Rule 424(b)(3)
No. 333-37657
CNL AMERICAN PROPERTIES FUND, INC.
This Supplement is part of, and should be read in conjunction with, the
Prospectus dated May 12, 1998. This Supplement replaces the Supplement dated
June 1, 1998. Capitalized terms used in this Supplement have the same meaning as
in the Prospectus unless otherwise stated herein.
The term "Company" includes, unless the context otherwise requires, CNL
American Properties Fund, Inc. and its wholly owned subsidiary, CNL APF
Partners, LP.
THE OFFERINGS
Upon completion of its Initial Offering on February 6, 1997, the
Company had received subscription proceeds of $150,591,765 (15,059,177 shares),
including 59,177 shares ($591,765) issued pursuant to the Reinvestment Plan.
Following the completion of its Initial Offering, the Company commenced its 1997
Offering of up to 27,500,000 shares and upon completion of such offering on
March 2, 1998, had received subscription proceeds of $251,872,648 (25,187,265
shares), including 187,265 shares ($1,872,648) issued pursuant to the
Reinvestment Plan. Net offering proceeds received by the Company from the Prior
Offerings, after deduction of selling commissions, marketing support and due
diligence expense reimbursement fees and offering expenses, totalled
approximately $361,100,000. Following the completion of the 1997 Offering, the
Company commenced this offering of up to 34,500,000 Shares. As of June 16, 1998,
the Company had received subscription proceeds of $97,518,266 (9,751,827
Shares), including 81,262 Shares ($812,615) issued pursuant to the Reinvestment
Plan in connection with this offering. Net offering proceeds received by the
Company from this offering, after deduction of selling commissions, marketing
support and due diligence expense reimbursement fees and offering expenses,
totalled approximately $88,300,000. As of June 16, 1998, the Company had
invested or committed for investment approximately $375,600,000 of aggregate net
proceeds from its offerings in 309 Properties, in providing mortgage financing
through Mortgage Loans, and in paying acquisition fees and certain acquisition
expenses, leaving approximately $73,800,000 in aggregate net offering proceeds
available for investment in Properties and Mortgage Loans.
BUSINESS
COMPLETED INVESTMENTS
As of June 16, 1998, the Company had invested or committed for
investment approximately $375,600,000 of aggregate net proceeds from its
offerings in 309 Properties, in providing mortgage financing through Mortgage
Loans, and to pay related acquisition fees and acquisition expenses. All of the
Properties are owned directly by the Company, except for two Properties which
are owned through joint venture arrangements. All of the Properties were
acquired since the Company commenced operations on June 1, 1995 and the leases
generally provide for initial terms ranging from 15 to 20 years and expire
between 2002 and 2022. Certain Properties will be accounted for as capital
leases for federal tax purposes; therefore, the Company will not be entitled to
depreciation expense on such Properties.
June 24, 1998 Prospectus Dated May 12, 1998
<PAGE>
The following tables set forth information for the Properties owned by
the Company as of June 16, 1998, including the number of Properties by
Restaurant Chain and the number of Properties by state.
Restaurant Number of Properties
Applebee's 2
Arby's 13
Bennigan's 19
Black-eyed Pea 18
Boston Market 31
Burger King 9
Charley's Place 2
Chevy's Fresh Mex 5
Darryl's 15
Denny's 4
Einstein Bros. Bagels 2
Golden Corral 31
Ground Round 13
Houlihan's 3
IHOP 9
Jack in the Box 38
KFC 1
Mr. Fable's 1
On The Border 1
Pizza Hut 44
Popeyes 1
Ruby Tuesday 2
Ruth's Chris Steak House 1
Ryan's Family Steak House 1
Shoney's 4
Sonny's Real Pit Bar-B-Q 7
Steak & Ale 18
TGI Friday's 1
Tumbleweed Southwest Mesquite Grill & Bar 7
Wendy's 6
----
Total 309
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<PAGE>
State Number of Properties
Alabama 8
Arizona 11
California 24
Colorado 7
Connecticut 1
Delaware 1
Florida 28
Georgia 13
Idaho 1
Illinois 5
Indiana 5
Iowa 4
Kansas 3
Kentucky 5
Maryland 7
Michigan 8
Minnesota 4
Missouri 8
Nevada 2
New Jersey 6
New Mexico 3
New York 1
North Carolina 10
Ohio 39
Oklahoma 8
Oregon 3
Pennsylvania 6
Rhode Island 1
South Carolina 1
Tennessee 15
Texas 48
Utah 1
Virginia 8
Washington 2
West Virginia 10
Wisconsin 2
----
Total 309
PROPERTY ACQUISITIONS
Between March 3, 1998 and June 16, 1998, the Company acquired 64
Properties consisting of land and building. In connection with the purchase of
these 64 Properties, the Company, as lessor, entered into long-term lease
agreements with unaffiliated lessees. The general terms of the lease agreements
are described in the section of the Prospectus entitled "Business - Description
of Property Leases." For the Properties that are to be constructed or renovated,
the Company has entered into development and indemnification and put agreements
with the lessees. The general terms of these agreements are described in the
section of the Prospectus entitled "Business - Site Selection and Acquisition of
Properties - Construction and Renovation."
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<PAGE>
The purchase prices for the Shoney's Property in Phoenix, Arizona, and
the Bennigan's Property in Orlando, Florida, include Construction Fees of
$37,500 and $978, respectively, paid to an Affiliate of the Advisor for services
provided in connection with the construction of the Properties. The Company
considers Construction Fees, to the extent that they are paid to Affiliates, to
be Acquisition Fees. Such Construction 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."
The following table sets forth the location of the 64 Properties,
consisting of land and building, acquired by the Company from March 3, 1998
through June 16, 1998, a description of the competition, and a summary of the
principal terms of the acquisition and lease of each Property.
-4-
<PAGE>
PROPERTY ACQUISITIONS
From March 3, 1998 through June 16, 1998
<TABLE>
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------------------- ------------ -------- --------------- --------------- ---------- -----------
<S> <C>
Ruby Tuesday $586,120 03/03/98 03/2013; two 11% of Total Cost for each lease at any time
(the "Somerset (excluding five-year (4); increases by year, (i) 5% of after the
Property") development renewal options 10% after the fifth annual gross seventh
Restaurant to be costs) (3) lease year and after sales minus (ii) lease year
constructed every five years the minimum
thereafter during the annual rent for
The Somerset Property lease term such lease year
is located on the west
side of U.S. 27, west
of S.R. 1577, in
Somerset, Pulaski
County, Kentucky, in
an area of mixed
retail, commercial, and
residential development.
Other fast-food, family-
style, and casual dining
restaurants located in
proximity to the Somerset
Property include a Sonic
Drive- In.
-5-
<PAGE>
Jack in the Box (5) $1,299,700 03/04/98 03/2016; four $126,721 (6); None at any time
(the "Pflugerville (3) (6) five-year increases by 8% after the
Property ") renewal options after the fifth lease seventh
Restaurant to be year and after every lease year
constructed five years thereafter
during the lease
The Pflugerville term
Property is located on
the northwest quadrant
of F.M. 1825 and Wells
Branch Parkway, in
Pflugerville, Travis
County, Texas, in an
area of mixed retail,
commercial, and residential
development. Other
fast-food, family-style,
and casual dining
restaurants located in
proximity to the
Pflugerville Property
include a local restaurant.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------------------- ------------ -------- --------------- --------------- ----------- -----------
<S> <C>
Jack in the Box (5) $973,022 03/13/98 03/2016; four $94,870 (6); None at any time
(the "Waxahachie (3) (6) five-year increases by 8% after the
Property ") renewal options after the fifth lease seventh
Restaurant to be year and after every lease year
constructed five years thereafter
during the lease
The Waxahachie term
Property is located on
the southeast quadrant
of U.S. Highway 287
Bypass and U.S.
Highway 77, in
Waxahachie, Ellis
County, Texas, in an
area of mixed retail,
commercial, and
residential
development. Other
fast-food, family-style,
and casual dining
restaurants located in
proximity to the
Waxahachie Property
include a KFC, a
McDonald's, a
Whataburger, a Taco
Bell, a Golden Corral,
a Schlotzsky's Deli,
and several local
restaurants.
