement.
Additional Subscription Procedures. Investors who have questions or who
wish to place orders for Shares by telephone or to participate in the
Reinvestment Plan should contact their Soliciting Dealer. Certain Soliciting
Dealers do not permit telephonic subscriptions or participation in the
Reinvestment Plan. See "Summary of Reinvestment Plan." The form of Subscription
Agreement for certain Soliciting Dealers who do not permit telephonic
subscriptions or participation in the Reinvestment Plan differs slightly from
the form attached hereto as Exhibit D, primarily in that it will eliminate one
or both of these options.
Investors who wish to establish an IRA for the purpose of investing
solely in Shares may do so by completing, in addition to the Subscription
Agreement, the special IRA account form attached hereto as a part of Exhibit D
appointing Franklin Bank, N.A., an unaffiliated bank, to act as their IRA
custodian. The custodian will not have the authority to vote any of the Shares
held in an IRA except in accordance with written instructions from the
beneficiary of the IRA, although it will hold the Shares on behalf of the
beneficiary and make distributions and, at the direction and in the discretion
of the beneficiary, investments in Shares or in other securities issued by
Affiliates of the Advisor. The custodian will not have authority at any time to
make investments through any such IRA on behalf of the beneficiary if the
investments do not constitute Shares or other securities issued by Affiliates of
the Advisor. The investors will not be required to pay any initial or annual
fees in connection with any such IRA. The fees for establishing and maintaining
all such IRAs will be paid by the Advisor initially and annually up to an
aggregate amount of $5,000, and by the Company above such amount.
As of April 9, 1996, the Company had received aggregate subscription
proceeds of $57,887,405 (5,788,741 Shares) from 3,440 stockholders, including
$128,151 (12,815 Shares) issued pursuant to the Reinvestment Plan, all of whom
had been admitted as stockholders as of that date.
ESCROW ARRANGEMENTS
Subscription proceeds will be received in trust and deposited in a
separate account with SouthTrust Estate & Trust Company, Inc. (the "Bank").
The Escrow Agreement between the Company and the Bank provides that
escrowed funds will be invested by the Bank in an interest-bearing account with
the power of investment in short-term, highly liquid securities issued or
guaranteed by the U.S. Government, other investments permitted under Rule 15c2-4
of the Securities Exchange Act of 1934, as amended, or, in other short-term,
highly liquid investments with appropriate safety of principal. Such
subscription funds will be released periodically (at least once per month) upon
admission of stockholders to the Company.
The interest, if any, earned on subscription proceeds will be payable
only to those subscribers whose funds have been held in escrow by the Bank for
at least 20 days. Stockholders will not otherwise be entitled to interest earned
on Company funds or to receive interest on their Invested Capital.
ERISA CONSIDERATIONS
The following is a summary of material considerations arising under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") and the
prohibited transaction provisions of Section 4975 of the Code that may be
relevant to prospective investors. This discussion does not purport to deal with
all aspects of ERISA or the Code that may be relevant to particular investors in
light of their particular circumstances.
A PROSPECTIVE INVESTOR THAT IS AN EMPLOYEE BENEFIT PLAN SUBJECT TO ERISA, A TAX-
QUALIFIED RETIREMENT PLAN, AN IRA, OR A GOVERNMENTAL, CHURCH, OR OTHER PLAN THAT
IS EXEMPT FROM ERISA IS ADVISED TO CONSULT ITS OWN LEGAL ADVISOR REGARDING THE
SPECIFIC CONSIDERATIONS ARISING UNDER APPLICABLE PROVISIONS OF
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ERISA, THE CODE, AND STATE LAW WITH RESPECT TO THE PURCHASE, OWNERSHIP, OR SALE
OF THE SHARES BY SUCH PLAN OR IRA.
Fiduciary Duties and Prohibited Transactions. A fiduciary of a pension,
profit-sharing, retirement or other employee benefit plan subject to ERISA (an
"ERISA Plan") should consider the fiduciary standards under ERISA in the context
of the ERISA Plan's particular circumstances before authorizing an investment of
any portion of the ERISA Plan's assets in the Common Stock. Accordingly, such
fiduciary should consider (i) whether the investment satisfies the
diversification requirements of Section 404(a)(1)(C) of ERISA; (ii) whether the
investment is in accordance with the documents and instruments governing the
ERISA Plan as required by Section 404(a)(1)(D) of ERISA; (iii) whether the
investment is prudent under Section 404(a)(1)(B) of ERISA; and (iv) whether the
investment is solely in the interests of the ERISA Plan participants and
beneficiaries and for the exclusive purpose of providing benefits to the ERISA
Plan participants and beneficiaries and defraying reasonable administrative
expenses of the ERISA Plan as required by Section 404(a)(1)(A) of ERISA.
In addition to the imposition of fiduciary standards, ERISA and Section
4975 of the Code prohibit a wide range of transactions between an ERISA Plan, an
IRA, or certain other plans (collectively, a "Plan") and persons who have
certain specified relationships to the Plan ("parties in interest" within the
meaning of ERISA and "disqualified persons" within the meaning of the Code).
Thus, a Plan fiduciary or person making an investment decision for a Plan also
should consider whether the acquisition or the continued holding of the Shares
might constitute or give rise to a direct or indirect prohibited transaction.
Plan Assets. The prohibited transaction rules of ERISA and the Code
apply to transactions with a Plan and also to transactions with the "plan
assets" of the Plan. The "plan assets" of a Plan include the Plan's interest in
an entity in which the Plan invests and, in certain circumstances, the assets of
the entity in which the Plan holds such interest. The term "plan assets" is not
specifically defined in ERISA or the Code, nor, as of the date hereof, has it
been interpreted definitively by the courts in litigation. On November 13, 1986,
the United States Department of Labor, the governmental agency primarily
responsible for administering ERISA, adopted a final regulation (the "DOL
Regulation") setting out the standards it will apply in determining whether an
equity investment in an entity will cause the assets of such entity to
constitute "plan assets." The DOL Regulation applies for purposes of both ERISA
and Section 4975 of the Code.
Under the DOL Regulation, if a Plan acquires an equity interest in an
entity, which equity interest is not a "publicly-offered security," the Plan's
assets generally would include both the equity interest and an undivided
interest in each of the entity's underlying assets unless certain specified
exceptions apply. The DOL Regulation defines a publicly-offered security as a
security that is "widely held," "freely transferable," and either part of a
class of securities registered under Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or sold pursuant to an
effective registration statement under the Securities Act (provided the
securities are registered under the Exchange Act within 120 days after the end
of the fiscal year of the issuer during which the offering occurred). The Shares
are being sold in an offering registered under the Securities Act of 1933, as
amended, and will be registered within the relevant time period under Section
12(b) of the Exchange Act.
The DOL Regulation provides that a security is "widely held" only if it
is part of a class of securities that is owned by 100 or more investors
independent of the issuer and of one another. However, a class of securities
will not fail to be "widely held" solely because the number of independent
investors falls below 100 subsequent to the initial public offering as a result
of events beyond the issuer's control. The Company expects the Shares to be
"widely held" upon completion of the offering.
The DOL Regulation provides that whether a security is "freely
transferable" is a factual question to be determined on the basis of all the
relevant facts and circumstances. The DOL Regulation further provides that when
a security is part of an offering in which the minimum investment is $10,000 or
less, as is the case with this offering, certain restrictions ordinarily will
not affect, alone or in combination, the finding that such securities are freely
transferable. The Company believes that the restrictions imposed under the
Articles of Incorporation on the transfer of the Common Stock are limited to
restrictions on transfer generally permitted under the DOL Regulation and are
not likely to result in the failure of the Common Stock to be "freely
transferable." See "Summary of the Articles of Incorporation and Bylaws --
Restriction on Ownership." The DOL Regulation only establishes a presumption in
favor of a finding of free transferability and, therefore, no assurance can be
given that the Department of Labor and the U.S. Treasury Department would not
reach a contrary conclusion with respect to the Common Stock.
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Assuming that the Shares will be "widely held" and "freely
transferable," the Company believes that the Shares will be publicly-offered
securities for purposes of the DOL Regulation and that the assets of the Company
will not be deemed to be "plan assets" of any Plan that invests in the Shares.
DETERMINATION OF OFFERING PRICE
The offering price per Share was determined by the Company based upon
the estimated costs of acquiring the Properties, the fees to be paid to the
Advisor and its Affiliates, as well as fees to third parties, and the expenses
of this offering.
SUPPLEMENTAL SALES MATERIAL
Shares are being offered only through this Prospectus. In addition to
this Prospectus, the Company may use certain sales materials in connection with
this offering, although only when accompanied or preceded by the delivery of
this Prospectus. No sales material may be used unless it has first been approved
in writing by the Company. As of the date of this Prospectus, it is anticipated
that the following sales material will be authorized for use by the Company in
connection with this offering: (i) a brochure entitled CNL American Properties
Fund, Inc.; (ii) a brochure describing CNL Group, Inc. and its affiliated
entities; (iii) a fact sheet describing the general features of the Company;
(iv) a cover letter transmitting the Prospectus; (v) a summary description of
the offering; (vi) a slide presentation; (vii) broker updates; (viii) an audio
cassette presentation; (ix) a video presentation; (x) a script for telephonic
marketing; (xi) seminar advertisements and invitations; and (xii) certain
third-party articles. All such materials will be used only by registered
broker-dealers which are members of the NASD. The Company also may respond to
specific questions from Soliciting Dealers and prospective investors. Additional
materials relating to the offering may be made available to Soliciting Dealers
for their internal use.
LEGAL OPINIONS
The legality of the Shares being offered hereby has been passed upon
for the Company by Shaw, Pittman, Potts & Trowbridge. Statements made under
"Risk Factors -- Federal Income Tax Risks" and "Federal Income Tax
Considerations" have been reviewed by Shaw, Pittman, Potts & Trowbridge, who
have given their opinion that such statements as to matters of law are correct
in all material respects. Shaw, Pittman, Potts & Trowbridge serves as securities
and tax counsel to the Company and to the Advisor and certain of their
Affiliates. Shaw, Pittman, Potts & Trowbridge has not reviewed any sticker
supplement to the Prospectus or amendment to the registration statement
subsequent to August 8, 1995. Certain members of the firm have invested in prior
programs sponsored by the Affiliates of the Company in aggregate amounts which
do not exceed one percent of the amounts sold by any such program, and members
of the firm also may invest in the Company.
EXPERTS
The audited consolidated financial statements (including the financial
statement schedule) of the Company, as of December 31, 1995 and 1994, and for
the year ended December 31, 1995 and for the period May 2, 1994 (date of
inception) through December 31, 1994, included in this Prospectus, have been
included herein in reliance on the report of Coopers & Lybrand, L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
ADDITIONAL INFORMATION
A Registration Statement has been filed with the Securities and
Exchange Commission with respect to the securities offered hereby. This
Prospectus does not contain all information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. The information so omitted may be obtained from
the principal office of the Commission in Washington, D.C., upon payment of the
fee prescribed by the Commission, or examined at the principal office of the
Commission without charge.
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DEFINITIONS
"Acquisition Expenses" shall mean any and all expenses incurred by the
Company, the Advisor, or any Affiliate of either in connection with the
selection or acquisition of any Property or the making of any Mortgage Loan,
whether or not acquired, including, without limitation, legal fees and expenses,
travel and communication expenses, costs of appraisals, nonrefundable option
payments on property not acquired, accounting fees and expenses, and title
insurance.
"Acquisition Fees" shall mean any and all fees and commissions,
exclusive of Acquisition Expenses, paid by any person or entity to any other
person or entity (including any fees or commissions paid by or to any Affiliate
of the Company or the Advisor) in connection with making or investing in
mortgage loans and the selection or acquisition of any Property, including,
without limitation, Development/Construction Management Fees, Construction
Financing Fees, real estate commissions, acquisition fees, finder's fees,
selection fees, nonrecurring management fees, consulting fees, loan fees,
points, or any other fees or commissions of a similar nature. Excluded shall be
development/construction management fees paid to any person or entity not
affiliated with the Advisor in connection with the actual development and
construction of any Property.
"Advisor" shall mean CNL Fund Advisors, Inc., a Florida corporation,
any successor advisor to the Company, or any person or entity to which CNL Fund
Advisors, Inc. or any successor advisors subcontracts substantially all of its
functions.
"Advisory Agreement" shall mean the Advisory Agreement between the
Company and the Advisor, pursuant to which the Advisor will act as the advisor
to the Company and provide specified services to the Company.
"Affiliate" shall mean (i) any person or entity directly or indirectly
through one or more intermediaries controlling, controlled by, or under common
control with another person or entity; (ii) any person or entity directly or
indirectly owning, controlling, or holding with power to vote ten percent (10%)
or more of the outstanding voting securities of another person or entity; (iii)
any officer, director, partner, or trustee of such person or entity; (iv) any
person ten percent (10%) or more of whose outstanding voting securities are
directly or indirectly owned, controlled or held, with power to vote, by such
other person; and (v) if such other person or entity is an officer, director,
partner, or trustee of a person or entity, the person or entity for which such
person or entity acts in any such capacity.
"Articles of Incorporation" shall mean the Articles of Incorporation,
as the same may be amended from time to time, of the Company.
"Asset Management Fee" shall mean the fee payable to the Advisor for
day-to-day professional management services in connection with the Company and
its Properties pursuant to the Advisory Agreement.
"Average Invested Assets" shall mean, for a specified period, the
average of the aggregate book value of the assets of the Company invested,
directly or indirectly, in Properties and loans secured by real estate before
reserves for depreciation or bad debts or other similar non-cash reserves,
computed by taking the average of such values at the end of each month during
such period.
"Bank" shall mean SouthTrust Estate & Trust Company, Inc., escrow agent
for the offering.
"Board of Directors" shall mean the Directors of the Company.
"Bylaws" shall mean the bylaws of the Company.
"CNL" shall mean CNL Group, Inc., the parent company of the Advisor and
the Managing Dealer.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commitment" shall mean the written commitment from a bank for a
$15,000,000 line of credit to be used by the Company to offer Secured Equipment
Leases.
"Common Stock" shall mean the common stock, par value $.01 per share,
of the Company.
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"Competitive Real Estate Commission" shall mean a real estate or
brokerage commission for the purchase or sale of property which is reasonable,
customary, and competitive in light of the size, type, and location of the
property. The total of all real estate commissions paid by the Company to all
persons and entities (including the subordinated real estate disposition fee
payable to the Advisor) in connection with any Sale of one or more of the
Company's Properties shall not exceed the lesser of (i) a Competitive Real
Estate Commission or (ii) six percent of the gross sales price of the Property
or Properties.
"Construction Financing Fees" shall mean construction financing fees
payable to Affiliates as Acquisition Fees, subject in each case to the approval
of a majority of the Board of Directors including a majority of the Independent
Directors, in connection with the acquisition of Properties from affiliated or
unaffiliated developers, to whom Affiliates of the Company have provided
construction financing. Such fees will be an amount equal to generally 1% to 2%
of the total amount of each loan plus the difference between the
Affiliate-lender's cost of funds and the amount of interest charged to the
developer with such difference determined by applying an annual percentage rate
of generally 1.5% to 3% throughout the duration of the loan to the outstanding
amount of the loan.
"Counsel" shall mean tax counsel to the Company.
"Development/Construction Management Fees" shall mean
development/construction management fees of generally 5% to 10% of the cost of
constructing or renovating a Property, payable to Affiliates as Acquisition
Fees, subject in each case to the approval of a majority of the Board of
Directors including a majority of the Independent Directors, in connection with
the acquisition of Properties that have been constructed or renovated by
Affiliates.
"Director" shall mean a member of the Board of Directors of the
Company.
"Distributions" shall mean any distributions of money or other property
by the Company to owners of Shares, including distributions that may constitute
a return of capital for federal income tax purposes.
"Equipment" shall mean the furniture, fixtures and equipment used at
Restaurant Chains.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Plan" shall mean a pension, profit-sharing, retirement, or other
employee benefit plan subject to ERISA.
"Excess Shares" shall mean the excess shares exchanged for shares of
Common Stock or Preferred Stock, as the case may be, transferred or proposed to
be transferred in excess of the Ownership Limit or which would otherwise
jeopardize the Company's status as a REIT under the Code.
"Front-End Fees" shall mean fees and expenses paid by any person or
entity to any person or entity for any services rendered in connection with the
organization of the Company and the acquisition of Properties, including Selling
Commissions, marketing support and due diligence expense reimbursement fees,
Organizational and Offering Expenses, Acquisition Expenses, Acquisition Fees,
and any other similar fees, however designated. During the term of the Company,
Front-End Fees shall not exceed 20% of Gross Proceeds.
"Gross Proceeds" shall mean the aggregate purchase price of all Shares
sold for the account of the Company through the offering, without deduction for
Selling Commissions, volume discounts, the marketing support and due diligence
expense reimbursement fee or Organization and Offering Expenses. For the purpose
of computing Gross Proceeds, the purchase price of any Share for which reduced
Selling Commissions are paid to the Managing Dealer or a Soliciting Dealer
(where net proceeds to the Company are not reduced) shall be deemed to be
$10.00.
"Independent Director" shall mean a Director who is not and within the
last two years has not been directly or indirectly associated with the Advisor
by virtue of (i) ownership of an interest in the Advisor or its Affiliates, (ii)
employment by the Advisor or its Affiliates, (iii) service as an officer or
director of the Advisor or its Affiliates, (iv) the performance of services,
other than as a Director, for the Company, (v) service as a director or trustee
of more than three real estate investment trusts advised by the Advisor, or (vi)
maintenance of a material business or professional relationship with the Advisor
or any of its Affiliates. A business or professional relationship is considered
material if the gross revenue derived by the Director from the Advisor and
Affiliates exceeds 5% of either the Company's annual gross revenue during either
of the last two years or the Director's net worth on a fair market value basis.
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"Independent Expert" shall mean a person or entity with no material
current or prior business or personal relationship with the Advisor or the
Directors and who is engaged to a substantial extent in the business of
rendering opinions regarding the value of assets of the type held by the
Company.
"Invested Capital" shall mean the amount calculated by multiplying the
total number of Shares purchased by stockholders by the issue price, reduced by
the portion of any Dividend that is attributable to Net Sales Proceeds and by
any amounts paid by the Company to repurchase Shares pursuant to the plan for
redemption of Shares.
"Investment in Properties" shall mean the amount of the Net Offering
Proceeds actually paid or allocated by the Company, either directly or through
joint venture arrangements or other partnerships, to the purchase, development,
construction, or improvement (including working capital reserves of up to five
percent of the Net Offering Proceeds) of Properties, and other cash payments
such as interest and taxes, but excluding Front-End Fees.
"IRA" shall mean an Individual Retirement Account.
"IRS" shall mean the Internal Revenue Service.
"Joint Ventures" shall mean the joint venture or general partnership
arrangements in which the Company is a co-venturer or general partner which are
established to acquire Properties.
"Listing" shall mean the listing of the Shares of the Company on a
national securities exchange or over-the-counter market.
"Loan" shall mean a loan, the maximum principal amount of which shall
not exceed 10% of Gross Proceeds.
"Managing Dealer" shall mean CNL Securities Corp., an Affiliate of the
Advisor, or such other person or entity selected by the Board of Directors to
act as the managing dealer for the offering. CNL Securities Corp. is a member of
the National Association of Securities Dealers, Inc.
"Mortgage Loans" shall mean notes or other evidences of indebtedness or
obligations which are secured or collateralized by building or other
improvements in real property.
"Mortgage Management Fee" shall mean the fee payable to the Advisor for
the day-to-day professional management services in connection with the Company
and its Mortgage Loans.
"Net Assets" shall mean the total assets of the Company (other than
intangibles) at cost before deducting depreciation or other non-cash reserves
less total liabilities, calculated quarterly by the Company, on a basis
consistently applied.
"Net Income" shall mean for any period, the total revenues applicable
to such period, less the total expenses applicable to such period excluding
additions to reserves for depreciation, bad debts or other similar non-cash
reserves; provided, however, Net Income for purposes of calculating total
allowable Operating Expenses (as defined herein) shall exclude the gain from the
sale of the Company's assets.
"Net Offering Proceeds" shall mean Gross Proceeds less (i) Selling
Commissions, (ii) Organizational and Offering Expenses, and (iii) the marketing
support and due diligence expense reimbursement fee.
"Net Sales Proceeds" shall mean, in the case of a transaction described
in clause (i)(A) of the definition of Sale, the proceeds of any such transaction
less the amount of all real estate commissions and closing costs paid by the
Company. In the case of a transaction described in clause (i)(B) of such
definition, Net Sales Proceeds means the proceeds of any such transaction less
the amount of any legal and other selling expenses incurred in connection with
such transaction. In the case of a transaction described in clause (i)(C) of
such definition, Net Sales Proceeds means the proceeds of any such transaction
actually distributed to the Company from the Joint Venture. In the case of a
transaction or series of transactions described in clause (i)(D) of the
definition of Sale, Net Sales Proceeds means the proceeds of any such
transaction less the amount of all commissions and closing costs paid by the
Company. In the case of a transaction described in clause (ii) of the definition
of Sale, Net Sales Proceeds means the proceeds of such transaction or series of
transactions less all amounts generated thereby and reinvested in one or more
Properties within 180 days thereafter and less the amount of any real estate
commissions, closing
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costs, and legal and other selling expenses incurred by or allocated to the
Company in connection with such transaction or series of transactions. Net Sales
Proceeds shall also include, in the case of any lease of a Property consisting
of a building only or any Secured Equipment Lease, any amounts from tenants or
lessees that the Company determines, in its discretion, to be economically
equivalent to proceeds of a Sale. Net Sales Proceeds shall not include any
reserves established by the Company in its sole discretion.
"Operating Expenses" shall include all costs and expenses incurred by
the Company, as determined under generally accepted accounting principles, which
in any way are related to the operation of the Company or to Company business,
including (a) advisory fees, (b) the Soliciting Dealer Servicing Fee, (c) the
Asset Management Fee, (d) the Performance Fee, and (e) the Subordinated
Incentive Fee, but excluding (i) the expenses of raising capital such as
Organizational and Offering Expenses, legal, audit, accounting, underwriting,
brokerage, listing, registration, and other fees, printing and other such
expenses, and tax incurred in connection with the issuance, distribution,
transfer, registration, and Listing of the Shares, (ii) interest payments, (iii)
taxes, (iv) non-cash expenditures such as depreciation, amortization, and bad
debt reserves, (v) the Advisor's subordinated 10% share of Net Sales Proceeds,
(vi) the Secured Equipment Lease Servicing Fee, and (vii) Acquisition Fees and
Acquisition Expenses, real estate commissions on the sale of property and other
expenses connected with the acquisition and ownership of real estate interests,
mortgage loans, or other property (such as the costs of foreclosure, insurance
premiums, legal services, maintenance, repair, and improvement of property).
"Organizational and Offering Expenses" shall mean any and all costs and
expenses, other than Selling Commissions, the 0.5% marketing support and due
diligence expense reimbursement fee, and the Soliciting Dealer Servicing Fee
incurred by the Company, the Advisor or any Affiliate of either in connection
with the formation, qualification, and registration of the Company and the
marketing and distribution of Shares, including, without limitation, the
following: legal, accounting, and escrow fees; printing, amending,
supplementing, mailing, and distributing costs; filing, registration, and
qualification fees and taxes; telegraph and telephone costs; and all advertising
and marketing expenses, including the costs related to investor and
broker-dealer sales meetings.
"Ownership Limit" shall mean, with respect to shares of Common Stock
and Preferred Stock, the percent limitation placed on the ownership of Common
Stock and Preferred Stock by any one Person (as defined in the Articles of
Incorporation). As of the initial date of this Prospectus, the Ownership Limit
is 9.8% of the outstanding Common Stock and 9.8% of the outstanding Preferred
Stock.
"Participants" shall mean those stockholders who elect to participate
in the Reinvestment Plan.
"Performance Fee" shall mean the fee payable to the Advisor under
certain circumstances if certain performance standards have been met and the
Subordinated Incentive Fee has not been paid.
"Plan" shall mean ERISA Plans, IRAs, Keogh plans, stock bonus plans,
and certain other plans.
"Preferred Stock" shall mean any class or series of preferred stock of
the Company that may be issued in accordance with the terms of the Articles of
Incorporation and applicable law.
"Properties" shall mean (i) the real properties, including the
buildings located thereon (ii) the real properties only, or (iii) the buildings
only, which are acquired by the Company, either directly or through joint
venture arrangements or other partnerships.
"Prospectus" shall mean the final prospectus included in the Company's
Registration Statement filed with the Securities and Exchange Commission,
pursuant to which the Company will offer Shares to the public, as the same may
be amended or supplemented from time to time after the effective date of such
Registration Statement.
"Qualified Plans" shall mean qualified pension, profit-sharing, and
stock bonus plans, including Keogh plans and IRAs.
"Real Estate Asset Value" shall mean the amount actually paid or
allocated to the purchase, development, construction or improvement of a
Property, exclusive of Acquisition Fees and Acquisition Expenses.
"Reinvestment Agent" or "Agent" shall mean the independent agent, which
currently is MMS Escrow and Transfer Agency, Inc., for Participants in the
Reinvestment Plan.
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"Reinvestment Plan" shall mean the Reinvestment Plan, in the form
attached hereto as Exhibit A.
"Reinvestment Proceeds" shall mean net proceeds available from the sale
of Shares under the Reinvestment Plan to redeem Shares or, under certain
circumstances, to purchase additional Properties.
"REIT" shall mean real estate investment trust, as defined pursuant
to Sections 856 through 860 of the Code.
"Related Party Tenant" shall mean a related party tenant, as defined
pursuant to Section 856(d)(2)(B) of the Code.
"Restaurant Chains" shall mean the national and regional restaurant
chains, primarily fast-food, family- style, and casual dining chains, to be
selected by the Advisor who themselves or their franchisees will either (i)
lease the Properties purchased by the Company, (ii) become borrowers under
Mortgage Loans, or (iii) become lessees of Secured Equipment Leases.
"Roll-Up Entity" shall mean a partnership, real estate investment
trust, corporation, trust, or similar entity that would be created or would
survive after the successful completion of a proposed Roll-Up Transaction.
"Roll-Up Transaction" shall mean a transaction involving the
acquisition, merger, conversion, or consolidation, directly or indirectly, of
the Company and the issuance of securities of a Roll-Up Entity. Such term does
not include: (i) a transaction involving securities of the Company that have
been listed on a national securities exchange or the National Association of
Securities Dealers Automated Quotation National Market System for at least 12
months; or (ii) a transaction involving the conversion to corporate, trust, or
association form of only the Company if, as a consequence of the transaction,
there will be no significant adverse change in stockholder voting rights, the
term of existence of the Company, compensation to the Advisor, or the investment
objectives of the Company.
"Sale" (i) shall mean any transaction or series of transactions
whereby: (A) the Company sells, grants, transfers, conveys, or relinquishes its
ownership of any Property or portion thereof, including the lease of any
Property consisting of the building only, and including any event with respect
to any Property which gives rise to a significant amount of insurance proceeds
or condemnation awards; (B) the Company sells, grants, transfers, conveys, or
relinquishes its ownership of all or substantially all of the interest of the
Company in any Joint Venture in which it is a co-venturer or partner; (C) any
Joint Venture in which the Company as a co-venturer or partner sells, grants,
transfers, conveys, or relinquishes its ownership of any Property or portion
thereof, including any event with respect to any Property which gives rise to
insurance claims or condemnation awards or, (D) the Company sells, grants,
conveys or relinquishes its interest in any Mortgage Loan or Secured Equipment
Lease or portion thereof, including any event with respect to any Mortgage Loan
or Secured Equipment Lease which gives rise to a significant amount of insurance
proceeds or similar awards, but (ii) shall not include any transaction or series
of transactions specified in clause (i)(A), (i)(B), (i)(C) or (i)(D) above in
which the proceeds of such transaction or series of transactions are reinvested
in one or more Properties, Mortgage Loans, or Secured Equipment Leases within
180 days thereafter.
"Secured Equipment Leases" shall mean the Equipment financing made
available by the Company to operators of Restaurant Chains pursuant to which the
Company will finance, through direct financing leases, the Equipment.
"Secured Equipment Lease Servicing Fee" shall mean the fee payable to
the Advisor by the Company out of the proceeds of the Loan for negotiating
Secured Equipment Leases and supervising the Secured Equipment Lease program
equal to 2% of the purchase price of the Equipment subject to each Secured
Equipment Lease and paid upon entering into such lease.
"Selling Commissions" shall mean any and all commissions payable to
underwriters, managing dealers, or other broker-dealers in connection with the
sale of Shares as described in the Prospectus, including, without limitation,
commissions payable to CNL Securities Corp.
"Shares" shall mean the up to 16,500,000 shares of Common Stock of the
Company to be sold in the offering.
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"Soliciting Dealer Servicing Fee" shall mean an annual fee of .20% of
Invested Capital on December 31 of each year following the year in which the
offering terminates, payable to the Managing Dealer (or in certain
circumstances, directly to a Soliciting Dealer exempt from registration as a
broker-dealer), which in turn may reallow all or a portion of such fee to the
Soliciting Dealers whose clients hold Shares on such date.
"Soliciting Dealers" shall mean those broker-dealers that are members
of the National Association of Securities Dealers, Inc., or that are exempt from
broker-dealer registration, and that, in either case, enter into participating
broker or other agreements with the Managing Dealer to sell Shares.
"Stockholders' 8% Return," as of each date, shall mean an aggregate
amount equal to an 8% cumulative, noncompounded, annual return on Invested
Capital.
"Subscription Agreement" shall mean the Subscription Agreement, in one
of the forms attached hereto as Exhibit D.
"Subordinated Incentive Fee" shall mean the fee payable to the Advisor
under certain circumstances if the Shares are listed on a national securities
exchange or over-the-counter market.
"Termination Date" shall mean the date of termination of the Advisory
Agreement.
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EXHIBIT A
FORM OF
AMENDED REINVESTMENT PLAN
<PAGE>
FORM OF
AMENDED REINVESTMENT PLAN
C N L AMERICAN PROPERTIES FUND, INC., A MARYLAND
CORPORATION (THE COMPANY), PURSUANT TO ITS ARTICLES OF INCORPORATION,
ADOPTED A REINVESTMENT PLAN (THE REINVESTMENT PLAN ) ON THE TERMS AND
CONDITIONS SET FORTH BELOW.
1. REINVESTMENT OF DISTRIBUTIONS. MMS ESCROW AND TRANSFER
AGENCY, INC., THE AGENT (THE REINVESTMENT AGENT ) FOR PARTICIPANTS
(THE PARTICIPANTS ) IN THE REINVESTMENT PLAN, WILL RECEIVE ALL CASH
DISTRIBUTIONS MADE BY THE COMPANY WITH RESPECT TO SHARES OF COMMON
STOCK OF THE COMPANY (THE SHARES ) OWNED BY EACH PARTICIPANT
(COLLECTIVELY, THE DISTRIBUTIONS ). THE REINVESTMENT AGENT WILL APPLY
SUCH DISTRIBUTIONS AS FOLLOWS:
(A) PRIOR TO THE TERMINATION OF THE PUBLIC OFFERING OF
SHARES, THE REINVESTMENT AGENT WILL INVEST DISTRIBUTIONS IN
SHARES ACQUIRED FROM THE MANAGING DEALER OR PARTICIPATING
BROKERS FOR THE OFFERING AT THE PUBLIC OFFERING PRICE PER SHARE,
OR $10.00 PER SHARE. COMMISSIONS AND THE MARKETING SUPPORT
AND DUE DILIGENCE FEE EQUAL TO 0.5% OF THE TOTAL AMOUNT RAISED
FROM SALE OF THE SHARES WILL BE PAID TO THE BROKER WHO MADE THE
INITIAL SALE OF SHARES TO THE PARTICIPANT AT THE SAME RATE AS FOR
INITIAL PURCHASES.
(B) AFTER TERMINATION OF THE PUBLIC OFFERING OF SHARES, THE
REINVESTMENT AGENT WILL PURCHASE SHARES FROM ANY ADDITIONAL SHARES WHICH
THE COMPANY ELECTS TO REGISTER WITH THE SECURITIES AND EXCHANGE COMMISSION
(THE SEC ) FOR THE REINVESTMENT PLAN, AT A PER SHARE PRICE EQUAL TO THE
FAIR MARKET VALUE OF THE SHARES DETERMINED BY (i) QUARTERLY APPRAISAL
UPDATES PERFORMED BY THE COMPANY BASED ON A REVIEW OF THE EXISTING
APPRAISAL AND LEASE OF EACH PROPERTY, FOCUSING ON A RE-EXAMINATION OF THE
CAPITALIZATION RATE APPLIED TO THE RENTAL STREAM TO BE DERIVED FROM THAT
PROPERTY; AND (ii) A REVIEW OF THE OUTSTANDING MORTGAGE LOANS AND SECURED
EQUIPMENT LEASES FOCUSING ON A DETERMINATION OF PRESENT VALUE BY A RE-
EXAMINATION OF THE CAPITALIZATION RATE APPLIED TO THE STREAM OF PAYMENTS
DUE UNDER THE TERMS OF EACH MORTGAGE LOAN AND SECURED EQUIPMENT LEASE.
THE CAPITALIZATION RATE USED BY THE COMPANY AND, AS A RESULT, THE PRICE
PER SHARE PAID BY PARTICIPANTS IN THE REINVESTMENT PLAN PRIOR TO LISTING
WILL BE DETERMINED BY THE ADVISOR IN ITS SOLE DISCRETION. THE FACTORS
THAT THE ADVISOR WILL USE TO DETERMINE THE CAPITALIZATION RATE INCLUDE (i)
ITS EXPERIENCE IN SELECTING, ACQUIRING AND MANAGING RESTAURANT PROPERTIES
SIMILAR TO THE PROPERTIES; (ii) AN EXAMINATION OF THE CONDITIONS IN THE
MARKET; AND (iii) CAPITALIZATION RATES IN USE BY PRIVATE APPRAISERS, TO
THE EXTENT THAT THE ADVISOR DEEMS SUCH FACTORS APPROPRIATE, AS WELL AS ANY
OTHER FACTORS THAT THE ADVISOR DEEMS RELEVANT OR APPROPRIATE IN MAKING ITS
DETERMINATION. THE COMPANY'S INTERNAL ACCOUNTANTS THEN CONVERT THE MOST
RECENT QUARTERLY BALANCE SHEET OF THE COMPANY FROM A "GAAP" BALANCE SHEET
TO A "FAIR MARKET VALUE" BALANCE SHEET. BASED ON THE "FAIR MARKET VALUE"
BALANCE SHEET, THE INTERNAL ACCOUNTANTS THEN ASSUME A SALE OF THE
COMPANY'S ASSETS AND THE LIQUIDATION OF THE COMPANY IN ACCORDANCE WITH ITS
CONSTITUTIVE DOCUMENTS AND APPLICABLE LAW AND COMPUTE THE APPROPRIATE
METHOD OF DISTRIBUTING THE CASH AVAILABLE AFTER PAYMENT OF REASONABLE
LIQUIDATION EXPENSES, INCLUDING CLOSING COSTS TYPICALLY ASSOCIATED WITH
THE SALE OF ASSETS AND SHARED BY THE BUYER AND SELLER, AND THE CREATION OF
REASONABLE RESERVES TO PROVIDE FOR THE PAYMENT OF ANY CONTINGENT
LIABILITIES. UPON LISTING OF THE SHARES ON A NATIONAL SECURITIES EXCHANGE
OR OVER-THE-COUNTER MARKET, THE REINVESTMENT AGENT MAY PURCHASE SHARES
EITHER THROUGH SUCH MARKET OR DIRECTLY FROM THE COMPANY PURSUANT TO A
REGISTRATION STATEMENT RELATING TO THE REINVESTMENT PLAN, IN EITHER CASE
AT A PER SHARE PRICE EQUAL TO THE THEN-PREVAILING MARKET PRICE ON THE
NATIONAL SECURITIES EXCHANGE OR OVER-THE-COUNTER MARKET ON WHICH THE
SHARES ARE LISTED AT THE DATE OF PURCHASE BY THE REINVESTMENT AGENT.
(C) FOR EACH PARTICIPANT, THE REINVESTMENT AGENT WILL MAINTAIN A
RECORD WHICH SHALL REFLECT FOR EACH FISCAL QUARTER THE DISTRIBUTIONS
RECEIVED BY THE REINVESTMENT AGENT ON BEHALF OF SUCH PARTICIPANT. THE
REINVESTMENT AGENT WILL USE THE AGGREGATE AMOUNT OF DISTRIBUTIONS TO ALL
PARTICIPANTS FOR EACH FISCAL QUARTER TO PURCHASE SHARES FOR THE
PARTICIPANTS. IF THE AGGREGATE AMOUNT OF DISTRIBUTIONS TO PARTICIPANTS
EXCEEDS THE AMOUNT REQUIRED TO PURCHASE ALL SHARES THEN AVAILABLE FOR
PURCHASE, THE REINVESTMENT AGENT WILL PURCHASE ALL AVAILABLE SHARES AND
WILL RETURN ALL REMAINING DISTRIBUTIONS TO THE PARTICIPANTS WITHIN 30 DAYS
A-1
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AFTER THE DATE SUCH DISTRIBUTIONS ARE MADE. THE PURCHASED SHARES WILL BE
ALLOCATED AMONG THE PARTICIPANTS BASED ON THE PORTION OF THE AGGREGATE
DISTRIBUTIONS RECEIVED BY THE REINVESTMENT AGENT ON BEHALF OF EACH
PARTICIPANT, AS REFLECTED IN THE RECORDS MAINTAINED BY THE REINVESTMENT
AGENT. THE OWNERSHIP OF THE SHARES PURCHASED PURSUANT TO THE REINVESTMENT
PLAN SHALL BE REFLECTED ON THE BOOKS OF THE COMPANY.
(D) DISTRIBUTIONS SHALL BE INVESTED BY THE REINVESTMENT
AGENT IN S H ARES PROMPTLY FOLLOWING THE PAYMENT DATE WITH
RESPECT TO SUCH DISTRIBUTIONS TO THE EXTENT SHARES ARE
AVAILABLE. IF SUFFICIENT SHARES ARE NOT AVAILABLE,
DISTRIBUTIONS SHALL BE INVESTED ON BEHALF OF THE PARTICIPANTS
IN ONE OR MORE INTEREST-BEARING ACCOUNTS IN FRANKLIN BANK, N.A.,
SOUTHFIELD, MICHIGAN, OR IN ANOTHER COMMERCIAL BANK APPROVED BY
THE COMPANY WHICH IS LOCATED IN THE CONTINENTAL UNITED STATES
AND HAS ASSETS OF AT LEAST $100,000,000, UNTIL SHARES ARE
AVAILABLE FOR PURCHASE, PROVIDED THAT ANY DISTRIBUTIONS THAT
HAVE NOT BEEN INVESTED IN SHARES WITHIN 30 DAYS AFTER SUCH
DISTRIBUTIONS ARE MADE BY THE COMPANY SHALL BE RETURNED TO
PARTICIPANTS.
(E) THE ALLOCATION OF SHARES AMONG PARTICIPANTS MAY
RESULT IN THE OWNERSHIP OF FRACTIONAL SHARES, COMPUTED TO FOUR
DECIMAL PLACES.
(F) DISTRIBUTIONS ATTRIBUTABLE TO SHARES PURCHASED ON
BEHALF OF THE PARTICIPANTS PURSUANT TO THE REINVESTMENT PLAN
WILL BE REINVESTED IN ADDITIONAL SHARES IN ACCORDANCE WITH THE
TERMS HEREOF.
(G) NO CERTIFICATES WILL BE ISSUED TO A PARTICIPANT
FOR SHARES PURCHASED ON BEHALF OF THE PARTICIPANT PURSUANT TO THE
REINVESTMENT PLAN. PARTICIPANTS IN THE REINVESTMENT PLAN WILL
RECEIVE STATEMENTS OF ACCOUNT IN ACCORDANCE WITH PARAGRAPH 7
BELOW.
2. ELECTION TO PARTICIPATE. ANY STOCKHOLDER WHO
PARTICIPATES IN THE PUBLIC OFFERING OF SHARES AND WHO HAS RECEIVED A
COPY OF THE FINAL PROSPECTUS INCLUDED IN THE COMPANY'S REGISTRATION
STATEMENT ON FORM S-11 FILED WITH THE SEC MAY ELECT TO PARTICIPATE IN
AND PURCHASE SHARES THROUGH THE REINVESTMENT PLAN AT ANY TIME BY
WRITTEN NOTICE TO THE COMPANY AND WOULD NOT NEED TO RECEIVE A
SEPARATE PROSPECTUS RELATING SOLELY TO THE REINVESTMENT PLAN. A
PERSON WHO BECOMES A STOCKHOLDER OTHERWISE THAN BY PARTICIPATING IN THE
PUBLIC OFFERING OF SHARES MAY PURCHASE SHARES THROUGH THE REINVESTMENT
PLAN ONLY AFTER RECEIPT OF A SEPARATE PROSPECTUS RELATING SOLELY TO THE
REINVESTMENT PLAN. PARTICIPATION IN THE REINVESTMENT PLAN WILL
COMMENCE WITH THE NEXT DISTRIBUTION MADE AFTER RECEIPT OF THE
PARTICIPANT'S NOTICE, PROVIDED IT IS RECEIVED MORE THAN TEN DAYS PRIOR
TO THE LAST DAY OF THE FISCAL MONTH OR QUARTER, AS THE CASE MAY BE,
TO WHICH SUCH DISTRIBUTION RELATES. SUBJECT TO THE PRECEDING SENTENCE,
REGARDLESS OF THE DATE OF SUCH ELECTION, A SHAREHOLDER WILL BECOME A
PARTICIPANT IN THE REINVESTMENT PLAN EFFECTIVE ON THE FIRST DAY OF
THE FISCAL MONTH (PRIOR TO TERMINATION OF THE OFFERING OF SHARES) OR
FISCAL QUARTER (AFTER TERMINATION OF THE OFFERING OF SHARES) FOLLOWING
SUCH ELECTION, AND THE ELECTION WILL APPLY TO ALL DISTRIBUTIONS
ATTRIBUTABLE TO THE FISCAL QUARTER OR MONTH (AS THE CASE MAY BE) IN
WHICH THE SHAREHOLDER MAKES SUCH WRITTEN ELECTION TO PARTICIPATE IN THE
REINVESTMENT PLAN AND TO ALL FISCAL QUARTERS OR MONTHS THEREAFTER.
3. DISTRIBUTION OF FUNDS. IN MAKING PURCHASES FOR
PARTICIPANTS' ACCOUNTS, THE REINVESTMENT AGENT MAY COMMINGLE
DISTRIBUTIONS ATTRIBUTABLE TO SHARES OWNED BY PARTICIPANTS IN THE
REINVESTMENT PLAN.
4. PROXY SOLICITATION. THE REINVESTMENT AGENT WILL
DISTRIBUTE TO PARTICIPANTS PROXY SOLICITATION MATERIAL RECEIVED BY IT
FROM THE COMPANY WHICH IS ATTRIBUTABLE TO SHARES HELD IN THE
REINVESTMENT PLAN. THE REINVESTMENT AGENT WILL VOTE ANY SHARES THAT
IT HOLDS FOR THE ACCOUNT OF A PARTICIPANT IN ACCORDANCE WITH THE
PARTICIPANT'S WRITTEN INSTRUCTIONS. IF A PARTICIPANT GIVES A PROXY TO
PERSON(S) REPRESENTING THE COMPANY COVERING SHARES REGISTERED IN THE
PARTICIPANT'S NAME, SUCH PROXY WILL BE DEEMED TO BE AN
INSTRUCTION TO THE REINVESTMENT AGENT TO VOTE THE FULL SHARES IN THE
PARTICIPANT'S ACCOUNT IN LIKE MANNER. IF A PARTICIPANT DOES NOT
DIRECT THE REINVESTMENT AGENT AS TO HOW THE SHARES SHOULD BE VOTED AND
DOES NOT GIVE A PROXY TO PERSON(S) REPRESENTING THE COMPANY COVERING
THESE SHARES, THE REINVESTMENT AGENT WILL NOT VOTE SAID SHARES.
5. ABSENCE OF LIABILITY. NEITHER THE COMPANY NOR THE REINVESTMENT AGENT
SHALL HAVE ANY RESPONSIBILITY OR LIABILITY AS TO THE VALUE OF THE COMPANY'S
SHARES, ANY CHANGE IN THE VALUE OF THE SHARES ACQUIRED FOR THE PARTICIPANT'S
ACCOUNT, OR THE RATE OF RETURN EARNED ON, OR THE VALUE OF, THE INTEREST-BEARING
ACCOUNTS, IN WHICH DISTRIBUTIONS ARE INVESTED. NEITHER THE COMPANY NOR THE
REINVESTMENT AGENT SHALL BE LIABLE FOR ANY ACT DONE IN GOOD FAITH, OR FOR ANY
GOOD FAITH OMISSION TO ACT, INCLUDING, WITHOUT LIMITATION, ANY CLAIMS OF
LIABILITY (A) ARISING
A-2
<PAGE>
OUT OF THE FAILURE TO TERMINATE A PARTICIPANT'S PARTICIPATION IN THE
REINVESTMENT PLAN UPON SUCH PARTICIPANT'S DEATH PRIOR TO RECEIPT OF NOTICE IN
WRITING OF SUCH DEATH AND THE EXPIRATION OF 15 DAYS FROM THE DATE OF RECEIPT
OF SUCH NOTICE AND (B) WITH RESPECT TO THE TIME AND THE PRICES AT WHICH
SHARES ARE PURCHASED FOR A PARTICIPANT. NOTWITHSTANDING THE FOREGOING,
LIABILITY UNDER THE FEDERAL SECURITIES LAWS CANNOT BE WAIVED. Similarly,
the Company and the Reinvestment Agent have been advised that in the opinion of
certain state securities commissioners, indemnification is also considered
contrary to public policy and therefore unenforceable.
6. Suitability.
(a) Within 60 days prior to the end of each fiscal
year, CNL Securities Corp., the managing dealer of the offering
( CSC ), will mail to each Participant a participation
agreement (the Participation Agreement ), in which the
Participant will be required to represent that there has been no
material change in the Participant's financial condition and
confirm that the representations made by the Participant in
the Subscription Agreement (a form of which shall be
attached to the Participation Agreement) are true and
correct as of the date of the Participation Agreement, except as
noted in the Participation Agreement or the attached form of
Subscription Agreement.
(b) Each Participant will be required to return the
executed Participation Agreement to CSC within 30 days after
receipt. In the event that a Participant fails to respond to
CSC or return the completed Participation Agreement on or
before the fifteenth (15th) day after the beginning of the
fiscal year following receipt of the Participation Agreement,
the Participant's Distribution for the first fiscal quarter of
that year will be sent directly to the Participant and no Shares
will be purchased on behalf of the Participant for that
fiscal quarter and, subject to (c) below, any fiscal quarters
thereafter, until CSC receives an executed Participation Agreement
from the Participant.
(c) If a Participant fails to return the executed
Participation Agreement to CSC prior to the end of the second
fiscal quarter for any year of the Participant's participation
in the Reinvestment Plan, the Participant's participation in the
Reinvestment Plan shall be terminated in accordance with Paragraph
11 below.
(d) Each Participant shall notify CSC in the event that, at
any time during his participation in the Reinvestment Plan,
there is any material change in the Participant's financial
condition or inaccuracy of any representation under the
Subscription Agreement.
(e) For purposes of this Paragraph 6, a material change shall
include any anticipated or actual decrease in net worth or annual
gross income or any other change in circumstances that would cause
the Participant to fail to meet the suitability standards set
forth in the Company's Prospectus.
7. Reports to Participants. Within 60 days after the end of
each fiscal quarter, the Reinvestment Agent will mail to each
Participant a statement of account describing, as to such
Participant, the Distributions received during the quarter, the number
of Shares purchased during the quarter, the per Share purchase price
for such Shares, the total administrative charge to such
Participant, and the total Shares purchased on behalf of the
Participant pursuant to the Reinvestment Plan. Each statement
shall also advise the Participant that, in accordance with Paragraph
6(d) hereof, he is required to notify CSC in the event that there
is any material change in his financial condition or if any
representation under the Subscription Agreement becomes inaccurate.
8. Administrative Charges, Commissions, and Plan Expenses. The Company
shall be responsible for all administrative changes and expenses charged by the
Reinvestment Agent. The administrative charge for each Participant for each
fiscal quarter shall be the lesser of 5% of the amount reinvested for the
Participant or $2.50, with a minimum charge of $.50. Any interest earned on
Distributions will be paid to the Company to defray costs relating to the
Reinvestment Plan. Additionally, the Company will pay to CSC selling
commissions of 7.5%, a marketing support and due diligence expense reimbursement
fee of .5%, and, in the event that proceeds of the sale of Shares pursuant to
the Reinvestment Plan are used to acquire Company properties, will pay to CNL
Fund Advisors, Inc. acquisition fees of 4.5% of the purchase price of the Shares
sold pursuant to the Reinvestment Plan.
A-3
<PAGE>
9. No Drawing. No Participant shall have any right to draw
checks or drafts against his account or give instructions to the
Company or the Reinvestment Agent except as expressly provided herein.
10. Taxes. Taxable Participants may incur a tax
liability for Distributions made with respect to such Participant's
Shares, even though they have elected not to receive their Distributions
in cash but rather to have their Distributions held in their account
under the Reinvestment Plan.
11. Termination.
(a) A Participant may terminate his participation in the
Reinvestment Plan at any time by written notice to the Company.
To be effective for any Distribution, such notice must be received
by the Company at least ten days prior to the last day of the
fiscal month or quarter to which such Distribution relates.
(b) T h e Company or the Reinvestment Agent may
terminate a Participant's individual participation in the
Reinvestment Plan, and the Company may terminate the
Reinvestment Plan itself at any time by ten d a y s' prior
written notice mailed to a Participant, or to all
Participants, as the case may be, at the address or addresses
shown on their account or such more recent address as a
Participant may furnish to the Company in writing.
(c) After termination of the Reinvestment Plan or
termination of a Participant's participation in the
Reinvestment Plan, the Reinvestment Agent will send to each
Participant (i) a statement of account in accordance with
Paragraph 7 hereof, and (ii) a check for (a) the amount of any
Distributions in the Participant's account that have not
been reinvested in Shares, and (b) the value of any fractional
Shares standing to the credit of a Participant's account based on
the market price of the Shares. The record books of the
Company will be revised to reflect the ownership of record of
the Participant's full Shares and any future Distributions made
after the effective date of the termination will be sent
directly to the former Participant.
12. Notice. Any notice or other communication required or
permitted to be given by any provision of this Reinvestment Plan shall
be in writing and addressed to Investor Services Department, CNL
Securities Corp., 400 East South Street, Suite 500, Orlando, Florida
32801, if to the Company, or to 1845 Maxwell, Suite 101, Troy,
Michigan 48084-4510, if to the Reinvestment Agent, or such other
addresses as may be specified by written notice to all Participants.
Notices to a Participant may be given by letter addressed to the
Participant at the Participant's last address of record with the
Company. Each Participant shall notify the Company promptly in writing
of any change of address.
13. Amendment. The terms and conditions of this
Reinvestment Plan may be amended or supplemented by an agreement
between the Reinvestment Agent and the Company at any time, including
but not limited to an amendment to the Reinvestment Plan to add a
voluntary cash contribution feature or to substitute a new Reinvestment
Agent to act as agent for the Participants or to increase the
administrative charge payable to the Reinvestment Agent, by
mailing an appropriate notice at least 30 days prior to the effective
date thereof to each Participant at his last address of record;
provided, that any such amendment must be approved by a majority of
the Independent Directors of the Company. Such amendment or supplement
shall be deemed conclusively accepted by each Participant except
those Participants from whom the Company receives written notice of
termination prior to the effective date thereof.
14. Governing Law. THIS REINVESTMENT PLAN AND A
PARTICIPANT'S ELECTION TO PARTICIPATE IN THE REINVESTMENT PLAN SHALL
BE GOVERNED BY THE LAWS OF THE STATE OF FLORIDA.
A-4
<PAGE>
EXHIBIT B
FINANCIAL INFORMATION
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
INDEX TO FINANCIAL STATEMENTS
Page
Pro Forma Consolidated Financial Information (unaudited):
Pro Forma Consolidated Balance Sheet as of December 31, 1995 B-2
Pro Forma Consolidated Statement of Earnings for the year
ended December 31, 1995 B-3
Notes to Pro Forma Consolidated Financial Statements
for the year ended December 31, 1995 B-4
Audited Consolidated Financial Statements:
Report of Independent Accountants B-8
Consolidated Balance Sheets as of December 31, 1995 and 1994 B-9
Consolidated Statements of Earnings for the year ended
December 31, 1995 and the period May 2, 1994 (date
of inception) through December 31, 1994 B-10
Consolidated Statements of Stockholders' Equity for the year ended
December 31, 1995 and the period May 2, 1994 (date of inception)
through December 31, 1994 B-11
Consolidated Statements of Cash Flows for the year ended
December 31, 1995 and the period May 2, 1994 (date of
inception) through December 31, 1994 B-12
Notes to Consolidated Financial Statements for the year
ended December 31, 1995 and the period May 2, 1994
(date of inception) through December 31, 1994 B-15
Financial Statement Schedule:
Schedule III - Real Estate and Accumulated Depreciation
as of December 31, 1995 B-29
Notes to Schedule III - Real Estate and Accumulated
Depreciation as of December 31, 1995 B-31
<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 December 31, 1995, including the receipt of
$38,454,158 in gross offering proceeds from the sale of 3,845,416
shares of common stock pursuant to a Form S-11 under the Securities Act
of 1933, as amended, effective March 29, 1995, and the
application of such proceeds to purchase 18 properties (including 16
properties which consist of land and building, one property
through a joint venture arrangement which consists of land and building
and one property which consists of building only), four of which
were under construction or renovation at December 31, 1995, and to pay
organizational and offering expenses, acquisition fees and
miscellaneous acquisition expenses, (ii) the receipt of $19,433,247 in
gross offering proceeds from the sale of 1,943,325 additional shares
of common stock during the period January 1, 1996 through April 9,
1996, and (iii) the application of such funds and $6,847,240 of
cash and cash equivalents at December 31, 1995, to purchase 30
additional properties acquired during the period January 1, 1996
through April 9, 1996 (two of which are under construction and
consist of building only, four of which are under construction and
consist of land and building, one of which is an existing
property consisting of land and building, and 23 properties which
consist of land only), to pay additional costs for the four properties
under construction or renovation a t December 31, 1995, to pay
offering expenses, acquisition fees and miscellaneous acquisition
expenses, and to provide mortgage financing to the lessee of the 23
properties consisting of land only, all as reflected in the pro forma
adjustments described in the related notes. The Pro Forma
Consolidated Balance Sheet as of December 31, 1995, includes the
transactions described in (i) above from its historical consolidated
balance sheet, adjusted to give effect to the transactions in (ii) and
(iii) above, as if they had occurred on December 31, 1995.
The Pro Forma Consolidated Statement of Earnings for the
year ended December 31, 1995, includes the historical operating
results of the properties described in (i) above from the dates of
their acquisitions plus operating results for the six of the 48
properties that were owned by the Company as of April 9, 1996, and
had a previous rental history prior to the Company's acquisition of
such properties, from the later of (a) the date the property became
operational as a rental property by the previous owner or (b) June 2,
1995 (the date the Company became operational), to the date the
property was acquired by the Company. No pro forma adjustments have
been made to the Pro Forma Consolidated Statement of Earnings for the
remaining 42 properties owned by the Company as of April 9, 1996, due
to the fact that these properties did not have a previous rental
history.
This pro forma consolidated financial information is
presented for informational purposes only and does not purport to
be indicative of the Company's financial results or condition if the
various events and transactions reflected therein had occurred on
the dates, or been in effect during the periods, indicated. This
pro forma consolidated financial information should not be viewed as
predictive of the Company's financial results or conditions in the
future.
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Pro Forma
ASSETS Historical Adjustments Pro Forma
<S> <C>
Land and buildings on operating leases,
less accumulated depreciation $19,723,726 $11,302,034 (a)
(640,510)(b) $30,385,250
Net investment in direct financing
leases (c) 1,373,882 3,295,938 (a)
1,407,516 (b) 6,077,336
Mortgage note receivable - 8,475,000 (a) 8,475,000
Cash and cash equivalents 11,508,445 (6,217,187)(a)
(624,753)(b)
(5,300)(b) 4,661,205
Receivables 113,613 113,613
Prepaid expenses 8,090 8,090
Organization costs, less accumulated
amortization 17,682 17,682
Accrued rental income 39,142 39,142
Other assets 818,504 130,402 (a) 948,906
----------- ----------- -----------
$33,603,084 $17,123,140 $50,726,224
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accrued construction costs payable $ 1,058,825 $ (922,062)(a)
(136,763)(b) $ -
Accounts payable and accrued expenses 79,904 79,904
Escrowed real estate taxes payable 9,696 9,696
Due to related parties 248,584 248,584
Rents paid in advance 25,351 25,351
Deferred financing income - 29,662 (a) 29,662
----------- ----------- -----------
Total liabilities 1,422,360 (1,029,163) 393,197
----------- ----------- -----------
Minority interest 200,076 273,716 (b) 473,792
----------- ----------- -----------
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 3,865,416 shares;
issued and outstanding, as adjusted,
5,808,741 shares 38,654 19,433 (a) 58,087
Capital in excess of par value 32,211,833 17,859,154 (a) 50,070,987
Accumulated distributions in excess
of net earnings (269,839 ) (269,839 )
----------- ----------- -----------
31,980,648 17,878,587 49,859,235
----------- ----------- -----------
$33,603,084 $17,123,140 $50,726,224
=========== =========== ===========
</TABLE>
See accompanying notes to unaudited pro forma consoldiated financial statements.
B-2
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
<S> <C>
Revenues:
Rental income from operating leases $ 498,817 $ 94,792 (1) $ 593,609
Earned income from direct financing
leases (2) 28,935 28,935
Contingent rental income 12,024 12,024
Interest income 119,355 (28,853)(3) 90,502
--------- --------- ---------
659,131 65,939 725,070
--------- --------- ---------
Expenses:
General operating and administrative 134,759 134,759
Professional services 8,119 8,119
Asset management fee to related party 23,078 4,368 (4) 27,446
State taxes 20,189 1,672 (5) 21,861
Depreciation and amortization 104,131 14,700 (6) 118,831
--------- --------- ---------
290,276 20,740 311,016
--------- --------- ---------
Earnings Before Minority Interest
in Earnings of Consolidated Joint
Venture 368,855 45,199 414,054
Minority Interest in Earnings of
Consolidated Joint Venture (76 ) (76 )
--------- --------- ---------
Net Earnings $ 368,779 $ 45,199 $ 413,978
========= ========= =========
Earnings Per Share of Common Stock (7) $ .19 $ .22
========= =========
Weighted Average Number of Shares
Outstanding (7) 1,898,350 1,905,970
========= =========
</TABLE>
See accompanying notes to unaudited pro forma consoldiated financial statements.
B-3
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995
Pro Forma Consolidated Balance Sheet:
(a) Represents gross proceeds of $19,433,247 from the issuance of
1,943,325 shares of common stock during the period January 1,
1996 through April 9, 1996, and proceeds of $29,662 of
deferred financing income (loan origination and commitment
fees, net of legal fees) from the $8,475,000 mortgage financing
described below, used (i) to acquire 30 properties for $13,090,424
(of which 23 properties consist of land only, two properties
consist of building only and five properties consist of
land and building), (ii) to fund estimated construction
costs of $1,685,516 ( $ 922,062 of which was accrued as
construction costs payable at December 31, 1995) relating to
three wholly-owned properties under construction or renovation
at December 31, 1995, (iii) to pay acquisition fees of $874,496
($744,094 of which was allocated to properties and $130,402 of
which was classified as other assets and will be allocated to
future properties), (iv) to pay selling commissions and offering
expenses (stock issuance costs) of $1,554,660, which have
been netted against capital in excess of par value and (v) to
provide mortgage financing in the amount of $8,475,000 to the
lessee of the 23 properties consisting of land only.
The pro forma adjustments to land and buildings on operating
leases and net investment in direct financing leases as a
result of the above transactions were as follows:
<TABLE>
<CAPTION>
Estimated
purchase price
(including con-
struction and Acquisition
closing costs) fees
and additional allocated
construction costs to property Total
<S><C>
23 Pizza Huts (land
only) in Michigan
and Ohio $ 4,210,125 $ 227,138 $ 4,437,263
TGI Friday's in
Marlboro, NJ 1,290,671 69,142 1,359,813
TGI Friday's in
Hazlet, NJ 1,245,112 66,702 1,311,814
Denny's in Grand
Rapids, MI 830,394 44,485 874,879
Burger King in
Oak Lawn, IL 1,913,488 102,509 2,015,997
Burger King in
Burbank, IL 1,115,349 59,751 1,175,100
Burger King in
Indian Head Park, IL 1,272,727 68,182 1,340,909
Burger King in
Highland, IN 1,212,558 64,958 1,277,516
Three wholly owned
properties under
construction or
renovation at
December 31, 1995 763,454 41,227 804,681
----------- ----------- -----------
$13,853,878 $ 744,094 $14,597,972
=========== =========== ===========
Adjustment classified
as follows:
Land and buildings on
operating leases $11,302,034
Net investment in
direct financing
leases 3,295,938
-----------
$14,597,972
===========
</TABLE>
B-4
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 1995
Pro Forma Consolidated Balance Sheet - Continued:
(b) Represents the use of $624,753 of the Company's net offering
proceeds, the assumed receipt of $273,716 in capital
contributions from the Company's co-venture partner in
accordance with the joint venture agreement of CNL/Corral South
Joint Venture, and $5,300 of the consolidated joint venture's
cash on hand at December 31, 1995, from previous capital
contributions to fund estimated construction costs of $903,769
($136,763 of which was accrued as construction costs payable at
December 31, 1995) relating to the one property of the joint
venture that was under construction at December 31, 1995. The
Company accounts for its expected 76 percent interest in the
accounts of CNL/Corral South Joint Venture under the full
consolidation method. All significant intercompany accounts
and transactions have been eliminated.
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 relating to the consolidated
joint venture were as follows:
Additional construction costs for property owned
by consolidated joint venture under construction
at December 31, 1995 $ 767,006
----------
$ 767,006
==========
Adjustment classified as follows:
Land and building on operating leases:
Reclassification of building costs from construction
in progress at December 31, 1995, to net invest-
ment in direct financing lease $ (640,510)
----------
Net investment in direct financing leases:
Additional construction costs 767,006
Reclassification of construction in progress 640,510
----------
1,407,516
----------
$ 767,006
==========
(c) In accordance with generally accepted accounting principles,
leases in which the present value of future minimum lease payments
equals or exceeds 90 percent of the value of the related
properties are treated as direct financing leases rather than as
land and buildings. The categorization of the leases has no
effect on rental revenues received. The building portions of
five of the properties (including one property owned through a
joint venture arrangement) have been classified as direct
financing leases.
B-5
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 1995
Pro Forma Consolidated Statement of Earnings:
(1) Represents rental income from operating leases and earned
income from direct financing leases for the six of the 48
properties acquired during the period from April 1, 1995 through
April 9, 1996 which had a previous rental history prior to the
acquisition of the property by the Company (the "Pro Forma
Properties"), for the period commencing the later of (i) the date
the property became operational as a rental property by the
previous owner or (ii) June 2, 1995 (the date the
Company became operational), to the date the property was
acquired by the Company. Each of these six properties was
acquired from an affiliate who had purchased and temporarily held
title to the property. The noncancellable leases in place during
the period the affiliate owned the properties were assigned to the
Company at the time the Company acquired the properties. The
following presents the actual date the Pro Forma Properties were
acquired by the Company as compared to the date the Pro
Forma Properties were treated as placed in service for purposes
of the Pro Forma Consolidated Statement of Earnings.
Date Placed Pro Forma
in Service Date Placed
By the Company In Service
Jack in the Box in
Los Angeles, CA June 1995 June 1995
Kenny Rogers Roasters in
Grand Rapids, MI August 1995 June 1995
Kenny Rogers Roasters in
Franklin, TN August 1995 June 1995
Denny's in Pasadena, TX September 1995 August 1995
Denny's in Shawnee, OK September 1995 August 1995
Denny's in Grand Rapids, MI March 1996 September 1995
In accordance with generally accepted accounting principles, lease
revenue from leases accounted for under the operating method is
recognized over the terms of the leases. For operating
leases providing escalating guaranteed minimum rents, income is
reported on a straight-line basis over the terms of the leases.
For leases accounted for as direct financing leases, future
minimum lease payments are recorded as a receivable. The
difference between the receivable and the estimated residual
values less the cost of the properties is recorded as unearned
income. The unearned income is amortized over the lease terms
to provide a constant rate of return. Accordingly, pro forma
rental income from operating leases and earned income from direct
financing leases does not necessarily represent rental payments
that would have been received if the properties had been
operational for the full pro forma period.
Generally, the leases provide for the payment of percentage
rent in addition to base rental income. However, due to
the fact that no percentage rent was due under the leases for
the Pro Forma Properties during the portion of 1995 that the
previous owners held the properties, no pro forma adjustment was
made for percentage rental income.
(2) See Note (c) under "Pro Forma Consolidated Balance Sheet"
above for a description of direct financing leases.
B-6
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 1995
Pro Forma Consolidated Statement of Earnings - Continued:
(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 on the later of (i) the
dates the Pro Forma Properties became operational as rental
properties by the previous owners or (ii) June 2, 1995 (the date
the Company became operational), through the actual dates of
acquisition by the Company, 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
1995.
(4) Represents incremental increase in asset management fees
relating to the Pro Forma Properties for the period commencing
the later of (i) the date the property became operational as a
rental property by the previous owner or (ii) June 2, 1995
(the date the Company became operational), to the date the
property was acquired by the Company. Asset management fees are
equal to 0.60% of the Company's Real Estate Asset Value
(estimated to be approximately $5,241,000 for the Pro Forma
Properties), as defined in the Company's prospectus.
(5) Represents adjustment to state tax expense due to the incremental
increase in rental revenues of Pro Forma Properties. Estimated
pro forma state tax expense was calculated based on an analysis
of state laws of the various states in which the Company has
acquired the Pro Forma Properties. The estimated pro forma state
taxes consist primarily of income and franchise taxes ranging
from zero to approximately three percent of the Company's pro
forma rental income of each Pro Forma Property. Due to the fact
that the Company's leases are triple net, the Company has not
included any amounts for real estate taxes in the pro forma
statement of earnings.
(6) Represents incremental increase in depreciation expense of the
building portions of the Pro Forma Properties accounted for as
operating leases using the straight-line method over an estimated
useful life of 30 years.
(7) Historical earnings per share were calculated based upon the
weighted average number of shares of common stock outstanding
during the period the Company was operational, June 2, 1995 (the
date following when the Company received the minimum offering
proceeds and funds were released from escrow) through December
31, 1995.
As a result of three of the six Pro Forma Properties being
treated in the Pro Forma Consolidated Statement of Earnings as
placed in service on June 2, 1995 (the date the Company became
operational), the Company assumed approximately 347,100 shares
of common stock were sold, and the net offering proceeds were
available for investment, on June 2, 1996. Due to the fact that
approximately 184,800 of these shares of common stock were
actually sold subsequently, during the period June 3, 1995
through June 20, 1995, the weighted average number of shares
outstanding for the pro forma period was adjusted. Pro forma
earnings per share were calculated based upon the weighted
average number of shares of common stock outstanding, as
adjusted, during the period the Company was operational, June 2,
1995 through December 31, 1995.
B-7
<PAGE>
Report of Independent Accountants
To the Board of Directors
CNL American Properties Fund, Inc.
We have audited the accompanying consolidated balance sheets of CNL
American Properties Fund, Inc. (a Maryland corporation) and its
subsidiary as of December 31, 1995 and 1994, and the related
consolidated statements of earnings, stockholders' equity, and cash
flows for the year ended December 31, 1995 and for the period May 2,
1994 (date of inception) through December 31, 1994, and the related
financial statement schedule. These financial statements and
financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
per-form the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial
statement presentation. We believe that our audits pro-vide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial
position of CNL American Properties Fund, Inc. and its subsidiary as
of December 31, 1995 and 1994, and the consolidated results of their
operations and their cash flows for the year ended December 31, 1995
and for the period May 2, 1994 (date of inception) through December
31, 1994 in conformity with generally accepted accounting
principles. In addition, in our opinion, the financial statement
schedule referred to above, when considered in relation to the basic
financial statements taken as a whole presents fairly, in all
material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Orlando, Florida
January 22, 1996
B-8
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
ASSETS 1995 1994
<S> <C>
Land and buildings on operating leases,
less accumulated depreciation $19,723,726 $ -
Net investment in direct financing lease 1,373,882 -
Cash and cash equivalents 11,508,445 945
Receivables 113,613 -
Prepaid expenses 8,090 -
Organization costs, less accumulated
amortization of $2,318 in 1995 17,682 -
Accrued rental income 39,142 -
Deferred offering costs - 928,640
Other assets 818,504 -
----------- -----------
$33,603,084 $ 929,585
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued construction costs payable $ 1,058,825 $ -
Accounts payable and accrued expenses 79,904 424,324
Escrowed real estate taxes payable 9,696 -
Due to related parties 248,584 305,261
Rents paid in advance 25,351 -
----------- -----------
Total liabilities 1,422,360 729,585
----------- -----------
Minority interest 200,076 -
----------- -----------
Commitments (Note 12)
Stockholders' equity:
Preferred stock, without par value.
Authorized and unissued 3,000,000
shares in 1995 - -
Excess shares, $.01 par value per share.
Authorized and unissued 23,000,000
shares in 1995 - -
Common stock, $.01 par value per share.
Authorized 20,000,000 and 100,000
shares, respectively, issued and
outstanding 3,865,416 and 20,000,
respectively 38,654 200
Capital in excess of par value 32,211,833 199,800
Accumulated distributions in excess of
net earnings (269,839 ) -
----------- -----------
Total stockholders' equity 31,980,648 200,000
----------- -----------
$33,603,084 $ 929,585
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
B-9
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
May 2, 1994
(Date of
Inception)
Year Ended through
December 31, December 31,
1995 1994
<S> <C>
Revenues:
Rental income from operating
leases $ 498,817 $ -
Earned income from direct financing
lease 28,935 -
Contingent rental income 12,024 -
Interest 119,355 -
---------- ----------
659,131 -
---------- ----------
Expenses:
General operating and
administrative 134,759 -
Professional services 8,119 -
Asset management fee to
related party 23,078 -
State taxes 20,189 -
Depreciation and amorti-
zation 104,131 -
---------- ----------
290,276 -
---------- ----------
Earnings Before Minority Interest in
Income of Consolidated Joint Venture 368,855 -
Minority Interest in Income of
Consolidated Joint Venture (76 ) -
---------- ----------
Net Earnings $ 368,779 $ -
========== ==========
Earnings Per Share of Common
Stock $ .19 $ -
========== ==========
Weighted Average Number of
Shares of Common Stock
Outstanding 1,898,350 -
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
B-10
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Year Ended December 31, 1995 and the
Period May 2, 1994 (Date of Inception) through
December 31, 1994
<TABLE>
<CAPTION>
Accumulated
distributions
Common stock Capital in in excess
Number Par excess of of net
of shares value par value earnings Total
<S> <C>
Balance at
May 2, 1994 - $ - $ - $ - $ -
Sale of common
stock to CNL
Fund Advisors,
Inc. 20,000 200 199,800 - 200,000
---------- ------- ----------- --------- -----------
Balance at
December 31, 1994 20,000 200 199,800 - 200,000
Subscriptions
received for
common stock
through public
offering and
distribution
reinvestment plan 3,845,416 38,454 38,415,704 - 38,454,158
Stock issuance costs - - (6,403,671) - (6,403,671)
Net earnings - - - 368,779 368,779
Distributions
declared ($.03
to $.06 per
share) - - - (638,618) (638,618 )
---------- ------- ----------- --------- -----------
Balance at
December 31, 1995 3,865,416 $38,654 $32,211,833 $(269,839) $31,980,648
========== ======= =========== ========= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
B-11
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
May 2, 1994
(Date of
Inception)
Year Ended through
December 31, December 31,
1995 1994
<S> <C>
Increase (Decrease) in Cash and Cash
Equivalents:
Cash Flows From Operating Activities:
Cash received from tenants $ 492,488 $ -
Cash paid for expenses (113,384 ) -
Interest received 119,355 -
------------ ------------
Net cash provided by operating
activities 498,459 -
------------ ------------
Cash Flows From Investing Activities:
Additions to land and buildings on
operating leases (18,835,969 ) -
Increase in net investment in
direct financing lease (1,364,960 ) -
Increase in other assets (628,142 ) -
------------ ------------
Net cash used in investing
activities (20,829,071 ) -
------------ ------------
Cash Flows From Financing Activities:
Reimbursement of acquisition, organi-
zation and stock issuance costs paid
by related parties on behalf of the
Company (2,500,056 ) (199,036 )
Contribution from minority interest
of consolidated joint venture 200,000 -
Sale of common stock to CNL Fund
Advisors, Inc. - 200,000
Subscriptions received from stock-
holders 38,454,158 -
Distributions to stockholders (635,286 ) -
Payment of stock issuance costs (3,680,704 ) (19 )
------------ ------------
Net cash provided by financing
activities 31,838,112 945
------------ ------------
Net Increase in Cash and Cash Equivalents 11,507,500 945
Cash and Cash Equivalents at Beginning of
Period 945 -
------------ ------------
Cash and Cash Equivalents at End of Period $ 11,508,445 $ 945
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
B-12
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
May 2, 1994
(Date of
Inception)
Year Ended through
December 31, December 31,
1995 1994
<S> <C>
Reconciliation of Net Earnings to Net Cash
Provided by Operating Activities:
Net earnings $ 368,779 $ -
------------ ------------
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation 100,318 -
Amortization 3,813 -
Increase in receivables (44,749 ) -
Decrease in net investment in direct
financing lease 1,078 -
Increase in prepaid expenses (8,090 ) -
Increase in accrued rental income (39,142 ) -
Increase in accounts payable and
accrued expenses 38,461 -
Increase in escrowed real estate
taxes payable 9,696 -
Increase in due to related parties,
excluding reimbursement of acqui-
sition, organization and stock
issuance costs paid on behalf
of the Company 42,868 -
Increase in rents paid in advance 25,351 -
Increase in minority interest 76 -
------------ ------------
Total adjustments 129,680 -
------------ ------------
Net Cash Provided by Operating Activities $ 498,459 $ -
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
B-13
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
May 2, 1994
(Date of
Inception)
Year Ended through
December 31, December 31,
1995 1994
<S> <C>
Supplemental Schedule of Non-Cash
Investing and Financing Activities:
Related parties paid certain
acquisition, organization and
stock issuance costs on behalf
of the Company as follows:
Acquisition costs $ 131,629 $ -
Organization costs 20,000 -
Stock issuance costs 2,084,145 461,866
------------ ------------
$ 2,235,774 $ 461,866
============ ============
Land, building and other costs
incurred and unpaid at end of
period $ 1,127,167 $ -
============ ============
Commissions, marketing support and
due diligence expense reimbursement
fee, and other stock issuance costs
incurred and unpaid at end of period $ 176,937 $ 729,585
============ ============
Distributions declared and unpaid at
end of period $ 3,332 $ -
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
B-14
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 1995 and the Period
May 2, 1994 (Date of Inception) through
December 31, 1994
1. Significant Accounting Policies:
Organization and Nature of Business - CNL Income Fund,
Inc. (the "Company") was organized in Maryland on May 2, 1994.
Effective December 6, 1994, the Company changed its name to
CNL Investment Fund, Inc. and effective February 1, 1995, the
Company changed its name to CNL American Properties Fund, Inc. The
Company was organized 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, family-style and casual dining
restaurant chains. To a lesser extent, the Company intends to
offer furniture, fixtures and equipment financing ("Secured
Equipment Leases") to operators of restaurant chains. The Company
may provide financing (the "Mortgage Loans") for the purchase of
buildings, generally be tenants that lease the underlying land
from the Company. Secured Equipment Leases will be funded from
the proceeds of a loan of up to ten percent of the gross offering
proceeds which the Company intends to obtain.
The Company was a development stage enterprise from May 2, 1994
through June 1, 1995. Since operations had not begun, activities
through June 1, 1995, were devoted to organization of the Company.
Principles of Consolidation - The Company accounts for its
expected 76 percent interest in CNL/Corral South Joint
Venture, a Florida general partnership, under the full
consolidation method. Minority interest represents the minority
joint venture partner's proportionate share of the equity in the
Company's consolidated subsidiary. All significant
intercompany accounts and trans-actions have been eliminated.
Land and Buildings on Operating Leases - Land and buildings on
operating leases are stated at cost. Buildings are depreciated on
the straight-line method over their estimated useful life of 30
years. When the Properties are sold, the related cost and
accumulated depreciation will be removed from the accounts and
gains or losses from sale will be reflected in income. The
Properties will be written down to net realizable value in the
event management believes that the undepreciated cost cannot
be recovered through operations. Management determines whether an
impairment in value has occurred by comparing the estimated
undiscounted cash flows with the carrying cost of the individual
Properties.
B-15
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Year Ended December 31, 1995 and the Period
May 2, 1994 (Date of Inception) through
December 31, 1994
1. Significant Accounting Policies - Continued:
Acquisition Fees and Miscellaneous Acquisition Expenses -
Acquisi-tion fees and miscellaneous acquisitions expenses
attributable to the Company's investment in Properties are
capitalized and allo-cated to land and buildings on operating
leases, net investment in direct financing lease and other assets
(See Note 6).
Lease Accounting - The leases are accounted for under either
the direct financing or the operating methods. Such methods are
described below:
Direct financing method - The lease accounted for under
the direct financing method is recorded at its net
investment(See Note 5). Unearned income is deferred and
amortized to income over the lease term so as to produce a
constant periodic rate of return on the Company's net
investment in the lease.
Operating method - Land and buildings are recorded at
cost, revenue is recognized as rentals are earned and
depreciation is charged to operations as incurred. When
scheduled rentals vary during the lease term, income is
recognized on a straight-line basis so as to produce a
constant periodic rent. Accrued rental income is the
aggregate difference between the scheduled rents which
vary during the lease term and the income recognized on a
straight-line basis.
Cash and Cash Equivalents - The Company considers all
highly liquid investments with a maturity of three months or
less when purchased to be cash equivalents. Cash and cash
equivalents consist of demand deposits at commercial banks and
money market funds (some of which are backed by government
securities). Cash equivalents are stated at cost plus accrued
interest, which approximates market value.
Cash accounts maintained on behalf of the Company in demand
deposits at commercial banks and money market funds may
exceed federally insured levels; however, the Company has not
experienced any losses in such accounts. The Company limits
investment of temporary cash investments to financial institutions
with high credit standing; therefore, management believes it is
not exposed to any significant credit risk on cash and cash
equivalents.
B-16
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Year Ended December 31, 1995 and the Period
May 2, 1994 (Date of Inception) through
December 31, 1994
1. Significant Accounting Policies - Continued:
Organization Costs - Organization costs are amortized over
five years using the straight-line method.
Income Taxes - The Company intends to make an election to be
taxed as a real estate investment trust ("REIT") under Sections
856 through 860 of the Internal Revenue Code commencing with its
taxable year ended December 31, 1995. If the Company qualifies
as a REIT, the Company generally will not be subject to federal
corporate income tax to the extent it distributes its REIT
taxable income to its stockholders, so long as it distributes at
least 95 percent of its REIT taxable income. Accordingly, no
provision for federal income taxes has been made in the
consolidated f i n ancial statements. REITs are subject to
a number of other organizational and operational
requirements. Even if the Company qualifies as a REIT, it
may be subject to certain state and local taxes on its income and
property, and federal income and excise taxes on its
undistributed income.
Earnings Per Share - Earnings per share are calculated based
upon the weighted average number of shares of common stock
outstanding during the period the Company was operational.
Use of Estimates - Management of the Company has made a
number of estimates and assumptions relating to the reporting
of assets and liabilities and the disclosure of contingent
assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
New Accounting Standard - In March 1995, the Financial
Accounting Standards Board issued Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.
The Statement, which is effective for fiscal years beginning
after December 15, 1995, requires that an entity review
long-lived assets and certain identifiable intangibles, to be
held and used, for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may
not be recoverable. The Company will adopt this standard in
1996. Adoption of this standard currently would not have had a
material effect on the Company's financial position or results of
operations.
B-17
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Year Ended December 31, 1995 and the Period
May 2, 1994 (Date of Inception) through
December 31, 1994
2. Public Offering:
The Company has filed a currently effective registration statement
on Form S-11 with the Securities and Exchange Commission.
A maximum of 10,000,000 shares ($100,000,000) may be sold,
and if the managing dealer exercises its option (in the
event the offering is oversubscribed) to sell an additional
5,000,000 shares ($50,000,000), a maximum of 15,000,000 shares
($150,000,000) may be sold. In addition, the Company has
registered an additional 1,500,000 shares ($15,000,000) which is
available only to stockholders who elect to participate in
the Company's reinvest-ment plan. The Company has adopted a
reinvestment plan pursuant to which stockholders may elect to
have the full amount of their cash distributions from the
Company reinvested in additional shares of common stock of the
Company. As of December 31, 1995, the Company had r e c eived
subscription proceeds of $38,454,158 (3,845,416 shares),
including $50,790 (5,079 shares) through the reinvestment plan.