-7-
<PAGE>
Jack in the Box (5) $895,688 03/16/98 03/2016; four $87,330 (6); None at any time
(the "Hutchins (3) (6) five-year increases by 8% after the
Property ") renewal options after the fifth lease seventh
Restaurant to be year and after every lease year
constructed five years thereafter
during the lease
The Hutchins Property term
is located on the
southwest quadrant of
East Palestine Road
and South Interstate
Highway 45, in
Hutchins, Dallas
County, Texas, in an
area of mixed retail,
commercial, and
residential
development. Other
fast-food, family-style,
and casual dining
restaurants located in
proximity to the
Hutchins Property
include a Dairy Queen
and a local restaurant.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- --------------------- ------------ -------- --------------- --------------- ----------- -----------
<S> <C>
Shoney's $507,605 03/24/98 03/2018; two 10.50% of Total for each lease at any time
(the "Phoenix #4 (excluding five-year Cost (4); increases year, (i) 6% of after the
Property") development renewal options by 2% after the annual gross seventh
Restaurant to be costs) (3) second lease year sales minus (ii) lease year
constructed and after every two the minimum
years thereafter annual rent for
The Phoenix #4 during the lease such lease year
Property is located on term
the northeast quadrant
of West McDowell Road
and North 51st Avenue,
in Phoenix, Maricopa
County, Arizona, in
an area of mixed
retail, commercial, and
residential development.
Other fast-food, family-
style, and casual
dining restaurants
located in proximity
to the Phoenix #4
Property include a Burger
King, a McDonald's, a
Sonic Drive-In, a Waffle
House, a Taco Bell, an
IHOP, and several local
restaurants.
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<PAGE>
Arby's (7) $411,487 04/06/98 04/2018; two (8) None at any time
(the "Columbus #2 (excluding five-year after the
Property") development renewal options seventh
Restaurant to be costs) (3) lease year
constructed
The Columbus #2 Property
is located on the
southeast quadrant of
Rosehill Road and East
Broad Street, in Columbus,
Franklin County, Ohio,
in an area of mixed retail,
commercial, and residential
development. Other fast-
food, family-style, and
casual dining restaurants
located in proximity to
the Columbus #2 Property
include a Taco Bell, a
Wendy's, a McDonald's,
a Subway Sandwich Shop,
and a local restaurant.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ------------------------ ------------ -------- --------------- --------------- ---------- -----------
<S> <C>
Arby's (7) $643,757 04/2018; two (8) None at any time
(the "Atlanta #2 (excluding 04/07/98 five-year after the
Property") development renewal options seventh
Restaurant to be costs) (3) lease year
constructed
The Atlanta #2 Property
is located on the east
side of Georgia Highway
141, north of McGinnis
Ferry Road, in Atlanta,
Forsyth County, Georgia,
in an area of mixed retail,
commercial, and residential
development. Other fast-
food, family-style, and
casual dining restaurants
located in proximity to the
Atlanta #2 Property include
a Chick-Fil-A, a McDonald's,
and a Wendy's.
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<PAGE>
Jack in the Box (5) $811,891 04/13/98 04/2016; four $79,159 (6); None at any time
(the "Gun Barrel City (3) (6) five-year increases by 8% after the
Property ") renewal options after the fifth lease seventh
Restaurant to be year and after every lease year
constructed five years thereafter
during the lease
The Gun Barrel City term
Property is located on
the north side of State
Highway 334, west of
the intersection of
Pleasureland Road, in
Gun Barrel City,
Henderson County,
Texas, in an area of
mixed retail,
commercial, and
residential
development. Other
fast-food, family-style,
and casual dining
restaurants located in
proximity to the Gun
Barrel City Property
include a Schlotzsky's
Deli, a Subway
Sandwich Shop, a
Taco Bell, a Burger
King, a Pizza Hut, a
Dairy Queen, a
McDonald's, a
Whataburger, and
several local
restaurants.
</TABLE>
-12-
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ---------------------- ------------ -------- --------------- --------------- ----------- -----------
<S> <C>
Jack in the Box (5) $999,670 04/13/98 04/2016; four $97,468 (6); None at any time
(the "Nacogdoches (3) (6) five-year increases by 8% after the
Property ") renewal options after the fifth lease seventh
Restaurant to be year and after every lease year
constructed five years thereafter
during the lease
The Nacogdoches term
Property is located on
the west side of U.S.
Highway 59, south of
College Street, in
Nacogdoches, Nacogdoches
County, Texas, in an area
of mixed retail, commercial,
and residential development.
Other fast-food, family-
style, and casual dining
restaurants located in
proximity to the Nacogdoches
Property include a Taco
Bell, a Wendy's, a McDonald's,
a Long John Silver's, a
Schlotzsky's Deli, a
Little Caesar's Pizza, a
Golden Corral, and several
local restaurants.
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<PAGE>
Boston Market (9) $950,361 04/14/98 05/2015; two $102,164; increases for each lease at any time
(10) five-year by 12% in 05/2002 year, (i) 5% of after
(the "Glendale renewal options and after every annual gross 05/2002
Property ") seven years sales minus (ii)
Existing restaurant thereafter during the the minimum
lease term annual rent for
The Glendale Property such lease year
is located on the south (11)
side of West Peoria Avenue,
east of 59th Avenue, in
Glendale, Maricopa County,
Arizona, in an area of mixed
retail, commercial, and
residential development.
Other fast-food, family-
style, and casual dining
restaurants located in
proximity to the Glendale
Property include a Taco Bell,
a KFC, a Popeye's, a Burger
King, an Applebee's, an Arby's,
a Jack in the Box, a Long John
Silver's, a Wendy's, a
McDonald's, and several local
restaurants.
</TABLE>
-14-
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ---------------------- ------------ -------- --------------- --------------- ----------- -----------
<S> <C>
Boston Market (9) $837,656 04/14/98 09/2010; three $90,048; increases for each lease at any time
(10) five-year by 10% in 09/2000 year, (i) 4% of after
(the "Warwick renewal options and after every five annual gross 09/2000
Property ") years thereafter sales minus (ii)
Existing restaurant during the lease the minimum
term annual rent for
The Warwick Property such lease year
is located on the east
side of Bald Hill Road,
north of Route 117, in
Warwick, Kent County,
Rhode Island, in an
area of mixed retail,
commercial, and
residential development.
Other fast-food, family-
style, and casual dining
restaurants located in
proximity to the Warwick
Property include a TGI
Friday's, an Olive Garden,
a Red Lobster, a Lone Star
Steakhouse & Saloon, a
McDonald's, a Burger King,
a Taco Bell, an Applebee's,
a Wendy's, and an East Side
Mario's.
-15-
<PAGE>
Jack in the Box (5) $1,150,008 04/14/98 04/2016; four $112,126 (6); None at any time
(the "St. Louis (3) (6) five-year increases by 8% after the
Property ") renewal options after the fifth lease seventh
Restaurant to be year and after every lease year
constructed five years thereafter
during the lease
The St. Louis Property term
is located on the northeast
quadrant of Lusher Road
and Redman Road, in St.
Louis, St. Louis County,
Missouri, in an area of
mixed retail, commercial,
and residential development.
Other fast-food, family-
style, and casual dining
restaurants located in
proximity to the St. Louis
Property include a Subway
Sandwich Shop, a McDonald's,
and an Arby's.
</TABLE>
-16-
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------------------- ------------ -------- --------------- --------------- ---------- -----------
<S> <C>
Jack in the Box (5) $1,175,298 04/30/98 04/2016; four $114,952 (6); None at any time
(the "Avondale (3) (6) five-year increases by 8% after the
Property ") renewal options after the fifth lease seventh
Restaurant to be year and after every lease year
constructed five years thereafter
during the lease
The Avondale Property term
is located on the northeast
corner of Rancho Santa Fe
Boulevard and Dysart Road,
in Avondale, Maricopa County,
Arizona, in an area of
mixed retail, commercial,
and residential development.
Other fast-food, family-style,
and casual dining restaurants
located in proximity to the
Avondale Property include a
McDonald's, a Waffle House,
a Whataburger, and a KFC.