3. Leases:
The Company leases its land and buildings primarily 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 the Statement of Financial
Accounting Standards No. 13, Accounting for Leases. As of
December 31, 1995, 17 of the leases have been classified as
operating leases and one lease has been classified as a direct
financing lease. Substantially all leases have initial terms
of 15 to 20 years (expiring between 2007 and 2015) and
provide for minimum rentals. In addition, all of the leases
provide for contingent rentals and/or scheduled rent
increases over the terms of the leases. Each tenant also pays all
property taxes and assessments, fully maintains the interior and
exterior of the building and carries insurance coverage
for public liability, property damage, fire and extended coverage.
The lease options generally allow tenants to renew the leases
for two to four successive five-year periods subject to the same
terms and conditions as the initial lease.
B-18
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Year Ended December 31, 1995 and the Period
May 2, 1994 (Date of Inception) through
December 31, 1994
4. Land and Buildings on Operating Leases:
Land and buildings on operating leases consisted of the
following at December 31:
1995 1994
Land $ 8,890,471 $ -
Buildings 10,049,032 -
----------- -----------
18,939,503 -
Less accumulated depreci-
ation (100,318) -
----------- -----------
18,839,185 -
Construction in progress 884,541 -
----------- -----------
$19,723,726 $ -
=========== ===========
Some leases provide for escalating guaranteed minimum rents
throughout the lease term. Income from these scheduled rent
increases is recognized on a straight-line basis over the terms
of the leases. For the year ended December 31, 1995, the Company
recognized $39,142 of such rental income.
The following is a schedule of future minimum lease
payments to be received on the noncancellable operating leases at
December 31, 1995:
1996 $ 1,814,981
1997 1,820,348
1998 1,825,130
1999 1,831,824
2000 1,841,123
Thereafter 23,444,157
-----------
$32,577,563
===========
These amounts do not include minimum lease payments that will
become due when Properties under development or renovation are
completed (See Note 12)
B-19
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Year Ended December 31, 1995 and the Period
May 2, 1994 (Date of Inception) through
December 31, 1994
5. Net Investment in Direct Financing Lease:
The following lists the components of the net investment
in direct financing lease at December 31:
1995 1994
Minimum lease payments
receivable $ 2,498,881 $ -
Estimated residual value 343,740 -
Less unearned income (1,468,739) -
----------- -----------
Net investment in direct
financing lease $ 1,373,882 $ -
=========== ===========
The following is a schedule of future minimum lease
payments to be received on the direct financing lease at December
31, 1995:
1996 $ 196,183
1997 195,997
1998 195,997
1999 195,997
2000 199,264
Thereafter 1,515,443
----------
$2,498,881
==========
6. Other Assets:
Other assets totalling $818,504 at December 31, 1995,
consisted of acquisition fees and miscellaneous acquisition
costs in the amount of $806,504 which will be allocated to future
Properties and $12,000 of other assets.
7. Capitalization:
The Company's Board of Directors has authorized a total of
46,000,000 shares of capital stock, consisting of 20,000,000
shares of common stock, $.01 par value per share, 3,000,000
shares of preferred stock, and 23,000,000 shares of excess
stock, $.01 par value per share. Of the 23,000,000 excess
shares, 20,000,000 are issuable in exchange for common stock and
3,000,000 are issuable in exchange for preferred stock.
B-20
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Year Ended December 31, 1995 and the Period
May 2, 1994 (Date of Inception) through
December 31, 1994
8. Stock Issuance Costs:
The Company has incurred certain expenses of its offering 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 organizational and 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.
As of December 31, 1995, the Company had incurred
$6,423,671 in organizational and offering costs, including
$3,076,333 in commissions and marketing support and due
diligence expense reimbursement fees (see Note 10). Of this
amount $6,403,671 has been treated as stock issuance costs and
$20,000 has been treated as organization costs. The stock
issuance costs have been charged to stockholders' equity
subject to the three percent cap described above.
9. Distributions:
For the year ended December 31, 1995, 59.82% of the distributions
received by stockholders were considered to be ordinary
income and 40.18% were considered a return of capital for
federal income tax purposes. No amounts distributed to
stockholders for the year ended December 31, 1995, 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.
10. Related Party Transactions:
Certain directors and officers of the Company hold similar
positions with the Advisor and the managing dealer, CNL Securities
Corp. In addition, as of December 31, 1994, the Advisor was the
sole stockholder of the Company.
CNL Securities Corp. is entitled to receive selling commissions
amounting to 7.5% of the total amount raised from the sale of
shares for services in connection with the formation of the
Company and the offering of shares, a substantial portion of which
B-21
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Year Ended December 31, 1995 and the Period
May 2, 1994 (Date of Inception) through
December 31, 1994
10. Related Party Transactions - Continued:
has been or will be paid as commissions to other
broker-dealers. As of December 31, 1995, the Company had
incurred $2,884,062 of such fees, of which approximately
$2,682,303 was paid by CNL Securities Corp. as commissions
to other broker-dealers.
In addition, CNL Securities Corp. is entitled to receive a
marketing support and due diligence expense reimbursement fee
equal to 0.5% of the total amount raised from the sale of
shares, a portion of which may be reallowed to other
broker-dealers. As of December 31, 1995, the Company had incurred
$192,271 of such fees.
CNL Securities Corp. will also receive a soliciting dealer
servicing fee payable annually by the Company beginning on
December 31 of the year following the year in which the offering
terminates in the amount of 0.20% of the stockholders'
investment in the Company. CNL Securities Corp. in turn may
reallow all or a portion of such fee to soliciting dealers whose
clients held shares on such date. The Company, however, may
pay the soliciting dealer servicing fee directly to any
soliciting dealer exempt from registration as a broker-dealer and
whose clients held shares on such date. As of December 31, 1995,
no such fees had been incurred.
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
the total amount raised from the sale of shares. As of
December 31, 1995, the Company had incurred $1,730,437 of such
fees.
In connection with the acquisition of Properties that
have been constructed or renovated by affiliates, subject to
approval by the C o m p a n y's Board of Directors, the
Company may incur develop- ment/construction management fees
of generally five to ten percent of the cost of constructing or
renovating a Property, payable to affiliates of the Company as
acquisition fees. Such fees will be included in the purchase
price of Properties purchased from developers that are affiliates
of the Company. As of December 31, 1995, no such fees had been
incurred by the Company.
B-22
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Year Ended December 31, 1995 and the Period
May 2, 1994 (Date of Inception) through
December 31, 1994
10. Related Party Transactions - Continued:
In connection with the acquisition of Properties from
affiliated or unaffiliated developers, to whom affiliates of the
Company have provided construction financing, subject to
approval by the Company's Board of Directors, the Company may
incur construction financing fees, payable to affiliates of the
Company as acquisition fees. Such fees will be in an amount equal
to generally one to two percent of the total amount of each loan
plus the difference determined by applying an annual percentage
rate of generally 1.5 to three percent throughout the duration
of the loan to the outstanding amount of the loan. Such fees
will be included in the purchase price of the Properties
purchased from developers that receive such loans. As of
December 31, 1995, no such fees had been incurred by the Company.
The total of all acquisition fees (including
develop-ment/construction m a nagement fees to affiliates and
construction financing fees to affiliates described above)
and acquisition expenses shall be reasonable and shall not
exceed an amount equal to six percent of the real estate asset
value of a Property (as defined in the Company's Articles
of Incorporation), or in the case of a Mortgage Loan, six
percent of funds advanced, unless a majority of the Board of
Directors (including a majority of the independent directors)
approves fees in excess of these limits subject to a
determination that the transaction is commercially competitive,
fair and reasonable to the Company.
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 two percent of the purchase price of the
Equipment that is the subject of a Secured Equipment Lease. As
of December 31, 1995, no secured equipment lease servicing fees
had been incurred.
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 (generally, the total amount invested
in the Properties as of the end of the preceding month,
exclusive of acquisition fees and acquisition expenses). The
asset 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
B-23
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Year Ended December 31, 1995 and the Period
May 2, 1994 (Date of Inception) through
December 31, 1994
10. Related Party Transactions - Continued:
any fiscal year shall be deferred without interest and may be
taken in such other fiscal year as the Advisor shall determine. As
of December 31, 1995, the Company had incurred $27,950 of such
fees, $4,872 of which has been capitalized as part of the
cost of building for Properties under construction.
Prior to such time, if any, as shares of the Company's common
stock are listed on a national securities exchange or
over-the-counter market, the Advisor is entitled to receive a
deferred, subordinated real estate disposition fee, payable upon
the sale of one or more Properties based on the lesser of
one-half of a competitive real estate commission or three percent
of the sales price if the Advisor provides a substantial amount of
services in connection with the sale. The real estate
disposition fee is payable only after the stockholders receive
distributions equal to the sum of an annual, aggregate,
cumulative, noncompounded eight percent return on their invested
capital, excluding distributions attributable to proceeds of the
sale of a Property ("Stockholders' 8% Return") plus their
aggregate invested capital. No deferred, subordinated real
estate disposition fees have been incurred to date.
A subordinated share of net sales proceeds will be paid to the
Advisor upon the sale of one or more Properties or Secured
Equipment Leases in an amount equal to ten percent of net sales
proceeds. This amount will be paid only after the stockholders
receive distributions equal to the sum of the stockholders'
aggregate invested capital and the Stockholders 8% Return. As
of December 31, 1995, no such payments have been made to the
Advisor.
The Advisor and its affiliates provide accounting and
administra-tive services to the Company (including accounting and
administra-tive services in connection with the offering of
shares) on a day-to-day basis. For the year ended December 31,
1995 and the period
B-24
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Year Ended December 31, 1995 and the Period
May 2, 1994 (Date of Inception) through
December 31, 1994
10. Related Party Transactions - Continued:
May 2, 1994 (date of inception) through December 31, 1994, the
expenses incurred for these services were classified as follows:
May 2, 1994
(Date of
Inception)
Year Ended through
December 31, December 31,
1995 1994
------------ ------------
Deferred offering costs $ - $ 42,431
Stock issuance costs 714,674 -
General operating and
administrative expenses 68,016 -
-------- --------
$782,690 $ 42,431
======== ========
During the year ended December 31, 1995, the Company
acquired nine Properties for an aggregate purchase price of
approximately $6,621,000 from affiliates of the Company. The
affiliates had purchased and temporarily held title to these
Properties in order to facilitate the acquisition of the
Properties by the Company. Each Property was acquired at a cost
no greater than the lesser of the cost of the Property to the
affiliate (including carrying costs) or the Property's appraised
value.
B-25
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Year Ended December 31, 1995 and the Period
May 2, 1994 (Date of Inception) through
December 31, 1994
10. Related Party Transactions - Continued:
The due to related parties consisted of the following at December 31:
1995 1994
---- ----
Due to the Advisor:
Expenditures incurred on behalf
of the Company and accounting
and administrative services $108,316 $305,261
Acquisition fees 45,118 -
Asset management fees 9,108 -
Distributions 3,332 -
-------- --------
165,874 305,261
-------- --------
Due to CNL Securities Corp:
Commissions 75,197 -
Marketing support and due
diligence expense reim-
bursement fees 5,013 -
-------- --------
80,210 -
-------- --------
Other 2,500 -
-------- --------
$248,584 $305,261
======== ========
11. Concentration of Credit Risk:
The following schedule presents rental and earned income from
individual lessees and restaurant chains, each representing more
than ten percent of the Company's total rental and earned income
for the year ended December 31, 1995:
Golden Corral Corporation
(operates Golden Corral restaurants) $212,406
Roasters Corp.
(operates Kenny Rogers' Roasters
restaurants) 82,136
Northstar Restaurants, Inc.
(operates Boston Market restaurants) 73,219
Foodmaker, Inc.
(operates a Jack in the Box restaurant) 66,813
Denwest Restaurant Corp.
(operates Denny's restaurants) 66,595
B-26
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Year Ended December 31, 1995 and the Period
May 2, 1994 (Date of Inception) through
December 31, 1994
11. Concentration of Credit Risk - Continued:
Although the Company's Properties are geographically diverse
and the lessees operate a variety of restaurant concepts,
default by any one of these lessees could significantly impact
the results 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 lessee.
It is expected that the percentage of total rental and
earned income contributed by these lessees and restaurant
chains will decrease as additional Properties are acquired and
leased in 1996 and subsequent years.
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
once construction is completed. 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 $3,214,700, of which approximately $1,760,000
in land and other costs had been incurred as of December 31,
1995. The buildings currently under construction are expected
to be operational by May 1996. In connection with the purchase of
each Property, the Company, as lessor, entered into a long-term
lease agreement. The general terms of the lease agreements are
substan-tially the same as those described in Note 3.
In addition, in connection with the acquisition of two
Properties during the year ended December 31, 1995, the
Company has committed to fund an aggregate amount of $500,000 for
the renovation of the Properties. As of December 31, 1995, the
Company had incurred approximately $234,000 in such costs. Upon
the completion of the renovation of the Properties and the payment
of such by the Company, the base rent due under the terms of the
lease will be adjusted upward. The renovations are
expected to be completed by March 1996.
The Company has obtained a commitment from a bank (the
"Bank") for a $15,000,000 line of credit (the "Commitment") to be
used by the Company to offer Secured Equipment Leases. The
Commitment provides that the Company will be able to receive
advances under the line of credit for a period of two years
from the date of
B-27
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Year Ended December 31, 1995 and the Period
May 2, 1994 (Date of Inception) through
December 31, 1994
12. Commitments - Continued:
closing on the loan. Generally, advances under the loan will
be fully amortizing term loans repayable in terms equal to
the duration of the Secured Equipment Leases, but in no event
greater than 72 months. Advances under the loan will bear
interest at either (i) a rate per annum equal to 215 basis
points above the Reserve Adjusted LIBOR Rate (as defined in
the Commitment) or (ii) a rate per annum equal to the Bank's
prime rate, whichever the Company selects at the time advances
are made. The Bank shall have a first security interest in and a
direct assignment of the Secured Equipment Leases. In
connection with such loan, at the date of closing, the Company
shall pay the Bank a commitment fee equal to $37,500 and shall
pay all of the Bank's expenses relating to the loan (of which
$12,000 had been incurred by the Company as of December 31,
1995). The written agreement between the Company and the Bank
expired on July 31, 1995; however, the Company has received an
oral agreement from the Bank to extend the terms of the
Commitment to the anticipated loan closing date. As of January
22, 1996, the loan closing had not occurred. The Company
anticipates closing on the loan in the first quarter of 1996.
13. Subsequent Events:
During the period January 1, 1996 through January 22, 1996, the
Company r e c e ived subscription proceeds for an additional
349,572 shares ($3,495,720) of common stock.
On January 1, 1996, the Company declared distributions of
$225,354 or $.0583 per share of common stock, payable on
March 29, 1996, to stockholders of record on January 1, 1996.
During the period January 1, 1996 through January 22, 1996, the
Company acquired 20 Properties (land only) for cash at a
total cost of approximately $3,761,000. The Company is leasing
the parcels to a single lessee pursuant to a master lease
agreement. The general terms of the master lease agreement are
substantially the same as those described in Note 3. The lessee
owns the buildings located on the 20 Properties. In c o nnection
therewith, the Company provided $8,475,000 of mortgage
financing to the lessee pursuant to a master mortgage note
which is collateralized by the building improvements of the 20
Properties and three additional properties. The master mortgage
note bears interest at a rate of 10.75% per annum and principal
and interest will be collected in equal monthly installments over
20 years starting March 1, 1996.
B-28
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC. AND SUBSIDIARY
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1995
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent
Initial Cost To Acquisition
Buildings
Encum- and Improve- Carrying
brances Land Improvements ments Costs
<S> <C>
Properties the Company
has Invested in Under
Operating Leases:
Boston Market Restaurants:
Grand Island, Nebraska - $ 234,685 $ 644,615 $ - $ -
Dubuque, Iowa - 353,608 663,968 - -
Chanhassen, Minnesota - 376,929 639,875 - -
Denny's Restaurant:
Pasadena, Texas - 467,140 240,925 - -
Shawnee, Oklahoma - 529,362 373,427 233,646 -
Golden Corral Family
Steakhouse Restaurants:
Dover, Delaware - 1,045,822 - 915,609 -
Universal City, Texas - 349,394 - 791,273 -
Cleburne, Texas - 351,505 - 766,463 -
Tampa, Florida - 816,121 - 641,129 -
Carlsbad, New Mexico - 376,075 - 740,814 -
Corsicana, Texas - 342,208 753,578 - -
Ft. Worth, Texas - 640,320 898,171 - -
Columbus, Ohio - 1,031,698 - 975,093 -
Jack in the Box Restaurants:
Los Angeles, California - 603,644 602,920 - -
Houston, Texas - 522,592 - 9,766 -
Kenny Rogers' Roasters
Restaurants:
Grand Rapids, Michigan - 282,806 599,309 - -
Franklin, Tennessee - 566,562 442,992 - -
----------- ----------- ---------- --------
$ 8,890,471 $ 5,859,780 $5,073,793 $ -
=========== =========== ========== ========
Property the Company has Invested
in Under Direct Financing Lease:
TGI Friday's Restaurant:
Orange, Connecticut - $ - $ - $1,374,960 $ -
=========== =========== ========== ========
</TABLE>
B-29
<PAGE>
<TABLE>
<CAPTION>
Life
on Which
Gross Amount at Which Carried Depreciation
at Close of Period (c) in Latest
Buildings Date Income
and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
<S> <C>
Properties the Company
has Invested in Under
Operating Leases:
Boston Market Restaurants:
Grand Island, Nebraska $ 234,685 $ 644,615 $ 879,300 $ 6,078 1995 09/95 (e)
Dubuque, Iowa 353,608 663,968 1,017,576 5,397 1995 10/95 (e)
376,929 639,875 1,016,804 3,214 1995 11/95 (e)
Chanhassen, Minnesota
467,140 240,925 708,065 2,558 1981 09/95 (e)
Denny's Restaurant: 529,362 607,073 1,136,435 3,964 1987 09/95 (e)
Pasadena, Texas
Shawnee, Oklahoma
Golden Corral Family 1,045,822 915,609 1,961,431 8,781 1995 08/95 (e)
Steakhouse Restaurants: 349,394 791,273 1,140,667 8,294 1995 08/95 (e)
Dover, Delaware 351,505 766,463 1,117,968 5,566 1995 08/95 (e)
Universal City, Texas
Cleburne, Texas
Tampa, Florida 816,121 641,129 1,457,250 (d) (b) 08/95 (d)
Carlsbad, New Mexico 376,075 740,814 1,116,889 8,536 1995 08/95 (e)
Corsicana, Texas 342,208 753,578 1,095,786 9,901 1995 08/95 (e)
Ft. Worth, Texas 640,320 898,171 1,538,491 11,094 1995 08/95 (e)
Columbus, Ohio 1,031,698 975,093 2,006,791 3,193 1995 11/95 (e)
Jack in the Box Restaurants:
Los Angeles, California 603,644 602,920 1,206,564 10,101 1986 06/95 (e)
Houston, Texas 522,592 9,766 532,358 (d) (b) 11/95 (d)
Kenny Rogers' Roasters
Restaurants:
Grand Rapids, Michigan
Franklin, Tennessee 282,806 599,309 882,115 8,169 1995 08/95 (e)
566,562 442,992 1,009,554 5,472 1995 08/95 (e)
----------- ----------- ----------- --------
$ 8,890,471 $10,933,573 $19,824,044 $100,318
=========== =========== =========== ========
Property the Company has Invested
in Under Direct Financing Lease:
TGI Friday's Restaurant:
Orange, Connecticut (h) (f) (f) (g) 1995 07/95 (g)
</TABLE>
B-30
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC. AND SUBSIDIARY
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1995
(a) Transactions in real estate and accumulated depreciation during
1995 are summarized as follows:
Accumulated
Cost Depreciation
Properties the Partnership
has Invested in Under
Operating Leases:
Balance, December 31, 1994 $ - $ -
Acquisitions 19,824,044 -
Depreciation expense (f) - 100,318
----------- -----------
Balance, December 31, 1995 $19,824,044 $ 100,318
=========== ===========
(b) Scheduled for completion in 1996.
(c) As of December 31, 1995, the aggregate cost of the Properties
owned by the Company and its subsidiary for federal income
tax purposes was $21,199,004. All of the leases are
treated as operating leases for federal income tax purposes.
(d) Property was not placed in service as of December 31, 1995;
therefore, no depreciation was taken.
(e) Depreciation expense is computed for buildings and
improvements based upon estimated lives of 30 years.
(f) For financial reporting purposes, the lease relating to this
building has been recorded as a direct financing lease.
Accordingly, costs relating to the building are not shown.
(g) For financial reporting purposes, the lease has been recorded as
a direct financing lease. The cost of the building has
been included in net investment in direct financing lease;
therefore, depreciation is not applicable.
(h) The Company owns the building only relating to this
Property. This property is subject to a ground lease
between the tenant and an unaffiliated third party. In
connection therewith, the Company entered into a tri-party
agreement with the tenant and the owner of the land. The
tri-party agreement provides that the tenant is responsible for
all obligations under the ground lease and provides certain
rights to the Company to help protect its interest in the
building in the event of a default by the tenant under the terms
of the ground lease.
B-31
<PAGE>
EXHIBIT C
PRIOR PERFORMANCE TABLES
<PAGE>
EXHIBIT C
PRIOR PERFORMANCE TABLES
The information in this Exhibit C contains certain relevant summary
information concerning prior partnerships sponsored by two of the Company's
principals (who also serve as the Chairman of the Board and President of the
Company) and their Affiliates (the "Prior Partnerships") which like the Company,
were formed to invest in restaurant properties leased on a triple-net basis to
operators of national and regional fast-food and family-style restaurant chains.
A more detailed description of the acquisitions by the Prior Partnerships
is set forth in Part II of the registration statement filed with the Securities
and Exchange Commission for this Offering and is available from the Company upon
request, without charge. In addition, upon request to the Company, the Company
will provide, without charge, a copy of the most recent Annual Report on Form
10-K filed with the Securities and Exchange Commission for CNL Income Fund,
Ltd., CNL Income Fund II, Ltd., CNL Income Fund III, Ltd., CNL Income Fund IV,
Ltd., CNL Income Fund V, Ltd., CNL Income Fund VI, Ltd., CNL Income Fund VII,
Ltd., CNL Income Fund VIII, Ltd., CNL Income Fund IX, Ltd., CNL Income Fund X,
Ltd., CNL Income Fund XI, Ltd., CNL Income Fund XII, Ltd., CNL Income Fund XIII,
Ltd., CNL Income Fund XIV, Ltd., CNL Income Fund XV, Ltd., CNL Income Fund XVI,
Ltd., CNL Income Fund XVII, Ltd. and CNL Income Fund XVIII, Ltd., as well as a
copy, for a reasonable fee, of the exhibits filed with such reports.
The investment objectives of the Prior Partnerships (like those of the
Company) generally include preservation and protection of capital, the potential
for increased income and protection against inflation, and potential for capital
appreciation, all through investment in restaurant properties. In addition, the
investment objectives of the Prior Partnerships included making partially tax-
sheltered distributions.
STOCKHOLDERS SHOULD NOT CONSTRUE INCLUSION OF THE FOLLOWING TABLES AS
IMPLYING THAT THE COMPANY WILL HAVE RESULTS COMPARABLE TO THOSE REFLECTED IN
SUCH TABLES. DISTRIBUTABLE CASH FLOW, FEDERAL INCOME TAX DEDUCTIONS, OR OTHER
FACTORS COULD BE SUBSTANTIALLY DIFFERENT. STOCKHOLDERS SHOULD NOTE THAT, BY
ACQUIRING SHARES IN THE COMPANY, THEY WILL NOT BE ACQUIRING ANY INTEREST IN ANY
PRIOR PARTNERSHIPS.
DESCRIPTION OF TABLES
The following Tables are included herein:
Table I - Experience in Raising and Investing Funds
Table II - Compensation to Sponsor
Table III - Operating Results of Prior Programs
Table V - Sales or Disposal of Properties
Unless otherwise indicated in the Tables, all information contained in the
Tables is as of December 31, 1995. The following is a brief description of the
Tables:
TABLE I - EXPERIENCE IN RAISING AND INVESTING FUNDS
Table I presents information on a percentage basis showing the experience
of two of the principals of the Company and their Affiliates in raising and
investing funds for the Prior Partnerships, the offerings of which closed
between December 1986 and December 1995.
C-1
<PAGE>
The Table sets forth information on the offering expenses incurred and
amounts available for investment expressed as a percentage of total dollars
raised. The Table also shows the percentage of property acquisition cost
leveraged, the date the offering commenced, and the time required to raise funds
for investment.
TABLE II - COMPENSATION TO SPONSOR
Table II provides information, on a total dollar basis, regarding amounts
and types of compensation paid to the general partners of the Prior
Partnerships.
The Table indicates the total offering proceeds and the portion of such
offering proceeds paid or to be paid to two of the principals of the Company and
their Affiliates in connection with the Prior Partnerships, the offerings of
which closed between December 1986 and December 1995. The Table also shows the
amounts paid to two of the principals of the Company and their Affiliates from
cash generated from operations and from cash generated from sales or refinancing
by each of the Prior Partnerships on a cumulative basis commencing with
inception and ending December 31, 1995.
TABLE III - OPERATING RESULTS OF PRIOR PROGRAMS
Table III presents a summary of operating results for the period from
inception through December 31, 1995, of the Prior Partnerships, the offerings of
which closed between December 1986 and December 1995.
The Table includes a summary of income or loss of the Prior Partnerships,
which are presented on the basis of generally accepted accounting principles
("GAAP"). (The principal difference between GAAP and the income tax basis of
reporting is that depreciation under the tax basis of reporting is based upon
the rates established by the Accelerated Cost Recovery System ["ACRS"] for
property placed in service between January 1, 1981 and December 31, 1986, and
the Modified Accelerated Cost Recovery System ["MACRS"] for property placed in
service after 1986. Use of ACRS usually results in a higher charge against
operations than would be the result if the depreciation rate applied to property
were based on the economic useful life of the property, as required by GAAP,
while use of MACRS usually results in a somewhat lower charge against
operations.) The Table also shows cash generated from operations, which
represents the cash generated from operations of the properties of the Prior
Partnerships, as distinguished from cash generated from other sources (special
items). The section of the Table entitled "Special Items" provides
information relating to cash generated from or used by items which are not
directly related to the operations of the properties of the Prior Partnerships,
but rather are related to items of a partnership nature. These items include
proceeds from capital contributions of limited partners and disbursements made
from these sources of funds, such as syndication and organizational costs,
acquisition of the properties and other costs which are related more to the
organization of the partnership and the acquisition of properties than to the
actual operations of the partnerships.
The Table also presents information pertaining to investment income,
returns of capital on a GAAP basis, cash distributions from operations, sales
and refinancing proceeds expressed in total dollar amounts as well as
distributions and tax results on a per $1,000 investment basis.
TABLE IV - RESULTS OF COMPLETED PROGRAMS
Table IV is omitted from this Exhibit C because none of the directors of
the Company or their Affiliates has been involved in completed programs which
made investments similar to those of the Company.
TABLE V - SALES OR DISPOSAL OF PROPERTIES
Table V provides information regarding the sale or disposal of properties
owned by the Prior Partnerships between December 1986 and December 1995.
C-2
<PAGE>
TABLE I
EXPERIENCE IN RAISING AND INVESTING FUNDS
<TABLE>
<CAPTION>
CNL Income CNL Income CNL Income CNL Income
Fund, Fund II, Fund III, Fund IV,
Ltd. Ltd. Ltd. Ltd.
----------- ----------- ----------- -----------
<S> <C>
Dollar amount offered $15,000,000 $25,000,000 $25,000,000 $30,000,000
=========== =========== =========== ===========
Dollar amount raised 100.0% 100.0% 100.0% 100.0%
----------- ----------- ----------- -----------
Less offering expenses:
Selling commissions
and discounts (8.5) (8.5) (8.5) (8.5)
Organizational expenses (2.9) (2.3) (3.0) (3.0)
Marketing support and
due diligence expense
reimbursement fees
(includes amounts
reallowed to
unaffiliated
entities) -- -- -- --
----------- ----------- ----------- -----------
(11.4) (10.8) (11.5) (11.5)
----------- ----------- ----------- -----------
Reserve for operations -- -- -- --
----------- ----------- ----------- -----------
Percent available for
investment 88.6% 89.2% 88.5% 88.5%
=========== =========== =========== ===========
Acquisition costs:
Cash down payment 83.6% 84.2% 83.5% 83.5%
Acquisition fees paid
to affiliates 5.0 5.0 5.0 5.0
Loan costs -- -- -- --
----------- ----------- ----------- -----------
Total acquisition costs 88.6% 89.2% 88.5% 88.5%
=========== =========== =========== ===========
Percent leveraged
(mortgage financing
divided by total
acquisition costs) -- -- -- --
Date offering began 4/09/86 1/02/87 8/10/87 5/06/88
Length of offering (in
months) 8.5 7.5 8.5 8
Months to invest 90% of
amount available for
investment measured
from date of offering 8.5 11 13 12.5
</TABLE>
C-3
<PAGE>
TABLE I - EXPERIENCE IN RAISING AND INVESTING FUNDS (continued)
<TABLE>
<CAPTION>
CNL Income CNL Income CNL Income CNL Income CNL Income CNL Income CNL Income
Fund V, Fund VI, Fund VII, Fund VIII, Fund IX, Fund X, Fund XI,
Ltd. Ltd. Ltd. Ltd. Ltd. Ltd. Ltd.
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C>
Dollar amount offered $25,000,000 $35,000,000 $30,000,000 $35,000,000 $35,000,000 $40,000,000 $40,000,000
=========== =========== =========== =========== =========== =========== ===========
Dollar amount raised 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
----------- ----------- ----------- ----------- ----------- ----------- -----------
Less offering expenses:
Selling commissions
and discounts (8.5) (8.5) (8.5) (8.5) (8.5) (8.5) (8.5)
Organizational expenses (3.0) (3.0) (3.0) (3.0) (3.0) (3.0) (3.0)
Marketing support and
due diligence expense
reimbursement fees
(includes amounts
reallowed to
unaffiliated
entities) -- -- -- -- (0.5) (0.5) (0.5)
----------- ----------- ----------- ----------- ----------- ----------- -----------
(11.5) (11.5) (11.5) (11.5) (12.0) (12.0) (12.0)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Reserve for operations -- -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Percent available for
investment 88.5% 88.5% 88.5% 88.5% 88.0% 88.0% 88.0%
=========== =========== =========== =========== =========== =========== ===========
Acquisition costs:
Cash down payment 83.5% 83.5% 83.5% 83.5% 83.0% 83.0% 83.0%
Acquisition fees paid
to affiliates 5.0 5.0 5.0 5.0 5.0 5.0 5.0
Loan costs -- -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total acquisition costs 88.5% 88.5% 88.5% 88.5% 88.0% 88.0% 88.0%
=========== =========== =========== =========== =========== =========== ===========
Percent leveraged
(mortgage financing
divided by total
acquisition costs) -- -- -- -- -- -- --
Date offering began 12/16/88 6/08/89 1/30/90 8/02/90 3/20/91 9/09/91 3/18/92
Length of offering (in
months) 6 7.5 6 7 5.5 6 6
Months to invest 90% of
amount available for
investment measured 12 16 10 13.5 12 7 6
from date of offering
</TABLE>
C-4
<PAGE>
TABLE I - EXPERIENCE IN RAISING AND INVESTING FUNDS (continued)
<TABLE>
<CAPTION>
CNL Income CNL Income CNL Income CNL Income CNL Income
Fund XII, Fund XIII, Fund XIV, Fund XV, Fund XVI,
Ltd. Ltd. Ltd. Ltd. Ltd.
----------- ----------- ----------- ----------- -----------
<S> <C>
Dollar amount offered $45,000,000 $40,000,000 $45,000,000 $40,000,000 $45,000,000
=========== =========== =========== =========== ===========
Dollar amount raised 100.0% 100.0% 100.0% 100.0% 100.0%
----------- ----------- ----------- ----------- -----------
Less offering expenses:
Selling commissions
and discounts (8.5) (8.5) (8.5) (8.5) (8.5)
Organizational expenses (3.0) (3.0) (3.0) (3.0) (3.0)
Marketing support and
due diligence expense
reimbursement fees
(includes amounts
reallowed to
unaffiliated
entities) (0.5) (0.5) (0.5) (0.5) (0.5)
----------- ----------- ----------- ----------- -----------
(12.0) (12.0) (12.0) (12.0) (12.0)
----------- ----------- ----------- ----------- -----------
Reserve for operations -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Percent available for
investment 88.0% 88.0% 88.0% 88.0% 88.0%
=========== =========== =========== =========== ===========
Acquisition costs:
Cash down payment 83.0% 82.5% 82.5% 82.5% 82.5%
Acquisition fees paid
to affiliates 5.0 5.5 5.5 5.5 5.5
Loan costs -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Total acquisition costs 88.0% 88.0% 88.0% 88.0% 88.0%
=========== =========== =========== =========== ===========
Percent leveraged
(mortgage financing
divided by total
acquisition costs) -- -- -- -- --
Date offering began 9/29/92 3/31/93 8/27/93 2/23/94 9/02/94
Length of offering (in
months) 6 5 6 6 9
Months to invest 90% of
amount available for
investment measured
from date of offering 11 10 11 10 11
</TABLE>
C-5
<PAGE>
TABLE II
COMPENSATION TO SPONSOR
<TABLE>
<CAPTION>
CNL Income CNL Income CNL Income CNL Income
Fund, Fund II, Fund III, Fund IV,
Ltd. Ltd. Ltd. Ltd.
----------- ----------- ----------- -----------
<S> <C>
Date offering commenced 4/09/86 1/02/87 8/10/87 5/06/88
Dollar amount raised $15,000,000 $25,000,000 $25,000,000 $30,000,000
=========== =========== ============ ===========
Amount paid to sponsor from
proceeds of offering:
Selling commissions and
discounts 2,125,000 2,125,000 2,550,000
Real estate commissions - - - -
Acquisition fees 750,000 1,250,000 1,250,000 1,500,000
Marketing support and
due diligence expense
reimbursement fees
(includes amounts
reallowed to
unaffiliated entities) - - - -
----------- ----------- ----------- -----------
Total amount paid to sponsor 2,025,000 3,375,000 3,375,000 4,050,000
=========== =========== ============ ===========
Dollar amount of cash generated
from operations before
deducting payments to
sponsor:
1995 1,241,057 2,249,390 2,282,034 2,750,169
1994 1,323,193 2,210,761 2,411,004 2,594,027
1993 1,321,053 2,214,797 2,332,160 2,696,323
1992 1,338,710 2,374,438 2,277,388 2,781,489
1991 1,468,807 2,524,093 2,426,263 2,578,520
1990 1,520,511 2,462,923 2,437,332 2,798,527
1989 1,542,424 2,449,414 2,430,482 2,642,185
1988 1,527,498 2,331,127 1,779,330 563,592
1987 1,537,453 1,204,453 93,740 -
1986 212,986 - - -
1985 - - - -
1984 - - - -
1983 - - - -
1982 - - - -
1981 - - - -
1980 - - - -
1979 - - - -
1978 - - - -
Amount paid to sponsor from
operations (administrative,
accounting and management
fees):
1995 58,543 81,023 78,597 79,776
1994 43,992 54,157 47,633 49,816
1993 35,320 44,620 39,619 42,764
1992 29,621 30,514 33,651 35,735
1991 26,084 28,141 26,912 27,315
1990 19,642 20,078 20,790 24,675
1989 30,059 18,505 20,419 36,121
1988 27,712 19,896 22,904 11,274
1987 15,596 9,141 2,703 -
1986 - - - -
1985 - - - -
1984 - - - -
1983 - - - -
1982 - - - -
1981 - - - -
1980 - - - -
1979 - - - -
1978 - - - -
Dollar amount of property
sales and refinancing
before deducting payments
to sponsor:
Cash 2,187,511 1,635,010 - 1,230,650
Notes - - - -
Amount paid to sponsors
from property sales and
refinancing:
Real estate commissions - - - -
Incentive fees - - - -
Other (Note 1) 66,750 - - -
</TABLE>
C-6
<PAGE>
<TABLE>
<CAPTION>
CNL Income CNL Income CNL Income CNL Income CNL Income CNL Income
Fund V, Fund VI, Fund VII, Fund VIII, Fund IX, Fund X,
Ltd. Ltd. Ltd. Ltd. Ltd. Ltd.
----------- ----------- ----------- ----------- ----------- -------------
<S> <C>
Date offering commenced 12/16/88 6/08/89 1/30/90 8/02/90 3/20/91 9/09/91
Dollar amount raised $25,000,000 $35,000,000 $30,000,000 $35,000,000 $35,000,000 $40,000,000
=========== =========== ============ =========== ============ ===========
Amount paid to sponsor from
proceeds of offering:
Selling commissions and
discounts 2,125,000 2,975,000 2,550,000 2,975,000 2,975,000 3,400,000
Real estate commissions - - - - - -
Acquisition fees 1,250,000 1,750,000 1,500,000 1,750,000 1,750,000 2,000,000
Marketing support and
due diligence expense
reimbursement fees
(includes amounts
reallowed to
unaffiliated entities) - - - - 175,000 200,000
----------- ----------- ----------- ----------- ----------- ----------- -
Total amount paid to sponsor 3,375,000 4,725,000 4,050,000 4,725,000 4,900,000 5,600,000
=========== =========== ============ =========== ============ =========== ==
Dollar amount of cash generated
from operations before
deducting payments to 2,226,800 3,304,277 2,565,797 3,337,050 3,162,674 3,603,470
sponsor: 2,224,393 3,303,435 2,780,851 3,453,350 3,250,836 3,828,234
1995 2,257,910 3,234,816 2,701,325 3,240,772 3,064,973 3,499,905
1994 2,390,704 3,240,209 2,716,954 3,256,005 3,179,912 3,141,123
1993 2,278,902 3,235,671 2,803,819 2,880,558 1,291,549 204,240
1992 2,382,083 2,964,865 1,411,939 288,291 - -
1991 1,544,368 585,207 - - - -
1990 - - - - - -
1989 - - - - - -
1988 - - - - - -
1987 - - - - - -
1986 - - - - - -
1985 - - - - - -
1984 - - - - - -
1983 - - - - - -
1982 - - - - - -
1981 - - - - - -
1980 - - - - - -
1979
1978
Amount paid to sponsor from
operations (administrative,
accounting and management 83,882 81,847 81,259 73,365 64,398 76,108
fees): 47,314 49,761 46,469 40,461 36,622 42,741
1995 42,252 40,130 40,143 39,011 35,678 38,999
1994 36,114 36,852 33,638 36,802 37,348 39,505
1993 30,125 36,956 36,193 37,626 18,596 2,834
1992 25,195 33,330 24,391 7,371 - -
1991 23,611 9,827 - - - -
1990 - - - - - -
1989 - - - - - -
1988
1987
1986 - - - - - -
1985 - - - - - -
1984 - - - - - -
1983 - - - - - -
1982 - - - - - -
1981 - - - - - -
1980 - - - - - -
1979 - - - - - -
1978 - - - - - -
Dollar amount of property
sales and refinancing
before deducting payments
to sponsor:
Cash - 2,328,984 1,569,036 1,532,852 - 1,057,386
Notes 1,040,000 - 1,400,000 460,000 - -
Amount paid to sponsors
from property sales and
refinancing:
Real estate commissions - - - - - -
Incentive fees - - - - - -
Other (Note 1) - - 7,200 13,800 - -
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
CNL Income CNL Income
Fund XI, Fund XII,
Ltd. Ltd.
---------- -----------
<S> <C>
Date offering commenced 3/18/92 9/29/92
Dollar amount raised $40,000,000 $45,000,000
============ ===========
Amount paid to sponsor from
proceeds of offering:
Selling commissions and
discounts 3,400,000 3,825,000
Real estate commissions - -
Acquisition fees 2,000,000 2,250,000
Marketing support and
due diligence expense
reimbursement fees
(includes amounts
reallowed to
unaffiliated entities) 200,000 225,000
---------- -----------
Total amount paid to sponsor 5,600,000 6,300,000
========== ===========
Dollar amount of cash generated
from operations before
deducting payments to 3,758,271 3,928,473
sponsor: 3,574,474 3,933,486
1995 3,434,512 3,320,549
1994 1,525,462 63,401
1993 - -
1992 - -
1991 - -
1990 - -
1989 - -
1988 - -
1987 - -
1986 - -
1985 - -
1984 - -
1983 - -
1982 - -
1981 - -
1980 - -
1979
1978
Amount paid to sponsor from
operations (administrative,
accounting and management 106,086 109,111
fees): 76,533 84,524
1995 78,926 73,789
1994 30,237 2,031
1993 - -
1992 - -
1991 - -
1990 - -
1989 - -
1988
1987
1986 - -
1985 - -
1984 - -
1983 - -
1982 - -
1981 - -
1980 - -
1979 - -
1978 - -
Dollar amount of property
sales and refinancing
before deducting payments
to sponsor:
Cash - -
Notes - -
Amount paid to sponsors
from property sales and
refinancing:
Real estate commissions - -
Incentive fees - -
Other (Note 1) - -
</TABLE>
C-8
<PAGE>
TABLE II - COMPENSATION TO SPONSOR (continued)
<TABLE>
<CAPTION>
CNL Income CNL Income CNL Income CNL Income
Fund XIII, Fund XIV, Fund XV, Fund XVI,
Ltd. Ltd. Ltd. Ltd.
----------- ----------- ----------- -----------
<S> <C>
Date offering commenced 3/31/93 8/27/93 2/23/94 9/02/94
Dollar amount raised $40,000,000 $45,000,000 $40,000,000 $45,000,000
=========== =========== ============ ===========
Amount paid to sponsor from
proceeds of offering:
Selling commissions and
discounts 3,400,000 3,825,000 3,400,000 3,825,000
Real estate commissions - - - -
Acquisition fees 2,200,000 2,475,000 2,200,000 2,475,000
Marketing support and
due diligence expense
reimbursement fees
(includes amounts
reallowed to
unaffiliated entities) 200,000 225,000 200,000 225,000
----------- ----------- ----------- -----------
Total amount paid to sponsor 5,800,000 6,525,000 5,800,000 6,525,000
=========== =========== ============ ===========
Dollar amount of cash generated
from operations before
deducting payments to
sponsor:
1995 3,482,461 3,823,939 3,361,477 2,619,840
1994 3,232,046 2,897,432 1,154,454 212,171
1993 1,148,550 329,957 - -
1992 - - - -
1991 - - - -
1990 - - - -
1989 - - - -
1988 - - - -
1987 - - - -
1986 - - - -
1985 - - - -
1984 - - - -
1983 - - - -
1982 - - - -
1981 - - - -
1980 - - - -
1979 - - - -
1978 - - - -
Amount paid to sponsor from
operations (administrative,
accounting and management
fees):
1995 103,083 114,095 122,107 138,445
1994 83,046 84,801 37,620 7,023
1993 27,003 8,220 - -
1992 - - - -
1991 - - - -
1990 - - - -
1989 - - - -
1988 - - - -
1987 - - - -
1986 - - - -
1985 - - - -
1984 - - - -
1983 - - - -
1982 - - - -
1981 - - - -
1980 - - - -
1979 - - - -
1978 - - - -
Dollar amount of property
sales and refinancing
before deducting payments
to sponsor:
Cash 286,411 696,012 811,706 -
Notes - - - -
Amount paid to sponsors
from property sales and
refinancing:
Real estate commissions - - - -
Incentive fees - - - -
Other - - - -
</TABLE>
Note 1: During the years ended December 31, 1992 and 1994, CNL Income
Fund, L t d . incurred $35,250 and $31,500, respectively, in
deferred, subordinated real estate disposition fees as a result of
the sale of two of its properties. In addition, during the year ended
December 31, 1995, CNL Income Fund VII, Ltd. and CNL Income Fund VIII,
Ltd. incurred $7,200 and $13,800, respectively, in deferred,
subordinated real estate disposition fees as a result of the
sale of one and two of their properties, respectively. As of December
31, 1995, no such amounts had been paid due to the subordinated nature
of this fee.
C-9
<PAGE>
TABLE III
Operating Results of Prior Programs
CNL INCOME FUND, LTD.
<TABLE>
<CAPTION>
1986
(Note 1) 1987 1988 1989
----------- ----------- ----------- -----------
<S> <C>
Gross revenues $ 191,554 $ 1,387,859 $ 1,463,585 $ 1,443,329
Equity in earnings of joint ventures 47,610 116,195 113,777 116,381
Profit from sale of properties 0 0 0 0
Interest income 68,373 40,172 15,852 14,788
Less: Operating expenses (20,031) (84,727) (100,630) (96,613)
Interest expense 0 0 0 0
Depreciation and amortization (45,887) (236,622) (248,962) (251,160)
Minority interest in income of
consolidated joint venture 0 (61) (1,406) 0
----------- ----------- ----------- -----------
Net income - GAAP basis 241,619 1,222,816 1,242,216 1,226,725
=========== =========== =========== ===========
Taxable income
- from operations 226,408 1,103,505 1,123,411 1,106,031
=========== =========== =========== ===========
- from gain on sale 0 0 0 0
=========== =========== =========== ===========
Cash generated from operations
(Notes 2 and 7) 212,986 1,521,857 1,499,786 1,512,365
Cash generated from sales 0 0 0 0
Cash generated from refinancing 0 0 0 0
----------- ----------- ----------- -----------
Cash generated from operations, sales
and refinancing 212,986 1,521,857 1,499,786 1,512,365
Less: Cash distributions to investors
(Note 8)
- from operating cash flow (212,986) (1,443,975) (1,499,786) (1,500,000)
- from sale of properties (Note 6) 0 0 0 0
- from cash flow from prior period 0 0 0 0
- from return of capital (Note 4) (82,152) 0 (214) 0
- from other (Note 5) 0 0 0 0
----------- ----------- ----------- -----------
Cash generated (deficiency) after cash
distributions (82,152) 77,882 (214) 12,365
Special items (not including sales and
refinancing):
Limited partners' capital
contributions 15,000,000 0 0 0
General partners' capital
contributions 1,000 0 0 0
Organization costs (51,890) 0 0 0
Syndication costs (1,455,695) (20,056) 0 0
Acquisition of land and buildings (9,909,615) (2,003,668) (8,106) 0
Lease costs 0 0 0 (50,000)
Investment in joint ventures (1,129,974) 0 0 0
Loan to tenant, net of repayments 0 0 0 0
Repayment of advances (advances)
to an affiliate (20,500) 20,500 0 0
Reimbursement of syndication and
acquisition costs paid on behalf
of CNL Income Fund, Ltd. by
related parties (189,401) (145,371) 0 0
Minority interest in joint venture,
net of distributions 0 26,417 (1,755) 0
Acquisition of minority interest in
joint venture 0 0 (26,600) 0
Increase in other assets (26,541) (12,300) 0 0
----------- ----------- ----------- -----------
Cash generated (deficiency) after cash
distributions and special items 2,135,232 (2,056,596) (36,675) (37,635)
=========== =========== =========== ===========
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 36 73 74 73
=========== =========== =========== ===========
- from recapture 0 0 0 0
=========== =========== =========== ===========
Capital gain (loss) 0 0 0 0
=========== =========== =========== ===========
</TABLE>
C-10
<PAGE>
TABLE III - CNL INCOME FUND, LTD. (continued)
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995
----------- ----------- ----------- ----------- ----------- -----------
<S> <C>
Gross revenues $ 1,414,800 $ 1,401,267 $ 1,328,805 $ 1,292,997 $ 1,233,600 $ 1,165,756
Equity in earnings of joint ventures 116,452 115,198 110,288 114,028 112,160 112,974
Profit from sale of properties 0 0 214,488 0 182,384 0
Interest income 15,208 13,002 13,668 5,302 13,111 11,837
Less: Operating expenses (81,179) (135,127) (128,135) (147,416) (110,252) (118,268)
Interest expense 0 0 0 0 0 0
Depreciation and amortization (251,784) (246,212) (233,093) (225,366) (222,427) (210,197)
Minority interest in income of
consolidated joint venture 0 0 0 0 0 0
----------- ----------- ----------- ----------- ----------- -----------
Net income - GAAP basis 1,213,497 1,148,128 1,306,021 1,039,545 1,208,576 962,102
=========== =========== =========== =========== =========== ===========
Taxable income
- from operations 1,085,391 1,031,688 970,214 922,353 996,832 863,755
=========== =========== =========== =========== =========== ===========
- from gain on sale 0 0 209,586 0 177,224 0
Cash generated from operations
(Notes 2 and 7) =========== =========== =========== =========== =========== ===========
Cash generated from sales
Cash generated from refinancing 1,500,869 1,442,723 1,309,089 1,285,733 1,279,201 1,182,514
0 0 1,169,021 0 1,018,490 0
Cash generated from operations, sales 0 0 0 0 0 0
and refinancing ----------- ----------- ----------- ----------- ----------- -----------
Less: Cash distributions to investors
(Note 8) 1,500,869 1,442,723 2,478,110 1,285,733 2,297,691 1,182,514
- from operating cash flow
- from sale of properties (Note 6)
- from cash flow from prior period (1,500,000) (1,442,723) (1,309,089) (1,063,216) (1,279,201) (1,182,514)
- from return of capital (Note 4) 0 0 (1,080,850) 0 0 (861,500)
- from other (Note 5) 0 (8,750) 0 0 (138,422) (120,554)
0 0 0 0 0 0
0 (48,527) (23,873) 0 0 0
----------- ----------- ----------- ----------- ----------- -----------
Cash generated (deficiency) after cash
distributions 869 (57,277) 64,298 222,517 880,068 (982,054)
Special items (not including sales and
refinancing):
Limited partners' capital
contributions 0 0 0 0 0 0
General partners' capital
contributions 0 65,000 7,400 0 120,000 0
Organization costs 0 0 0 0 0 0
Syndication costs 0 0 0 0 0 0
Acquisition of land and buildings 0 (7,049) (14,523) 0 0 0
Lease costs 0 (2,000) 0 0 0 0
Investment in joint ventures 0 0 0 0 0 0
Loan to tenant, net of repayments 0 0 (25,000) 25,000 0 0
Repayment of advances (advances)
to an affiliate 0 0 0 0 0 0
Reimbursement of syndication and
acquisition costs paid on behalf
of CNL Income Fund, Ltd. by
related parties 0 0 0 0 0 0
Minority interest in joint venture,
net of distributions 0 0 0 0 0 0
Acquisition of minority interest in
joint venture 0 0 0 0 0 0
Increase in other assets 0 0 (30,000) 0 0 0
----------- ----------- ----------- ----------- ----------- -----------
Cash generated (deficiency) after cash
distributions and special items 869 (1,326) 2,175 247,517 1,000,068 (982,054)
=========== =========== =========== =========== =========== ===========
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 72 68 64 61 66 57
=========== =========== =========== =========== =========== ===========
- from recapture 0 0 0 0 0 0
=========== =========== =========== =========== =========== ===========
Capital gain (loss) 0 0 14 0 12 0
=========== =========== =========== =========== =========== ===========
</TABLE>
C-11
<PAGE>
TABLE III - CNL INCOME FUND, LTD. (continued)
<TABLE>
<CAPTION>
1986
(Note 1) 1987 1988 1989
----------- ----------- ----------- -----------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 39 81 82 81
- from capital gain 0 0 0 0
- from return of capital (Note 3) 9 15 18 19
----------- ----------- ----------- -----------
Total distributions on GAAP basis (Note 8) 48 96 100 100
=========== =========== =========== ===========
Source (on cash basis)
- from sales 0 0 0 0
- from refinancing 0 0 0 0
- from operations 35 96 100 100
- from cash flow from prior period 0 0 0 0
- from return of capital (Note 4) 13 0 0 0
- from other (Note 5) 0 0 0 0
----------- ----------- ----------- -----------
Total distributions on cash basis (Note 8) 48 96 100 100
=========== =========== =========== ===========
Total cumulative cash distributions per
$1,000 investment from inception 48 144 244 344
Amount (in percentage terms) remaining
invested in program properties at the
end of each year (period) presented
(original total acquisition cost of
properties retained, divided by original
total acquisition cost of all properties
in program) (Note 6) 100% 100% 100% 100%
</TABLE>
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995
---------- ---------- ---------- ---------- ---------- ----------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 80 76 72 69 68 63
- from capital gain 0 0 14 0 12 0
- from return of capital (Note 3) 20 24 75 2 15 81
---------- ---------- ---------- ---------- ---------- ----------
Total distributions on GAAP basis (Note 8) 100 100 161 71 95 144
=========== ========== ========== ========== ========== ==========
Source (on cash basis)
- from sales 0 0 72 0 0 57
- from refinancing 0 0 0 0 0 0
- from operations 100 96 87 71 85 79
- from cash flow from prior period 0 1 0 0 10 8
- from return of capital (Note 4) 0 0 0 0 0 0
- from other (Note 5) 0 3 2 0 0 0
---------- ---------- ---------- ---------- ---------- ----------
Total distributions on cash basis (Note 8) 100 100 161 71 95 144
=========== ========== ========== ========== ========== ==========
Total cumulative cash distributions per
$1,000 investment from inception 444 544 705 776 871 1,015
Amount (in percentage terms) remaining
invested in program properties at the
end of each year (period) presented
(original total acquisition cost of
properties retained, divided by original
total acquisition cost of all properties
in program) (Note 6) 100% 100% 92% 92% 85% 85%
</TABLE>
Note 1: The registration statement relating to the offering of units by CNL
Income Fund, Ltd. became effective on April 9, 1986. All income and
expenses include the period from April 9, 1986 to December 31, 1986.
Note 2: Cash generated from operations includes cash received from tenants, plus
distributions from joint ventures, less cash paid for expenses, plus
interest received.
Note 3: Cash distributions presented above as a return of capital on a GAAP
b a sis represent the amount of cash distributions in excess of
accumulated net income on a GAAP basis. Accumulated net income includes
deductions for depreciation and amortization expense and income from
certain non-cash items. This amount is not required to be presented as
a return of capital except for purposes of this table, and CNL Income
Fund, Ltd. has not treated this amount as a return of capital for any
other purpose, except for amounts described in Note 6 below.
Note 4: CNL Income Fund, Ltd. makes its distributions in the current period
rather than in arrears based on estimated operating results. In cases
where distributions exceed cash from operations in the current period,
once finally determined, subsequent distributions are lowered
accordingly in order to avoid any return of capital. This amount is not
required to be presented as a return of capital except for purposes of
this table, and CNL Income Fund, Ltd. has not treated this amount as a
return of capital for any other purpose, except for amounts described in
Note 6 below.
Note 5: The corporate general partner of CNL Income Fund, Ltd. contributed
$65,000, $7,400 and $120,000 during the years ended December 31, 1991,
1992 and 1994, respectively, in connection with the operations of the
partnership.
Note 6: During the year ended December 31, 1992, CNL Income Fund, Ltd. sold one
of its properties. Of the net sales proceeds distributed to the limited
partners, $823,975 was treated as a return of capital for purposes of
calculating the limited partners' preferred return. In addition, during
the year ended December 31, 1994, CNL Income Fund, Ltd. sold a property
and $861,500 of net sales proceeds distributed to limited partners was
treated as a return of capital for purposes of calculating the limited
partners' preferred return. As a result of these returns of capital,
the amount of the limited partners' adjusted capital contributions
(which generally is the limited partners' capital contributions, less
distributions from the sale of a property that are considered to be a
return of capital) was decreased.
Note 7: Cash generated from operations per this table agrees to cash generated
from operations per the statement of cash flows included in the
financial statements of CNL Income Fund, Ltd.
Note 8: As a result of the partnership's change in investor services agents in
1993, distributions are now declared at the end of each quarter and paid
in the following quarter. Since this table generally presents
distributions on a cash basis (rather than amounts declared),
distributions on a cash basis for 1993 only reflect payments for three
quarters. Distributions declared for the quarter ended December 31,
1993 and 1994, are reflected in the 1994 and 1995 columns, respectively,
for distributions on a cash basis due to the payment of such
distributions in January 1994 and 1995, respectively. As a result of
1994 and 1995 distributions being presented on a cash basis,
distributions declared and unpaid as of December 31, 1994 and 1995, are
not included in the 1994 and 1995 totals, respectively.
C-12
<PAGE>
TABLE III
Operating Results of Prior Programs
CNL INCOME FUND II, LTD.
<TABLE>
<CAPTION>
1987
(Note 1) 1988 1989 1990
------------ ------------ ------------ ------------
<S> <C>
Gross revenue $ 891,543 $ 2,379,358 $ 2,416,161 $ 2,413,874
Equity in earnings of joint ventures 6,648 39,579 82,531 103,198
Profit from sale of properties 0 0 0 0
Interest income 303,497 55,545 30,522 31,682
Lease termination income 0 0 0 0
Less: Operating expenses (39,295) (120,160) (127,796) (104,043)
Interest expense 0 0 0 0
Depreciation and amortization (170,283) (442,652) (460,460) (452,752)
------------ ------------ ------------ ------------
Net income - GAAP basis 992,110 1,911,670 1,940,958 1,991,959
============ ============ ============ ============
Taxable income
- from operations 1,010,827 1,931,840 1,963,484 2,021,575
============ ============ ============ ============
- from gain (loss) on sale 0 0 0 0
============ ============ ============ ============
Cash generated from operations
(Notes 2 and 6) 1,195,312 2,311,231 2,430,909 2,442,845
Cash generated from sales (Note 4) 0 0 0 0
Cash generated from refinancing 0 0 0 0
------------ ------------ ------------ ------------
Cash generated from operations, sales
and refinancing 1,195,312 2,311,231 2,430,909 2,442,845
Less: Cash distributions to investors
(Note 7)
- from operating cash flow (1,153,877) (2,281,500) (2,376,000) (2,438,500)
- from sale of properties 0 0 0 0
- from cash flow from prior period 0 0 0 0
- from other 0 0 0 0
------------ ------------ ------------ ------------
Cash generated (deficiency) after
cash distributions 41,435 29,731 54,909 4,345
Special items (not including sales and
refinancing):
Limited partners' capital
contributions 25,000,000 0 0 0
General partners' capital
contributions (Note 5) 1,000 0 0 0
Organization costs (10,000) 0 0 0
Syndication costs (2,445,247) 0 0 0
Acquisition of land and buildings (19,482,309) (2,462,767) (22,330) 0
Lease costs 0 0 (50,000) 0
Investment in joint ventures (307,355) 0 (1,217) (65,000)
Insurance proceeds 0 0 0 65,000
Deposit received from tenant to be
used for renovation 0 0 0 0
Proceeds received from tenant in
connection with termination of
lease 0 0 0 0
Increase in restricted cash 0 0 0 0
Repayment of advance from an
affiliate (20,500) 0 0 0
Reimbursement of syndication and
acquisition costs paid on behalf
of CNL Income Fund II, Ltd. by
related parties (253,510) (1,547) 0 0
Increase in other assets 0 0 0 0
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 2,523,514 (2,434,583) (18,638) 4,345
============ ============ ============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 53 77 78 80
============ ============ ============ ============
- from recapture 0 0 0 0
============ ============ ============ ============
Capital gain (loss) 0 0 0 0
============ ============ ============ ============
</TABLE>
C-13
<PAGE>
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995
------------ ------------ ------------ ------------ ------------
<S> <C>
$ 2,442,225 $ 2,324,625 $ 2,251,780 $ 2,177,384 $ 2,284,560
Gross revenue 126,321 109,302 124,098 132,810 153,677
Equity in earnings of joint ventures 0 0 161,025 40,650 0
Profit from sale of properties 26,047 17,748 14,656 13,484 17,517
Interest income 0 0 0 198,482 0
Lease termination income (136,678) (174,212) (255,962) (195,568) (160,444)
Less: Operating expenses 0 0 0 0 0
Interest expense (448,317) (446,317) (445,065) (441,725) (456,793)
Depreciation and amortization ------------ ------------ ------------ ------------ ------------
2,009,598 1,831,146 1,850,532 1,925,517 1,838,517
Net income - GAAP basis ============ ============ ============ ============ ============
Taxable income 2,031,552 1,936,526 1,694,054 1,912,389 1,786,291
- from operations ============ ============ ============ ============ ============
0 0 108,901 (37,097) 0
- from gain (loss) on sale ============ ============ ============ ============ ============
Cash generated from operations 2,495,952 2,343,924 2,170,177 2,156,604 2,168,367
(Notes 2 and 6) 0 0 746,800 888,210 0
Cash generated from sales (Note 4) 0 0 0 0 0
Cash generated from refinancing ------------ ------------ ------------ ------------ ------------
Cash generated from operations, sales 2,495,952 2,343,924 2,916,977 3,044,814 2,168,367
and refinancing
Less: Cash distributions to investors (2,438,500) (2,343,924) (1,782,000) (2,156,604) (2,168,367)
(Note 7) 0 0 0 0 0
- from operating cash flow 0 (94,576) 0 (281,896) (207,633)
- from sale of properties 0 0 0 0 0
- from cash flow from prior period ------------ ------------ ------------ ------------ ------------
- from other
57,452 (94,576) 1,134,977 606,314 (207,633)
Cash generated (deficiency) after
cash distributions
Special items (not including sales and
refinancing): 0 0 0 0 0
Limited partners' capital
contributions 0 0 0 161,000 0
General partners' capital 0 0 0 0 0
contributions (Note 5)
Organization costs
Syndication costs 0 0 0 0 0
Acquisition of land and buildings 0 0 (637,900) (651,540) (4,323)
Lease costs 0 0 (1,800) 0 (12,426)
Investment in joint ventures 0 0 0 (260,732) (121)
Insurance proceeds 0 0 0 0 0
Deposit received from tenant to be
used for renovation 0 0 0 0 25,000
Proceeds received from tenant in
connection with termination of
lease 0 0 0 198,482 0
Increase in restricted cash 0 0 0 0 (25,000)
Repayment of advance from an
affiliate 0 0 0 0 0
Reimbursement of syndication and
acquisition costs paid on behalf
of CNL Income Fund II, Ltd. by
related parties 0 0 0 0 0
Increase in other assets 0 0 0 (1,750) 0
------------ ------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 57,452 (94,576) 495,277 51,774 (224,503)
============ ============ ============ ============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 80 77 67 76 71
============ ============ ============ ============ ============
- from recapture 0 0 0 0 0
============ ============ ============ ============ ============
Capital gain (loss) 0 0 4 (1) 0
============ ============ ============ ============ ============
</TABLE>
C-14
<PAGE>
TABLE III - CNL INCOME FUND II, LTD. (continued)
<TABLE>
<CAPTION>
1987
(Note 1) 1988 1989 1990
------------ ------------ ------------ ------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 52 76 77 79
- from capital gain 0 0 0 0
- from investment income from
prior period 0 0 0 0
- from return of capital (Note 3) 9 15 18 19
------------ ---------- ------------- ------------
Total distributions on GAAP basis
(Note 7) 61 91 95 98
============ ========== ============= ============
Source (on cash basis)
- from sales 0 0 0 0
- from refinancing 0 0 0 0
- from operations 61 91 95 98
- from cash flow from prior
period 0 0 0 0
- from other 0 0 0 0
------------ ---------- ------------- ------------
Total distributions on cash basis
(Note 7) 61 91 95 98
============ ========== ============= ============
Total cumulative cash distributions
per $1,000 investment from
inception 61 152 247 345
Amount (in percentage terms)
remaining invested in program
properties at the end of each year
(period) presented (original total
acquisition cost of properties
retained, divided by original total
acquisition cost of all properties
in program) (Note 4) 100% 100% 100% 100%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995
------------ ------------ ------------ ------------ ------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 80 73 65 75 73
- from capital gain 0 0 6 2 0
- from investment income from
prior period 0 0 0 2 0
- from return of capital (Note 3) 18 25 0 19 22
------------ ------------ ------------ ------------ ------------
Total distributions on GAAP basis
(Note 7) 98 98 71 98 95
============ ============ ============ ============ ============
Source (on cash basis)
- from sales 0 0 0 0 0
- from refinancing 0 0 0 0 0
- from operations 98 94 71 86 87
- from cash flow from prior
period 0 4 0 12 8
- from other 0 0 0 0 0
------------ ------------ ------------ ------------ ------------
Total distributions on cash basis
(Note 7) 98 98 71 98 95
============ ============ ============ ============ ============
Total cumulative cash distributions
per $1,000 investment from
inception 443 541 612 710 805
Amount (in percentage terms)
remaining invested in program
properties at the end of each year
(period) presented (original total
acquisition cost of properties
retained, divided by original total
acquisition cost of all properties
in program) (Note 4) 100% 100% 100% 99% 99%
</TABLE>
Note 1: The registration statement relating to the offering of units by CNL
Income Fund II, Ltd. became effective on January 2, 1987. All income
and expenses include the period from January 2, 1987 to December 31,
1987.
Note 2: Cash generated from operations includes cash received from tenants,
plus distributions from joint ventures, less cash paid for expenses,
plus interest received.
Note 3: Cash distributions presented above as a return of capital on a GAAP
basis represent the amount of cash distributions in excess of
accumulated net income on a GAAP basis. Accumulated net income
includes deductions for depreciation and amortization expense and
income from certain non-cash items. This amount is not required to be
presented as a return of capital except for purposes of this table, and
CNL Income Fund II, Ltd. has not treated this amount as a return of
capital for any other purpose.
Note 4: In July 1993, the partnership sold one of its properties and received
net sales proceeds of $746,800. In addition, in 1994, the partnership
sold two additional properties and received net sales proceeds of
$888,210. The sale of one of the properties in 1994 qualified as a
like-kind exchange transaction in accordance with Section 1031 of the
Internal Revenue Code. As a result, no gain was recognized for tax
purposes on the sale of this property. The partnership reinvested
approximately $1,554,000 of the net sales proceeds in three additional
properties. The remaining sales proceeds were used to pay partnership
expenses and to meet other working capital needs.
Note 5: The corporate general partner of CNL Income Fund II, Ltd. contributed
$161,000 during the year ended December 31, 1994, in connection with
the operations of the partnership.
Note 6: Cash generated from operations per this table agrees to cash generated
from operations per the statement of cash flows included in the
financial statements of CNL Income Fund II, Ltd.
Note 7: As a result of the partnership's change in investor services agents in
1993, distributions are now declared at the end of each quarter and
paid in the following quarter. Since this table generally presents
d i stributions on a cash basis (rather than amounts declared),
distributions on a cash basis for 1993 only reflect payments for three
quarters. Distributions declared for the quarter ended December 31,
1 9 9 3 and 1994, are reflected in the 1994 and 1995 columns,
respectively, for distributions on a cash basis due to the payment of
such distributions in January 1994 and 1995, respectively. As a result
of 1994 and 1995 distributions being presented on a cash basis,
distributions declared and unpaid as of December 31, 1994 and 1995, are
not included in the 1994 and 1995 totals, respectively.
C-15
<PAGE>
TABLE III
Operating Results of Prior Programs
CNL INCOME FUND III, LTD.
<TABLE>
<CAPTION>
1987
(Note 1) 1988 1989 1990
------------ ------------ ------------ ------------
<S> <C>
Gross revenue $ 55,316 $ 1,607,223 $ 2,487,626 $ 2,504,506
Equity in earnings (losses) of joint
venture 0 0 60,079 61,636
Profit from sale of properties 0 0 0 0
Provision for loss on land and
building (Note 6) 0 0 0 0
Interest income 41,081 233,970 36,574 30,541
Less: Operating expenses (6,340) (111,115) (126,039) (112,087)
Interest expense 0 0 0 0
Depreciation and amortization (19,877) (294,811) (451,668) (458,189)
Minority interest in income of
consolidated joint venture 0 (20,509) (17,240) (17,290)
------------ ------------ ------------ ------------
Net income - GAAP basis 70,180 1,414,758 1,989,332 2,009,117
============ ============ ============ ============
Taxable income
- from operations 76,166 1,427,351 2,012,200 2,073,719
============ ============ ============ ============
- from gain on sale 0 0 0 0
============ ============ ============ ============
Cash generated from operations
(Notes 2 and 7) 91,037 1,756,426 2,410,063 2,416,542
Cash generated from sales 0 0 0 0
Cash generated from refinancing 0 0 0 0
------------ ------------ ------------ ------------
Cash generated from operations,
sales and refinancing 91,037 1,756,426 2,410,063 2,416,542
Less: Cash distributions to investors
(Note 8)
- from operating cash flow (91,037) (1,672,500) (2,376,000) (2,376,000)
- from sale of properties 0 0 0 0
- from cash flow from prior period 0 0 0 0
- from return of capital (Note 4) (2,103) 0 0 0
------------ ------------ ------------ ------------
Cash generated (deficiency) after
cash distributions (2,103) 83,926 34,063 40,542
Special items (not including sales
and refinancing):
Limited partners' capital
contributions 11,345,875 13,654,125 0 0
General partners' capital
contributions (Note 5) 1,000 0 0 0
Organization costs (10,000) 0 0 0
Syndication costs (973,197) (1,398,802) (150) 0
Acquisition of land and buildings (7,269,301) (13,799,321) (165,636) 0
Lease costs 0 0 0 0
Investment in and loans to joint
ventures 0 (650,540) (95,294) 0
Investment of tenant security
deposit 0 (50,000) 0 0
Proceeds from certificate of
deposit 0 0 50,000 0
Decrease (increase) in restricted
cash 0 (29,820) 0 29,820
Reimbursement of syndication and
acquisition costs paid on behalf
of CNL Income Fund III, Ltd. by
related parties (189,613) (393,065) (933) 0
Repayment of advance (advances) to
affiliates (4,129) 4,129 0 0
Collection on loans 0 0 0 0
Distributions to holder of minority
interest 0 (26,348) (20,028) (20,184)
Decrease (increase) in other assets (25,188) (40,869) 11,515 0
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 2,873,344 (2,646,585) (186,463) 50,178
============ ============ ============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 27 61 80 82
============ ============ ============ ============
- from recapture 0 0 0 0
============ ============ ============ ============
Capital gain (loss) 0 0 0 0
============ ============ ============ ============
</TABLE>
C-16
<PAGE>
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995
------------ ------------ ------------ ------------ ------------
<S> <C>
Gross revenue $ 2,473,440 $ 2,379,939 $ 2,458,704 $ 2,496,217 $ 2,339,419
Equity in earnings (losses) of joint
venture (17,482) 31,040 26,521 20,952 22,015
Profit from sale of properties 0 0 0 0 0
Provision for loss on land and
building (Note 6) 0 0 0 0 (207,844)
Interest income 30,119 20,416 16,444 11,951 14,006
Less: Operating expenses (133,947) (256,773) (171,418) (218,737) (233,384)
Interest expense 0 0 0 0 0
Depreciation and amortization (458,189) (457,439) (449,120) (434,491) (434,492)
Minority interest in income of
consolidated joint venture (17,169) (17,242) (24,669) (17,287) (17,205)
------------ ------------ ------------ ------------ ------------
Net income - GAAP basis 1,876,772 1,699,941 1,856,462 1,858,605 1,482,515
============ ============ ============ ============ ============
Taxable income
- from operations 1,864,647 1,854,785 1,922,069 1,925,870 1,728,573
============ ============ ============ ============ ============
- from gain on sale 0 0 0 0 0
============ ============ ============ ============ ============
Cash generated from operations
2,399,351 2,243,737 2,292,541 2,363,371 2,203,437
0 0 0 0 0
(Notes 2 and 7) 0 0 0 0 0
Cash generated from sales ------------ ------------ ------------ ------------ ------------
Cash generated from refinancing
2,399,351 2,243,737 2,292,541 2,363,371 2,203,437
Cash generated from operations,
sales and refinancing
Less: Cash distributions to investors (2,376,000) (2,243,737) (1,782,000) (2,363,371) (2,203,437)
(Note 8) 0 0 0 0 0
- from operating cash flow 0 (132,263) 0 (12,629) (172,563)
- from sale of properties 0 0 0 0 0
- from cash flow from prior period ------------ ------------ ------------ ------------ ------------
- from return of capital (Note 4)
23,351 (132,263) 510,541 (12,629) (172,563)
Cash generated (deficiency) after
cash distributions
Special items (not including sales
and refinancing): 0 0 0 0 0
Limited partners' capital
contributions 0 160,500 0 0 0
General partners' capital 0 0 0 0 0
contributions (Note 5) 0 0 0 0 0
Organization costs 0 0 0 0 0
Syndication costs 0 0 (8,000) (4,000) 0
Acquisition of land and buildings
Lease costs (132,084) (19,728) 0 0 0
Investment in and loans to joint
ventures 0 0 0 0 0
Investment of tenant security
deposit 0 0 0 0 0
Proceeds from certificate of
deposit 0 0 0 0 0
Decrease (increase) in restricted
cash
Reimbursement of syndication and
acquisition costs paid on behalf 0 0 0 0 0
of CNL Income Fund III, Ltd. by
related parties 0 0 0 0 0
Repayment of advance (advances) to 55,000 8,206 27,206 26,173 0
affiliates
Collection on loans (19,854) (20,031) (27,455) (20,033) (19,997)
Distributions to holder of minority 0 0 0 0 0
interest
Decrease (increase) in other assets
------------ ------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items (73,587) (3,316) 502,292 (10,489) (192,560)
============ ============ ============ ============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 74 73 76 76 68
============ ============ ============ ============ ============
- from recapture 0 0 0 0 0
============ ============ ============ ============ ============
Capital gain (loss) 0 0 0 0 0
============ ============ ============ ============ ============
</TABLE>
C-17
<PAGE>
TABLE III - CNL INCOME FUND III, LTD. (continued)
<TABLE>
<CAPTION>
1987
(Note 1) 1988 1989 1990
------------ ------------ ------------ ------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 25 60 79 80
- from capital gain 0 0 0 0
- from investment income from prior
period 0 0 0 0
- from return of capital (Note 3) 9 12 16 15
------------ ------------ ------------ ------------
Total distributions on GAAP basis
(Note 8) 34 72 95 95
============ ============ ============ ============
Source (on cash basis)
- from sales 0 0 0 0
- from refinancing 0 0 0 0
- from operations 33 72 95 95
- from cash flow from prior
period 0 0 0 0
- from return of capital (Note 4) 1 0 0 0
------------ ------------ ------------ ------------
Total distributions on cash basis
(Note 8) 34 72 95 95
============ ============ ============ ============
Total cumulative cash distributions
per $1,000 investment from
inception 34 106 201 296
Amount (in percentage terms)
remaining invested in program
properties at the end of each year
(period) presented (original total
acquisition cost of properties
retained, divided by original total
acquisition cost of all properties
in program) 100% 100% 100% 100%
</TABLE>
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995
------------ ------------ ------------ ------------ ------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis) 74 67 71 74 59
- from investment income 0 0 0 0 0
- from capital gain
- from investment income from prior 0 0 0 0 0
period 21 28 0 21 36
- from return of capital (Note 3) ------------ ------------ ------------ ------------ ------------
Total distributions on GAAP basis 95 95 71 95 95
(Note 8) ============ ============ ============ ============ ============
Source (on cash basis)
- from sales 0 0 0 0 0
- from refinancing 0 0 0 0 0
- from operations 95 90 71 95 88
- from cash flow from prior
period 0 5 0 0 7
- from return of capital (Note 4) 0 0 0 0 0
------------ ------------ ------------ ------------ ------------
Total distributions on cash basis
(Note 8) 95 95 71 95 95
============ ============ ============ ============ ============
Total cumulative cash distributions
per $1,000 investment from
inception 391 486 557 652 747
Amount (in percentage terms)
remaining invested in program
properties at the end of each year
(period) presented (original total
acquisition cost of properties
retained, divided by original total
acquisition cost of all properties
in program) 100% 100% 100% 100% 100%
</TABLE>
Note 1: The registration statement relating to the offering of units by CNL
Income Fund III, Ltd. became effective on August 10, 1987. All income
and expenses include the period from August 10, 1987 to December 31,
1987.
Note 2: Cash generated from operations includes cash received from tenants,
plus distributions from joint ventures, less cash paid for expenses,
plus interest received.
Note 3: Cash distributions presented above as a return of capital on a GAAP
basis represent the amount of cash distributions in excess of
accumulated net income on a GAAP basis. Accumulated net income
includes deductions for depreciation and amortization expense and
income from certain non-cash items. This amount is not required to be
presented as a return of capital except for purposes of this table, and
CNL Income Fund III, Ltd. has not treated this amount as a return of
capital for any other purpose.
Note 4: CNL Income Fund III, Ltd. makes its distributions in the current period
rather than in arrears based on estimated operating results. In cases
where distributions exceed cash from operations in the current period,
o n c e finally determined, subsequent distributions are lowered
accordingly in order to avoid any return of capital. This amount is
not required to be presented as a return of capital except for purposes
of this table, and CNL Income Fund III, Ltd. has not treated this
amount as a return of capital for any other purpose.
Note 5: The corporate general partner of CNL Income Fund III, Ltd. contributed
$160,000 during the year ended December 31, 1992, in connection with
the operations of the partnership.
Note 6: During the year ended December 31, 1995, CNL Income Fund III, Ltd.
recorded an allowance for loss on land and building of $207,844 for
financial reporting purposes relating to one of its properties. The
loss represents the difference between the property's carrying value
and the estimated net realizable value, based on an anticipated sales
price expected to be received from an unrelated third party.
Note 7: Cash generated from operations per this table agrees to cash generated
from operations per the statement of cash flows included in the
financial statements of CNL Income Fund III, Ltd.
Note 8: As a result of the partnership's change in investor services agents in
1993, distributions are now declared at the end of each quarter and
paid in the following quarter. Since this table generally presents
d i stributions on a cash basis (rather than amounts declared),
distributions on a cash basis for 1993 only reflect payments for three
quarters. Distributions declared for the quarter ended December 31,
1 9 9 3 and 1994, are reflected in the 1994 and 1995 columns,
respectively, for distributions on a cash basis due to the payment of
such distributions in January 1994 and 1995, respectively. As a result
of 1994 and 1995 distributions being presented on a cash basis,
distributions declared and unpaid as of December 31, 1994 and 1995, are
not included in the 1994 and 1995 totals, respectively.
C-18
<PAGE>
TABLE III
Operating Results of Prior Programs
CNL INCOME FUND IV, LTD.