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<PAGE>
Boston Market (9) $969,159 05/08/98 10/2010; three $104,185; increases for each lease at any time
(10) five-year by 10% in 10/2000 year, (i) 4% of after
(the "Columbus #3 renewal options and after every five annual gross 10/2000
Property ") years thereafter sales minus (ii)
Existing restaurant during the lease the minimum
term annual rent for
The Columbus #3 such lease year
Property is located on (11)
the northwest quadrant
of the intersection of
Bethel Road and Olentangy
River Road, in Columbus,
Franklin County, Ohio,
in an area of mixed
retail, commercial, and
residential development.
Other fast-food, family-style,
and casual dining restaurants
located in proximity to the
Columbus #3 Property
include a Bob Evans, a
McDonald's, a Wendy's, and a KFC.
</TABLE>
-18-
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Ren t To Purchase
- -------------------- ----------- -------- --------------- --------------- ----------- -----------
<S> <C>
Chevy's Fresh Mex $2,200,000 05/15/98 05/2013; two $209,000; increases for each lease at any time
(the "Naperville ten-year renewal by 10% after the year, (i) 5% of during the
Property ") options fifth lease year and annual gross lease term
Existing restaurant after every five sales minus (ii)
years thereafter the minimum
The Naperville during the lease annual rent for
Property is located on term such lease year
the southwest corner of
North Naper Boulevard
and Lincoln Road, in
Naperville, DuPage
County, Illinois, in an
area of mixed retail,
commercial, and
residential
development. Other
fast-food, family-style,
and casual dining
restaurants located in
proximity to the
Naperville Property
include a TGI Friday's,
a Pizza Hut, an
Applebee's, a Bob
Evans, and several
local restaurants.
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<PAGE>
Jack in the Box (5) $972,841 05/22/98 05/2016; four $94,852 (6); None at any time
(the "Fresno #2 (3) (6) five-year increases by 8% after the
Property ") renewal options after the fifth lease seventh
Restaurant to be year and after every lease year
constructed five years thereafter
during the lease
The Fresno #2 term Property
is located on the northeast
quadrant of North Cedar
Avenue and East Nees Avenue,
in Fresno, Fresno County,
California, in an area of
mixed retail, commercial,
and residential development.
Other fast-food, family-style,
and casual dining restaurants
located in proximity to the
Fresno #2 Property include a
Taco Bell, a Schlotzsky's Deli,
a Burger King, and several
local restaurants.
</TABLE>
-20-
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
- ---------------------
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------- ----------- -------- --------------- --------------- ---------- -----------
<S> <C>
Arby's (7) $650,000 05/29/98 05/2018; two $59,735; increases None at any time
(the "Arab Property ") five-year by 4.14% after the after the
Existing restaurant renewal options third lease year and seventh
after every three lease year
The Arab Property is years thereafter
located on the west during the lease
side of North Brindlee
term Mountain Parkway,
south of 12th Avenue
Northwest, in Arab,
Marshall County, Alabama,
in an area of mixed retail,
commercial, and residential
development. Other fast-
food, family-style, and
casual dining restaurants
located in proximity to the
Arab Property include a
Captain D's, a Hardee's, a
Taco Bell, a Pizza Hut, and
a Dairy Queen.
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<PAGE>
Sonny's Real Pit Bar- $1,510,221 06/02/98 06/2018; four $147,247; increases for each lease at any time
B-Q (12) five-year by 10% after the year, (i) 6% of after the
(the "Athens renewal options fifth lease year and annual gross seventh
Property ") after every five sales minus (ii) lease year
Existing restaurant years thereafter the minimum
during the lease annual rent for
The Athens Property is term such lease year
located on the south
side of US 78, south of
the Georgia Square
Mall, in Athens, Clarke
County, Georgia, in an
area of mixed retail,
commercial, and
residential
development. Other
fast-food, family-style,
and casual dining
restaurants located in
proximity to the
Athens Property
include a Burger King
and a Wendy's.
</TABLE>
-22-
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
- ---------------------
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------- ----------- -------- --------------- --------------- ----------- -----------
<S> <C>
Sonny's Real Pit Bar- $915,285 06/02/98 06/2018; four $89,240; increases for each lease at any time
B-Q (12) five-year by 10% after the year, (i) 6% of after the
(the "Conyers renewal options fifth lease year and annual gross seventh
Property ") after every five sales minus (ii) lease year
Existing restaurant years thereafter the minimum
during the lease annual rent for
The Conyers Property term such lease year
is located on the
northeast corner of
Highway 20 and 183, in
Conyers, Rockdale County,
Georgia, in an area of mixed
retail, commercial, and
residential development.
Other fast-food, family-style,
and casual dining restaurants
located in proximity to the
Conyers Property include a
Waffle House and a local
restaurant.
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<PAGE>
Sonny's Real Pit Bar- $1,327,164 06/02/98 06/2018; four $129,398; increases for each lease at any time
B-Q (12) five-year by 10% after the year, (i) 6% of after the
(the "Doraville renewal options fifth lease year and annual gross seventh
Property ") after every five sales minus (ii) lease year
Existing restaurant years thereafter the minimum
during the lease annual rent for
The Doraville Property term such lease year
is located on the
southwest quadrant of
Peachtree Industrial
Boulevard and Winters
Chapel Road, in
Doraville, Dekalb
County, Georgia, in an
area of mixed retail,
commercial, and
residential
development. Other
fast-food, family-style,
and casual dining
restaurants located in
proximity to the
Doraville Property
include a Burger King,
and a Waffle House.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
- ---------------------
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------- ----------- -------- --------------- --------------- --------- -----------
<S> <C>
Sonny's Real Pit Bar- $1,098,342 06/02/98 06/2018; four $107,088; increases for each lease at any time
B-Q (12) five-year by 10% after the year, (i) 6% of after the
(the "Jonesboro renewal options fifth lease year and annual gross seventh
Property ") after every five sales minus (ii) lease year
Existing restaurant years thereafter the minimum
during the lease annual rent for
The Jonesboro term such lease year
Property is located on
the south side of
Morrow Industrial
Boulevard, east of
Highway 19, in
Jonesboro, Clayton
County, Georgia, in an
area of mixed retail,
commercial, and
residential
development. Other
fast-food, family-style,
and casual dining
restaurants located in
proximity to the
Jonesboro Property
include an Applebee's,
a McDonald's, a
Blimpie's, a Captain
D's, and a local
restaurant.
-25-
<PAGE>
Sonny's Real Pit Bar- $1,327,164 06/02/98 06/2018; four $129,398; increases for each lease at any time
B-Q (12) five-year by 10% after the year, (i) 6% of after the
(the "Marietta #2 renewal options fifth lease year and annual gross seventh
Property ") after every five sales minus (ii) lease year
Existing restaurant years thereafter the minimum
during the lease annual rent for
The Marietta #2 term such lease year
Property is located on
the west side of Cobb
Parkway, south of
Roswell Road, in
Marietta, Cobb County,
Georgia, in an area of
mixed retail, commercial,
and residential development.
Other fast-food, family-
style, and casual dining
restaurants located in
proximity to the Marietta #2
Property include a Checkers,
a Shoney's, a Taco Bell, a
Chick-Fil-A, an IHOP, a Sonic
Drive- In, a Krystal Burger,
and a local restaurant.
</TABLE>
-26-
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
- ---------------------
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------- ----------- -------- --------------- --------------- ---------- -----------
<S> <C>
Sonny's Real Pit Bar- $1,609,071 06/02/98 06/2018; four $156,884; increases for each lease at any time
B-Q (12) five-year by 10% after the year, (i) 6% of after the
(the "Norcross renewal options fifth lease year and annual gross seventh
Property ") after every five sales minus (ii) lease year
Existing restaurant years thereafter the minimum
during the lease annual rent for
The Norcross Property term such lease year
is located on the
southwest quadrant of
Tech Drive and Indian
Trail, in Norcross,
Gwinnett County, Georgia,
in an area of mixed retail,
commercial, and residential
development. Other fast-
food, family-style, and
casual dining restaurants
located in proximity to the
Norcross Property include
a Sonic Drive-In, and a
Schlotzsky's Deli.