<TABLE>
<CAPTION>
1988
(Note 1) 1989 1990 1991
------------ ------------ ------------ ------------
<S> <C>
Gross revenue $ 236,113 $ 2,540,112 $ 2,705,889 $ 2,607,075
Equity in earnings of joint ventures 8,367 92,589 194,745 207,752
Profit from sale of properties 0 0 0 0
Interest income 318,111 150,156 27,203 22,674
Less: Operating expenses (26,424) (175,108) (175,697) (221,842)
Interest expense 0 0 0 0
Depreciation and amortization (50,019) (427,683) (468,389) (467,451)
------------ ------------ ------------ ------------
Net income - GAAP basis 486,148 2,180,066 2,283,751 2,148,208
============ ============ ============ ============
Taxable income
- from operations 481,448 2,095,089 2,222,457 2,034,837
============ ============ ============ ============
- from gain on sale 0 0 0 0
============ ============ ============ ============
Cash generated from operations
(Notes 2 and 7) 552,318 2,606,064 2,773,852 2,551,205
Cash generated from sales (Note 5) 0 0 0 0
Cash generated from refinancing 0 0 0 0
------------ ------------ ------------ ------------
Cash generated from operations, sales
and refinancing 552,318 2,606,064 2,773,852 2,551,205
Less: Cash distributions to investors
(Note 8)
- from operating cash flow (510,163) (2,606,064) (2,760,000) (2,551,205)
- from sale of properties 0 0 0 0
- from cash flow from prior period 0 (11,736) 0 (44,271)
- from return of capital (Note 4) 0 0 0 (22,520)
- from other (Note 6) 0 0 0 (142,004)
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions 42,155 (11,736) 13,852 (208,795)
Special items (not including sales and
refinancing):
Limited partners' capital
contributions 30,000,000 0 0 0
General partners' capital
contributions 1,000 0 0 142,004
Organization costs (10,000) 0 0 0
Syndication costs (2,720,258) (41,440) 0 0
Lease costs 0 0 0 (5,050)
Acquisition of land and buildings (19,131,848) (3,382,106) (221,182) (2,155)
Investment in direct financing
leases 0 (2,236,216) 0 0
Investment in joint ventures (906,725) (375,408) (168) (15,960)
Proceeds from transfer of joint
venture interest 0 95,201 123,394 0
Increase in restricted cash 0 0 0 0
Reimbursement of syndication and
acquisition costs paid on behalf
of CNL Income Fund IV, Ltd. by
related parties (760,951) (5,264) (269) 0
Repayment of advance (advances)
to an affiliate (14,693) 14,693 0 0
Increase in other assets (373,299) (5,790) 0 0
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 6,125,381 (5,948,066) (84,373) (89,956)
============ ============ ============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 31 69 73 67
============ ============ ============ ============
- from recapture 0 0 0 0
============ ============ ============ ============
Capital gain (loss) 0 0 0 0
============ ============ ============ ============
</TABLE>
C-19
<PAGE>
<TABLE>
<CAPTION>
1992 1993 1994 1995
------------ ------------ ------------ ------------
<S> <C>
$ 2,708,496 $ 2,678,068 $ 2,591,454 $ 2,608,216
Gross revenue 198,177 235,457 247,197 245,778
Equity in earnings of joint ventures 0 0 128,592 128,547
Profit from sale of properties 15,370 20,202 27,119 17,578
Interest income (158,464) (209,789) (220,033) (330,843)
Less: Operating expenses 0 0 0 0
Interest expense (471,737) (460,193) (463,805) (458,937)
Depreciation and amortization ------------ ------------ ------------ ------------
2,291,842 2,263,745 2,310,524 2,210,339
Net income - GAAP basis ============ ============ ============ ============
Taxable income 2,236,726 2,229,572 2,164,504 2,153,355
- from operations ============ ============ ============ ============
0 0 124,367 0
- from gain on sale ============ ============ ============ ============
Cash generated from operations 2,745,754 2,653,559 2,544,211 2,670,393
(Notes 2 and 7) 0 0 712,000 518,650
Cash generated from sales (Note 5)
Cash generated from refinancing
0 0 0 0
Cash generated from operations, sales ------------ ------------ ------------ ------------
and refinancing
Less: Cash distributions to investors 2,745,754 2,653,559 3,256,211 3,189,043
(Note 8)
- from operating cash flow
- from sale of properties (2,745,754) (2,070,000) (2,544,211) (2,670,393)
- from cash flow from prior period 0 0 0 0
- from return of capital (Note 4) 0 0 (215,789) (89,607)
- from other (Note 6) 0 0 0 0
(14,246) 0 0 0
Cash generated (deficiency) after cash ------------ ------------ ------------ ------------
distributions
(14,246) 583,559 496,211 429,043
Special items (not including sales and
refinancing):
Limited partners' capital 0 0 0 0
contributions
General partners' capital 21,000 77,500 0 0
contributions 0 0 0 0
Organization costs 0 0 0 0
Syndication costs (2,160) (10,560) (360) (1,800)
Lease costs 0 (34,011) (537,317) (1,628)
Acquisition of land and buildings
Investment in direct financing 0 0 0 0
leases 0 0 0 0
Investment in joint ventures
Proceeds from transfer of joint 0 0 0 0
venture interest 0 0 0 (518,150)
Increase in restricted cash
Reimbursement of syndication and
acquisition costs paid on behalf
of CNL Income Fund IV, Ltd. by (3,028) 0 0 (1,175)
related parties
Repayment of advance (advances) 0 0 0 0
to an affiliate 0 0 0 0
Increase in other assets ------------ ------------ ------------ ------------
Cash generated (deficiency) after cash 1,566 616,488 (41,466) (93,710)
distributions and special items ============ ============ ============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss) 74 74 71 71
- from operations ============ ============ ============ ============
0 0 0 0
- from recapture ============ ============ ============ ============
0 0 4 0
Capital gain (loss) ============ ============ ============ ============
</TABLE>
C-20
<PAGE>
TABLE III - CNL INCOME FUND IV, LTD. (continued)
<TABLE>
<CAPTION>
1988
(Note 1) 1989 1990 1991
------------ ------------ ------------ ------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 32 72 75 71
- from capital gain 0 0 0 0
- from investment income from prior
period 0 0 0 0
- from return of capital (Note 3) 2 15 17 21
------------ ------------ ------------ ------------
Total distributions on GAAP basis (Note 8) 34 87 92 92
============ ============ ============ ============
Source (on cash basis)
- from sales 0 0 0 0
- from refinancing 0 0 0 0
- from operations 34 87 92 85
- from cash flow from prior period 0 0 0 1
- from return of capital (Note 4) 0 0 0 1
- from other (Note 6) 0 0 0 5
------------ ------------ ------------ ------------
Total distributions on cash basis (Note 8) 34 87 92 92
============ ============ ============ ============
Total cumulative cash distributions per
$1,000 investment from inception 34 121 213 305
Amount (in percentage terms) remaining
invested in program properties at the
end of each year (period) presented
(original total acquisition cost of
properties retained, divided by original
total acquisition cost of all properties
in program) (Note 5) 100% 100% 100% 100%
</TABLE>
<TABLE>
<CAPTION>
1992 1993 1994 1995
------------ ------------ ------------ ------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 76 69 72 69
- from capital gain 0 0 4 4
- from investment income from prior
period 0 0 6 0
- from return of capital (Note 3) 16 0 10 19
------------ ------------ ------------ ------------
Total distributions on GAAP basis (Note 8) 92 69 92 92
============ ============ ============ ============
Source (on cash basis)
- from sales 0 0 0 0
- from refinancing 0 0 0 0
- from operations 92 69 85 89
- from cash flow from prior period 0 0 7 3
- from return of capital (Note 4) 0 0 0 0
- from other (Note 6) 0 0 0 0
------------ ------------ ------------ ------------
Total distributions on cash basis (Note 8) 92 69 92 92
============ ============ ============ ============
Total cumulative cash distributions per
$1,000 investment from inception 397 466 558 650
Amount (in percentage terms) remaining
invested in program properties at the
end of each year (period) presented
(original total acquisition cost of
properties retained, divided by original
total acquisition cost of all properties
in program) (Note 5) 100% 100% 100% 100%
</TABLE>
Note 1: The registration statement relating to the offering of units by CNL
Income Fund IV, Ltd. became effective on May 6, 1988. All income and
expenses include the period from May 6, 1988 to December 31, 1988.
Note 2: Cash generated from operations includes cash received from tenants,
plus distributions from joint ventures, less cash paid for expenses,
plus interest received.
Note 3: Cash distributions presented above as a return of capital on a GAAP
basis represent the amount of cash distributions in excess of
accumulated net income on a GAAP basis. Accumulated net income
includes deductions for depreciation and amortization expense and
income from certain non-cash items. This amount is not required to be
presented as a return of capital except for purposes of this table, and
CNL Income Fund IV, Ltd. has not treated this amount as a return of
capital for any other purpose.
Note 4: CNL Income Fund IV, Ltd. makes its distributions in the current period
rather than in arrears based on estimated operating results. In cases
where distributions exceed cash from operations in the current period,
o n c e finally determined, subsequent distributions are lowered
accordingly in order to avoid any return of capital. This amount is
not required to be presented as a return of capital except for purposes
of this table, and CNL Income Fund IV, Ltd. has not treated this amount
as a return of capital for any other purpose.
Note 5: During April 1994, the partnership sold one of its properties for
$712,000. Subsequently, the partnership reinvested $539,794 of the net
sales proceeds in two additional properties. The remaining net sales
proceeds were used by the partnership to meet other working capital
needs of the Partnership. In December 1995, CNL Income Fund IV, Ltd.
sold one of its properties for $520,000 and received net sales proceeds
of $518,650. At December 31, 1995, the net sales proceeds were being
held in an interest bearing escrow account pending the release of funds
by the escrow agent to acquire an additional property or return the
funds to the partnership. In January 1996, CNL Income Fund IV, Ltd.
reinvested the net sales proceeds, along with additional funds, in an
additional property as tenants-in-common with affiliates of its general
partners.
Note 6: The corporate general partner of CNL Income Fund IV, Ltd. contributed
$142,004, $21,000 and $77,500 during the years ended December 31, 1991,
1992 and 1993, respectively, in connection with the operations of the
partnership.
Note 7: Cash generated from operations per this table agrees to cash generated
from operations per the statement of cash flows included in the
financial statements of CNL Income Fund IV, Ltd.
Note 8: As a result of the partnership's change in investor services agents in
1993, distributions are now declared at the end of each quarter and
paid in the following quarter. Since this table generally presents
d i stributions on a cash basis (rather than amounts declared),
distributions on a cash basis for 1993 only reflect payments for three
quarters. Distributions declared for the quarter ended December 31,
1 9 9 3 and 1994, are reflected in the 1994 and 1995 columns,
respectively, for distributions on a cash basis due to the payment of
such distributions in January 1994 and 1995, respectively. As a result
of 1994 and 1995 distributions being presented on a cash basis,
distributions declared and unpaid as of December 31, 1994 and 1995, are
not included in the 1994 and 1995 totals, respectively.
C-21
<PAGE>
TABLE III
Operating Results of Prior Programs
CNL INCOME FUND V, LTD.
<TABLE>
<CAPTION>
1988
(Note 1) 1989 1990 1991
------------ ------------ ------------ ------------
<S> <C>
Gross revenue $ 0 $ 1,122,067 $ 2,527,538 $ 2,507,285
Equity in earnings of unconsolidated
joint ventures 0 448 36,362 51,823
Profit from sale of properties
(Note 4) 0 0 0 0
Interest income 0 459,899 41,407 22,199
Less: Operating expenses 0 (74,006) (132,991) (201,129)
Interest expense 0 0 0 0
Depreciation and amortization 0 (117,848) (335,444) (343,363)
Minority interest in loss
(income) of consolidated
joint venture 0 (20,558) (43,323) (43,040)
------------ ------------ ------------ ------------
Net income - GAAP basis 0 1,370,002 2,093,549 1,993,775
============ ============ ============ ============
Taxable income
- from operations 0 1,268,799 1,983,848 1,842,653
============ ============ ============ ============
- from gain on sale 0 0 0 0
============ ============ ============ ============
Cash generated from operations
(Notes 2 and 6) 0 1,520,757 2,356,888 2,248,777
Cash generated from sales 0 0 0 0
Cash generated from refinancing 0 0 0 0
------------ ------------ ------------ ------------
Cash generated from operations, sales
and refinancing 0 1,520,757 2,356,888 2,248,777
Less: Cash distributions to investors
(Note 7)
- from operating cash flow 0 (1,370,974) (2,286,701) (2,248,777)
- from sale of properties 0 0 0 0
- from cash flow from prior period 0 0 0 (51,606)
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions 0 149,783 70,187 (51,606)
Special items (not including sales and
refinancing):
Limited partners' capital
contributions 24,010 24,976,000 0 0
General partners' capital
contributions 1,000 0 0 45,000
Withdrawal of original limited
partner 0 (10) 0 0
Organization costs 0 (10,000) 0 0
Syndication costs 0 (2,358,755) 0 0
Lease costs 0 0 0 (21,660)
Acquisition of land and buildings 0 (15,843,161) (2,129,325) (47,605)
Loan to tenant 0 0 0 (28,512)
Collections on mortgage note
receivable (Note 4) 0 0 0 0
Collections on note receivable 0 0 0 9,206
Investment in direct financing leases 0 (4,124,100) (38,042) 0
Investment in joint ventures 0 (21,292) (132,376) 0
Investment of tenant security deposit 0 (15,000) 0 0
Proceeds from certificate of deposit 0 0 15,000 0
Proceeds from sale of portion of land
for right of way purposes 0 0 0 0
Proceeds from sale of joint venture
interest 0 0 365,000 0
Increase in other assets (64) (95,773) 0 0
Reimbursement of syndication and
acquisition costs paid on behalf
of CNL Income Fund V, Ltd. by
related parties 0 (599,934) (4,792) 0
Distributions to holder of minority
interest 0 (23,319) (49,169) (29,086)
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 24,946 2,034,439 (1,903,517) (124,263)
============ ============ ============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 0 61 79 73
============ ============ ============ ============
- from recapture 0 0 0 0
============ ============ ============ ============
Capital gain (loss) 0 0 0 0
============ ============ ============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1992 1993 1994 1995
------------ ------------ ------------ ------------
<S> <C>
Gross revenue $ 2,405,496 $ 2,347,566 $ 2,292,921 $ 2,200,192
Equity in earnings of unconsolidated
joint ventures 49,839 45,711 47,219 47,018
Profit from sale of properties
(Note 4) 0 0 0 5,924
Interest income 15,127 10,650 7,564 55,785
Less: Operating expenses (153,618) (281,407) (208,805) (243,187)
Interest expense 0 0 0 0
Depreciation and amortization (345,847) (345,485) (403,147) (397,735)
Minority interest in loss
(income) of consolidated
joint venture 4,434 17,859 7,277 11,823
------------ ------------ ------------ ------------
Net income - GAAP basis 1,975,431 1,794,894 1,743,029 1,679,820
============ ============ ============ ============
Taxable income
- from operations 1,922,820 1,733,453 1,746,181 1,514,341
============ ============ ============ ============
- from gain on sale 0 0 0 5,855
============ ============ ============ ============
Cash generated from operations
(Notes 2 and 6) 2,354,590 2,215,658 2,177,079 2,142,918
Cash generated from sales 0 0 0 0
Cash generated from refinancing 0 0 0 0
------------ ------------ ------------ ------------
Cash generated from operations, sales
and refinancing 2,354,590 2,215,658 2,177,079 2,142,918
Less: Cash distributions to investors
(Note 7)
- from operating cash flow (2,300,053) (1,735,129) (2,177,079) (2,142,918)
- from sale of properties 0 0 0 0
- from cash flow from prior period 0 0 (122,921) (157,082)
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions 54,537 480,529 (122,921) (157,082)
Special items (not including sales and
refinancing):
Limited partners' capital
contributions 0 0 0 0
General partners' capital
contributions 0 0 0 31,500
Withdrawal of original limited
partner 0 0 0 0
Organization costs
Syndication costs 0 0 0 0
Lease costs 0 0 0 0
Acquisition of land and buildings 0 0 0 0
Loan to tenant 0 0 0 0
Collections on mortgage note 0 0 0 0
receivable (Note 4)
Collections on note receivable 0 0 0 11,409
Investment in direct financing leases 19,306 0 0 0
Investment in joint ventures 0 0 0 0
Investment of tenant security deposit 0 0 0 0
Proceeds from certificate of deposit 0 0 0 0
Proceeds from sale of portion of land 0 0 0 0
for right of way purposes
Proceeds from sale of joint venture 0 0 0 7,625
interest
Increase in other assets 0 0 0 0
Reimbursement of syndication and 0 0 0 0
acquisition costs paid on behalf
of CNL Income Fund V, Ltd. by
related parties 0 0 0 0
Distributions to holder of minority
interest (26,731) (10,725) 0 0
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 47,112 469,804 (122,921) (106,548)
============ ============ ============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 76 69 69 60
============ ============ ============ ============
- from recapture 0 0 0 0
============ ============ ============ ============
Capital gain (loss) 0 0 0 0
============ ============ ============ ============
</TABLE>
C-22
<PAGE>
TABLE III - CNL INCOME FUND V, LTD. (continued)
<TABLE>
<CAPTION>
1988
(Note 1) 1989 1990 1991
------------ ------------ ------------ ------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 0 66 83 79
- from capital gain 0 0 0 0
- from investment income from prior
period 0 0 0 0
- from return of capital (Note 3) 0 0 8 13
------------ ------------ ------------ ------------
Total distributions on GAAP basis
(Note 7) 0 66 91 92
============ ============ ============ ============
Source (on cash basis)
- from sales 0 0 0 0
- from refinancing 0 0 0 0
- from operations 0 66 91 90
- from cash flow from prior
period 0 0 0 2
------------ ------------ ------------ ------------
Total distributions on cash basis
(Note 7) 0 66 91 92
============ ============ ============ ============
Total cumulative cash distributions
per $1,000 investment from inception 0 66 157 249
Amount (in percentage terms) remaining
invested in program properties at the
end of each year (period) presented
(original total acquisition cost of
properties retained, divided by original
total acquisition cost of all properties
in program) (Note 4) N/A 100% 100% 100%
</TABLE>
<TABLE>
<CAPTION>
1992 1993 1994 1995
------------ ------------ ------------ ------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 78 69 69 66
- from capital gain 0 0 0 0
- from investment income from prior
period 0 0 2 0
- from return of capital (Note 3) 14 0 21 26
------------ ------------ ------------ ------------
Total distributions on GAAP basis
(Note 7) 92 69 92 92
============ ============ ============ ============
Source (on cash basis)
- from sales 0 0 0 0
- from refinancing 0 0 0 0
- from operations 92 69 87 86
- from cash flow from prior
period 0 0 5 6
------------ ------------ ------------ ------------
Total distributions on cash basis
(Note 7) 92 69 92 92
============ ============ ============ ============
Total cumulative cash distributions
per $1,000 investment from inception 341 410 502 594
Amount (in percentage terms) remaining
invested in program properties at the
end of each year (period) presented
(original total acquisition cost of
properties retained, divided by original
total acquisition cost of all properties
in program) (Note 4) 100% 100% 100% 95%
</TABLE>
Note 1: The registration statement relating to the offering of units by CNL
Income Fund V, Ltd. became effective on December 16, 1988. Activities
through February 1, 1989, were devoted to organization of the
partnership and operations had not begun.
Note 2: Cash generated from operations includes cash received from tenants,
plus distributions from joint ventures, less cash paid for expenses,
plus interest received.
Note 3: Cash distributions presented above as a return of capital on a GAAP
basis represent the amount of cash distributions in excess of
accumulated net income on a GAAP basis. Accumulated net income includes
deductions for depreciation and amortization expense and income from
certain non-cash items. This amount is not required to be presented as
a return of capital except for purposes of this table, and CNL Income
Fund V, Ltd. has not treated this amount as a return of capital for any
other purpose.
Note 4: In August 1995, CNL Income Fund V, Ltd. sold one of its properties to
the tenant and in connection therewith accepted a promissory note in
the principal sum of $1,040,000, collateralized by a mortgage on the
property. The note bears interest at a rate of 10.25% per annum and is
being collected in 59 equal monthly installments of $9,319, with a
balloon payment of $1,006,004 due in July 2000. In accordance with
generally accepted accounting principles, the partnership recorded the
sale using the installment method; therefore, the gain on sale of the
property was deferred and is being recognized as income proportionately
as payments under the mortgage note are collected. The partnership
recognized a gain of $1,571 for financial reporting purposes for the
year ended December 31, 1995, and had a deferred gain of $141,641 at
December 31, 1995. The general partners anticipate that payments
collected under the mortgage note will be reinvested in additional
properties or used for other partnership purposes.
Note 5: The corporate general partner of CNL Income Fund V, Ltd. contributed
$45,000 and $31,500 during the years ended December 31, 1991 and 1995,
respectively.
Note 6: Cash generated from operations per this table agrees to cash generated
from operations per the statement of cash flows included in the
financial statements of CNL Income Fund V, Ltd.
Note 7: As a result of the partnership's change in investor services agents in
1993, distributions are now declared at the end of each quarter and
paid in the following quarter. Since this table generally presents
d i stributions on a cash basis (rather than amounts declared),
distributions on a cash basis for 1993 only reflect payments for three
quarters. Distributions declared for the quarter ended December 31,
1 9 9 3 and 1994, are reflected in the 1994 and 1995 columns,
respectively, for distributions on a cash basis due to the payment of
such distributions in January 1994 and 1995, respectively. As a result
of 1994 and 1995 distributions being presented on a cash basis,
distributions declared and unpaid as of December 31, 1994 and 1995, are
not included in the 1994 and 1995 totals, respectively.
C-23
<PAGE>
TABLE III
Operating Results of Prior Programs
CNL INCOME FUND VI, LTD.
<TABLE>
<CAPTION>
1988
(Note 1) 1989 1990 1991
------------ ------------ ------------ ------------
<S> <C>
Gross revenue $ 0 $ 83,266 $ 2,760,167 $ 3,378,012
Equity in earnings of unconsolidated
joint ventures 0 0 12,246 41,607
Profit (Loss) from sale of properties 0 0 0 0
Interest income 0 527,128 417,935 43,401
Less: Operating expenses 0 (33,611) (144,999) (234,452)
Interest expense 0 0 0 0
Depreciation and amortization 0 (14,823) (405,738) (508,761)
Minority interest in income of
consolidated joint venture 0 0 (13,116) (17,873)
------------ ------------ ------------ ------------
Net income - GAAP basis 0 561,960 2,626,495 2,701,934
============ ============ ============ ============
Taxable income
- from operations 0 559,399 2,490,985 2,495,354
============ ============ ============ ============
- from gain on sale (Note 4) 0 0 0 0
============ ============ ============ ============
Cash generated from operations
(Notes 2 and 5) 0 575,380 2,931,535 3,198,715
Cash generated from sales (Note 4) 0 0 0 0
Cash generated from refinancing 0 0 0 0
------------ ------------ ------------ ------------
Cash generated from operations, sales
and refinancing 0 575,380 2,931,535 3,198,715
Less: Cash distributions to investors
(Note 6)
- from operating cash flow 0 (567,092) (2,876,824) (3,150,375)
- from sale of properties 0 0 0 0
- from cash flow from prior period 0 0 0 0
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions 0 8,288 54,711 48,340
Special items (not including sales and
refinancing):
Limited partners' capital
contributions 10 33,833,625 1,166,375 0
General partners' capital
contributions 1,000 0 0 0
Withdrawal of original limited
partner 0 (10) 0 0
Organization costs 0 (10,000) 0 0
Syndication costs 0 (3,105,276) (136,045) 0
Acquisition of land and buildings 0 (12,005,638) (13,096,593) (601,145)
Investment in direct financing
leases 0 (810,522) (2,836,022) (829)
Investment in joint ventures 0 0 (322,916) (150,378)
Proceeds from transfer of joint
venture interest 0 0 0 21,000
Lease costs 0 0 0 (14,200)
Loan to tenant 0 0 (200,920) 0
Collections on loan to tenant 0 0 0 200,920
Collections on mortgage note
receivable 0 0 0 0
Decrease(increase) in other assets (72) (1,044,052) 0 0
Reimbursement of syndication and
acquisition costs paid on behalf
of CNL Income Fund VI, Ltd. by
related parties 0 (773,705) (92,589) (23,408)
Distributions to holder of minority
interest 0 0 (16,590) (21,959)
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 938 16,092,710 (15,480,589) (541,659)
============ ============ ============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 0 32 71 71
============ ============ ============ ============
- from recapture 0 0 0 0
============ ============ ============ ============
Capital gain (loss) (Note 4) 0 0 0 0
============ ============ ============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1992 1993 1994 1995
------------ ------------ ------------ ------------
<S> <C>
Gross revenue $ 3,552,597 $ 3,595,729 $ 3,394,257 $ 3,331,584
Equity in earnings of unconsolidated
joint ventures 42,537 44,350 70,499 83,483
Profit (Loss) from sale of properties 0 0 332,664 95,913
Interest income 17,257 15,548 24,933 43,352
Less: Operating expenses (190,190) (163,373) (196,287) (182,432)
Interest expense 0 0 0 0
Depreciation and amortization (516,527) (516,717) (510,246) (490,386)
Minority interest in income of
consolidated joint venture (19,172) (19,845) (20,792) (20,133)
------------ ------------ ------------ ------------
Net income - GAAP basis 2,886,502 2,955,692 3,095,028 2,861,381
============ ============ ============ ============
Taxable income
- from operations 2,601,278 2,732,663 2,724,815 2,566,953
============ ============ ============ ============
- from gain on sale (Note 4) 0 0 0 92,999
============ ============ ============ ============
Cash generated from operations
(Notes 2 and 5) 3,203,357 3,194,686 3,253,674 3,222,430
Cash generated from sales (Note 4) 0 0 1,429,481 899,503
Cash generated from refinancing 0 0 0 0
------------ ------------ ------------ ------------
Cash generated from operations, sales
and refinancing 3,203,357 3,194,686 4,683,155 4,121,933
Less: Cash distributions to investors
(Note 6)
- from operating cash flow (3,150,252) (2,382,184) (3,150,000) (3,150,000)
- from sale of properties 0 0 0 0
- from cash flow from prior period 0 0 0 0
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions 53,105 812,502 1,533,155 971,933
Special items (not including sales and
refinancing):
Limited partners' capital
contributions 0 0 0 0
General partners' capital
contributions 0 0 0 0
Withdrawal of original limited
partner 0 0 0 0
Organization costs 0 0 0 0
Syndication costs 0 0 0 0
Acquisition of land and buildings (26,500) 0 (980,904) (25,646)
Investment in direct financing
leases 0 0 0 (723,237)
Investment in joint ventures (6,171) 0 (455,146) 0
Proceeds from transfer of joint
venture interest 0 0 0 0
Lease costs (4,800) (3,600) (1,500) (3,300)
Loan to tenant 0 0 0 0
Collections on loan to tenant 0 0 0 0
Collections on mortgage note
receivable 0 0 0 2,967
Decrease(increase) in other assets 4,067 0 0 0
Reimbursement of syndication and
acquisition costs paid on behalf
of CNL Income Fund VI, Ltd. by
related parties 0 0 0 (1,375)
Distributions to holder of minority
interest (23,229) (23,821) (22,077) (26,824)
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items (3,528) 785,081 73,528 194,518
============ ============ ============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 74 77 77 73
============ ============ ============ ============
- from recapture 0 0 0 0
============ ============ ============ ============
Capital gain (loss) (Note 4) 0 0 0 3
============ ============ ============ ============
</TABLE>
C-24
<PAGE>
TABLE III - CNL INCOME FUND VI, LTD. (continued)
<TABLE>
<CAPTION>
1988
(Note 1) 1989 1990 1991
------------ ------------ ------------ ------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 0 32 74 76
- from capital gain 0 0 0 0
- from investment income from prior
period 0 0 0 0
- from return of capital (Note 3) 0 0 8 14
------------ ------------ ------------ ------------
Total distributions on GAAP basis
(Note 6) 0 32 82 90
============ ============ ============ ============
Source (on cash basis)
- from operations 0 32 82 90
- from sale of partnership interests 0 0 0 0
- from cash flow from prior period 0 0 0 0
------------ ------------ ------------ ------------
Total distributions on cash basis (Note 6) 0 32 82 90
============ ============ ============ ============
Total cumulative cash distributions per
$1,000 investment from inception 0 32 114 204
Amount (in percentage terms) remaining
invested in program properties at the
end of each year (period) presented
(original total acquisition cost of
properties retained, divided by original
total acquisition cost of all properties
in program) (Note 4) N/A 100% 100% 100%
</TABLE>
<TABLE>
<CAPTION>
1992 1993 1994 1995
------------ ------------ ------------ ------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 82 68 78 78
- from capital gain 0 0 10 3
- from investment income from prior
period 0 0 2 9
- from return of capital (Note 3) 8 0 0 0
------------ ------------ ------------ ------------
Total distributions on GAAP basis
(Note 6) 90 68 90 90
============ ============ ============ ============
Source (on cash basis)
- from operations 90 68 90 90
- from sale of partnership interests 0 0 0 0
- from cash flow from prior period 0 0 0 0
------------ ------------ ------------ ------------
Total distributions on cash basis (Note 6) 90 68 90 90
============ ============ ============ ============
Total cumulative cash distributions per
$1,000 investment from inception 294 362 452 542
Amount (in percentage terms) remaining
invested in program properties at the
end of each year (period) presented
(original total acquisition cost of
properties retained, divided by original
total acquisition cost of all properties
in program) (Note 4) 100% 100% 100% 100%
</TABLE>
Note 1: Pursuant to a registration statement on Form S-11 under the Securities
Act of 1933, as amended, CNL Income Fund VI, Ltd. ("CNL VI") and CNL
Income Fund V, Ltd. each registered for sale $25,000,000 units of
limited partnership interest ("Units"). The offering of Units of CNL
Income Fund V, Ltd. commenced December 16, 1988. Pursuant to the
registration statement, CNL VI's offering of Units could not commence
until the offering of Units of CNL Income Fund V, Ltd. was terminated.
CNL Income Fund V, Ltd. terminated its offering of Units on June 7,
1989, at which time the maximum offering proceeds of $25,000,000 had
been received. Upon the termination of the offering of Units of CNL
Income Fund V, Ltd., CNL VI commenced its offering of Units.
Activities through June 22, 1989, were devoted to organization of the
partnership and operations had not begun.
Note 2: Cash generated from operations includes cash received from tenants,
plus distributions from joint ventures, less cash paid for expenses,
plus interest received.
Note 3: Cash distributions presented above as a return of capital on a GAAP
basis represent the amount of cash distributions in excess of
accumulated net income on a GAAP basis. Accumulated net income
includes deductions for depreciation and amortization expense and
income from certain non-cash items. This amount is not required to be
presented as a return of capital except for purposes of this table, and
CNL Income Fund VI, Ltd. has not treated this amount as a return of
capital for any other purpose.
Note 4: During the year ended December 31, 1994, the partnership sold two of
its properties and received net proceeds of $1,429,481. The sale of
these properties was structured to qualify as like-kind exchange
transactions in accordance with Section 1031 of the Internal Revenue
Code. As a result, no gain or loss was recognized for federal income
tax purposes. Subsequent to the sale of these properties, the
partnership reinvested the sales proceeds in two additional properties.
In June 1995, CNL Income Fund VI, Ltd. sold a property and received net
sales proceeds of $899,503. In August 1995, the partnership reinvested
$724,612 in an additional property. In addition, in January 1996, the
p a rtnership reinvested the remaining net sales proceeds in an
additional property as tenants-in-common with affiliates of the general
partners.
Note 5: Cash generated from operations per this table agrees to cash generated
from operations per the statement of cash flows included in the
financial statements of CNL Income Fund VI, Ltd.
Note 6: As a result of the partnership's change in investor services agents in
1993, distributions are now declared at the end of each quarter and
paid in the following quarter. Since this table generally presents
d i stributions on a cash basis (rather than amounts declared),
distributions on a cash basis for 1993 only reflect payments for three
quarters. Distributions declared for the quarter ended December 31,
1 9 9 3 and 1994, are reflected in the 1994 and 1995 columns,
respectively, for distributions on a cash basis due to the payment of
such distributions in January 1994 and 1995, respectively. As a result
of 1994 and 1995 distributions being presented on a cash basis,
distributions declared and unpaid as of December 31, 1994 and 1995, are
not included in the 1994 and 1995 totals, respectively.
C-25
<PAGE>
TABLE III
Operating Results of Prior Programs
CNL INCOME FUND VII, LTD.
<TABLE>
<CAPTION>
1989
(Note 1) 1990 1991 1992
------------ ------------ ------------ ------------
<S> <C>
Gross revenue $ 0 $ 1,107,671 $ 2,922,456 $ 2,827,336
Equity in earnings of unconsolidated
joint ventures 0 21,785 57,994 115,763
Profit (Loss) from sale of properties
(Note 6) 0 0 0 110,344
Interest income 0 352,475 87,982 33,395
Less: Operating expenses 0 (71,687) (151,806) (149,202)
Interest expense 0 0 0 0
Depreciation and amortization 0 (171,276) (369,363) (365,245)
Other (Note 7) 0 0 0 0
Minority interest in income of
consolidated joint venture 0 (8,113) (18,999) (19,338)
------------ ------------ ------------ ------------
Net income - GAAP basis 0 1,230,855 2,528,264 2,553,053
============ ============ ============ ============
Taxable income
- from operations 0 1,187,723 2,395,751 2,286,276
============ ============ ============ ============
- from gain on sale (Notes 4 and 5) 0 0 0 65,924
============ ============ ============ ============
Cash generated from operations
(Notes 2 and 8) 0 1,387,548 2,767,626 2,683,316
Cash generated from sales (Notes 4
and 5) 0 0 0 700,000
Cash generated from refinancing 0 0 0 0
------------ ------------ ------------ ------------
Cash generated from operations, sales
and refinancing 0 1,387,548 2,767,626 3,383,316
Less: Cash distributions to investors
(Note 9)
- from operating cash flow 0 (1,255,979) (2,640,400) (2,683,316)
- from sale of properties 0 0 0 0
- from cash flow from prior period 0 0 0 (16,688)
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions 0 131,569 127,226 683,312
Special items (not including sales and
refinancing):
Limited partners' capital
contributions 0 30,000,000 0 0
General partners' capital
contributions 1,000 0 0 0
Organization costs 0 (10,000) 0 0
Syndication costs 0 (2,695,286) 445 0
Acquisition of land and buildings 0 (18,596,877) (1,219,126) (284,264)
Collections on mortgage notes
receivable (Note 6) 0 0 0 0
Investment in direct financing leases 0 (4,758,884) 0 (338,216)
Investment in joint ventures 0 (365,168) (1,115,881) (53,542)
Return of capital from joint ventures 0 0 0 0
Increase in other assets (76) (244,822) 0 0
Reimbursement of syndication and
acquisition costs paid on behalf
of CNL Income Fund VII, Ltd. by
related parties 0 (853,348) (8,665) (117)
Distributions to holder of minority
interest 0 (8,246) (18,940) (19,221)
Other 0 0 1,522 0
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 924 2,598,938 (2,233,419) (12,048)
============ ============ ============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 0 51 79 75
============ ============ ============ ============
- from recapture 0 0 0 0
============ ============ ============ ============
Capital gain (loss) (Notes 4 and 5) 0 0 0 2
============ ============ ============ ============
</TABLE>
C-26
<PAGE>
<TABLE>
<CAPTION>
1993 1994 1995
------------ ------------ ------------
<S> <C>
Gross revenue $ 2,837,025 $ 2,764,901 $ 2,502,152
Equity in earnings of unconsolidated
joint ventures 115,908 142,974 154,937
Profit (Loss) from sale of properties
(Note 6) 0 77,379 (5,135)
Interest income 19,348 28,254 78,522
Less: Operating expenses (157,425) (139,845) (225,784)
Interest expense 0 0 0
Depreciation and amortization (362,070) (351,565) (329,350)
Other (Note 7) 0 0 (174,466)
Minority interest in income of
consolidated joint venture (18,876) (18,798) (18,728)
------------ ------------ ------------
Net income - GAAP basis 2,433,910 2,503,300 1,982,148
============ ============ ============
Taxable income
- from operations 2,269,497 2,283,272 2,171,377
============ ============ ============
- from gain on sale (Notes 4 and 5) 0 45,612 (179,648)
============ ============ ============
Cash generated from operations
(Notes 2 and 8) 2,661,182 2,734,382 2,484,538
Cash generated from sales (Notes 4
and 5)
Cash generated from refinancing 0 869,036 0
0 0 0
Cash generated from operations, sales ------------ ------------ ------------
and refinancing
Less: Cash distributions to investors 2,661,182 3,603,418 2,484,538
(Note 9)
- from operating cash flow
- from sale of properties (2,046,235) (2,700,002) (2,484,538)
- from cash flow from prior period 0 0 0
0 0 (275,464)
Cash generated (deficiency) after cash ------------ ------------ ------------
distributions
Special items (not including sales and 614,947 903,416 (275,464)
refinancing):
Limited partners' capital
contributions
General partners' capital 0 0 0
contributions
Organization costs 0 0 0
Syndication costs 0 0 0
Acquisition of land and buildings 0 0 0
Collections on mortgage notes (4,678) (397,536) 0
receivable (Note 6)
Investment in direct financing leases 0 0 12,725
Investment in joint ventures 0 0 0
Return of capital from joint ventures (48) (425,887) 0
Increase in other assets 0 0 0
Reimbursement of syndication and 0 0 0
acquisition costs paid on behalf
of CNL Income Fund VII, Ltd. by
related parties 0 0 0
Distributions to holder of minority
interest (19,092) (20,464) (17,240)
Other 0 0 0
------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 591,129 59,529 (279,979)
============ ============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 75 75 72
============ ============ ============
- from recapture 0 0 0
============ ============ ============
Capital gain (loss) (Notes 4 and 5) 0 2 (6)
============ ============ ============
</TABLE>
C-27
<PAGE>
TABLE III - CNL INCOME FUND VII, LTD. (continued)
<TABLE>
<CAPTION>
1989
(Note 1) 1990 1991 1992
------------ ------------ ------------ ------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 0 52 83 81
- from capital gain 0 0 0 4
- from investment income from
prior period 0 0 0 0
- from return of capital (Note 3) 0 2 5 5
------------ ------------ ------------ ------------
Total distributions on GAAP basis
(Note 9) 0 54 88 90
============ ============ ============ ============
Source (on cash basis)
- from sales 0 0 0 0
- from refinancing 0 0 0 0
- from operations 0 54 88 89
- from cash flow from prior period 0 0 0 1
------------ ------------ ------------ ------------
Total distributions on cash basis
(Note 9) 0 54 88 90
============ ============ ============ ============
Total cumulative cash distributions
per $1,000 investment from inception 0 54 142 232
Amount (in percentage terms) remaining
invested in program properties at the
end of each year (period) presented
(original total acquisition cost of
properties retained, divided by original
total acquisition cost of all properties
in program) (Notes 4, 5 and 6) N/A 100% 100% 100%
</TABLE>
<TABLE>
<CAPTION>
1993 1994 1995
------------ ------------ ------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 68 80 65
- from capital gain 0 3 0
- from investment income from
prior period 0 7 5
- from return of capital (Note 3) 0 0 22
------------ ------------ ------------
Total distributions on GAAP basis
(Note 9) 68 90 92
============ ============ ============
Source (on cash basis)
- from sales 0 0 0
- from refinancing 0 0 0
- from operations 68 90 83
- from cash flow from prior period 0 0 9
------------ ------------ ------------
Total distributions on cash basis
(Note 9) 68 90 92
============ ============ ============
Total cumulative cash distributions
per $1,000 investment from inception 300 390 482
Amount (in percentage terms) remaining
invested in program properties at the
end of each year (period) presented
(original total acquisition cost of
properties retained, divided by original
total acquisition cost of all properties
in program) (Notes 4, 5 and 6) 100% 100% 94%
</TABLE>
Note 1: The registration statement relating to the offering of units by CNL
Income Fund VII, Ltd. became effective on January 30, 1990. Activities
through March 8, 1990, were devoted to organization of the partnership
and operations had not begun.
Note 2: Cash generated from operations includes cash received from tenants,
plus distributions from joint ventures, less cash paid for expenses,
plus interest received.
Note 3: Cash distributions presented above as a return of capital on a GAAP
basis represent the amount of cash distributions in excess of
accumulated net income on a GAAP basis. Accumulated net income
includes deductions for depreciation and amortization expense and
income from certain non-cash items. This amount is not required to be
presented as a return of capital except for purposes of this table, and
CNL Income Fund VII, Ltd. has not treated this amount as a return of
capital for any other purpose.
Note 4: On May 19, 1992, one of the partnership's properties was taken by the
State Department of Transportation as a result of condemnation
proceedings, and the partnership received condemnation proceeds of
$700,000. Since this property was held by the partnership for less
than two years and was involuntarily taken in condemnation proceedings,
the partnership has elected to defer a portion of the gain from the
sale for tax purposes and reinvest a majority of the proceeds in other
restaurant properties.
Note 5: In May 1994, the partnership sold one of its properties and received
net sales proceeds of $869,036. Subsequent to the sale of this
property, the partnership used the net sales proceeds to reinvest in
two additional properties or for other partnership purposes.
Note 6: In August 1995, CNL Income Fund VII, Ltd. sold one of its properties to
the tenant and in connection therewith accepted a promissory note in
the principal sum of $1,160,000, collateralized by a mortgage on the
property. The note bears interest at a rate of 10.25% per annum and is
being collected in 59 equal monthly installments of $10,395, with a
balloon payment of $1,106,657 due in July 2000. In accordance with
generally accepted accounting principles, the partnership recorded the
sale using the installment method; therefore, the gain on sale of the
property was deferred and is being recognized as income proportionately
as payments under the mortgage note are being collected. The
partnership recognized a gain of $1,421 for financial reporting
purposes for the year ended December 31, 1995, and had a deferred gain
of $128,065 at December 31, 1995. The general partners anticipate that
payments collected under the mortgage note will be reinvested in
additional properties or used for other partnership purposes. In
addition, in December 1995, CNL Income Fund VII, Ltd. sold one of its
properties to the subtenant of the property and in connection therewith
a c cepted a promissory note in the principal sum of $240,000,
collateralized by a mortgage on the property. The note bears interest
at a rate of 10% per annum and is being collected in 119 equal
installments of $2,106, with a balloon payment of $218,252 due December
2005. Proceeds received from payments collected under the mortgage
note are expected to be distributed to the limited partners or used for
other partnership purposes.
Note 7: During the year ended December 31, 1995, the building located on one of
the partnership's properties was demolished. As a result, the
undepreciated cost of the building was charged to income for financial
reporting purposes.
C-28
<PAGE>
Note 8: Cash generated from operations per this table agrees to cash generated
from operations per the statement of cash flows included in the
financial statements of CNL Income Fund VII, Ltd.
Note 9: As a result of the partnership's change in investor services agents in
1993, distributions are now declared at the end of each quarter and
paid in the following quarter. Since this table generally presents
d i stributions on a cash basis (rather than amounts declared),
distributions on a cash basis for 1993 only reflect payments for three
quarters. Distributions declared for the quarter ended December 31,
1 9 9 3 and 1994, are reflected in the 1994 and 1995 columns,
respectively, for distributions on a cash basis due to the payment of
such distributions in January 1994 and 1995, respectively. As a result
of 1994 and 1995 distributions being presented on a cash basis,
distributions declared and unpaid as of December 31, 1994 and 1995, are
not included in the 1994 and 1995 totals, respectively.
C-29
<PAGE>
TABLE III
Operating Results of Prior Programs
CNL INCOME FUND VIII, LTD.
<TABLE>
<CAPTION>
1989
(Note 1) 1990 1991 1992
------------ ------------ ------------ ------------
<S> <C>
Gross revenue $ 0 $ 262,113 $ 2,719,978 $ 3,346,555
Equity in earnings of unconsolidated
joint ventures 0 0 103,195 241,148
Profit (Loss) from sale of properties 0 0 7,047 0
Interest income 0 40,345 321,312 33,477
Less: Operating expenses 0 (18,274) (151,188) (156,144)
Interest expense 0 0 0 0
Depreciation and amortization 0 (42,458) (182,535) (226,377)
Minority interest in income of
consolidated joint venture 0 0 (10,168) (14,362)
------------ ------------ ------------ ------------
Net income - GAAP basis 0 241,726 2,807,641 3,224,297
============ ============ ============ ============
Taxable income
- from operations 0 238,870 2,470,765 2,750,886
============ ============ ============ ============
- from gain (loss) on sale 0 0 6,517 0
============ ============ ============ ============
Cash generated from operations
(Notes 2 and 7) 0 280,920 2,842,932 3,219,203
Cash generated from sales (Notes 4
and 5) 0 0 347,987 0
Cash generated from refinancing 0 0 0 0
------------ ------------ ------------ ------------
Cash generated from operations, sales
and refinancing 0 280,920 3,190,919 3,219,203
Less: Cash distributions to investors
(Note 8)
- from operating cash flow 0 (266,364) (2,573,695) (3,127,143)
- from sale of properties 0 0 0 0
- from cash flow from prior period 0 0 0 0
- from other 0 0 0 0
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 0 14,556 617,224 92,060
Special items (not including sales and
refinancing):
Limited partners' capital
contributions 0 21,343,892 13,656,108 0
General partners' capital
contributions 1,000 0 0 0
Organization costs 0 (10,000) 0 0
Syndication costs 0 (1,880,317) (1,165,045) 0
Acquisition of land and buildings 0 (11,468,731) (3,899,575) (1,119,387)
Investment in direct financing
leases 0 (2,053,171) (9,101,514) (1,344)
Investment in joint ventures 0 0 (3,008,634) (13)
Return of capital from joint
ventures 0 0 0 0
Increase in other assets (76) (380,641) 0 0
Reimbursement of syndication and
acquisition costs paid on behalf
of CNL Income Fund VIII, Ltd. by
related parties 0 (1,018,263) (69,490) (3,072)
Distributions to holder of minority
interest 0 0 (9,074) (12,594)
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 924 4,547,325 (2,980,000) (1,044,350)
============ ============ ============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 0 20 73 78
============ ============ ============ ============
- from recapture 0 0 0 0
============ ============ ============ ============
Capital gain (loss) 0 0 0 0
============ ============ ============ ============
</TABLE>
C-30
<PAGE>
<TABLE>
<CAPTION>
1993 1994 1995
------------ ------------ ------------
<S> <C>
Gross revenue $ 3,418,241 $ 3,406,108 $ 3,368,201
Equity in earnings of unconsolidated
joint ventures 246,027 245,933 244,933
Profit (Loss) from sale of properties 0 0 59,926
Interest income 24,283 32,273 68,145
Less: Operating expenses (157,387) (142,979) (172,732)
Interest expense 0 0 0
Depreciation and amortization (209,123) (218,961) (217,576)
Minority interest in income of
consolidated joint venture (14,247) (14,107) (14,142)
------------ ------------ ------------
Net income - GAAP basis 3,307,794 3,308,267 3,336,755
============ ============ ============
Taxable income
- from operations 2,718,665 2,890,736 3,096,286
============ ============ ============
- from gain (loss) on sale 0 0 (101,622)
============ ============ ============
Cash generated from operations
(Notes 2 and 7) 3,201,761 3,412,889 3,263,685
Cash generated from sales (Notes 4
and 5) 0 0 1,184,865
Cash generated from refinancing 0 0 0
------------ ------------ ------------
Cash generated from operations, sales
and refinancing 3,201,761 3,412,889 4,448,550
Less: Cash distributions to investors
(Note 8)
- from operating cash flow (2,384,934) (3,150,000) (3,263,685)
- from sale of properties 0 0 0
- from cash flow from prior period 0 0 (43,817)
- from other 0 0 0
------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 816,827 262,889 1,141,048
Special items (not including sales and
refinancing):
Limited partners' capital
contributions 0 0 0
General partners' capital
contributions 0 0 0
Organization costs 0 0 0
Syndication costs 0 0 0
Acquisition of land and buildings 0 0 (397,291)
Investment in direct financing
leases (136,464) 0 (550,911)
Investment in joint ventures 0 0 0
Return of capital from joint
ventures 495 0 0
Increase in other assets 0 0 0
Reimbursement of syndication and
acquisition costs paid on behalf
of CNL Income Fund VIII, Ltd. by
related parties (1,925) 0 0
Distributions to holder of minority
interest (12,614) (13,562) (11,526)
------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 666,319 249,327 181,320
============ ============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 77 82 88
============ ============ ============
- from recapture 0 0 0
============ ============ ============
Capital gain (loss) 0 0 (3)
============ ============ ============
</TABLE>
C-31
<PAGE>
TABLE III - CNL INCOME FUND VIII, LTD. (continued)
<TABLE>
<CAPTION>
1989
(Note 1) 1990 1991 1992
------------ ------------ ------------ ------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 0 20 76 89
- from capital gain 0 0 0 0
- from investment income from prior
period 0 0 0 0
- from return of capital (Note 3) 0 2 0 0
------------ ------------ ------------ ------------
Total distributions on GAAP basis
(Note 8) 0 22 76 89
============ ============ ============ ============
Source (on cash basis)
- from sales 0 0 0 0
- from refinancing 0 0 0 0
- from operations 0 22 76 89
- from cash flow from prior period 0 0 0 0
- from other 0 0 0 0
------------ ------------ ------------ ------------
Total distributions on cash basis
(Note 8) 0 22 76 89
============ ============ ============ ============
Total cumulative cash distributions
per $1,000 investment from inception 0 22 98 187
Amount (in percentage terms) remaining
invested in program properties at the
end of each year (period) presented
(original total acquisition cost of
properties retained, divided by original
total acquisition cost of all properties
in program) (Notes 4, 5 and 6) N/A 100% 100% 100%
</TABLE>
<TABLE>
<CAPTION>
1993 1994 1995
------------ ------------ ------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 68 90 93
- from capital gain 0 0 2
- from investment income from prior
period 0 0 0
- from return of capital (Note 3) 0 0 0
------------ ------------ ------------
Total distributions on GAAP basis
(Note 8) 68 90 95
============ ============ ============
Source (on cash basis)
- from sales 0 0 0
- from refinancing 0 0 0
- from operations 68 90 93
- from cash flow from prior period 0 0 2
- from other 0 0 0
------------ ------------ ------------
Total distributions on cash basis
(Note 8) 68 90 95
============ ============ ============
Total cumulative cash distributions
per $1,000 investment from inception 255 345 440
Amount (in percentage terms) remaining
invested in program properties at the
end of each year (period) presented
(original total acquisition cost of
properties retained, divided by original
total acquisition cost of all properties
in program) (Notes 4, 5 and 6) 100% 100% 98%
</TABLE>
Note 1: Pursuant to a registration statement on Form S-11 under the Securities
Act of 1933, as amended, CNL Income Fund VIII, Ltd. ("CNL VIII") and
CNL Income Fund VII, Ltd. each registered for sale $30,000,000 units of
limited partnership interests ("Units"). The offering of Units of CNL
Income Fund VII, Ltd. commenced January 30, 1990. Pursuant to the
registration statement, CNL VIII's offering of Units could not commence
until the offering of Units of CNL Income Fund VII, Ltd. was
terminated. CNL Income Fund VII, Ltd. terminated its offering of Units
on August 1, 1990, at which time the maximum offering proceeds of
$30,000,000 had been received. Upon the termination of the offering of
Units of CNL Income Fund VII, Ltd., CNL VIII commenced its offering of
U n i ts. Activities through August 22, 1990, were devoted to
organization of the partnership and operations had not begun.
Note 2: Cash generated from operations includes cash received from tenants,
plus distributions from joint ventures, less cash paid for expenses,
plus interest received.
Note 3: Cash distributions presented as a return of capital on a GAAP basis
represent the amount of cash distributions in excess of accumulated net
income on a GAAP basis. Accumulated net income includes deductions for
depreciation and amortization expense and income from certain non-cash
items. This amount is not required to be presented as a return of
capital except for purposes of this table, and CNL Income Fund VIII,
Ltd. has not treated this amount as a return of capital for any other
purpose.
Note 4: During 1991, two properties ceased operations and were sold to third
parties. The net proceeds from the sales were $347,987. The
partnership used the proceeds to renovate one restaurant property and
t o make certain additions or improvements to other restaurant
properties.
Note 5: In July 1995, CNL Income Fund VIII, Ltd. sold one of its properties and
received net sales proceeds of $1,184,865. In September 1995, the
partnership reinvested $950,663 of the net sales proceeds in an
additional property. The remaining net sales proceeds are expected to
be used to purchase an additional property or for other partnership
purposes.
Note 6: In December 1995, CNL Income Fund VIII, Ltd. sold two of its properties
to the subtenant of the properties and in connection therewith accepted
two promissory notes in the principal sums totalling $460,000,
collateralized by mortgages on the properties. The notes bear interest
at a rate of 10% per annum and are being collected in 119 equal
installments totalling $4,037, with balloon payments totalling $418,576
due December 2005. Proceeds received from payments collected under the
mortgage notes are expected to be distributed to the limited partners
or used for other partnership purposes.
Note 7: Cash generated from operations per this table agrees to cash generated
from operations per the statement of cash flows included in the
financial statements of CNL Income Fund VIII, Ltd.
C-32
<PAGE>
Note 8: As a result of the partnership's change in investor services agents in
1993, distributions are now declared at the end of each quarter and
paid in the following quarter. Since this table generally presents
d i stributions on a cash basis (rather than amounts declared),
distributions on a cash basis for 1993 only reflect payments for three
quarters. Distributions declared for the quarter ended December 31,
1 9 9 3 and 1994, are reflected in the 1994 and 1995 columns,
respectively, for distributions on a cash basis due to the payment of
such distributions in January 1994 and 1995, respectively. As a result
of 1994 and 1995 distributions being presented on a cash basis,
distributions declared and unpaid as of December 31, 1994 and 1995, are
not included in the 1994 and 1995 totals, respectively.
C-33
<PAGE>
TABLE III
Operating Results of Prior Programs
CNL INCOME FUND IX, LTD.
<TABLE>
<CAPTION>
1990
(Note 1) 1991 1992 1993
------------ ------------ ------------ ------------
<S> <C>
Gross revenue $ 0 $ 787,718 $ 2,957,084 $ 3,010,717
Equity in earnings of joint ventures 0 52,325 389,625 470,094
Profit from sale of properties 0 0 0 0
Interest income 0 423,913 72,644 23,218
Less: Operating expenses 0 (56,243) (158,885) (167,115)
Interest expense 0 0 0 0
Depreciation and amortization 0 (77,647) (220,070) (220,052)
------------ ------------ ------------ ------------
Net income - GAAP basis 0 1,130,066 3,040,398 3,116,862
============ ============ ============ ============
Taxable income
- from operations 0 1,136,231 2,682,360 2,587,955
============ ============ ============ ============
- from gain on sale 0 0 0 0
============ ============ ============ ============
Cash generated from operations
(Notes 2 and 3) 0 1,272,953 3,142,564 3,029,295
Cash generated from sales 0 0 0 0
Cash generated from refinancing 0 0 0 0
------------ ------------ ------------ ------------
Cash generated from operations, sales
and refinancing 0 1,272,953 3,142,564 3,029,295
Less: Cash distributions to investors
(Note 4)
- from operating cash flow 0 (1,119,489) (2,880,517) (2,383,067)
- from sale of properties 0 0 0 0
- from cash flow from prior period 0 0 0 0
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions 0 153,464 262,047 646,228
Special items (not including sales and
refinancing):
Limited partners' capital
contributions 0 35,000,000 0 0
General partners' capital
contributions 1,000 0 0 0
Organization costs 0 (10,000) 0 0
Syndication costs 0 (3,261,772) 0 0
Acquisition costs paid by the
partnership on behalf of
related parties 0 (12,942) 0 0
Reimbursement of acquisition costs
paid by the partnership on behalf
of related parties 0 0 12,942 0
Acquisition of land and buildings 0 (14,265,241) (1,137,138) 0
Investment in direct financing
leases 0 (8,680,844) (79,493) (30,493)
Investment in joint venture 0 (2,768,296) (3,387,844) 0
Return of capital from joint
ventures 0 0 0 655
Increase in other assets (78) (285,383) 0 0
Reimbursement of syndication and
acquisition costs paid on behalf
of CNL Income Fund IX, Ltd. by
related parties 0 (1,038,645) (13,269) 0
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 922 4,830,341 (4,342,755) 616,390
============ ============ ============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 0 44 76 73
============ ============ ============ ============
- from recapture 0 0 0 0
============ ============ ============ ============
Capital gain (loss) 0 0 0 0
============ ============ ============ ============
</TABLE>
C-34
<PAGE>
<TABLE>
<CAPTION>
1994 1995
------------ ------------
<S> <C>
Gross revenue $ 2,879,282 $ 2,917,144
Equity in earnings of joint ventures 456,154 453,794
Profit from sale of properties 0 0
Interest income 26,958 57,209
Less: Operating expenses (125,815) (186,693)
Interest expense 0 0
Depreciation and amortization (232,996) (253,483)
------------ ------------
Net income - GAAP basis 3,003,583 2,987,971
============ ============
Taxable income
- from operations 2,818,525 2,581,931
============ ============
- from gain on sale 0 0
============ ============
Cash generated from operations
(Notes 2 and 3) 3,214,214 3,098,276
Cash generated from sales 0 0
Cash generated from refinancing 0 0
------------ ------------
Cash generated from operations, sales
and refinancing 3,214,214 3,098,276
Less: Cash distributions to investors
(Note 4)
- from operating cash flow (3,150,002) (3,098,276)
- from sale of properties 0 0
- from cash flow from prior period 0 (51,728)
------------ ------------
Cash generated (deficiency) after cash
distributions 64,212 (51,728)
Special items (not including sales and
refinancing):
Limited partners' capital
contributions 0 0
General partners' capital
contributions 0 0
Organization costs 0 0
Syndication costs 0 0
Acquisition costs paid by the
partnership on behalf of
related parties 0 0
Reimbursement of acquisition costs
paid by the partnership on behalf
of related parties 0 0
Acquisition of land and buildings 0 0
Investment in direct financing
leases 0 0
Investment in joint venture 0 0
Return of capital from joint
ventures 0 0
Increase in other assets 0 0
Reimbursement of syndication and
acquisition costs paid on behalf
of CNL Income Fund IX, Ltd. by
related parties 0 0
------------ ------------
Cash generated (deficiency) after cash
distributions and special items 64,212 (51,728)
============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 80 73
============ ============
- from recapture 0 0
============ ============
Capital gain (loss) 0 0
============ ============
</TABLE>
C-35
<PAGE>
TABLE III - CNL INCOME FUND IX, LTD. (continued)
<TABLE>
<CAPTION>
1990
(Note 1) 1991 1992 1993
------------ ------------ ------------ ------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 0 44 82 68
- from capital gain 0 0 0 0
- from investment income from
prior period 0 0 0 0
------------ ------------ ------------ ------------
Total distributions on GAAP basis
(Note 4) 0 44 82 68
============ ============ ============ ============
Source (on cash basis)
- from sales 0 0 0 0
- from refinancing 0 0 0 0
- from operations 0 44 82 68
- from cash flow from prior period 0 0 0 0
------------ ------------ ------------ ------------
Total distributions on cash basis
(Note 4) 0 44 82 68
============ ============ ============ ============
Total cumulative cash distributions
per $1,000 investment from inception 0 44 126 194
Amount (in percentage terms) remaining
invested in program properties at the
end of each year (period) presented
(original total acquisition cost of
properties retained, divided by original
total acquisition cost of all properties
in program) N/A 100% 100% 100%
<CAPTION>
1994 1995
------------ ------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 85 85
- from capital gain 0 0
- from investment income from
prior period 5 5
------------ ------------
Total distributions on GAAP basis
(Note 4) 90 90
============ ============
Source (on cash basis)
- from sales 0 0
- from refinancing 0 0
- from operations 90 89
- from cash flow from prior period 0 1
------------ ------------
Total distributions on cash basis
(Note 4) 90 90
============ ============
Total cumulative cash distributions
per $1,000 investment from inception 284 374
Amount (in percentage terms) remaining
invested in program properties at the
end of each year (period) presented
(original total acquisition cost of
properties retained, divided by original
total acquisition cost of all properties
in program) 100% 100%
</TABLE>
Note 1: The registration statement relating to the offering of Units by CNL
Income Fund IX, Ltd. became effective on March 20, 1991. Activities
through April 11, 1991, were devoted to organization of the partnership
and operations had not begun.
Note 2: Cash generated from operations includes cash received from tenants,
plus distributions from joint ventures, less cash paid for expenses,
plus interest received.
Note 3: Cash generated from operations per this table agrees to cash generated
from operations per the statement of cash flows included in the
financial statements of CNL Income Fund IX, Ltd.
Note 4: As a result of the partnership's change in investor services agents in
1993, distributions are now declared at the end of each quarter and
paid in the following quarter. Since this table generally presents
d i stributions on a cash basis (rather than amounts declared),
distributions on a cash basis for 1993 only reflect payments for three
quarters. Distributions declared for the quarter ended December 31,
1 9 9 3 and 1994, are reflected in the 1994 and 1995 columns,
respectively, for distributions on a cash basis due to the payment of
such distributions in January 1994 and 1995, respectively. As a result
of 1994 and 1995 distributions being presented on a cash basis,
distributions declared and unpaid as of December 31, 1994 and 1995, are
not included in the 1994 and 1995 totals, respectively.
C-36
<PAGE>
TABLE III
Operating Results of Prior Programs
CNL INCOME FUND X, LTD.
<TABLE>
<CAPTION>
1990
(Note 1) 1991 1992 1993
------------ ------------ ------------ ------------
<S> <C>
Gross revenue $ 0 $ 80,723 $ 2,985,620 $ 3,729,533
Equity in earnings of unconsolidated
joint venture 0 0 184,425 273,564
Profit from sale of properties 0 0 0 0
Interest income 0 77,424 149,051 35,072
Less: Operating expenses 0 (7,078) (147,094) (178,294)
Interest expense 0 0 0 0
Depreciation and amortization 0 (5,603) (261,058) (215,143)
Minority interest in income of
consolidated joint venture 0 0 (4,902) (8,159)
------------ ------------ ------------ ------------
Net income - GAAP basis 0 145,466 2,906,042 3,636,573
============ ============ ============ ============
Taxable income
- from operations 0 187,164 2,652,037 2,936,325
============ ============ ============ ============
- from gain on sale 0 0 0 0
============ ============ ============ ============
Cash generated from operations
(Notes 2 and 5) 0 201,406 3,101,618 3,460,906
Cash generated from sales (Note 4) 0 0 0 0
Cash generated from refinancing 0 0 0 0
------------ ------------ ------------ ------------
Cash generated from operations, sales
and refinancing 0 201,406 3,101,618 3,460,906
Less: Cash distributions to investors
(Note 6)
- from operating cash flow 0 (163,012) (2,760,446) (2,659,655)
- from sale of properties 0 0 0 0
- from cash flow from prior period 0 0 0 0
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions 0 38,394 341,172 801,251
Special items (not including sales and
refinancing):
Limited partners' capital
contributions 0 19,972,663 20,027,337 0
General partners' capital
contributions 1,000 0 0 0
Organization costs 0 (10,000) 0 0
Syndication costs 0 (1,942,339) (1,880,824) 0
Acquisition of land and buildings 0 (7,317,942) (12,095,378) (316)
Investment in direct financing
leases 0 (3,024,796) (8,018,153) (46,364)
Investment in joint ventures 0 0 (3,687,069) 0
Return of capital from joint
ventures 0 0 0 0
Deposit received for sale of land
and building 0 0 0 0
Increase in other assets (78) (482,466) 0 0
Reimbursement of syndication and
acquisition costs paid on behalf
of CNL Income Fund X, Ltd. by
related parties 0 (815,938) (313,196) (544)
Distributions to holder of minority
interest 0 0 (5,729) (5,543)
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 922 6,417,576 (5,631,840) 748,484
============ ============ ============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 0 17 70 73
============ ============ ============ ============
- from recapture 0 0 0 0
============ ============ ============ ============
Capital gain (loss) 0 0 0 0
============ ============ ============ ============
C-37
<PAGE>
<CAPTION>
1994 1995
------------ ------------
<S> <C>
Gross revenue $ 3,710,792 $ 3,544,446
Equity in earnings of unconsolidated
joint venture 271,512 267,799
Profit from sale of properties 0 67,214
Interest income 46,456 72,600
Less: Operating expenses (138,507) (189,230)
Interest expense 0 0
Depreciation and amortization (208,941) (201,696)
Minority interest in income of
consolidated joint venture (8,471) (9,066)
------------ ------------
Net income - GAAP basis 3,672,841 3,552,067
============ ============
Taxable income
- from operations 3,212,304 2,956,800
============ ============
- from gain on sale 0 50,819
============ ============
Cash generated from operations
(Notes 2 and 5) 3,785,493 3,527,362
Cash generated from sales (Note 4) 0 1,057,386
Cash generated from refinancing 0 0
------------ ------------
Cash generated from operations, sales
and refinancing 3,785,493 4,584,748
Less: Cash distributions to investors
(Note 6)
- from operating cash flow (3,500,017) (3,527,362)
- from sale of properties 0 0
- from cash flow from prior period 0 (172,641)
------------ ------------
Cash generated (deficiency) after cash
distributions 285,476 884,745
Special items (not including sales and
refinancing):
Limited partners' capital
contributions 0 0
General partners' capital
contributions 0 0
Organization costs 0 0
Syndication costs 0 0
Acquisition of land and buildings 0 (359,506)
Investment in direct financing
leases 0 (566,097)
Investment in joint ventures 0 0
Return of capital from joint
ventures 0 0
Deposit received for sale of land
and building 0 69,000
Increase in other assets 0 0
Reimbursement of syndication and
acquisition costs paid on behalf
of CNL Income Fund X, Ltd. by
related parties 0 0
Distributions to holder of minority
interest (7,909) (7,998)
------------ ------------
Cash generated (deficiency) after cash
distributions and special items 277,567 20,144
============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 80 73
============ ============
- from recapture 0 0
============ ============
Capital gain (loss) 0 1
============ ============
</TABLE>
C-38
<PAGE>
TABLE III - CNL INCOME FUND X, LTD. (continued)
<TABLE>
<CAPTION>
1990
(Note 1) 1991 1992 1993
------------ ------------ ------------ ------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 0 13 73 66
- from capital gain 0 0 0 0
- from investment income from
prior period 0 0 0 0
- from return of capital (Note 3) 0 2 0 0
------------ ------------ ------------ ------------
Total distributions on GAAP basis
(Note 6) 0 15 73 66
============ ============ ============ ============
Source (on cash basis)
- from sales 0 0 0 0
- from refinancing 0 0 0 0
- from operations 0 15 73 66
- from cash flow from prior
period 0 0 0 0
------------ ------------ ------------ ------------
Total distributions on cash basis
(Note 6) 0 15 73 66
============ ============ ============ ============
Total cumulative cash distributions
per $1,000 investment from inception 0 15 88 154
Amount (in percentage terms) remaining
invested in program properties at the
end of each year (period) presented
(original total acquisition cost of
properties retained, divided by original
total acquisition cost of all properties
in program) (Note 4) N/A 100% 100% 100%
<CAPTION>
1994 1995
------------ ------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 88 87
- from capital gain 0 2
- from investment income from
prior period 0 4
- from return of capital (Note 3) 0 0
------------ ------------
Total distributions on GAAP basis
(Note 6) 88 93
============ ============
Source (on cash basis)
- from sales 0 0
- from refinancing 0 0
- from operations 88 88
- from cash flow from prior
period 0 5
------------ ------------
Total distributions on cash basis
(Note 6) 88 93
============ ============
Total cumulative cash distributions
per $1,000 investment from inception 242 335
Amount (in percentage terms) remaining
invested in program properties at the
end of each year (period) presented
(original total acquisition cost of
properties retained, divided by original
total acquisition cost of all properties
in program) (Note 4) 100% 99%
</TABLE>
Note 1: Pursuant to a registration statement on Form S-11 under the Securities
Act of 1933, as amended, CNL Income Fund X, Ltd. ("CNL X") and CNL
Income Fund IX, Ltd. each registered for sale $35,000,000 units of
limited partnership interests ("Units"). The offering of Units of CNL
Income Fund IX, Ltd. commenced March 20, 1991. Pursuant to the
registration statement, CNL X's offering of Units could not commence
until the offering of Units of CNL Income Fund IX, Ltd. was terminated.
CNL Income Fund IX, Ltd. terminated its offering of Units on September
6, 1991, at which time the maximum offering proceeds of $35,000,000 had
been received. Upon the termination of the offering of Units of CNL
Income Fund IX, Ltd., CNL X commenced its offering of Units.
Activities through September 24, 1991, were devoted to organization of
the partnership and operations had not begun.
Note 2: Cash generated from operations includes cash received from tenants,
plus distributions from joint ventures, less cash paid for expenses,
plus interest received.
Note 3: Cash distributions presented above as a return of capital on a GAAP
basis represent the amount of cash distributions in excess of
accumulated net income on a GAAP basis. Accumulated net income
includes deductions for depreciation and amortization expense and
income from certain non-cash items. This amount is not required to be
presented as a return of capital except for purposes of this table, and
CNL Income Fund X, Ltd. has not treated this amount as a return of
capital for any other purpose.
Note 4: In August 1995, CNL Income Fund X, Ltd. sold one of its properties and
received net sales proceeds of $1,050,186. In September 1995, the
partnership reinvested $928,122 in an additional property. In
addition, in January 1996, the partnership reinvested the remaining net
sales proceeds in an additional property as tenants-in-common with
affiliates of the general partners.
Note 5: Cash generated from operations per this table agrees to cash generated
from operations per the statement of cash flows included in the
financial statements of CNL Income Fund X, Ltd.
Note 6: As a result of the partnership's change in investor services agents in
1993, distributions are now declared at the end of each quarter and
paid in the following quarter. Since this table generally presents
d i stributions on a cash basis (rather than amounts declared),
distributions on a cash basis for 1993 only reflect payments for three
quarters. Distributions declared for the quarter ended December 31,
1 9 9 3 and 1994, are reflected in the 1994 and 1995 columns,
respectively, for distributions on a cash basis due to the payment of
such distributions in January 1994 and 1995, respectively. As a result
of 1994 and 1995 distributions being presented on a cash basis,
distributions declared and unpaid as of December 31, 1994 and 1995, are
not included in the 1994 and 1995 totals, respectively.
C-39
<PAGE>
TABLE III
Operating Results of Prior Programs
CNL INCOME FUND XI, LTD.
<TABLE>
<CAPTION>
1991
(Note 1) 1992 1993 1994 1995
------------ ------------ ------------ ------------ ------------
<S> <C>
Gross revenue $ 0 $ 1,269,086 $ 3,831,648 $ 3,852,107 $ 3,820,990
Equity in earnings of unconsolidated
joint ventures 0 33,367 121,059 119,370 118,384
Profit from sale of properties 0 0 0 0 0
Interest income 0 150,535 24,258 30,894 51,192
Less: Operating expenses 0 (63,390) (206,987) (179,717) (237,126)
Interest expense 0 0 0 0 0
Depreciation and amortization 0 (180,631) (469,127) (481,226) (481,226)
Minority interests in income of
consolidated joint ventures 0 (23,529) (68,399) (68,936) (70,038)
------------ ------------ ------------ ------------ ------------
Net income - GAAP basis 0 1,185,438 3,232,452 3,272,492 3,202,176
============ ============ ============ ============ ============
Taxable income
- from operations 0 1,295,104 2,855,026 2,947,445 2,985,221
============ ============ ============ ============ ============
- from gain on sale 0 0 0 0 0
============ ============ ============ ============ ============
Cash generated from operations
(Notes 2 and 4) 0 1,495,225 3,355,586 3,497,941 3,652,185
Cash generated from sales 0 0 0 0 0
Cash generated from refinancing 0 0 0 0 0
------------ ------------ ------------ ------------ ------------
Cash generated from operations, sales
and refinancing 0 1,495,225 3,355,586 3,497,941 3,652,185
Less: Cash distributions to investors
(Note 5)
- from operating cash flow 0 (1,205,030) (2,495,002) (3,400,001) (3,500,023)
- from sale of properties 0 0 0 0 0
- from cash flow from prior period 0 0 0 0 0
------------ ------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions 0 290,195 860,584 97,940 152,162
Special items (not including sales and
refinancing):
Limited partners' capital
contributions 0 40,000,000 0 0 0
General partners' capital
contributions 1,000 0 0 0 0
Minority interests' capital
contributions 0 426,367 0 0 0
Organization costs 0 (10,000) 0 0 0
Syndication costs 0 (3,922,875) 0 0 0
Acquisition of land and buildings 0 (26,428,556) (276,157) 0 0
Investment in direct financing
leases 0 (6,716,561) (276,206) 0 0
Investment in joint ventures 0 (1,658,925) (772) 0 0
Reimbursement of syndication and
acquisition costs paid on behalf
of CNL Income Fund XI, Ltd. by
related parties 0 (1,011,487) (900) 0 0
Increase in other assets 0 (122,024) 0 0 0
Distributions to holders of minority
interests 0 (17,467) (51,562) (57,641) (54,227)
------------ ------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 1,000 828,667 254,987 40,299 97,935
============ ============ ============ ============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 0 45 71 73 74
============ ============ ============ ============ ============
- from recapture 0 0 0 0 0
============ ============ ============ ============ ============
Capital gain (loss) 0 0 0 0 0
============ ============ ============ ============ ============
C-40
<PAGE>
TABLE III - CNL INCOME FUND XI, LTD. (continued)
<CAPTION>
1991
(Note 1) 1992 1993 1994 1995
------------ ------------ ------------ ------------ ------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 0 41 62 81 79
- from capital gain 0 0 0 0 0
- from investment income from
prior period 0 0 0 4 9
- from return of capital (Note 3) 0 1 0 0 0
------------ ------------ ------------ ------------ ------------
Total distributions on GAAP basis
(Note 5) 0 42 62 85 88
============ ============ ============ ============ ============
Source (on cash basis)
- from sales 0 0 0 0 0
- from refinancing 0 0 0 0 0
- from operations 0 42 62 85 88
- from cash flow from prior
period 0 0 0 0 0
------------ ------------ ------------ ------------ ------------
Total distributions on cash basis
(Note 5) 0 42 62 85 88
============ ============ ============ ============ ============
Total cumulative cash distributions
per $1,000 investment from inception 0 42 104 189 277
Amount (in percentage terms) remaining
invested in program properties at the
end of each year (period) presented
(original total acquisition cost of
properties retained, divided by original
total acquisition cost of all properties
in program) N/A 100% 100% 100% 100%
</TABLE>
Note 1: The registration statement relating to the offering of Units by CNL
Income Fund XI, Ltd. became effective on March 12, 1992. Activities
through April 22, 1992, were devoted to organization of the partnership
and operations had not begun.
Note 2: Cash generated from operations includes cash received from tenants,
plus distributions from joint ventures, less cash paid for expenses,
plus interest received.
Note 3: Cash distributions presented above as a return of capital on a GAAP
basis represent the amount of cash distributions in excess of
accumulated net income on a GAAP basis. Accumulated net income
includes deductions for depreciation and amortization expense and
income from certain non-cash items. This amount is not required to be
presented as a return of capital except for purposes of this table, and
CNL Income Fund XI, Ltd. has not treated this amount as a return of
capital for any other purpose.
Note 4: Cash generated from operations per this table agrees to cash generated
from operations per the statement of cash flows included in the
financial statements of CNL Income Fund XI, Ltd.
Note 5: As a result of the partnership's change in investor services agents in
1993, distributions are now declared at the end of each quarter and
paid in the following quarter. Since this table generally presents
d i stributions on a cash basis (rather than amounts declared),
distributions on a cash basis for 1993 only reflect payments for three
quarters. Distributions declared for the quarter ended December 31,
1 9 9 3 and 1994, are reflected in the 1994 and 1995 columns,
respectively, for distributions on a cash basis due to the payment of
such distributions in January 1994 and 1995, respectively. As a result
of 1994 and 1995 distributions being presented on a cash basis,
distributions declared and unpaid as of December 31, 1994 and 1995, are
not included in the 1994 and 1995 totals, respectively.
C-41
<PAGE>
TABLE III
Operating Results of Prior Programs
CNL INCOME FUND XII, LTD.
<TABLE>
<CAPTION>
1991
(Note 1) 1992 1993 1994 1995
------------ ------------ ------------ ------------ ------------
<S> <C>
Gross revenue $ 0 $ 25,133 $ 3,374,640 $ 4,397,881 $ 4,404,792
Equity in earnings of joint ventures 0 46 49,604 85,252 81,582
Profit from sale of properties 0 0 0 0 0
Interest income 0 45,228 190,082 65,447 84,197
Less: Operating expenses 0 (7,211) (193,804) (192,951) (228,404)
Interest expense 0 0 0 0 0
Depreciation and amortization 0 (3,997) (286,293) (327,795) (327,795)
------------ ------------ ------------ ------------ ------------
Net income - GAAP basis 0 59,199 3,134,229 4,027,834 4,014,372
============ ============ ============ ============ ============
Taxable income
- from operations 0 58,543 2,749,072 3,301,005 3,262,046
============ ============ ============ ============ ============
- from gain on sale 0 0 0 0 0
============ ============ ============ ============ ============
Cash generated from operations
(Notes 2 and 5) 0 61,370 3,246,760 3,848,962 3,819,362
Cash generated from sales 0 0 0 0 0
Cash generated from refinancing 0 0 0 0 0
------------ ------------ ------------ ------------ ------------
Cash generated from operations, sales
and refinancing 0 61,370 3,246,760 3,848,962 3,819,362
Less: Cash distributions to investors
(Note 6)
- from operating cash flow 0 (61,370) (1,972,769) (3,768,754) (3,819,362)
- from sale of properties 0 0 0 0 0
- from return of capital (Note 4) 0 (60,867) 0 0 0
- from cash flow from prior period 0 0 0 0 (5,645)
------------ ------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions 0 (60,867) 1,273,991 80,208 (5,645)
Special items (not including sales and
refinancing):
Limited partners' capital
contributions 0 21,543,270 23,456,730 0 0
General partners' capital
contributions 1,000 0 0 0 0
Organization costs 0 (10,000) 0 0 0
Syndication costs 0 (2,066,937) (2,277,637) 0 0
Acquisition of land and buildings 0 (7,536,009) (15,472,737) (230) 0
Investment in direct financing
leases 0 (2,503,050) (11,875,100) (591) 0
Loan to tenant of joint venture,
net of repayments 0 0 (207,189) 6,400 7,008
Investment in joint ventures 0 (372,045) (468,771) (4,400) 0
Increase in restricted cash 0 0 0 0 0
Reimbursement of syndication and
acquisition costs paid on behalf
of CNL Income Fund XII, Ltd. by
related parties 0 (704,923) (432,749) 0 0
Increase in other assets 0 (654,497) 0 0 0
Other 0 0 0 973 0
------------ ------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 1,000 7,634,942 (6,003,462) 82,360 1,363
============ ============ ============ ============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 0 5 64 73 72
============ ============ ============ ============ ============
- from recapture 0 0 0 0 0
============ ============ ============ ============ ============
Capital gain (loss) 0 0 0 0 0
============ ============ ============ ============ ============
C-42
<PAGE>
TABLE III - CNL INCOME FUND XII, LTD. (continued)
<CAPTION>
1991
(Note 1) 1992 1993 1994 1995
------------ ------------ ------------ ------------ ------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 0 5 46 84 85
- from capital gain 0 0 0 0 0
- from return of capital (Note 3) 0 7 0 0 0
------------ ------------ ------------ ------------ ------------
Total distributions on GAAP basis
(Note 6) 0 12 46 84 85
============ ============ ============ ============ ============
Source (on cash basis)
- from sales 0 0 0 0 0
- from refinancing 0 0 0 0 0
- from operations 0 6 46 84 85
- from return of capital (Note 4) 0 6 0 0 0
- from cash flow from prior period 0 0 0 0 0
------------ ------------ ------------ ------------ ------------
Total distributions on cash basis
(Note 6) 0 12 46 84 85
============ ============ ============ ============ ============
Total cumulative cash distributions
per $1,000 investment from inception 0 12 58 142 227
Amount (in percentage terms) remaining
invested in program properties at the
end of each year (period) presented
(original total acquisition cost of
properties retained, divided by original
total acquisition cost of all properties
in program) N/A 100% 100% 100% 100%
</TABLE>
Note 1: Pursuant to a registration statement on Form S-11 under the Securities
Act of 1933, as amended, CNL Income Fund XII, Ltd. ("CNL XII") and CNL
Income Fund XI, Ltd. each registered for sale $40,000,000 units of
limited partnership interests ("Units"). The offering of Units of CNL
Income Fund XI, Ltd. commenced March 12, 1992. Pursuant to the
registration statement, CNL XII could not commence until the offering
of Units of CNL Income Fund XI, Ltd. was terminated. CNL Income Fund
XI, Ltd. terminated its offering of Units on September 28, 1992, at
which time the maximum offering proceeds of $40,000,000 had been
received. Upon the termination of the offering of Units of CNL Income
Fund XI, Ltd., CNL XII commenced its offering of Units. Activities
t h rough October 8, 1992, were devoted to organization of the
partnership and operations had not begun.
Note 2: Cash generated from operations includes cash received from tenants,
plus distributions from joint ventures, less cash paid for expenses,
plus interest received.
Note 3: Cash distributions presented above as a return of capital on a GAAP
basis represent the amount of cash distributions in excess of
accumulated net income on a GAAP basis. Accumulated net income
includes deductions for depreciation and amortization expense and
income from certain non-cash items. This amount is not required to be
presented as a return of capital except for purposes of this table, and
CNL Income Fund XII, Ltd. has not treated this amount as a return of
capital for any other purpose.
Note 4: CNL Income Fund XII, Ltd. makes its distributions in the current period
rather than in arrears based on estimated operating results. In cases
where distributions exceed cash from operations in the current period,
o n c e finally determined, subsequent distributions are lowered
accordingly in order to avoid any return of capital. This amount is
not required to be presented as a return of capital except for purposes
of this table, and CNL Income Fund XII, Ltd. has not treated this
amount as a return of capital for any other purpose.
Note 5: Cash generated from operations per this table agrees to cash generated
from operations per the statement of cash flows included in the
financial statements of CNL Income Fund XII, Ltd.
Note 6: As a result of the partnership's change in investor services agents in
1993, distributions are now declared at the end of each quarter and
paid in the following quarter. Since this table generally presents
d i stributions on a cash basis (rather than amounts declared),
distributions on a cash basis for 1993 only reflect payments for three
quarters. Distributions declared for the quarter ended December 31,
1 9 9 3 and 1994, are reflected in the 1994 and 1995 columns,
respectively, for distributions on a cash basis due to the payment of
such distributions in January 1994 and 1995, respectively. As a result
of 1994 and 1995 distributions being presented on a cash basis,
distributions declared and unpaid as of December 31, 1994 and 1995, are
not included in the 1994 and 1995 totals, respectively.
C-43
<PAGE>
TABLE III
Operating Results of Prior Programs
CNL INCOME FUND XIII, LTD.
<TABLE>
<CAPTION>
1992
(Note 1) 1993 1994 1995
------------ ------------ ------------ ------------
<S> <C>
Gross revenue $ 0 $ 966,564 $ 3,558,447 $ 3,806,944
Equity in earnings of joint ventures 0 1,305 43,386 98,520
Profit (Loss) from sale of properties
(Note 4) 0 0 0 (29,560)
Interest income 0 181,568 77,379 51,410
Less: Operating expenses 0 (59,390) (183,311) (214,705)
Interest expense 0 0 0 0
Depreciation and amortization 0 (148,170) (378,269) (393,435)
------------ ------------ ------------ ------------
Net income - GAAP basis 0 941,877 3,117,632 3,319,174
============ ============ ============ ============
Taxable income
- from operations 0 978,535 2,703,252 2,920,859
============ ============ ============ ============
- from gain (loss) on sale 0 0 0 0
============ ============ ============ ============
Cash generated from operations
(Notes 2 and 5) 0 1,121,547 3,149,000 3,379,378
Cash generated from sales (Note 4) 0 0 0 286,411
Cash generated from refinancing 0 0 0 0
------------ ------------ ------------ ------------
Cash generated from operations, sales
and refinancing 0 1,121,547 3,149,000 3,665,789
Less: Cash distributions to investors
(Note 5)
- from operating cash flow 0 (528,364) (2,800,004) (3,350,014)
- from sale of properties 0 0 0 0
------------ ------------ ------------ ------------
Cash generated (deficiency) after
cash distributions 0 593,183 348,996 315,775
Special items (not including sales
and refinancing):
Limited partners' capital
contributions 0 40,000,000 0 0
General partners' capital
contributions 1,000 0 0 0
Syndication costs 0 (3,932,017) (181) 0
Acquisition of land and buildings 0 (19,691,630) (5,764,308) (336,116)
Investment in direct financing leases 0 (6,760,624) (1,365,075) 0
Investment in joint ventures 0 (314,998) (545,139) (140,052)
Reimbursement of organization,
syndication and acquisition costs
paid on behalf of CNL Income Fund
XIII, Ltd. by related parties 0 (799,980) (25,036) (3,074)
Increase in other assets 0 (454,909) 9,226 0
Other 0 0 0 954
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 1,000 8,639,025 (7,341,517) (162,513)
============ ============ ============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 0 33 67 72
============ ============ ============ ============
- from recapture 0 0 0 0
============ ============ ============ ============
Capital gain (loss) (Note 4) 0 0 0 0
============ ============ ============ ============
C-44
<PAGE>
TABLE III - CNL INCOME FUND XIII, LTD. (continued)
<CAPTION>
1992
(Note 1) 1993 1994 1995
------------ ------------ ------------ ------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 0 18 70 82
- from capital gain 0 0 0 0
- from investment income from prior
period 0 0 0 2
------------ ------------ ------------ ------------
Total distributions on GAAP basis (Note 5) 0 18 70 84
============ ============ ============ ============
Source (on cash basis)
- from sales 0 0 0 0
- from refinancing 0 0 0 0
- from operations 0 18 70 84
------------ ------------ ------------ ------------
Total distributions on cash basis (Note 5) 0 18 70 84
============ ============ ============ ============
Total cumulative cash distributions per
$1,000 investment from inception 0 18 88 172
Amount (in percentage terms) remaining
invested in program properties at the
end of each year (period) presented
(original total acquisition cost of
properties retained, divided by original
total acquisition cost of all properties
in program) N/A 100% 100% 100%
</TABLE>
Note 1: The registration statement relating to the offering of Units by CNL
Income Fund XIII, Ltd. became effective on March 17, 1993. Activities
through April 15, 1993, were devoted to organization of the partnership
and operations had not begun.