-27-
<PAGE>
Sonny's Real Pit Bar- $1,212,753 06/02/98 06/2018; four $118,243; increases for each lease at any time
B-Q (12) five-year by 10% after the year, (i) 6% of after the
(the "Smyrna renewal options fifth lease year and annual gross seventh
Property ") after every five sales minus (ii) lease year
Existing restaurant years thereafter the minimum
during the lease annual rent for
The Smyrna Property term such lease year
is located on the
northwest quadrant
of New Spring Road
and Cobb Parkway, in
Smyrna, Cobb County,
Georgia, in an area of
mixed retail,
commercial, and residential
development. Other fast-
food, family-style, and
casual dining restaurants
located in proximity to the
Smyrna Property include an
Applebee's, a Wendy's, and
a Pizza Hut.
</TABLE>
-28-
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
- ---------------------
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------- ----------- -------- --------------- --------------- ---------- -----------
<S> <C>
IHOP $2,250,000 06/04/98 06/2017; three $227,813; increases for each lease during the
(the "Hollywood five-year by 10% after the year, (i) 4% of eleventh
Property ") renewal options fifth lease year and annual gross lease year
Existing restaurant after every five sales minus (ii) and at the
years thereafter the minimum end of the
The Hollywood during the lease annual rent for initial lease
Property is located on term such lease year term
the southwest corner of (11)
Sunset Boulevard and
Orange Drive, in
Hollywood, Los
Angeles County,
California, in an area
of mixed retail,
commercial, and
residential
development. Other
fast-food, family-style,
and casual dining
restaurants located in
proximity to the
Hollywood Property
include a Burger King,
a Wendy's, an In and
Out Burgers, a Boston
Market, a McDonald's,
and several local
restaurants.
-29-
<PAGE>
Golden Corral $444,771 06/05/98 12/2013; four 10.75% of Total for each lease during the
(the "Brunswick (excluding five-year Cost (4) year, 5% of first through
Property ") development renewal options the amount by seventh
Restaurant to be costs) (3) which annual lease years
constructed gross sales and the
exceed tenth
The Brunswick $2,844,477 through
Property is located on (11) fifteenth
the northwest corner of lease years
Golden Isle Parkway only
and the proposed
Altama Connector
Boulevard, in
Brunswick, Glynn
County, Georgia, in an
area of mixed retail
and commercial
development. Other
fast-food, family-style,
and casual dining
restaurants located in
proximity to the
Brunswick Property
include an Applebee's,
an Arby's, a Wendy's,
and a Captain D's.
</TABLE>
-30-
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
- ---------------------
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------- ----------- -------- --------------- --------------- ---------- -----------
<S> <C>
Wendy's $527,649 06/05/98 06/2018; two 10.25% of Total for each lease at any time
(the "Knoxville #3 (excluding five-year Cost (4) year, (i) 7% of after the
Property") development renewal options annual gross seventh
Restaurant to be costs) (3) sales minus (ii) lease year
constructed the minimum
annual rent for
The Knoxville #3 such lease year
Property is located on
the northeast corner of
Asheville Highway and
River Turn Drive, in
Knoxville, Knox
County, Tennessee, in
an area of mixed retail,
commercial, and
residential
development. Other
fast-food, family-style,
and casual dining
restaurants located in
proximity to the
Knoxville #3 Property
include a Subway
Sandwich Shop.
-31-
<PAGE>
Bennigan's (13) (14) $806,660 06/08/98 06/2013; three 10.375% of Total for each lease None
(the "Orlando #4 (excluding five-year Cost (4); increases year, (i) 6% of
Property ") development renewal options by 10% after the annual gross
Restaurant to be costs) (3) fifth lease year and sales minus (ii)
constructed after every five the minimum
years thereafter annual rent for
The Orlando #4 during the lease such lease year
Property is located on term
the northeast quadrant
of Semoran Boulevard and
T.G. Lee Boulevard, in
Orlando, Orange County,
Florida, in an area of
mixed retail, commercial,
and residential development.
Other fast-food, family-
style, and casual dining
restaurants located in
proximity to the Orlando
#4 Property include a
Chili's, a Tony Roma's,
a TGI Friday's, and a
Denny's.
</TABLE>
-32-
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
- ---------------------
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------- ----------- -------- --------------- --------------- --------- -----------
<S> <C>
Burger King $465,137 06/09/98 06/2018; two 10.50% of Total for each lease at any time
(the "Atlanta #3 (excluding five-year Cost (4); increases year, 8% of after the
Property ") development renewal options by 10% after the the amount by fifth lease
Restaurant to be costs) (3) fifth lease year and which annual year
constructed after every five gross sales
years thereafter exceed
The Atlanta #3 during the lease $1,300,000
Property is located on term minus the
the north side of minimum
Marietta Boulevard and annual rent for
the south side of such lease year
Bolton Road, in
Atlanta, Fulton County,
Georgia, in an area of
mixed retail, commercial,
and residential development.
Other fast-food, family-
style, and casual dining
restaurants located in
proximity to the Atlanta #3
Property include a Church's
Fried Chicken and a Blimpie's.
-33-
<PAGE>
Bennigan's (14) (15) $1,627,907 06/16/98 06/2018; two $166,860; increases None (16)
(the "Bedford #3 ten-year renewal by 10% after the
Property ") options fifth lease year and
Existing restaurant after every five
years thereafter
The Bedford #3 during the
lease Property is located
on term the southeast corner
of Plaza Parkway and Bay
Street, in Bedford, Tarrant
County, Texas, in an area
of mixed retail, commercial,
and residential development.
Other fast-food, family-style,
and casual dining restaurants
located in proximity to the
Bedford #3 Property include
a Steak & Ale, a Chili's,
an On the Border, a Black-eyed
Pea, a Don Pablo's, and
several local restaurants.
</TABLE>
-34-
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
- ---------------------
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------- ------------ -------- --------------- --------------- --------- -----------
<S> <C>
Bennigan's (14) (15) $1,837,209 06/16/98 06/2018; two $188,314; increases None (16)
(the "Clearwater ten-year renewal by 10% after the
Property ") options fifth lease year and
Existing restaurant after every five
years thereafter
The Clearwater during the lease
Property is located on term
the north side of Gulf
to Bay Boulevard,
north of the Clearwater
Mall, in Clearwater,
Pinellas County,
Florida, in an area of
mixed retail,
commercial, and
residential
development. Other
fast-food, family-style,
and casual dining
restaurants located in
proximity to the
Clearwater Property
include a Ruby
Tuesday, a Perkins,
and several local
restaurants.
-35-
<PAGE>
Bennigan's (14) (15) $1,604,651 06/16/98 06/2018; two $164,477; increases None (16)
(the "Colorado Springs ten-year renewal by 10% after the
#2 Property ") options fifth lease year and
Existing restaurant after every five
years thereafter
The Colorado Springs during the lease
#2 Property is located term
on the northwest
corner of North
Academy Boulevard
and North Carefree
Circle, in Colorado
Springs, El Paso
County, Colorado, in
an area of mixed retail,
commercial, and
residential
development. Other
fast-food, family-style,
and casual dining
restaurants located in
proximity to the
Colorado Springs #2
Property include a
Chili's, a Tony
Roma's, an East Side
Mario's, and several
local restaurants.
</TABLE>
-36-
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
- ---------------------
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------- ------------ -------- --------------- --------------- ---------- -----------
<S> <C>
Bennigan's (14) (15) $1,697,674 06/16/98 06/2018; two $174,012; increases None (16)
(the "Englewood #1 ten-year renewal by 10% after the
Property ") options fifth lease year and
Existing restaurant after every five
years thereafter
The Englewood #1 during the lease
Property is located on term
the northwest corner of
East Arapahoe Road
and South Boston
Street, in Englewood,
Arapahoe County,
Colorado, in an area of
mixed retail,
commercial, and
residential
development. Other
fast-food, family-style,
and casual dining
restaurants located in
proximity to the
Englewood #1 Property
include a Ruby Tuesday,
a Chevy's Fresh Mex, a
Denny's, and several local
restaurants.