Note 2: Cash generated from operations includes cash received from tenants,
plus distributions from joint ventures, less cash paid for expenses,
plus interest received.
Note 3: Cash generated from operations per this table agrees to cash generated
from operations per the statement of cash flows included in the
financial statements of CNL Income Fund XIII, Ltd.
Note 4: During 1995, the partnership sold one of its properties to a tenant for
i t s o riginal purchase price, excluding acquisition fees and
miscellaneous acquisition expenses. The net sales proceeds were used
to acquire an additional property. As a result of this transaction,
the partnership recognized a loss for financial reporting purposes of
$29,560 primarily due to acquisition fees and miscellaneous acquisition
expenses the partnership had allocated to the property and due to the
accrued rental income relating to future scheduled rent increases that
the partnership had recorded and reversed at the time of sale.
Note 5: As a result of the partnership's change in investor services agents in
1993, distributions are now declared at the end of each quarter and
paid in the following quarter. Since this table generally presents
d i stributions on a cash basis (rather than amounts declared),
distributions on a cash basis for 1993 only reflect payments for three
quarters. Distributions declared for the quarter ended December 31,
1 9 9 3 and 1994, are reflected in the 1994 and 1995 columns,
respectively, for distributions on a cash basis due to the payment of
such distributions in January 1994 and 1995, respectively. As a result
of 1994 and 1995 distributions being presented on a cash basis,
distributions declared and unpaid as of December 31, 1994 and 1995, are
not included in the 1994 and 1995 totals, respectively.
C-45
<PAGE>
TABLE III
Operating Results of Prior Programs
CNL INCOME FUND XIV, LTD.
<TABLE>
<CAPTION>
1992
(Note 1) 1993 1994 1995
------------ ------------ ------------ ------------
<S> <C>
Gross revenue $ 0 $ 256,234 $ 3,135,716 $ 4,017,266
Equity in earnings of joint ventures 0 1,305 35,480 338,717
Profit (Loss) from sale of properties
(Note 4) 0 0 0 (66,518)
Interest income 0 27,874 200,499 50,724
Less: Operating expenses 0 (14,049) (181,980) (248,840)
Interest expense 0 0 0 0
Depreciation and amortization 0 (28,918) (257,640) (340,112)
------------ ------------ ------------ ------------
Net income - GAAP basis 0 242,446 2,932,075 3,751,237
============ ============ ============ ============
Taxable income
- from operations 0 278,845 2,482,240 3,162,165
============ ============ ============ ============
- from gain on sale 0 0 0 0
============ ============ ============ ============
Cash generated from operations
(Notes 2 and 3) 0 321,737 2,812,631 3,709,844
Cash generated from sales (Note 4) 0 0 0 696,012
Cash generated from refinancing 0 0 0 0
------------ ------------ ------------ ------------
Cash generated from operations, sales
and refinancing 0 321,737 2,812,631 4,405,856
Less: Cash distributions to investors
(Note 5)
- from operating cash flow 0 (9,050) (2,229,952) (3,543,751)
- from sale of properties 0 0 0 0
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions 0 312,687 582,679 862,105
Special items (not including sales and
refinancing):
Limited partners' capital
contributions 0 28,785,100 16,214,900 0
General partners' capital
contributions 1,000 0 0 0
Syndication costs 0 (2,771,892) (1,618,477) 0
Acquisition of land and buildings 0 (13,758,004) (11,859,237) (964,073)
Investment in direct financing leases 0 (4,187,268) (5,561,748) (75,352)
Investment in joint ventures 0 (315,209) (1,561,988) (1,087,218)
Return of capital from joint venture 0 0 0 0
Reimbursement of organization,
syndication and acquisition costs
paid on behalf of CNL Income Fund
XIV, Ltd. by related parties 0 (706,215) (376,738) (577)
Increase in other assets 0 (444,267) 0 0
Other 0 0 0 5,530
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 1,000 6,914,932 (4,180,609) (1,259,585)
============ ============ ============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 0 16 56 70
============ ============ ============ ============
- from recapture 0 0 0 0
============ ============ ============ ============
Capital gain (loss) (Note 4) 0 0 0 0
============ ============ ============ ============
C-46
<PAGE>
TABLE III - CNL INCOME FUND XIV, LTD. (continued)
<CAPTION>
1992
(Note 1) 1993 1994 1995
------------ ------------ ------------ ------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 0 1 51 79
- from capital gain 0 0 0 0
- from return of capital 0 0 0 0
------------ ------------ ------------ ------------
Total distributions on GAAP basis (Note 5) 0 1 51 79
============ ============ ============ ============
Source (on cash basis)
- from sales 0 0 0 0
- from refinancing 0 0 0 0
- from operations 0 1 51 79
------------ ------------ ------------ ------------
Total distributions on cash basis (Note 5) 0 1 51 79
============ ============ ============ ============
Total cumulative cash distributions
per $1,000 investment from inception 0 1 52 131
Amount (in percentage terms) remaining
invested in program properties at the
end of each year (period) presented
(original total acquisition cost of
properties retained, divided by original
total acquisition cost of all properties
in program) N/A 100% 100% 100%
</TABLE>
Note 1: Pursuant to a registration statement on Form S-11 under the Securities
Act of 1933, as amended, CNL Income Fund XIV, Ltd. ("CNL XIV") and CNL
Income Fund XIII, Ltd. each registered for sale $40,000,000 units of
limited partnership interests ("Units"). The offering of Units of CNL
Income Fund XIII, Ltd. commenced March 17, 1993. Pursuant to the
registration statement, CNL XIV could not commence until the offering
of Units of CNL Income Fund XIII, Ltd. was terminated. CNL Income Fund
XIII, Ltd. terminated its offering of Units on August 26, 1993, at
which time the maximum offering proceeds of $40,000,000 had been
received. Upon the termination of the offering of Units of CNL Income
Fund XIII, Ltd., CNL XIV commenced its offering of Units. Activities
through September 13, 1993, were devoted to organization of the
partnership and operations had not begun.
Note 2: Cash generated from operations includes cash received from tenants,
plus distributions from joint ventures, less cash paid for expenses,
plus interest received.
Note 3: Cash generated from operations per this table agrees to cash generated
from operations per the statement of cash flows included in the
financial statements of CNL Income Fund XIV, Ltd.
Note 4: During 1995, the partnership sold two of its properties to a tenant for
i t s o riginal purchase price, excluding acquisition fees and
miscellaneous acquisition expenses. The net sales proceeds were used
t o acquire two additional properties. As a result of these
transactions, the partnership recognized a loss for financial reporting
purposes of $66,518 primarily due to acquisition fees and miscellaneous
acquisition expenses the partnership had allocated to the property and
due to the accrued rental income relating to future scheduled rent
increases that the partnership had recorded and reversed at the time of
sale.
Note 5: As a result of the partnership's change in investor services agents in
1993, distributions are now declared at the end of each quarter and
paid in the following quarter. Since this table generally presents
d i stributions on a cash basis (rather than amounts declared),
distributions on a cash basis for 1993 only reflect payments for three
quarters. Distributions declared for the quarter ended December 31,
1 9 9 3 and 1994, are reflected in the 1994 and 1995 columns,
respectively, for distributions on a cash basis due to the payment of
such distributions in January 1994 and 1995, respectively. As a result
of 1994 and 1995 distributions being presented on a cash basis,
distributions declared and unpaid as of December 31, 1994 and 1995, are
not included in the 1994 and 1995 totals, respectively.
C-47
<PAGE>
TABLE III
Operating Results of Prior Programs
CNL INCOME FUND XV, LTD.
<TABLE>
<CAPTION>
1993
(Note 1) 1994 1995
------------ ------------ ------------
<S> <C>
Gross revenue $ 0 $ 1,143,586 $ 3,546,320
Equity in earnings of joint venture 0 8,372 280,606
Profit (Loss) from sale of properties (Note 4) 0 0 (71,023)
Interest income 0 167,734 88,059
Less: Operating expenses 0 (62,926) (228,319)
Interest expense 0 0 0
Depreciation and amortization 0 (70,848) (243,175)
------------ ------------ ------------
Net income - GAAP basis 0 1,185,918 3,372,468
============ ============ ============
Taxable income
- from operations 0 1,026,715 2,861,912
============ ============ ============
- from gain on sale 0 0 0
============ ============ ============
Cash generated from operations (Notes 2 and 3) 0 1,116,834 3,239,370
Cash generated from sales (Note 4) 0 0 811,706
Cash generated from refinancing 0 0 0
------------ ------------ ------------
Cash generated from operations, sales and refinancing 0 1,116,834 4,051,076
Less: Cash distributions to investors (Note 5)
- from operating cash flow 0 (635,944) (2,650,003)
- from sale of properties 0 0 0
------------ ------------ ------------
Cash generated (deficiency) after cash distributions 0 480,890 1,401,073
Special items (not including sales and refinancing):
Limited partners' capital contributions 0 40,000,000 0
General partners' capital contributions 1,000 0 0
Syndication costs 0 (3,892,003) 0
Acquisition of land and buildings 0 (22,152,379) (1,625,601)
Investment in direct financing leases 0 (6,792,806) (2,412,973)
Investment in joint venture 0 (1,564,762) (720,552)
Reimbursement of organization, syndication and
acquisition costs paid on behalf of CNL Income
Fund XV, Ltd. by related parties 0 (1,098,197) (23,507)
Increase in other assets 0 (187,757) 0
Other (38) (6,118) 25,150
------------ ------------ ------------
Cash generated (deficiency) after cash distributions
and special items 962 4,786,868 (3,356,410)
============ ============ ============
TAX AND DISTRIBUTION DATA PER $1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 0 33 71
============ ============ ============
- from recapture 0 0 0
============ ============ ============
Capital gain (loss) (Note 4) 0 0 0
============ ============ ============
C-48
<PAGE>
TABLE III - CNL INCOME FUND XV, LTD. (continued)
<CAPTION>
1993
(Note 1) 1994 1995
------------ ------------ ------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 0 21 66
- from capital gain 0 0 0
------------ ------------ ------------
Total distributions on GAAP basis (Note 5) 0 21 66
============ ============ ============
Source (on cash basis)
- from sales 0 0 0
- from refinancing 0 0 0
- from operations 0 21 66
------------ ------------ ------------
Total distributions on cash basis (Note 5) 0 21 66
============ ============ ============
Total cumulative cash distributions per $1,000 investment
from inception 0 21 87
Amount (in percentage terms) remaining invested in program
properties at the end of each year (period) presented
(original total acquisition cost of properties
retained, divided by original total acquisition
cost of all properties in program) N/A 100% 100%
</TABLE>
Note 1: The registration statement relating to this offering of Units of CNL
Income Fund XV, Ltd. became effective February 23, 1994. Activities
through March 23, 1994, were devoted to organization of the partnership
and operations had not begun.
Note 2: Cash generated from operations includes cash received from tenants,
plus distributions from joint venture, less cash paid for expenses,
plus interest received.
Note 3: Cash generated from operations per this table agrees to cash generated
from operations per the statement of cash flows included in the
financial statements of CNL Income Fund XV, Ltd.
Note 4: During 1995, the partnership sold three of its properties to a tenant
for its original purchase price, excluding acquisition fees and
miscellaneous acquisition expenses. The majority of the net sales
proceeds were used to acquire two additional properties. The remaining
net sales proceeds will be used towards the purchase of an additional
property. As a result of these transactions, the partnership
recognized a loss for financial reporting purposes of $71,023 primarily
due to acquisition fees and miscellaneous acquisition expenses the
partnership had allocated to the three properties and due to the
accrued rental income relating to future scheduled rent increases that
the partnership had recorded and reversed at the time of sale.
Note 5: Distributions declared for the quarter ended December 31, 1994 are
reflected in the 1995 column due to the payment of such distributions
in January 1995. As a result of distributions being presented on a
cash basis, distributions declared and unpaid as of December 31, 1994
and 1995, are not included in the 1994 and 1995 totals, respectively.
C-49
<PAGE>
TABLE III
Operating Results of Prior Programs
CNL INCOME FUND XVI, LTD.
<TABLE>
<CAPTION>
1993
(Note 1) 1994 1995
------------ ------------ ------------
<S> <C>
Gross revenue $ 0 $ 186,257 $ 2,702,504
Profit from sale of properties 0 0 0
Interest income 0 21,478 321,137
Less: Operating expenses 0 (10,700) (274,595)
Interest expense 0 0 0
Depreciation and amortization 0 (9,458) (318,205)
------------ ------------ ------------
Net income - GAAP basis 0 187,577 2,430,841
============ ============ ============
Taxable income
- from operations 0 189,864 2,139,382
============ ============ ============
- from gain on sale 0 0 0
============ ============ ============
Cash generated from operations (Notes 2 and 3) 0 205,148 2,481,395
Cash generated from sales 0 0 0
Cash generated from refinancing 0 0 0
------------ ------------ ------------
Cash generated from operations, sales and refinancing 0 205,148 2,481,395
Less: Cash distributions to investors (Note 4)
- from operating cash flow 0 (2,845) (1,798,921)
- from sale of properties 0 0 0
------------ ------------ ------------
Cash generated (deficiency) after cash distributions 0 202,303 682,474
Special items (not including sales and refinancing):
Limited partners' capital contributions 0 20,174,172 24,825,828
General partners' capital contributions 1,000 0 0
Syndication costs 0 (1,929,465) (2,452,743)
Acquisition of land and buildings 0 (13,170,132) (16,012,458)
Investment in direct financing leases 0 (975,853) (5,595,236)
Reimbursement of organization, syndication and
acquisition costs paid on behalf of CNL Income
Fund XVI, Ltd. by related parties 0 (854,154) (405,569)
Increase in other assets 0 (443,625) (58,720)
Other (36) (20,714) 20,714
------------ ------------ ------------
Cash generated (deficiency) after cash distributions
and special items 964 2,982,532 1,004,290
============ ============ ============
TAX AND DISTRIBUTION DATA PER $1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 0 17 53
============ ============ ============
- from recapture 0 0 0
============ ============ ============
Capital gain (loss) 0 0 0
============ ============ ============
C-50
<PAGE>
TABLE III - CNL INCOME FUND XVI, LTD. (continued)
<CAPTION>
1993
(Note 1) 1994 1995
------------ ------------ ------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 0 1 45
- from capital gain 0 0 0
- from return of capital 0 0 0
------------ ------------ ------------
Total distributions on GAAP basis (Note 4) 0 1 45
============ ============ ============
Source (on cash basis)
- from sales 0 0 0
- from refinancing 0 0 0
- from operations 0 1 45
------------ ------------ ------------
Total distributions on cash basis (Note 4) 0 1 45
============ ============ ============
Total cumulative cash distributions per $1,000
investment from inception 0 1 46
Amount (in percentage terms) remaining invested
in program properties at the end of each
year (period) presented (original total acquisition
cost of properties retained, divided by original
total acquisition cost of all properties in program) N/A 100% 100%
</TABLE>
Note 1: Pursuant to a registration statement on Form S-11 under the Securities
Act of 1933, as amended, CNL Income Fund XVI, Ltd. ("CNL XVI") and CNL
Income Fund XV, Ltd. each registered for sale $40,000,000 units of
limited partnership interests ("Units"). The offering of Units of CNL
Income Fund XV, Ltd. commenced February 23, 1994. Pursuant to the
registration statement, CNL XVI could not commence until the offering
of Units of CNL Income Fund XV, Ltd. was terminated. CNL Income Fund
XV, Ltd. terminated its offering of Units on September 1, 1994, at
which time the maximum offering proceeds of $40,000,000 had been
received. Upon the termination of the offering of Units of CNL Income
Fund XV, Ltd., CNL XVI commenced its offering of Units. Activities
through September 22, 1994, were devoted to organization of the
partnership and operations had not begun.
Note 2: Cash generated from operations includes cash received from tenants,
less cash paid for expenses, plus interest received.
Note 3: Cash generated from operations per this table agrees to cash generated
from operations per the statement of cash flows included in the
financial statements of CNL Income Fund XVI, Ltd.
Note 4: Distributions declared for the quarter ended December 31, 1994 are
reflected in the 1995 column due to the payment of such distributions
in January 1995. As a result of distributions being presented on a
cash basis, distributions declared and unpaid as of December 31, 1994
and 1995, are not included in the 1994 and 1995 totals, respectively.
C-51
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
<TABLE>
<CAPTION>
Selling Price, Net of
Closing Costs and GAAP Adjustments
--------------------------------------------------------------
Purchase
Cash money Adjustments
received Mortgage mortgage resulting
net of balance taken from
Date Date of closing at time back by application
Property Acquired Sale costs of sale program of GAAP Total
<S> <C>
CNL Income Fund, Ltd.:
Burger King -
San Dimas, CA 02/05/87 06/12/92 $1,169,021 0 0 0 $1,169,021
Wendy's -
Fairfield, CA 07/01/87 10/03/94 1,018,490 0 0 0 1,018,490
CNL Income Fund II, Ltd.:
Golden Corral -
Salisbury, NC 05/29/87 07/21/93 746,800 0 0 0 746,800
Pizza Hut -
Graham, TX 08/24/87 07/28/94 261,628 0 0 0 261,628
Golden Corral -
Medina, OH 11/18/87 11/30/94 626,582 0 0 0 626,582
CNL Income Fund IV, Ltd.:
Taco Bell -
York, PA 03/22/89 04/27/94 712,000 0 0 0 712,000
Burger King -
Hastings, MI 08/12/88 12/15/95 518,650 0 0 0 518,650
CNL Income Fund V, Ltd.:
Perkins -
Myrtle Beach, SC (2) 02/28/90 08/25/95 1,040,000 0 0 0 1,040,000
CNL Income Fund VI, Ltd.:
Hardee's -
Batesville, AR 11/02/89 05/24/94 791,211 0 0 0 791,211
Hardee's -
Heber Springs, AR 02/13/90 05/24/94 638,270 0 0 0 638,270
Hardee's -
Little Canada, MN 11/28/89 06/29/95 899,503 0 0 0 899,503
<CAPTION>
Cost of Properties
Including Closing and
Soft Costs
--------------------------------
Excess
Total (deficiency)
acquisition of property
cost, capital operating cash
Original improvements receipts over
mortgage closing and cash
Property financing soft costs (1) Total expenditures
<S> <C>
CNL Income Fund, Ltd.:
Burger King -
San Dimas, CA 0 $955,000 $955,000 $214,021
Wendy's -
Fairfield, CA 0 861500 861,500 156,990
CNL Income Fund II, Ltd.:
Golden Corral -
Salisbury, NC 0 642800 642,800 104,000
Pizza Hut -
Graham, TX 0 205500 205,500 56,128
Golden Corral -
Medina, OH 0 743000 743,000 (116,418)
CNL Income Fund IV, Ltd.:
Taco Bell -
York, PA 0 616501 616,501 95,499
Burger King -
Hastings, MI 0 419936 419,936 98,714
CNL Income Fund V, Ltd.:
Perkins -
Myrtle Beach, SC (2) 0 986418 986,418 53,582
CNL Income Fund VI, Ltd.:
Hardee's -
Batesville, AR 0 605500 605,500 185,711
Hardee's -
Heber Springs, AR 0 532893 532,893 105,377
Hardee's -
Little Canada, MN 0 821692 821,692 77,811
</TABLE>
(1) Amounts shown do not include pro rata share of original offering costs or
acquisition fees.
(2) These partnerships accepted mortgage note receivables in connection with the
sales of these properties.
C-52
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES (continued)
<TABLE>
<CAPTION>
Selling Price, Net of
Closing Costs and GAAP Adjustments
--------------------------------------------------------------
Purchase
Cash money Adjustments
received Mortgage mortgage resulting
net of balance taken from
Date Date of closing at time back by application
Property Acquired Sale costs of sale program of GAAP Total
<S> <C>
CNL Income Fund VII, Ltd.:
Taco Bell -
Kearns, UT 06/14/90 05/19/92 700,000 0 0 0 700,000
Hardee's -
St. Paul, MN 08/09/90 05/24/94 869,036 0 0 0 869,036
Perkins -
Florence, SC (3) 08/28/90 08/25/95 1,160,000 0 0 0 1,160,000
Church's Fried Chicken -
Jacksonville, FL (4) 04/30/90 12/01/95 240,000 0 0 0 240,000
CNL Income Fund VIII, Ltd.:
Church's Fried Chicken -
Melbourne, FL 09/28/90 02/01/91 172,945 0 0 0 172,945
Church's Fried Chicken -
Cocoa, FL 09/28/90 05/14/91 175,042 0 0 0 175,042
Denny's -
Ocoee, FL 03/16/91 07/31/95 1,184,865 0 0 0 1,184,865
Church's Fried Chicken -
Jacksonville, FL (4) 09/28/90 12/01/95 240,000 0 0 0 240,000
Church's Fried Chicken -
Jacksonville, FL (5) 09/28/90 12/01/95 220,000 0 0 0 220,000
CNL Income Fund X, Ltd.:
Shoney's -
Denver, CO 03/04/92 08/11/95 1,050,186 0 0 0 1,050,186
<CAPTION>
Cost of Properties
Including Closing and
Soft Costs
--------------------------------
Excess
Total (deficiency)
acquisition of property
cost, capital operating cash
Original improvements receipts over
mortgage closing and cash
Property financing soft costs (1) Total expenditures
<S> <C>
CNL Income Fund VII, Ltd.:
Taco Bell -
Kearns, UT 0 560,202 560,202 139,798
Hardee's -
St. Paul, MN 0 742,333 742,333 126,703
Perkins -
Florence, SC (3) 0 1,084,905 1,084,905 75,095
Church's Fried Chicken -
Jacksonville, FL (4) 0 233,728 233,728 6,272
CNL Income Fund VIII, Ltd.:
Church's Fried Chicken -
Melbourne, FL 0 166,022 166,022 6,923
Church's Fried Chicken -
Cocoa, FL 0 175,694 175,694 (652)
Denny's -
Ocoee, FL 0 949,199 949,199 235,666
Church's Fried Chicken -
Jacksonville, FL (4) 0 238,153 238,153 1,847
Church's Fried Chicken -
Jacksonville, FL (5) 0 215,845 215,845 4,155
CNL Income Fund X, Ltd.:
Shoney's -
Denver, CO 0 987,679 987,679 62,507
</TABLE>
(1) Amounts shown do not include pro rata share of original offering costs or
acquisition fees.
(2) These partnerships accepted mortgage note receivables in connection with the
sales of these properties.
C-53
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES (continued)
<TABLE>
<CAPTION>
Selling Price, Net of
Closing Costs and GAAP Adjustments
--------------------------------------------------------------
Purchase
Cash money Adjustments
received Mortgage mortgage resulting
net of balance taken from
Date Date of closing at time back by application
Property Acquired Sale costs of sale program of GAAP Total
<S> <C>
CNL Income Fund XIII, Ltd.:
Checkers -
Houston, TX 03/31/94 04/24/95 286,411 0 0 0 286,411
CNL Income Fund XIV, Ltd.:
Checkers -
Knoxville, TN 03/31/94 03/01/95 339,031 0 0 0 339,031
Checkers -
Dallas, TX 03/31/94 03/01/95 356,981 0 0 0 356,981
CNL Income Fund XV, Ltd.:
Checkers -
Knoxville, TN 05/27/94 03/01/95 263,221 0 0 0 263,221
Checkers -
Leavenworth, KS 06/22/94 03/01/95 259,600 0 0 0 259,600
Checkers -
Knoxville, TN 07/08/94 03/01/95 288,885 0 0 0 288,885
<CAPTION>
Cost of Properties
Including Closing and
Soft Costs
--------------------------------
Excess
Total (deficiency)
acquisition of property
cost, capital operating cash
Original improvements receipts over
mortgage closing and cash
Property financing soft costs (1) Total expenditures
<S> <C>
CNL Income Fund XIII, Ltd.:
Checkers -
Houston, TX 0 286,411 286,411 0
CNL Income Fund XIV, Ltd.:
Checkers -
Knoxville, TN 0 339,031 339,031 0
Checkers -
Dallas, TX 0 356,981 356,981 0
CNL Income Fund XV, Ltd.:
Checkers -
Knoxville, TN 0 263,221 263,221 0
Checkers -
Leavenworth, KS 0 259,600 259,600 0
Checkers -
Knoxville, TN 0 288,885 288,885 0
</TABLE>
(1) Amounts shown do not include pro rata share of original offering costs or
acquisition fees.
(2) These partnerships accepted mortgage note receivables in connection with the
sales of these properties.
C-54
<PAGE>
EXHIBIT D
SUBSCRIPTION AGREEMENT
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
UP TO 16,500,000 SHARES--$10.00 PER SHARE
MINIMUM PURCHASE--250 SHARES ($2,500)
100 SHARES ($1,000) FOR IRAS, KEOGH, AND QUALIFIED PLANS
(Minimum purchase may be higher in certain states)
PLEASE READ CAREFULLY this Subscription Agreement and the Notices (on the back
of the Agreement) before completing this document. TO SUBSCRIBE FOR SHARES,
complete and sign, where appropriate, and deliver the Subscription Agreement,
along with your check, to your Registered Representative. YOUR CHECK SHOULD
BE MADE PAYABLE TO:
SOUTHTRUST ESTATE & TRUST COMPANY, INC.
ALL ITEMS ON THE SUBSCRIPTION AGREEMENT MUST BE COMPLETED IN ORDER FOR YOUR
SUBSCRIPTION TO BE PROCESSED.
CNL SECURITIES CORP.
(407) 422-1574 OR (800) 522-3863
Overnight Packages: Regular Mail Packages:
Attn: Investor Services Attn: Investor Services
400 E. South Street, Suite 500 Post Office Box 1033
Orlando, Florida 32801 Orlando, Florida 32802-1033
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
1. INVESTMENT
This subscription is in the amount of $ for the purchase of Shares ($10.00
per Share). The minimum initial subscription is 250 Shares ($2,500); 100 Shares
($1,000) for IRA, Keogh and qualified plan accounts (except in states with
higher minimum purchase requirements).
[ ] ADDITIONAL PURCHASE [ ] REINVESTMENT PLAN - Investor elects to
participate in Plan (See prospectus for
details.)
2. SUBSCRIBER INFORMATION
Name (1st) ____________________________ Date of Birth (MM/DD/YY) __________
Name (2nd) ____________________________ Date of Birth (MM/DD/YY) __________
Address ______________________ City _________ State ___ Zip Code _______
Custodian Account No. ______________Daytime Phone # ( ___ ) _______________
[ ] U.S. Citizen [ ] Resident Alien [ ] Foreign Resident Country
[ ] Check if Subscriber is a U.S. citizen residing outside the U.S.
Income Tax Filing State __________________________
ALL SUBSCRIBERS: State of Residence of Subscriber/Plan Beneficiary (required)
TAXPAYER IDENTIFICATION NUMBER: For most individual taxpayers, it is their
Social Security number. Note: If the purchase is in more than one name, the
number should be that of the first person listed. For IRAs, Keoghs and
qualified plans, enter BOTH the Social Security number and the taxpayer
identification number.
TAXPAYER ID# __ - _______ SOCIAL SECURITY # ___ - __ - ___
3. INVESTOR MAILING ADDRESS
For the Subscriber of an IRA, Keogh, or qualified plan to receive informational
mailings, please complete if different from address in Section 2.
Name ___________________________________________
Address ________________________________________
City __________________________________ State _______ Zip Code __________
Daytime Phone #( ___ ) __________
4. DIRECT DEPOSIT ADDRESS
Investors requesting direct deposit of distribution checks to another financial
institution or mutual fund, please complete below. In no event will the Company
or Affiliates be responsible for any adverse consequences of direct deposit.
Company ________________________________________
Address ________________________________________
City ________________________ State _________ Zip Code ___________
Account No. _________________ Daytime Phone #( ___ ) ___________
5. FORM OF OWNERSHIP
(Select only one)
[ ] INDIVIDUAL-one signature required (1)
[ ] HUSBAND AND WIFE, AS COMMUNITY PROPERTY- two signatures required (15)
[ ] TENANTS IN COMMON-two signatures required (3)
[ ] TENANTS BY THE ENTIRETY-two signatures required (31)
[ ] CORPORATIONS
[ ] S-Corporation (22)
[ ] C-Corporation (5)
[ ] IRA-custodian signature required (23)
[ ] SEP-custodian signature required (38)
[ ] TAXABLE TRUST (7)
[ ] TAX-EXEMPT TRUST (28)
[ ] IRREVOCABLE TRUST-trustee signature required (21)
[ ] JOINT TENANTS WITH RIGHT OF SURVIVORSHIP-all parties must sign (8)
[ ] A MARRIED PERSON/SEPARATE PROPERTY-one signature required (34)
[ ] KEOGH (H.R.10)-trustee signature required (24)
[ ] CUSTODIAN-custodian signature required (33)
[ ] PARTNERSHIP (3)
[ ] NON-PROFIT ORGANIZATION (12)
[ ] PENSION PLAN-trustee signature(s) required (19)
[ ] PROFIT SHARING PLAN-trustee signature(s) required (27)
[ ] CUSTODIAN UGMA-STATE of -custodian signature required
(16)
[ ] CUSTODIAN UTMA-STATE of -custodian signature required
(42)
[ ] ESTATE-Personal Representative signature required (13)
[ ] REVOCABLE GRANTOR TRUST-grantor signature required (25)
[ ] SUBSCRIBER elects to have the Shares covered by this subscription placed in
a new sponsored IRA account offered by Franklin Bank as
custodian. IRA documents will be sent to subscriber upon receipt of
subscription documents. There is no annual fee involved
for CNL American Properties Fund, Inc. investments
<PAGE>
6. SUBSCRIBER SIGNATURES
If the Subscriber is executing the Subscriber Signature Page, the Subscriber
understands that, BY EXECUTING THIS AGREEMENT A SUBSCRIBER DOES NOT WAIVE ANY
RIGHTS HE MAY HAVE UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE
ACT OF 1934 OR UNDER ANY STATE SECURITIES LAW:
X X
Signature of 1st Subscriber Date Signature of 2nd Subscriber Date
7. BROKER/DEALER INFORMATION
Broker/Dealer NASD Firm Name
Registered Representative
Branch Mail Address
City State Zip Code [ ] Please check if new address
Phone #( ) _____________ Fax #( ) ___________ [ ] Sold CNL
before
Shipping Address City State Zip Code
[ ] TELEPHONIC SUBSCRIPTIONS (check here): If the Registered Representative
and Branch Manager are executing the signature page on behalf of the
Subscriber, both must sign below. Registered Representatives and Branch
Managers may not sign on behalf of residents of Florida, Iowa, Maine,
Michigan, Minnesota, Mississippi, Missouri, Nebraska, New Mexico, North
Carolina, Ohio, Oregon, South Dakota, Tennessee, or Washington. [NOTE:
Not to be executed until Subscriber(s) has (have) acknowledged receipt of
final prospectus.] Telephonic subscriptions may not be completed for IRA
accounts.
[ ] REGISTERED INVESTMENT ADVISOR (check here): If an owner or principal or
any member of the RIA firm is an NASD licensed Registered Representative
affiliated with a Broker/Dealer, the transaction should be conducted
through that Broker/Dealer, not through the RIA.
PLEASE READ CAREFULLY THE REVERSE SIDE OF THIS SIGNATURE PAGE AND SUBSCRIPTION
AGREEMENT BEFORE COMPLETING
X
Principal, Branch Manager or Other Date Print or Type Name of Person
Authorized Signature Signing
X
Registered Representative/Investment Date Print or Type Name of Person
Advisor Signature Signing
Make check payable to: SOUTHTRUST ESTATE & TRUST COMPANY, INC., ESCROW AGENT
Please remit check and For overnight delivery,
subscription document please send to: FOR OFFICE USE ONLY
to:
CNL SECURITIES CORP. CNL SECURITIES CORP. Sub. #
Attn: Investor Attn: Investor Services
Services 400 E. South Street, Suite 500 Admit Date
P.O. Box 1033 Orlando, FL 32801
Orlando, FL 32802-1033 (407) 422-1574 Amount
(800) 522-3863 (800) 522-3863
Region
RSVP
<PAGE>
NOTICE TO ALL INVESTORS:
(a) The purchase of Shares for an IRA or Keogh plan does not itself create
the plan.
(b) The Company, in its sole and absolute discretion, may accept or reject
the Subscriber's subscription which if rejected will be promptly returned to the
Subscriber, without interest. Non-U.S. Stockholders (as defined in the
Prospectus) will be admitted as stockholders with the approval of the Advisor.
(c) THE SALE OF SHARES SUBSCRIBED FOR HEREUNDER MAY NOT BE COMPLETED UNTIL
AT LEAST FIVE BUSINESS DAYS AFTER THE DATE THE SUBSCRIBER RECEIVES A FINAL
PROSPECTUS. EXCEPT AS PROVIDED IN THIS NOTICE, THE NOTICE BELOW, AND IN THE
PROSPECTUS, THE SUBSCRIBER WILL NOT BE ENTITLED TO REVOKE OR WITHDRAW HIS
SUBSCRIPTION.
NOTICE TO CALIFORNIA AND FLORIDA RESIDENTS: California and Florida investors
will have the right to withdraw their subscription funds if subscriptions for at
least $1,500,000 have not been accepted by the Company within six months after
the initial offer of Shares of the Company pursuant to the Prospectus and the
Company elects at that time to extend the offering beyond such date. The
Company will promptly notify California and Florida investors if the Company so
elects to extend the offering, and such investors must exercise their right to
withdraw within ten (10) days of such notice by delivering written notice to the
Company of their intention to exercise such right. The subscription funds of
withdrawing California and Florida investors will be promptly returned along
with such investor's pro rata share of interest earned thereon net of any escrow
fees calculated as set forth in the Prospectus and the Escrow Agreement.
NOTICE TO CALIFORNIA RESIDENTS: IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER
OF THIS SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION
THEREFORE, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS
OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
California investors who do not execute the Subscription Agreement will receive
a confirmation of investment accompanied by a second copy of the final
Prospectus, and will have the opportunity to rescind the investment within ten
(10) days from the date of confirmation.
NOTICE TO NORTH CAROLINA RESIDENTS: By signing this Subscription Agreement,
North Carolina investors acknowledge receipt of the Prospectus and represent
that they meet the suitability standards for North Carolina investors listed in
the Prospectus.
BROKER/DEALER AND FINANCIAL REPRESENTATIVE:
By signing this subscription agreement, the signers certify that they recognize
and have complied with their obligations under the NASD's Rules of Fair
Practice, and hereby certify as follows: (i) a copy of the Prospectus, including
the Subscription Agreement attached thereto as Exhibit C, as amended and/or
supplemented to date, has been delivered to the Subscriber; (ii) they have
discussed such investor's prospective purchase of Shares with such investor and
have advised such investor of all pertinent facts with regard to the liquidity
and marketability of the Shares; and (iii) they have reasonable grounds to
believe that the purchase of Shares is a suitable investment for such investor,
that such investor meets the suitability standards applicable to such investor
set forth in the Prospectus and related supplements, if any, and that such
investor is in a financial position to enable such investor to realize the
benefits of such an investment and to suffer any loss that may occur with
respect thereto and will maintain documentation on which the determination was
based for a period of not less than six years; and (iv) under penalties of
perjury, (a) the information provided in this Subscription Agreement to the best
of our knowledge and belief is true, correct, and complete, including, but not
limited to, the number shown above as the Subscriber's taxpayer identification
number; (b) to the best of our knowledge and belief, the Subscriber is not
subject to backup withholding either because the Subscriber has not been
notified that the Subscriber is subject to backup withholding as result of
failure to report all interest or dividends or the Internal Revenue Service has
notified the subscriber that the Subscriber is no longer subject to backup
withholding under Section 3406(a)(1)(C) of the Internal Revenue Code of 1986, as
amended; and (c) to the best of our knowledge and belief, the Subscriber is not
a nonresident alien, foreign corporation, foreign trust, or foreign estate for
U.S. tax purposes, and we hereby agree to notify the Company if it comes to the
attention of either of us that the Subscriber becomes such a person within sixty
(60) days of any event giving rise to the Subscriber becoming such a person.
<PAGE>
FRANKLIN BANK, N.A.,
Franklin Bank, N.A. P.O. Box 7090 Troy, MI 48007-7090 1-800-344-0667
INDIVIDUAL RETIREMENT ACCOUNT APPLICATION
ACCOUNTHOLDER INFORMATION: _________________ ______________________________
Social Security # Date
_______________________________ ___________________________________________
Name Date of Birth
_____________________________________________________________________________
Address City State Zip
__________________________________ ________________________________________
Home Phone Work Phone
_____________________________________________________________________________
Financial Consultant Firm Address Phone
It is not reasonable to project the growth of your IRA investments
include assets other than bank time deposits or savings accounts. Therefore,
your final account balance will depend upon many factors the amount of your
contributions, the amount of time the funds are invested, the earnings and/or
losses from the investments, expenses incurred such as brokerage commissions and
trustee's fees and the overall performance of your investments. We expressly
state that the growth in the value of your IRA cannot be guaranteed or
projected.
SIGNATURES IMPORTANT: Please read before signing.
I understand the eligibility requirements for the type of IRA
deposit I am making and I state that I do qualify to make the
deposit. I understand that the terms and conditions which
apply to the Individual Retirement Account are contained in
this Application and Form 5305A (which will be provided within
10 days of our receipt of this application). I agree to be
bound by those terms and conditions. I understand that I will
not be required to pay an annual fee as long as all
investments in this IRA are sponsored by a CNL entity. Within
seven (7) days from the date I establish the Individual
Retirement Account I may revoke it without penalty by mailing
or delivering a written notice to the Custodian.
I assume complete responsibility for:
1. Determining that I am eligible for an IRA each year I make
a contribution.
2. Insuring that all contributions I make are within the
limits set forth by the tax laws.
3. The tax consequences of any contribution (including
rollover contributions) and distributions.
Signature _______________________________________________
Accountholder
______________________ ________________
Authorized Signature Trustee Date
DESIGNATION OF
BENEFICIARY(IES): I designate the individual(s) named below as my primary
and contingent Beneficiary(ies) of the IRA. I revoke
all prior IRA Beneficiary designations, if any, made by
me. I understand that I may change or add Beneficiaries
at any time by completing and delivering the proper form
to the Custodian. (If you wish to name more than one
Beneficiary, attach a list of each Beneficiary's name,
social security number, relationship to you and
percentage share in this IRA.)
If any primary or contingent Beneficiary dies before me,
his or her interest and the interest of his or her heirs
shall terminate completely, and the percentage share of
any remaining Beneficiary(ies) shall be increased on a
pro rata basis.
Primary The following individual(s) shall be my Primary
Beneficiary(ies):
Beneficiary(ies)
Name_____________________ Social Security #____________
Address__________________ Date of Birth______ Share______
_________________________ Relationship____________
Contingent If none of the Primary Beneficiaries survive me,
the following individual(s) shall be my Beneficiary(ies):
Beneficiary(ies)
Name____________________ Social Security #__________
Address_________________ Date of Birth__________ Share______
________________________ Relationship_____________________
Spousal Consent
I am the spouse of IRA accountholder named above. I agree to
my spouse's naming of a primary Beneficiary other than myself.
I acknowledge that I have received a fair and reasonable
disclosure of my spouse's property and financial obligation.
I also acknowledge that I shall have no claim whatsoever
against the Custodian for any payments to my spouse's
Beneficiary(ies).