-37-
<PAGE>
Bennigan's (14) (15) $2,232,558 06/16/98 06/2018; two $228,837; increases None (16)
(the "Englewood #2 ten-year renewal by 10% after the
Property ") options fifth lease year and
Existing restaurant after every five
years thereafter
The Englewood #2 during the lease
Property is located on term
the northwest corner of
Route 4 and South Van
Brunt Street, in
Englewood, Bergen
County, New Jersey, in
an area of mixed retail,
commercial, and
residential
development. Other
fast-food, family-style,
and casual dining
restaurants located in
proximity to the
Englewood #2 Property
include a local
restaurant.
</TABLE>
-38-
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
- ---------------------
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------- ------------ -------- --------------- --------------- ---------- -----------
<S> <C>
Bennigan's (14) (15) $2,051,163 06/16/98 06/2018; two $210,244; increases None (16)
(the "Florham Park ten-year renewal by 10% after the
Property ") options fifth lease year and
Existing restaurant after every five
years thereafter
The Florham Park during the lease
Property is located on term
the southeast quadrant
of Columbia Turnpike
and Felch Road, in
Florham Park, Morris
County, New Jersey, in
an area of mixed retail,
commercial, and
residential
development. Other
fast-food, family-style,
and casual dining
restaurants located in
proximity to the
Florham Park Property
include a KFC and a
McDonald's.
Bennigan's (14) (15) $1,790,698 06/16/98 06/2018; two $183,547; increases None (16)
(the "Houston #8 ten-year renewal by 10% after the
Property ") options fifth lease year and
Existing restaurant after every five
years thereafter
The Houston #8 during the
lease Property is located
on term the southeast corner
of Greenspoint Drive and
North Belt, in Houston,
Harris County, Texas, in
an area of mixed retail,
commercial, and residential
development. Other fast-food,
family-style, and casual
dining restaurants located
in proximity to the Houston
#8 Property include a local
restaurant.
</TABLE>
-39-
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
- ---------------------
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------- ------------ -------- --------------- --------------- ---------- -----------
<S> <C>
Bennigan's (14) (15) $1,511,628 06/16/98 06/2018; two $154,942; increases None (16)
(the "Jacksonville #4 ten-year renewal by 10% after the
Property ") options fifth lease year and
Existing restaurant after every five
years thereafter
The Jacksonville #4 during
the lease Property is located
on term the south side
of Baymeadows Road, west
of Interstate 95 and east of
Phillips Highway, in
Jacksonville, Duval County,
Florida, in an area of mixed
retail, commercial, and
residential development.
Other fast-food, family-
style, and casual dining
restaurants located in
proximity to the Jacksonville
#4 Property include a Steak
& Ale, a Chili's, an Applebee's,
a Red Lobster, a TGI Friday's,
a Rio Bravo, and
several local restaurants.
-40-
<PAGE>
Bennigan's (14) (15) $1,790,698 06/16/98 06/2018; two $183,547; increases None (16)
(the "Jacksonville #5 ten-year renewal by 10% after the
Property ") options fifth lease year and
Existing restaurant after every five
years thereafter
The Jacksonville #5 during the lease
Property is located on term
the southwest quadrant
of Blanding Boulevard
and Interstate 295, in
Jacksonville, Duval
County, Florida, in an
area of mixed retail,
commercial, and
residential
development. Other
fast-food, family-style,
and casual dining
restaurants located in
proximity to the
Jacksonville #5
Property include a
Steak & Ale, an Olive
Garden, a Red Lobster,
a Longhorn
Steakhouse, a
Shoney's, and a local
restaurant.
</TABLE>
-41-
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
- ---------------------
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------- ------------ -------- --------------- --------------- ---------- -----------
<S> <C>
Bennigan's (14) (15) $2,209,302 06/16/98 06/2018; two $226,453; increases None (16)
(the "Mount Laurel ten-year renewal by 10% after the
Property ") options fifth lease year and
Existing restaurant after every five
years thereafter
The Mount Laurel during the lease
Property is located on term
the southwest corner of
Route 73 and the New
Jersey Turnpike, in
Mount Laurel,
Burlington County,
New Jersey, in an area
of mixed retail,
commercial, and
residential
development. Other
fast-food, family-style,
and casual dining
restaurants located in
proximity to the Mount
Laurel Property include
a Bob Evans, a Burger King,
a McDonald's, a Denny's,
a Wendy's, and a local
restaurant.
-42-
<PAGE>
Bennigan's (14) (15) $1,767,442 06/16/98 06/2018; two $181,163; increases None (16)
(the "North Richland ten-year renewal by 10% after the
Hills Property ") options fifth lease year and
Existing restaurant after every five
years thereafter
The North Richland during the lease
Hills Property is term
located on the south
side of Bedford Euless
Road, opposite and
south of Strummer
Road, in North
Richland Hills, Tarrant
County, Texas, in an
area of mixed retail,
commercial, and
residential
development. Other
fast-food, family-style,
and casual dining
restaurants located in
proximity to the North
Richland Hills Property
include an Olive
Garden, a TGI
Friday's, a Steak &
Ale, and a local
restaurant.
</TABLE>
-43-
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
- ---------------------
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------- ------------ -------- --------------- --------------- ---------- -----------
<S> <C>
Bennigan's (14) (15) $1,674,419 06/16/98 06/2018; two $171,628; increases None (16)
(the "Oklahoma City ten-year renewal by 10% after the
#2 Property ") options fifth lease year and
Existing restaurant after every five
years thereafter
The Oklahoma City #2 during the lease
Property is located on term
the southwest corner of
West Interstate 40
Service Road and
Cornell Parkway, in
Oklahoma City,
Oklahoma County,
Oklahoma, in an area
of mixed retail,
commercial, and
residential
development. Other
fast-food, family-style,
and casual dining
restaurants located in
proximity to the
Oklahoma City #2 Property
include two Cracker Barrels,
an Outback Steakhouse, an
On the Border, a Steak & Ale,
a Denny's, and several local
restaurants.
-44-
<PAGE>
Bennigan's (14) (15) $2,325,581 06/16/98 06/2018; two $238,372; increases None (16)
(the "Orlando #2 ten-year renewal by 10% after the
Property ") options fifth lease year and
Existing restaurant after every five
years thereafter
The Orlando #2 during the
lease Property is located
on term the south side of
International Drive, north
of Carrier Drive, in Orlando,
Orange County, Florida,
in an area of mixed retail,
commercial, and residential
development. Other fast-food,
family-style, and casual
dining restaurants located
in proximity to the Orlando
#2 Property include a Steak
& Ale, a Red Lobster, a
Sizzler, a Chili's, a TGI
Friday's, an Olive Garden,
a Bahama Breeze, a Western
Steer, and several local
restaurants.
</TABLE>
-45-
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
- ---------------------
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------- ------------ -------- --------------- --------------- ---------- -----------
<S> <C>
Bennigan's (14) (15) $1,581,395 06/16/98 06/2018; two $162,093; increases None (16)
(the "Pensacola #2 ten-year renewal by 10% after the
Property ") options fifth lease year and
Existing restaurant after every five
years thereafter
The Pensacola #2 during the lease
Property is located on term
the west side of
Plantation Road, north
of the Pensacola
Central Business
District, in Pensacola,
Escambia County,
Florida, in an area of
mixed retail,
commercial, and
residential
development. Other
fast-food, family-style,
and casual dining
restaurants located in
proximity to the
Pensacola #2 Property
include a Darryl's, a
Steak & Ale, and
several local
restaurants.
-46-
<PAGE>
Bennigan's (14) (15) $2,046,512 06/16/98 06/2018; two $209,767; increases None (16)
(the "St. Louis Park ten-year renewal by 10% after the
Property ") options fifth lease year and
Existing restaurant after every five
years thereafter
The St. Louis Park during the lease
Property is located on term
the south side of
Wayzata Boulevard,
north of Louisiana
Avenue South, in St.
Louis Park, Hennepin
County, Minnesota, in
an area of mixed
retail, commercial,
and residential
development. Other
fast-food, family-style,
and casual dining
restaurants located in
proximity to the St.
Louis Park Property include
a Fuddruckers, a TGI
Friday's, a Perkins,
and several local
restaurants.
</TABLE>
-47-
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ------------------ ------------ -------- --------------- --------------- --------- -----------
<S> <C>
Bennigan's (14) (15) $1,934,884 06/16/98 06/2018; two $198,326; increases None (16)
(the "Tampa #4 ten-year renewal by 10% after the
Property ") options fifth lease year and
Existing restaurant after every five
years thereafter
The Tampa #4 during the
lease Property is located
on term the north side of
East Fowler Avenue within
the University Square Mall,
in Tampa, Hillsborough
County, Florida, in an area
of mixed retail, commercial,
and residential development.
Other fast-food, family-
style, and casual dining
restaurants located in
proximity to the Tampa #4
Property include a Rio Bravo,
a TGI Friday's, and a
local restaurant.
-48-
<PAGE>
Bennigan's (14) (15) $1,172,093 06/16/98 06/2018; two $120,140; increases None (16)
(the "Winston-Salem ten-year renewal by 10% after the
#2 Property ") options fifth lease year and
Existing restaurant after every five
years thereafter
The Winston-Salem #2 during the lease
Property is located on term
the north side of North
Point Boulevard, east
of University Parkway,
in Winston-Salem,
Forsyth County, North
Carolina, in an area of
mixed retail,
commercial, and
residential
development. Other
fast-food, family-style,
and casual dining
restaurants located in
proximity to the
Winston-Salem #2
Property include a
Darryl's, a Golden
Corral, and several
local restaurants.
</TABLE>
-49-
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
- ---------------------
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------- ------------ -------- --------------- --------------- ---------- -----------
<S> <C>
Steak & Ale (14) (15) $1,604,651 06/16/98 06/2018; two $164,477; increases None (16)
(the "Altamonte ten-year renewal by 10% after the
Springs Property ") options fifth lease year and
Existing restaurant after every five
years thereafter
The Altamonte Springs during the lease
Property is located on term
the southeast quadrant
of West Highway 436
and Westmonte Drive,
in Altamonte Springs,
Seminole County,
Florida, in an area of
mixed retail,
commercial, and
residential
development. Other
fast-food, family-style,
and casual dining
restaurants located in
proximity to the
Altamonte Springs
Property include a
Bennigan's, a
McDonald's, a Perkins,
a TGI Friday's, a
Cooker, a Red Lobster,
a Longhorn
Steakhouse, an Olive
Garden, a Long John
Silver's, a Rio Bravo,
and a local restaurant.
-50-
<PAGE>
Steak & Ale (14) (15) $1,372,093 06/16/98 06/2018; two $140,640; increases None (16)
(the "Austin ten-year renewal by 10% after the
Property ") options fifth lease year and
Existing restaurant after every five
years thereafter
The Austin Property is
during the lease located
on the term southeast
quadrant of West Anderson
Lane and Burnet Road, in
Austin, Travis County,
Texas, in an area of mixed
retail, commercial, and
residential development.
Other fast-food, family-style,
and casual dining
restaurants located in
proximity to the Austin
Property include a Popeyes,
a Jack in the Box, a Houston's,
a Denny's, and a local
restaurant.
</TABLE>
-51-
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
- ---------------------
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------- ------------ -------- --------------- --------------- ---------- -----------
<S> <C>
Steak & Ale (14) (15) $1,320,930 06/16/98 06/2018; two $135,395; increases None (16)
(the "Birmingham ten-year renewal by 10% after the
Property ") options fifth lease year and
Existing restaurant after every five
years thereafter
The Birmingham during
the lease Property is
located on term the north
side of Medford Drive
and the south side of
Orchard Road, in
Birmingham, Jefferson
County, Alabama, in
an area of mixed retail,
commercial, and
residential development.
Other fast-food, family-
style, and casual dining
restaurants located in
proximity to the
Birmingham Property
include a Denny's, a
Chick-Fil-A, and a local
restaurant.
-52-
<PAGE>
Steak & Ale (14) (15) $1,618,605 06/16/98 06/2018; two $165,907; increases None (16)
(the "College Park ten-year renewal by 10% after the
Property ") options fifth lease year and
Existing restaurant after every five
years thereafter
The College Park during the lease
Property is located on term
the northwest quadrant
of Virginia Avenue
and Harrison Road, in
College Park, Fulton
County, Georgia, in an
area of mixed retail,
commercial, and
residential
development. Other
fast-food, family-style,
and casual dining
restaurants located in
proximity to the
College Park Property
include a Waffle
House, a Hardee's, a
KFC, a Blimpie's, and
several local
restaurants.
</TABLE>
-53-
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
- ---------------------
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------- ------------ -------- --------------- --------------- ---------- -----------
<S> <C>
Steak & Ale (14) (15) $1,534,884 06/16/98 06/2018; two $157,326; increases None (16)
(the "Conroe ten-year renewal by 10% after the
Property ") options fifth lease year and
Existing restaurant after every five
years thereafter
The Conroe Property is during the lease
located on the east side term
of Interstate 45, north
of Highway 105, in
Conroe, Montgomery
County, Texas, in an
area of mixed retail,
commercial, and
residential
development. Other
fast-food, family-style,
and casual dining
restaurants located in
proximity to the
Conroe Property
include an Outback
Steakhouse, a Ryan's
Family Steak House,
and a local restaurant.
-54-
<PAGE>
Steak & Ale (14) (15) $1,748,837 06/16/98 06/2018; two $179,256; increases None (16)
(the "Greenville #2 ten-year renewal by 10% after the
Property ") options fifth lease year and
Existing restaurant after every five
years thereafter
The Greenville #2 during
the lease Property is
located on term the
northeast corner of North
Pleasantburg Drive and
Villa Drive, in Greenville,
Greenville County, South
Carolina, in an area of
mixed retail, commercial,
and residential development.
Other fast-food, family-
style, and casual dining
restaurants located in
proximity to the Greenville
#2 Property include a Pizza
Hut and a local restaurant.
</TABLE>
-55-
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
- ---------------------
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------- ------------ -------- --------------- --------------- ---------- -----------
<S> <C>
Steak & Ale (14) (15) $1,767,442 06/16/98 06/2018; two $181,163; increases None (16)
(the "Houston #9 ten-year renewal by 10% after the
Property ") options fifth lease year and
Existing restaurant after every five
years thereafter
The Houston #9 during the lease
Property is located on term
the southwest corner of
Mangum Road and the
Northwest Freeway, in
Houston, Harris
County, Texas, in an
area of mixed retail,
commercial, and
residential
development. Other
fast-food, family-style,
and casual dining
restaurants located in
proximity to the
Houston #9 Property
include a Bennigan's,
an Olive Garden, and
several local
restaurants.
-56-
<PAGE>
Steak & Ale (14) (15) $1,837,209 06/16/98 06/2018; two $188,314; increases None (16)
(the "Houston #10 ten-year renewal by 10% after the
Property ") options fifth lease year and
Existing restaurant after every five
years thereafter
The Houston #10 during the lease
Property is located on term
the south side of Katy
Freeway, west of
Wilcrest Drive, in
Houston, Harris
County, Texas, in an
area of mixed retail,
commercial, and
residential
development. Other
fast-food, family-style,
and casual dining
restaurants located in
proximity to the
Houston #10 Property
include a Carrabba's
Italian Grill and a
local restaurant.
</TABLE>
-57-
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
- ---------------------
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------- ------------ -------- --------------- --------------- ---------- -----------
<S> <C>
Steak & Ale (14) (15) $1,372,093 06/16/98 06/2018; two $140,640; increases None (16)
(the "Huntsville #2 ten-year renewal by 10% after the
Property ") options fifth lease year and
Existing restaurant after every five
years thereafter
The Huntsville #2 during
the lease Property is
located on term the south
side of University Drive,
east of S.R. 53, in
Huntsville, Madison County,
Alabama, in an area of mixed
retail, commercial, and
residential development.
Other fast-food, family-
style, and casual dining
restaurants located in
proximity to the Huntsville
#2 Property include a
Darryl's, an Olive Garden,
a Quincy's, and several
local restaurants.