_____________________________ _____________________
Spouse's Signature Date
<PAGE>
EXHIBIT E
PRO FORMA ESTIMATE OF TAXABLE INCOME
BEFORE DIVIDENDS PAID DEDUCTION
<PAGE>
PRO FORMA ESTIMATE OF TAXABLE INCOME BEFORE DIVIDENDS PAID DEDUCTION OF
CNL AMERICAN PROPERTIES FUND, INC. AND SUBSIDIARY
GENERATED FROM THE OPERATIONS OF PROPERTIES ACQUIRED AS OF APRIL 9, 1996
FOR A 12-MONTH PERIOD (UNAUDITED)
The following schedule represents pro forma unaudited estimates
of taxable income before dividends paid deduction of each Property
acquired by the Company since inception, 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 TGI Friday's Golden Corral Golden Corral
Los Angeles, CA (14) Orange, CT (12)(16) Dover, DE (13)(16) Cleburne, TX (7)(16)
<S> <C>
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction:
Base Rent (1) $114,756 $195,997 $214,648 $114,959
Interest Income (2) - - - -
-------- -------- -------- --------
Total Revenues 114,756 195,997 214,648 114,959
-------- -------- -------- --------
Asset Management Fees (3) (6,868 ) (7,821 ) (11,166 ) (6,364 )
Mortgage Management Fee (4) - - - -
General and Administrative
Expenses (5) (7,115 ) (12,152 ) (13,308 ) (7,127 )
-------- -------- -------- --------
Total Operating Expenses (13,983 ) (19,973 ) (24,474 ) (13,491 )
-------- -------- -------- --------
Estimated Cash Available from
Operations 100,773 176,024 190,174 101,468
Depreciation and Amortization
Expense (6) (15,459 ) (35,228 ) (23,477 ) (19,653 )
-------- -------- -------- --------
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction of the Company $ 85,314 $140,796 $166,697 $ 81,815
======== ======== ======== ========
</TABLE>
See Footnotes
E-1
<PAGE>
<TABLE>
<CAPTION>
Kenny Rogers Golden Corral Kenny Rogers
Roasters Universal Golden Corral Roasters
Grand Rapids, MI (8) City, TX (7)(16) Carlsbad, NM (7)(16) Franklin, TN (8)
<S> <C>
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction:
Base Rent (1) $ 89,751 $117,155 $114,828 $102,164
Interest Income (2) - - - -
-------- -------- -------- --------
Total Revenues 89,751 117,155 114,828 102,164
-------- -------- -------- --------
Asset Management Fees (3) (5,022 ) (6,493 ) (6,358 ) (5,747 )
Mortgage Management Fee (4) - - - -
General and Administrative
Expenses (5) (5,565 ) (7,264 ) (7,119 ) (6,334 )
-------- -------- -------- --------
Total Operating Expenses (10,587 ) (13,757 ) (13,477 ) (12,081 )
-------- -------- -------- --------
Estimated Cash Available from
Operations 79,164 103,398 101,351 90,083
Depreciation and Amortization
Expense (6) (15,367 ) (20,289 ) (18,995 ) (11,359 )
-------- -------- -------- --------
Pro forma Estimate of Taxable
Income Before Dividends Paid
Deduction of the Company $ 63,797 $ 83,109 $ 82,356 $ 78,724
======== ======== ======== ========
</TABLE>
See Footnotes
E-2
<PAGE>
<TABLE>
<CAPTION>
Golden Corral Golden Corral Golden Corral Denny's
Tampa, FL (9)(16) Corsicana, TX (7) Fort Worth, TX (7) Pasadena, TX (10)(16)
<S> <C>
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction:
Base Rent (1) $199,882 $114,125 $156,804 $101,040
-------- -------- -------- --------
Interest Income (2) - - - -
Total Revenues 199,882 114,125 156,804 101,040
-------- -------- -------- --------
Asset Management Fees (3) (10,500 ) (6,238 ) (8,758 ) (5,531 )
Mortgage Management Fee (4) - - - -
General and Administrative
Expenses (5) (12,393 ) (7,076 ) (9,722 ) (6,264 )
-------- -------- -------- --------
Total Operating Expenses (22,893 ) (13,314 ) (18,480 ) (11,795 )
-------- -------- -------- --------
Estimated Cash Available from
Operations 176,989 100,811 138,324 89,245
Depreciation and Amortization
Expense (6) (27,429 ) (19,323 ) (23,030 ) (12,934 )
-------- -------- -------- --------
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction of the Company $149,560 $ 81,488 $115,294 $ 76,311
======== ======== ======== ========
</TABLE>
See Footnotes
E-3
<PAGE>
<TABLE>
<CAPTION>
Denny's Boston Market Boston Market Boston Market
Shawnee, OK (10)(16) Grand Island, NE Dubuque, IA (11) Chanhassen, MN (11)
<S> <C>
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction:
Base Rent (1) $120,477 $ 90,048 $104,185 $104,510
Interest Income (2) - - - -
-------- -------- -------- --------
Total Revenues 120,477 90,048 104,185 104,510
-------- -------- -------- --------
Asset Management Fees (3) (6,567 ) (5,006 ) (5,793 ) (5,788 )
Mortgage Management Fee (4) - - - -
General and Administrative
Expenses (5) (7,470 ) (5,583 ) (6,459 ) (6,480 )
-------- -------- -------- --------
Total Operating Expenses (14,037 ) (10,589 ) (12,252 ) (12,268 )
-------- -------- -------- --------
Estimated Cash Available from
Operations 106,440 79,459 91,933 92,242
Depreciation and Amortization
Expense (6) (16,008 ) (16,529 ) (17,025 ) (16,407 )
-------- -------- -------- --------
Pro forma Estimate of Taxable
Income Before Dividends Paid
Deduction of the Company $ 90,432 $ 62,930 $ 74,908 $ 75,835
======== ======== ======== ========
</TABLE>
See Footnotes
E-4
<PAGE>
<TABLE>
<CAPTION>
Golden Corral Jack in the Box 23 Pizza Hut TGI Friday's
Columbus, OH (13)(16) Houston, TX (14)(16) Properties Marlboro, NJ (12)(16)
<S> <C>
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction:
Base Rent (1) $215,899 $ 110,051 $ 467,500 $ 197,270
Interest Income (2) - - 904,897 -
-------- ---------- ---------- ----------
Total Revenues 215,899 110,051 1,372,397 197,270
-------- ---------- ---------- ----------
Asset Management Fees (3) (11,424 ) (6,013 ) (25,261 ) (7,744 )
Mortgage Management Fee (4) - - (50,850 ) -
General and Administrative
Expenses (5) (13,386 ) (6,823 ) (85,089 ) (12,231 )
-------- ---------- ---------- -----------
Total Operating Expenses (24,810 ) (12,836 ) (161,200 ) (19,975 )
-------- ---------- ---------- -----------
Estimated Cash Available from
Operations 191,089 97,215 1,211,197 177,295
Depreciation and Amortization
Expense (6) (25,002 ) (13,685 ) (22,883 ) (34,867 )
-------- ---------- ---------- ----------
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction of the Company $166,087 $ 83,530 $1,188,314 $ 142,428
======== ========== ========== ==========
</TABLE>
See Footnotes
E-5
<PAGE>
<TABLE>
<CAPTION>
TGI Friday's Denny's Burger King Burger King
Hazlet, NJ (12)(16) Grand Rapids, MI (10) Oak Lawn, IL (15)(16) Burbank, IL (15)(16)
<S> <C>
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction:
Base Rent (1) $189,265 $ 97,952 $205,700 $119,900
Interest Income (2) - - - -
-------- -------- -------- --------
Total Revenues 189,265 97,952 205,700 119,900
-------- -------- -------- --------
Asset Management Fees (3) (7,471 ) (4,982 ) (11,481 ) (6,692 )
Mortgage Management Fee (4) - - - -
General and Administrative
Expenses (5) (11,734 ) (6,073 ) (12,753 ) (7,434 )
-------- -------- -------- --------
Total Operating Expenses (19,205 ) (11,055 ) (24,234 ) (14,126 )
-------- -------- -------- --------
Estimated Cash Available from
Operations 170,060 86,897 181,466 105,774
Depreciation and Amortization
Expense (6) (33,636 ) (14,038 ) (22,287 ) (16,218 )
-------- -------- -------- --------
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction of the Company $136,424 $ 72,859 $159,179 $ 89,556
======== ======== ======== ========
</TABLE>
See Footnotes
E-6
<PAGE>
<TABLE>
<CAPTION>
Burger King Burger King
Indian Head Park, IL (15)(16) Highland, IN (15)(16) Total
<S> <C>
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction:
Base Rent (1) $136,818 $130,350 $3,926,034
Interest Income (2) - - 904,897
-------- -------- ----------
Total Revenues 136,818 130,350 4,830,931
-------- -------- ----------
Asset Management Fees (3) (7,636 ) (7,275 ) (205,999 )
Mortgage Management Fee (4) - - (50,850 )
General and Administrative
Expenses (5) (8,483 ) (8,082 ) (299,519 )
-------- -------- ----------
Total Operating Expenses (16,119 ) (15,357 ) (556,368 )
-------- -------- ----------
Estimated Cash Available from
Operations 120,699 114,993 4,274,563
Depreciation and Amortization
Expense (6) (19,389 ) (16,197 ) (526,714 )
-------- -------- ----------
Pro Forma Estimate of Taxable
Income Before Dividends Paid
Deduction of the Company $101,310 $ 98,796 $3,747,849
======== ======== ==========
</TABLE>
E-7
<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
$8,475,000, collateralized by building improvements located on
the 23 Pizza Hut Properties. The Master Mortgage Note bears
interest at a rate of 10.75% per annum and principal and
interest will be collected in equal monthly installments over 20
years beginning in March 1996. Amount does not include $42,375
of loan commitment fees and $42,375 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 17
public limited partnerships which own properties similar to
those owned by the Company. Amount does not include soliciting
dealer servicing fee due to the fact that such fee will not be
incurred until December 31 of the year following the year in which
the offering terminates.
(6) The estimated federal tax basis of the depreciable portion (the
building portion) of each Property has been depreciated on the
straight-line method over 39 years. In connection with the 23
Pizza Hut Properties, acquisition fees allocated to the Master
Mortgage Note have been amortized on a straight- line basis over
the life of the agreement (20 years).
(7) The lessee of the Cleburne, Universal City, Carlsbad,
Corsicana and Ft. Worth Properties is the same unaffiliated
lessee.
(8) The lessee of the Grand Rapids #1 and Franklin Properties is the
same unaffiliated lessee.
(9) The Company acquired an interest in CNL/Corral South Joint
Venture, a general partnership between the Company and an
unaffiliated co-venturer. Based on anticipated development costs
for the Property, the Company expects to own a 76% interest
in the CNL/Corral South Joint Venture upon completion of
construction. Therefore, amounts presented in this table
represent estimated amounts to be allocated to the Company from
the joint venture.
(10) The lessee of the Pasadena, Shawnee and Grand Rapids #2 Properties
is the same unaffiliated lessee.
(11) The lessee of the Dubuque, Chanhassen and Grand Island Properties
is the same unaffiliated lessee.
(12) The lessee of the Orange, Marlboro and Hazlet Properties is the
same unaffiliated lessee.
(13) The lessee of the Dover and Columbus Properties is the same
unaffiliated lessee.
(14) The lessee of the Los Angeles and Houston Properties is the same
unaffiliated lessee.
E-8
<PAGE>
(15) The lessee of the Oak Lawn, Burbank, Indian Head Park and
Highland Properties is the same unaffiliated lessee.
(16) The Company accepted an assignment of an interest in the ground
lease relating to the Orange, Marlboro, and Hazlet Properties
effective July 19, 1995, February 6, 1996, and March 6, 1996,
respectively, in consideration of its funding of certain
preliminary development costs and its agreement to fund
remaining development costs not in excess of the amount specified
below. The development agreements for the Properties which are to
be constructed or renovated provide that construction or
renovation must be completed no later than the dates set forth
below:
Property Estimated Final Completion Date
Orange Property Opened for business October 30, 1995
Dover Property Opened for business December 16, 1995
Cleburne Property Opened for business October 19, 1995
Universal City
Property Opened for business September 15, 1995
Carlsbad Property Opened for business September 5, 1995
Tampa Property Opened for business February 5, 1996
Pasadena Property May 8, 1996
Shawnee Property Opened for business December 21, 1995
Columbus Property Opened for business November 28, 1995
Houston Property Opened for business March 3, 1996
Marlboro Property July 7, 1996
Hazlet Property August 3, 1996
Oak Lawn Property July 18, 1996
Burbank Property July 18, 1996
Indian Head Park
Property August 1, 1996
Highland Property August 1, 1996
E-9
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 35. Financial Statements and Exhibits.
(a) Financial Statements:
The following financial statements are included in the
Prospectus.
(1) Pro Forma Balance Sheet as of December 31, 1995
(2) Pro Forma Statement of Earnings for the year ended
December 31, 1995
(3) Notes to Pro Forma Financial Statements
(4) Report of Independent Accountants for CNL American
Properties Fund, Inc.
(5) Consolidated Balance Sheets at December 31, 1995 and
1994
(6) Consolidated Statements of Earnings for the year
ended December 31, 1995 and the period May 2, 1994
(Date of Inception) through December 31, 1994
(7) Consolidated Statements of Stockholders' Equity for
the year ended December 31, 1995 and the period May
2, 1994 (Date of Inception) through December 31, 1994
(8) Consolidated Statements of Cash Flows for the year
ended December 31, 1995 and the period May 2, 1994
(Date of Inception) through December 31, 1994
(9) Notes to Consolidated Financial Statements
(10) Schedule III - Real Estate and Accumulated
Depreciation as of December 31, 1995
(11) Notes to Schedule III - Real Estate and Accumulated
Depreciation as of December 31, 1995
(12) Pro Forma Consolidated Balance Sheet as of September
30, 1996
(13) Pro Forma Consolidated Statement of Earnings for the
nine months ended September 30, 1996
(14) Pro Forma Consolidated Statement of Earnings for the
year ended December 31, 1995
(15) Notes to Pro Forma Consolidated Financial Statements
for the nine months ended September 30, 1996 and the
year ended December 31, 1995
(16) Condensed Consolidated Balance Sheets as of September
30, 1996 and December 31, 1995
(17) Condensed Consolidated Statements of Earnings for the
nine months ended September 30, 1996 and 1995
(18) Condensed Consolidated Statements of Stockholders'
Equity for the nine months ended September 30, 1996
and the year ended December 31, 1995
II-1
<PAGE>
(19) Condensed Consolidated Statements of Cash Flows for
the nine months ended September 30, 1996 and 1995
(20) Notes to Condensed Consolidated Financial Statements
for the nine months ended September 30, 1996 and
1995
All other Schedules have been omitted as the required
information is inapplicable or is presented in the financial statements
or related notes.
II-2
<PAGE>
(b) Exhibits:
*1.1 Form of Managing Dealer Agreement
*1.2 Form of Participating Broker Agreement
*1.3 Sponsor Agreement between CNL American Properties
Fund, Inc., CNL Securities Corp., CNL Fund Advisors,
Inc., and Financial Network Investment Corporation
*1.4 Soliciting Dealer Agreement between CNL American
Properties Fund, Inc., CNL Securities Corp., CNL Fund
Advisors, Inc., and American Express Financial
Advisors, Inc. dated May 1, 1995.
*3.1 CNL Income Fund, Inc. Articles of Incorporation
*3.2 Articles of Amendment to Articles of Incorporation of
CNL Income Fund, Inc.
*3.3 Articles of Amendment to Articles of Incorporation of
CNL Investment Fund, Inc.
*3.4 Form of CNL American Properties Fund, Inc. Amended
and Restated Articles of Incorporation
*3.5 Form of CNL American Properties Fund, Inc. Bylaws
*4.1 CNL American Properties Fund, Inc. Articles of
Incorporation (Previously filed as Exhibits 3.1, 3.2
and 3.3.)
*4.2 Form of CNL American Properties Fund, Inc. Amended
and Restated Articles of Incorporation (Previously
filed as Exhibit 3.4.)
*4.3 Form of CNL American Properties Fund, Inc. Bylaws
(Previously filed as Exhibit 3.5.)
*4.4 Form of Amended Reinvestment Plan (Previously
included in the Prospectus as Exhibit A.)
4.5 Form of Stock Certificate (Filed herewith.)
*5.1 Opinion of Shaw, Pittman, Potts & Trowbridge as to
the legality of the securities being registered by
CNL American Properties Fund, Inc.
*8.1 Opinion of Shaw, Pittman, Potts & Trowbridge
regarding certain material tax issues relating to CNL
American Properties Fund, Inc.
*10.1 Form of Escrow Agreement between CNL American
Properties Fund, Inc. and South Trust Estate & Trust
Company, Inc.
*10.2 Advisory Agreement between CNL American Properties
Fund, Inc. and CNL Fund Advisors, Inc. dated April
20, 1996
*Previously filed.
II-3
<PAGE>
*10.3 Form of Joint Venture Agreement
*10.4 Form of Development Agreement
*10.5 Form of Indemnification and Put Agreement
*10.6 Form of Unconditional Guarantee of Payment and
Performance
*10.7 Form of Lease Agreement for Existing Restaurant
*10.8 Form of Lease Agreement for Restaurant to be
Constructed
*10.9 Form of Real Estate Sale and Lease Contract
*10.10 Form of Amended Reinvestment Plan (Included in the
prospectus as Exhibit A.)
*10.11 Promissory Note, dated March 5, 1996, among
Registrant and First Union National Bank of Florida
relating to a $15,000,000 loan (Included as Exhibit
10.2 to Form 10-K filed with the Securities and
Exchange Commission on April 1, 1996, and
incorporated herein by reference.)
*10.12 Line of Credit and Security Agreement, dated March 5,
1996, among Registrant and First Union National Bank
of Florida relating to a $15,000,000 loan (Included
as Exhibit 10.3 to Form 10-K filed with the
Securities and Exchange Commission on April 1, 1996,
and incorporated herein by reference.)
*10.13 Collateral Assignment of Contract Rights, dated March
5, 1996, among Registrant and First Union National
Bank of Florida relating to a $15,000,000 loan
(Included as Exhibit 10.4 to Form 10-K filed with the
Securities and Exchange Commission on April 1, 1996,
and incorporated herein by reference.)
*23.1 Consent of Coopers & Lybrand L.L.P., Certified Public
Accountants, dated March 28, 1995
*23.2 Consent of Coopers & Lybrand L.L.P., Certified Public
Accountants, dated September 29, 1995
*23.3 Consent of Shaw, Pittman, Potts & Trowbridge
(Previously included in its opinion filed as Exhibit
5.1.)
*23.4 Consent of Coopers & Lybrand L.L.P., Certified Public
Accountants, dated November 20, 1995
*23.5 Consent of Coopers & Lybrand L.L.P., Certified Public
Accountants, dated February 19, 1996
*23.6 Consent of Coopers & Lybrand L.L.P., Certified Public
Accountants, dated April 8, 1996
*23.7 Consent of Coopers & Lybrand L.L.P., Certified Public
Accountants, dated April 25, 1996
*Previously filed.
II-4
<PAGE>
*23.8 Consent of Coopers & Lybrand L.L.P., Certified Public
Accountants, dated July 25, 1996
*23.9 Consent of Coopers & Lybrand L.L.P., Certified Public
Accountants, dated October 13, 1996
23.10 Consent of Coopers & Lybrand L.L.P., Certified Public
Accountants, dated January 17, 1997 (Filed herewith.)
*Previously filed.
II-5
<PAGE>
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS
Table VI presents information concerning the acquisition of real
properties by public real estate limited partnerships sponsored by Affiliates of
the Company in the nine years ended June 30, 1996. The information includes the
gross leasable space or number of units and total square feet of units, dates of
purchase, locations, cash down payment and contract purchase price plus
acquisition fee. This information is intended to assist the prospective investor
in evaluating the terms involved in acquisitions by such prior partnerships.
<PAGE>
TABLE VI
ACQUISITIONS OF PROPERTIES BY PROGRAMS
<TABLE>
<CAPTION>
CNL Income CNL Income CNL Income CNL Income
Fund, Fund II, Fund III, Fund IV,
Ltd. Ltd. Ltd. Ltd.
(Note 2) (Note 3) (Note 4) (Note 5)
<S> <C>
AL,DC,FL,GA,
AL,AZ,CO,FL, AZ,CA,FL,GA, IL,IN,KS,MA,
AL,AZ,CA,FL, GA,IL,IN,LA, IA,IL,IN,KS, MD,MI,MS,NC,
GA,LA,MD,OK, MI,MN,MO,NC, KY,MD,MI,MN, OH,PA,TN,TX,
Locations TX,VA NM,OH,TX,WY MO,NE,OK,TX VA
Type of property Restaurants Restaurants Restaurants Restaurants
Gross leasable space
(sq. ft.) or number
of units and 20 units 43 units 32 units 43 units
total square feet
of units 67,645 s/f 149,829 s/f 131,992 s/f 156,317 s/f
Dates of purchase 6/17/86 - 2/11/87- 10/04/87- 6/24/88-
12/17/87 12/08/94 6/30/88 1/24/96
Cash down payment (Note 1) $12,296,264 $23,182,624 $19,637,008 $26,594,469
Contract purchase price
plus acquisition fee $12,222,062 $23,022,783 $19,512,548 $26,479,912
Other cash expenditures
expensed - - - -
Other cash expenditures
capitalized 74,202 159,841 124,460 114,557
----------- ----------- ----------- -----------
Total acquisition cost
(Note 1) $12,296,264 $23,182,624 $19,637,008 $26,594,469
=========== =========== =========== ===========
</TABLE>
Note 1: This amount was derived from capital contributions from partners and
net sales proceeds reinvested in other properties.
Note 2: The partnership owns a 50% interest in three separate joint ventures
which each own a restaurant property.
Note 3: The partnership owns a 49%, 50% and 64% interest in three separate
joint ventures. Each joint venture owns one restaurant property. In
addition, the partnership owns a 33.87% interest in one restaurant
property held as tenants-in-common with an affiliate.
Note 4: The partnership owns a 73.4% and 69.07% interest in two separate joint
ventures. Each joint venture owns one restaurant property.
Note 5: The partnership owns a 51%, 26.6%, 57%, 96.1% and 68.87% interest in
five separate joint ventures. Each joint venture owns one restaurant
property. In addition, the partnership owns a 53.68% interest in one
restaurant property held as tenants-in-common with affiliates.
<PAGE>
TABLE VI - ACQUISITIONS OF PROPERTIES BY PROGRAMS (continued)
<TABLE>
<CAPTION>
CNL Income CNL Income CNL Income CNL Income
Fund V, Fund VI, Fund VII, Fund VIII,
Ltd. Ltd. Ltd. Ltd.
(Note 6) (Note 7) (Note 8) (Note 9)
<S> <C>
AR,AZ,FL,IN,
FL,GA,IL,IN, MA,MI,MN,NC, AZ,CO,FL,GA,
MI,NH,NY,OH, NE,NM,NY,OH, IN,LA,MI,MN, AZ,FL,IN,LA,
SC,TN,TX,UT, OK,PA,TN,TX, OH,SC,TN,TX, MI,MN,NC,NY,
Locations WA VA,WY UT,WA OH,TN,TX,VA
Type of property Restaurants Restaurants Restaurants Restaurants
Gross leasable space
(sq. ft.) or number
of units and 30 units 46 units 45 units 40 units
total square feet
of units 117,652 s/f 173,841 s/f 160,939 s/f 179,705 s/f
Dates of purchase 2/06/89- 7/13/89- 3/30/90- 9/13/90-
1/05/90 1/24/96 7/29/94 5/31/96
Cash down payment (Note 1) $22,113,522 $32,679,181 $27,310,125 $31,985,071
Contract purchase price
plus acquisition fee $21,706,859 $32,146,520 $26,638,040 $31,450,507
Other cash expenditures
expensed - - - -
Other cash expenditures
capitalized 406,663 532,661 672,085 534,564
----------- ----------- ----------- -----------
Total acquisition cost
(Note 1) $22,113,522 $32,679,181 $27,310,125 $31,985,071
=========== =========== =========== ===========
</TABLE>
Note 6: The partnership owns a 43%, 49% and 66.5% interest in three separate
joint ventures. Each joint venture owns one restaurant property.
Note 7: The partnership owns a 3.9%, 14.5%, 36% and a 66.14% interest in four
separate joint ventures. Each joint venture owns one restaurant
property. In addition, the partnership owns a 51.67% and a 17.93%
interest in two restaurant properties held separately as
tenants-in-common with affiliates.
Note 8: The partnership owns a 51%, 83.3%, 4.79% and a 18% interest in four
separate joint ventures. Three of the joint ventures each own one
restaurant property and the other joint venture owns six restaurant
properties. In addition, the partnership owns a 48.33% interest in one
restaurant property held as tenants-in-common with an affiliate.
Note 9: The partnership owns a 85.5%, 87.68%, 36.8% and a 12% interest in four
separate joint ventures. Three of the joint ventures each own one
restaurant property and the other joint venture owns six restaurant
properties.
<PAGE>
TABLE VI - ACQUISITIONS OF PROPERTIES BY PROGRAMS (continued)
<TABLE>
<CAPTION>
CNL Income CNL Income CNL Income CNL Income
Fund IX, Fund X, Fund XI, Fund XII,
Ltd. Ltd. Ltd. Ltd.
(Note 10) (Note 11) (Note 12) (Note 13)
<S> <C>
AL,AZ,CA,CO,
AL,CA,CO,FL, CT,FL,KS,LA,
AL,FL,GA,IL, ID,IL,LA,MI, MA,MI,MS,NC, AL,AZ,CA,FL,
IN,LA,MI,MN, MO,MT,NC,NH, NH,NM,OH,OK, GA,LA,MO,MS,
MS,NC,NH,NY, NM,NY,OH,PA, PA,SC,TX,VA, NC,NM,OH,SC,
Locations OH,SC,TN,TX SC,TN,TX WA TN,TX,WA
Type of property Restaurants Restaurants Restaurants Restaurants
Gross leasable space
(sq. ft.) or number
of units and 41 units 49 units 39 units 49 units
total square feet
of units 177,469 s/f 203,466 s/f 168,418 s/f 206,865 s/f
Dates of purchase 5/31/91- 10/01/91- 5/18/92- 11/20/92-
10/01/92 1/24/96 10/16/92 5/31/96
Cash down payment (Note 1) $30,748,694 $36,036,814 $35,200,825 $40,840,795
Contract purchase price
plus acquisition fee $30,021,833 $35,320,865 $34,595,348 $40,339,796
Other cash expenditures
expensed - - - -
Other cash expenditures
capitalized 726,861 715,949 605,477 500,999
----------- ----------- ----------- -----------
Total acquisition cost
(Note 1) $30,748,694 $36,036,814 $35,200,825 $40,840,795
=========== =========== =========== ===========
</TABLE>
Note 10: The partnership owns a 50%, 45.2% and 27.3% interest in three
separate joint ventures. One of the joint ventures owns one
restaurant property and the other two joint ventures own six
restaurant properties each.
Note 11: The partnership owns a 50%, 88.3%, 40.95% and 10.5% interest in
four separate joint ventures. Three of the joint ventures own one
restaurant property each and the other joint venture owns six
restaurant properties. In addition, the partnership owns a 13.37%
interest in one restaurant property held as tenants-in-common with
affiliates.
Note 12: The partnership owns a 62.2%, 77.33%, 85% and 76.6% interest in
four separate joint ventures. Each joint venture owns one
restaurant property.
Note 13: The partnership owns a 31.13%, 59.05%, 18.61% and 88% interest in
four separate joint ventures. Each joint venture owns one
restaurant property.
<PAGE>
TABLE VI - ACQUISITIONS OF PROPERTIES BY PROGRAMS (continued)
<TABLE>
<CAPTION>
CNL Income CNL Income CNL Income CNL Income
Fund XIII, Fund XIV, Fund XV, Fund XVI,
Ltd. Ltd. Ltd. Ltd.
(Note 14) (Note 15) (Note 16)
<S> <C>
AL,AR,AZ,CA, AL,AZ,CO,FL, CA,FL,GA,KS, AZ,CA,CO,DC,
CO,FL,GA,IN, GA,KS,LA,MO, KY,MO,MS,NC, FL,GA,ID,IN,
KS,LA,MD,NC, MS,NC,NJ,NV, NJ,NM,OH,OK, KS,MN,MO,NC,
OH,PA,SC,TN, OH,SC,TN,TX, PA,SC,TN,TX, NM,NV,OH,TN,
Locations TX,VA VA VA TX,UT,WI
Type of property Restaurants Restaurants Restaurants Restaurants
Gross leasable space
(sq. ft.) or number
of units and 48 units 56 units 48 units 43 units
total square feet
of units 156,156 s/f 161,913 s/f 143,473 s/f 166,793 s/f
Dates of purchase 5/18/93- 9/27/93- 4/28/94- 10/21/94-
4/24/95 3/16/95 1/24/96 3/15/96
Cash down payment (Note 1) $34,905,219 $39,943,098 $35,778,136 $39,421,376
Contract purchase price
plus acquisition fee $34,535,596 $39,515,928 $35,388,860 $39,030,014
Other cash expenditures
expensed - - - -
Other cash expenditures
capitalized 369,623 427,170 389,276 391,362
----------- ----------- ----------- -----------
Total acquisition cost
(Note 1) $34,905,219 $39,943,098 $35,778,136 $39,421,376
=========== =========== =========== ===========
</TABLE>
Note 14: The partnership owns a 50% and 28% interest in two separate joint
ventures. Each joint venture owns one restaurant property. In
addition, the Partnership owns a 66.13% interest in one restaurant
property held as tenants-in-common with an affiliate.
Note 15: The partnership owns a 50% interest in two separate joint ventures
and a 72% interest in one joint venture. Two of the joint ventures
each own one restaurant property and the other joint venture owns
two restaurant properties.
Note 16: The partnership owns a 50% interest in a joint venture which owns
two restaurant properties. In addition, the partnership owns a
15.02% interest in one restaurant property held as
tenants-in-common with affiliates.
<PAGE>
TABLE VI - ACQUISITIONS OF PROPERTIES BY PROGRAMS (continued)
CNL Income
Fund XVII,
Ltd.
CA,FL,IL,IN,
MI,NV,SC,TN,
Locations TX
Type of property Restaurants
Gross leasable space
(sq. ft.) or number
of units and 13 units
total square feet
of units 62,488 s/f
Dates of purchase 12/20/95 -
6/30/96
Cash down payment (Note 1) $12,616,047
Contract purchase price
plus acquisition fee $12,574,025
Other cash expenditures
expensed -
Other cash expenditures
capitalized 42,022
-----------
Total acquisition cost
(Note 1) $12,616,047
===========
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certified that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-11 and has duly caused this Post-
Effective Amendment No. 8 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Orlando,
State of Florida, on the 17th day of January, 1997.
CNL AMERICAN PROPERTIES FUND, INC.
(Registrant)
By: /s/JAMES M. SENEFF, JR.
-------------------------
JAMES M. SENEFF, JR.,
Chairman of the Board and
Chief Executive Officer
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 8 to the Registration Statement has been signed
below by the following persons in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/James M. Seneff, Jr. Chairman of the Board and January 17, 1997
- ----------------------- Chief Executive Officer
JAMES M. SENEFF, JR. (Principal Executive Officer)
/s/Robert A. Bourne Director and President January 17, 1997
- ------------------- (Principal Financial and
ROBERT A. BOURNE Accounting Officer)
/s/G. Richard Hostetter Independent Director January 17, 1997
- -----------------------
G. RICHARD HOSTETTER
/s/J. Joseph Kruse Independent Director January 17, 1997
- ------------------
J. JOSEPH KRUSE
/s/Richard C. Huseman Independent Director January 17, 1997
- ---------------------
RICHARD C. HUSEMAN
<PAGE>
EXHIBIT INDEX
Exhibit Number Page
*1.1 Form of Managing Dealer Agreement
*1.2 Form of Participating Broker Agreement
*1.3 Sponsor Agreement between CNL American Properties
Fund, Inc., CNL Securities Corp., CNL Fund Advisors,
Inc., and Financial Network Investment Corporation
*1.4 Soliciting Dealer Agreement between CNL American
Properties Fund, Inc., CNL Securities Corp., CNL Fund
Advisors, Inc., and American Express Financial
Advisors, Inc. dated May 1, 1995.
*3.1 CNL Income Fund, Inc. Articles of Incorporation
*3.2 Articles of Amendment to Articles of Incorporation of
CNL Income Fund, Inc.
*3.3 Articles of Amendment to Articles of Incorporation of
CNL Investment Fund, Inc.
*3.4 Form of CNL American Properties Fund, Inc. Amended
and Restated Articles of Incorporation
*3.5 Form of CNL American Properties Fund, Inc. Bylaws
*4.1 CNL American Properties Fund, Inc. Articles of
Incorporation (Previously filed as Exhibits 3.1, 3.2
and 3.3.)
*4.2 Form of CNL American Properties Fund, Inc. Amended
and Restated Articles of Incorporation (Previously
filed as Exhibit 3.4.)
*4.3 Form of CNL American Properties Fund, Inc. Bylaws
(Previously filed as Exhibit 3.5.)
*4.4 Form of Amended Reinvestment Plan (Included in the
Prospectus as Exhibit A.)
4.5 Form of Stock Certificate (Filed herewith.)
*5.1 Opinion of Shaw, Pittman, Potts & Trowbridge as to
the legality of the securities being registered by
CNL American Properties Fund, Inc.
*Previously filed.
i
<PAGE>
EXHIBIT INDEX
Exhibit Number Page
*8.1 Opinion of Shaw, Pittman, Potts & Trowbridge
regarding certain material tax issues relating to CNL
American Properties Fund, Inc.
*10.1 Form of Escrow Agreement between CNL American
Properties Fund, Inc. and South Trust Estate & Trust
Company, Inc.
*10.2 Advisory Agreement between CNL American Properties
Fund, Inc. and CNL Fund Advisors, Inc. dated April
20, 1996
*10.3 Form of Joint Venture Agreement
*10.4 Form of Development Agreement
*10.5 Form of Indemnification and Put Agreement
*10.6 Form of Unconditional Guarantee of Payment and
Performance
*10.7 Form of Lease Agreement for Existing Restaurant
*10.8 Form of Lease Agreement for Restaurant to be
Constructed
*10.9 Form of Real Estate Sale and Lease Contract
*10.10 Form of Amended Reinvestment Plan (Included in the
prospectus as Exhibit A.)
*10.11 Promissory Note, dated March 5, 1996, among
Registrant and First Union National Bank of Florida
relating to a $15,000,000 loan (Included as Exhibit
10.2 to Form 10-K filed with the Securities and
Exchange Commission on April 1, 1996, and
incorporated herein by reference.)
*10.12 Line of Credit and Security Agreement, dated March 5,
1996, among Registrant and First Union National Bank
of Florida relating to a $15,000,000 loan (Included
as Exhibit 10.3 to Form 10-K filed with the
Securities and Exchange Commission on April 1, 1996,
and incorporated herein by reference.)
*10.13 Collateral Assignment of Contract Rights, dated March
5, 1996, among Registrant and First Union National
Bank of Florida relating to a $15,000,000 loan
(Included as Exhibit 10.4 to Form 10-K filed with the
Securities and Exchange Commission on April 1, 1996,
and incorporated herein by reference.)
*Previously filed.
ii
<PAGE>
EXHIBIT INDEX
Exhibit Number Page
*23.1 Consent of Coopers & Lybrand L.L.P., Certified Public
Accountants, dated March 28, 1995
*23.2 Consent of Coopers & Lybrand L.L.P., Certified Public
Accountants, dated September 29, 1995
*23.3 Consent of Shaw, Pittman, Potts & Trowbridge
(Previously included in its opinion filed as Exhibit
5.1.)
*23.4 Consent of Coopers & Lybrand L.L.P., Certified Public
Accountants, dated November 20, 1995
*23.5 Consent of Coopers & Lybrand L.L.P., Certified Public
Accountants, dated February 19, 1996
*23.6 Consent of Coopers & Lybrand L.L.P., Certified Public
Accountants, dated April 8, 1996
*23.7 Consent of Coopers & Lybrand L.L.P., Certified Public
Accountants, dated April 25, 1996
*23.8 Consent of Coopers & Lybrand L.L.P., Certified Public
Accountants, dated July 25, 1996
*23.9 Consent of Coopers & Lybrand L.L.P., Certified Public
Accountants, dated October 15, 1996
23.10 Consent of Coopers & Lybrand L.L.P., Certified Public
Accountants, dated January 17, 1997 (Filed
herewith.)
*Previously filed.
iii
EXHIBIT 4.5
Form of Stock Certificate
<PAGE>
EXHIBIT 4.5
<TABLE>
<CAPTION>
<S> <C>
NUMBER SHARES
------------ ---------------------------------- ------------
| | CNL American Properties Fund, Inc. | |
| | ================================== | |
| | Incorporated Under the Laws | |
------------ of the State of Maryland ------------
TRANSFER
RESTRICTIONS
ON REVERSE SIDE CUSIP 12613A101
</TABLE>
THIS CERTIFIES THAT
is the owner of ______________________________________ fully paid and
non-assessible shares of the par value of $0.01 each of the COMMON STOCK of CNL
American Properties Fund, Inc. transferable on the books of the Corporation by
the holder hereof in person or by duly authorized attorney upon surrender of
this Certificate properly endorsed. This Certificate is not valid unless
countersigned and registered by the Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated
/s/ Lynn E. Rose [SEAL] /s/ Robert A. Bourne
------------ ----------------
Secretary President
COUNTERSIGNED AND REGISTERED MMS ESCROW AND TRANSFER AGENCY, INC.
BY /s/ Craig Moncher TRANSFER AGENT
-------------------- AND REGISTRAR
AUTHORIZED SIGNATURE
<PAGE>
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN OR DESTROYED, THE
CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO THE ISSUANCE OF A
REPLACEMENT CERTIFICATE.
The securities represented by this certificate are subject to restrictions on
transfer for the purpose of maintenance of the Corporation's status as a real
estate investment trust ("REIT") under the Internal Revenue Code of 1986, as
amended (the "Code"). Except as otherwise provided pursuant to the Articles of
Incorporation of the Corporation, no Person may (i) Beneficially or
Constructively own shares of any class or series of Equity Stock in excess of
9.8 percent (or such greater percentage as may be determined by the Board of
Directors of the Corporation) of the Value of the outstanding shares of such
class or series of Equity Stock of the Corporation or (ii) Beneficially Own
Equity Stock which would result in the Corporation being "closely held" under
section 856(h) of the Code or otherwise would cause the Corporation to fail to
qualify as a REIT. Any Person who attempts or proposes to Beneficially or
Constructively Own shares of Equity Stock in excess of the above limitations
must notify the Corporation in writing at least fifteen (15) days prior to the
proposed or attempted transfer. If the transfer restrictions referred to herein
are violated, the shares of Equity Stock represented hereby automatically will
be exchanged for shares of Excess Stock and will be held in trust by the
Corporation, all as provided in the Articles of Incorporation of the
Corporation. All capitalized terms in this legend have the meanings identified
in the Corporation's Articles of Incorporation, as the same may be amended or
restated from time to time, a copy of which, including the restrictions on
transfer, will be sent without charge to each stockholder who so requests.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as through they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not
as tenants in common
UNIF GIFT MIN ACT Custodian
------------------ -----------------
(Cust) (Minor)
under Uniform Gifts to Minors Act
------------------------
(State)
Additional abbreviations may also be used though not in the above list.
For value received ___________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY ASSIGNEE ACCOUNT #
OR OTHER IDENTIFYING NUMBER ----------------
OF ASSIGNEE
SELLING PRICE
LESS COMMISSION
- ----------------------------- (IF APPLICABLE) ------------------
TYPE OF OWNERSHIP
- ----------------------------- -----------------
- -------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS,
INCLUDING ZIP CODE, OF ASSIGNEE)
- ------------------------------------------------------------------- shares of
the capital stock represented by the within Certificate, and so hereby
irrevocably constitute and appoint _______________________________________
Attorney to transfer the said stock on the books of the within named Corporation
with full power of substitution in the premises.
Assignee's Signature Dated
----------------------- ---------------
Assignor's Signature Dated
----------------------- ---------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME
AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OF ANY CHANGE
WHATEVER.
Please submit the completed form to: MMS Escrow and Transfer Agency,
P.O. Box 7090, Troy, MI 48007-7090
EXHIBIT 23.10
Consent of Coopers & Lybrand L.L.P.,
Certified Public Accountants,
dated January 17, 1997
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-11 (File
No. 33-78790) of our report dated January 22, 1996 on our audits of the
financial statements of CNL American Properties Fund, Inc. We also consent to
the reference to our Firm under the caption "Experts".
/S/ COOPERS & LYBRAND L.L.P.
------------------------
COOPERS & LYBRAND L.L.P.
Orlando, Florida
January 17, 1996