-58-
<PAGE>
Steak & Ale (14) (15) $1,465,116 06/16/98 06/2018; two $150,174; increases None (16)
(the "Jacksonville #6 ten-year renewal by 10% after the
Property ") options fifth lease year and
Existing restaurant after every five
years thereafter
The Jacksonville #6 during the lease
Property is located on term
the west side of
Blanding Boulevard
and the north side of
Youngerman Circle, in
Jacksonville, Duval
County, Florida, in an
area of mixed retail,
commercial, and
residential
development. Other
fast-food, family-style,
and casual dining
restaurants located in
proximity to the
Jacksonville #6
Property include a
Steak & Ale, an Olive
Garden, a Red Lobster,
a Bennigan's, a
Longhorn Steakhouse,
a Shoney's, and a local
restaurant.
</TABLE>
-59-
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
- ---------------------
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------- ------------ -------- --------------- --------------- ---------- -----------
<S> <C>
Steak & Ale (14) (15) $1,395,349 06/16/98 06/2018; two $143,023; increases None (16)
(the "Maitland ten-year renewal by 10% after the
Property ") options fifth lease year and
Existing restaurant after every five
years thereafter
The Maitland Property during the lease
is located on the term
northeast corner of
South Orlando Avenue
and Manor Road, in
Maitland, Orange
County, Florida, in an
area of mixed retail,
commercial, and
residential
development. Other
fast-food, family-style,
and casual dining
restaurants located in
proximity to the
Maitland Property
include a Perkins, a
McDonald's, and a
local restaurant.
-60-
<PAGE>
Steak & Ale (14) (15) $1,418,605 06/16/98 06/2018; two $145,407; increases None (16)
(the "Mesquite ten-year renewal by 10% after the
Property ") options fifth lease year and
Existing restaurant after every five
years thereafter
The Mesquite Property
during the lease is
located on the east
term side of Towne
Crossing Boulevard,
west of Interstate
635 and south of
Interstate 30, in
Mesquite, Dallas
County, Texas, in
an area of mixed retail,
commercial, and
residential development.
Other fast-food,
family-style, and
casual dining
restaurants located
in proximity to the
Mesquite Property
include a Red Lobster,
an Outback Steakhouse,
an Olive Garden, a Tony
Roma's, a TGI Friday's,
a Grady's, a Black-eyed
Pea, a Chili's, and
several local restaurants.
</TABLE>
-61-
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
- ---------------------
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------- ------------ -------- --------------- --------------- ---------- -----------
<S> <C>
Steak & Ale (14) (15) $1,674,419 06/16/98 06/2018; two $171,628; increases None (16)
(the "Miami ten-year renewal by 10% after the
Property ") options fifth lease year and
Existing restaurant after every five
years thereafter
The Miami Property is
during the lease located
on the term northwest
side of Southwest 97th
Avenue, east of Route 874
South, in Miami, Dade
County, Florida, in an
area of mixed retail,
commercial, and residential
development. Other fast-food,
family-style, and casual
dining restaurants located
in proximity to the Miami
Property include a Tony
Roma's and a Boston Market.
Steak & Ale (14) (15) $1,604,651 06/16/98 06/2018; two $164,477; increases None (16)
(the "Middletown ten-year renewal by 10% after the
Property ") options fifth lease year and
Existing restaurant after every five
years thereafter
The Middletown during the lease
Property is located on term
the northwest quadrant
of Highway 35 and
Kings Highway, in
Middletown,
Monmouth County,
New Jersey, in an area
of mixed retail, commercial,
and residential development.
Other fast-food, family-
style, and casual dining
restaurants located in
proximity to the Middletown
Property include a Wendy's
and a local restaurant.
</TABLE>
-62-
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
- ---------------------
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------- ------------ -------- --------------- --------------- ---------- -----------
<S> <C>
Steak & Ale (14) (15) $1,558,140 06/16/98 06/2018; two $159,709; increases None (16)
(the "Orlando #3 ten-year renewal by 10% after the
Property ") options fifth lease year and
Existing restaurant after every five
years thereafter
The Orlando #3 during the lease
Property is located on term
the southwest corner of
North Semoran
Boulevard and East
Colonial Drive, in
Orlando, Orange
County, Florida, in an
area of mixed retail,
commercial, and
residential
development. Other
fast-food, family-style,
and casual dining
restaurants located in
proximity to the
Orlando #3 Property
include several local
restaurants.
-63-
<PAGE>
Steak & Ale (14) (15) $1,232,558 06/16/98 06/2018; two $126,337; increases None (16)
(the "Palm Harbor ten-year renewal by 10% after the
Property ") options fifth lease year and
Existing restaurant after every five
years thereafter
The Palm Harbor during
the lease Property is
located on term the west
side of U.S. 19 North
within the Fountain Mall
Shopping Center, in Palm
Harbor, Pinellas County,
Florida, in an area of
mixed retail, commercial,
and residential development.
Other fast-food, family-
style, and casual dining
restaurants located in
proximity to the Palm Harbor
Property include a Hops
Grill & Bar, a Carrabba's
Italian Grill, and several
local restaurants.
</TABLE>
-64-
<PAGE>
<TABLE>
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
- ---------------------
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------- ------------ -------- --------------- --------------- ---------- -----------
<S> <C>
Steak & Ale (14) (15) $1,116,279 06/16/98 06/2018; two $114,419; increases None (16)
(the "Pensacola #3 ten-year renewal by 10% after the
Property ") options fifth lease year and
Existing restaurant after every five
years thereafter
The Pensacola #3 during the lease
Property is located on term
the south side of
Plantation Road and on
the west side of North
Davis Highway, in
Pensacola, Escambia
County, Florida, in an
area of mixed retail,
commercial, and
residential
development. Other
fast-food, family-style,
and casual dining
restaurants located in
proximity to the
Pensacola #3 Property
include a Darryl's, a
Bennigan's, and
several local
restaurants.
-65-
<PAGE>
Steak & Ale (14) (15) $1,418,605 06/16/98 06/2018; two $145,407; increases None (16)
(the "Tulsa Property ") ten-year renewal by 10% after the
Existing restaurant options fifth lease year and
after every five
The Tulsa Property is
years thereafter located
on the during the lease
southeast corner of term
East 51st Street and
Vandalia Avenue, in
Tulsa, Tulsa County,
Oklahoma, in an area of
mixed retail, commercial,
and residential development.
Other fast-food, family-
style, and casual dining
restaurants located in
proximity to the Tulsa
Property include a Red
Lobster and several local
restaurants.
</TABLE>
-66-
<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>
Somerset Property $609,000 Fresno #2 Property $ 573,000
Pflugerville Property 668,000 Arab Property 454,000
Waxahachie Property 558,000 Athens Property 978,018
Hutchins Property 680,000 Conyers Property 227,000
Phoenix #4 Property 371,000 Doraville Property 826,000
Columbus #2 Property 601,000 Jonesboro Property 691,000
Atlanta #2 Property 646,000 Marietta #2 Property 895,000
Gun Barrel City Property 576,000 Norcross Property 976,000
Nacogdoches Property 674,000 Smyrna Property 654,000
Glendale Property 494,000 Hollywood Property 988,000
Warwick Property 699,000 Brunswick Property 1,183,000
St. Louis Property 761,000 Knoxville #3 Property 476,000
Avondale Property 639,000 Orlando #4 Property 1,387,000
Columbus #3 Property 730,000 Atlanta #3 Property 621,000
Naperville Property 1,360,000
</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
Somerset, Phoenix #4, Columbus #2, Atlanta #2, Knoxville #3, Orlando #4
and Atlanta #3 Properties, minimum annual rent will become due and
payable on the earlier of (i) a specific number of days (ranging from
120 to 180) after execution of the lease, (ii) the date the certificate
of occupancy for the restaurant is issued, (iii) the date the
restaurant opens for business to the public or (iv) the date the tenant
receives from the landlord its final funding of the construction costs.
For the Brunswick Property, minimum annual rent will become due and
payable on the earlier of (i) 180 days after execution of the lease,
(ii) the date the certificate of occupancy for the restaurant is issued
or (iii) the date the restaurant opens for business to the public.
During the period commencing with the effective date of the lease to
the date minimum annual rent becomes payable for the Somerset, Phoenix
#4, Knoxville #3 and Atlanta #3 Properties, as described above, the
tenant shall pay monthly interim rent equal to a specified rate per
annum (ranging from 10.25% to 11%) of the amount funded by the Company
in connection with the purchase and construction of the Properties.
During the period commencing with the effective date of the lease to
the date minimum annual rent becomes payable for the Columbus #2 and
Atlanta #2 Properties, as described above, the tenant shall pay monthly
interim rent equal to the product of 325 basis points over the
"Applicable Treasury Rate" (US Treasuries with a maturity date of 20
years) multiplied by the amounts funded by the Company in connection
with the purchase and construction of the Properties. During the period
commencing with the effective date of the lease to the date minimum
annual rent becomes payable for the Brunswick Property, as described
above, interim rent equal to ten percent per annum of the amount funded
by the Company in connection with the purchase and construction of the
Properties shall accrue and be payable in a single lump sum at the time
of final funding of the construction costs.
(3) The development agreements or lease addendums for the Properties which
are to be constructed, provide that construction must be completed no
later than the
-67-
<PAGE>
dates set forth below. The maximum cost to the Company (including the
purchase price of the land, development costs, and closing and
acquisition costs) is not expected to, but may, exceed the amounts set
forth below:
<TABLE>
<CAPTION>
Property Estimated Maximum Cost Estimated Final Completion Date
<S> <C>
Somerset Property $1,129,565 July 1, 1998
Pflugerville Property 1,299,700 August 31, 1998
Waxahachie Property 973,022 September 9, 1998
Hutchins Property 895,688 September 12, 1998
Phoenix #4 Property 822,519 September 20, 1998
Columbus #2 Property 1,013,726 October 3, 1998
Atlanta #2 Property 1,244,240 October 4, 1998
Gun Barrel City Property 811,891 October 10, 1998
Nacogdoches Property 999,670 October 10, 1998
St. Louis Property 1,150,008 October 11, 1998
Avondale Property 1,175,298 October 27, 1998
Fresno #2 Property 972,841 November 18, 1998
Brunswick Property 1,654,127 December 2, 1998
Knoxville #3 Property 1,010,352 October 3, 1998
Orlando #4 Property 2,110,561 December 5, 1998
Atlanta #3 Property 926,114 December 6, 1998
</TABLE>
(4) The "Total Cost" is equal to the sum of (i) the purchase price of the
property, (ii) closing costs and (iii) actual development costs
incurred under the development agreement or lease addendum.
(5) The lessee of the Pflugerville, Waxahachie, Hutchins, Gun Barrel City,
Nacogdoches, St. Louis, Avondale and Fresno #2 Properties is the same
unaffiliated lessee.
(6) 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.
(7) The lessee of the Columbus #2, Atlanta #2 and Arab Properties is the
same unaffiliated lessee.
(8) Initial minimum annual rent shall equal the lease rate which is in
effect 15 business days prior to the commencement of the annual rent
(See footnote 2), multiplied by the amount funded by the Company in
connection with the purchase and construction of the Property. Minimum
annual rent shall be adjusted upward at the end of every three years
after the Company's closing on the Property by the lower of (i) 4.14%
of the minimum annual rent or (ii) an amount equal to the product
obtained by multiplying the Consumer Price Index by three.
(9) The lessee of the Glendale, Warwick and Columbus #3 Properties is the
same unaffiliated lessee.
(10) The tenant of this Property exercised its option under the terms of its
lease agreement to substitute an existing Property with this
replacement Property. The replacement Property will continue under the
terms of the lease of the original Property.
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<PAGE>
(11) Percentage rent shall be calculated on a calendar year basis (January 1
to December 31).
(12) The lessee of the Athens, Conyers, Doraville, Jonesboro, Marietta #2,
Norcross and Smyrna Properties is the same unaffiliated lessee.
(13) The Company acquired an interest in CNL/Lee Vista 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 an approximate 68% interest in the CNL/Lee
Vista Joint Venture upon completion of construction.
(14) The lessee of the 18 Bennigan's Properties and the 18 Steak & Ale
Properties is the same unaffiliated lessee.
(15) The Company and the lessee of 17 of the 18 Bennigan's Properties and
the 18 Steak & Ale Properties have agreed that they will treat the
leases of these Properties as financing transactions for federal income
tax purposes, unless otherwise required by law. As a result, the
Company will not be entitled to the depreciation relating to the
buildings for federal income tax purposes.
(16) The lessee shall have the option to purchase the Property at any time
during the 61st, 121st or 181st month of the lease, the 20th year of
the lease and the last 30 days of any renewal term of the lease for
prices equal to the purchase price of the Property to the Company plus
a specified percentage (ranging from 10 to 30 percent depending on the
time the option is exercised). If at the end of the initial lease term,
or any subsequent renewal period, the lessee does not elect to purchase
the Property or renew the lease, the Company may require the lessee to
purchase the Property at a cost equal to the purchase price of the
Property to the Company.
-69-
<PAGE>
PENDING INVESTMENTS
As of June 16, 1998, the Company had initial commitments to acquire ten
properties with purchase prices aggregating approximately $11,600,000. These ten
properties include five properties consisting of land and building and five
properties consisting of building only. The acquisition of each of these
properties is subject to the fulfillment of certain conditions, including, but
not limited to, a satisfactory environmental survey and property appraisal.
There can be no assurance that any or all of the conditions will be satisfied
or, if satisfied, that one or more of these properties will be acquired by the
Company. If acquired, the leases of all ten of these properties are expected to
be entered into on substantially the same terms described in "Business --
Description of Property Leases."
In connection with five of the ten properties, the Company anticipates
owning only the buildings and not the underlying land. However, the Company
anticipates entering into a landlord estoppel agreement with the landlord of the
land and a collateral assignment of the ground lease with the lessee in
connection with one of the properties, and a tri-party agreement with the lessee
and the landlord of the land in connection with the other four properties, in
order to provide the Company with certain rights with respect to the land on
which the buildings are located.
PORTFOLIO ACQUISITIONS
The Company may from time to time consider the acquisition of existing
portfolios consisting primarily of net-leased restaurant properties, both from
unaffiliated third parties and from Affiliates of the Advisor. The acquisition
of such portfolios could be made either for cash or securities of the Company or
for a combination of both. Any acquisition of a portfolio of properties from an
Affiliate of the Advisor would be subject to the approval of the Independent
Directors of the Company and, depending upon the size of the potential
acquisition, an opinion by a third party that the consideration proposed to be
paid by the Company would be fair to the Company from a financial point of view.
DESCRIPTION OF PROPERTY LEASES
Term of Leases. The following table sets forth the number of Property
leases expiring in each year for the Properties owned by the Company as of June
16, 1998. Since lease renewal options are exercisable at the option of the
tenant, the table below only presents the year in which the initial lease term
expires.
<TABLE>
<CAPTION>
Year of Initial Lease
Term Expiration Number of Properties
<S> <C>
2002 1
2006 1
2008 2
2009 1
2010 10
2011 21
2012 39
2013 12
2014 4
2015 31
2016 61
2017 73
2018 52
2022 1
----
Total 309
</TABLE>
-70-
<PAGE>
BORROWING
As of June 16, 1998, the Company had funded $24,168,103 in Secured
Equipment Leases through advances under its Line of Credit and had used
$19,000,000 of uninvested net offering proceeds to temporarily reduce the
balance outstanding under the Line of Credit pending the investment of such
offering proceeds in Properties or Mortgage Loans in order to reduce interest
expense incurred by the Company.
SALE OF PROPERTIES
In May 1998, the Company sold two of its Properties to tenants for a
total of approximately $1,233,000. The Company intends to reinvest the net sales
proceeds from the sale of these Properties in additional Properties.
In April and May 1998, a tenant exercised its option under the terms of
its lease agreements to substitute three existing Properties with three
replacement Properties which were approved by the Company. In conjunction
therewith, the Company simultaneously exchanged three Boston Market Properties
in Grand Island, Nebraska; Franklin, Tennessee; and Dubuque, Iowa for three
replacement Boston Market Properties in Warwick, Rhode Island; Glendale,
Arizona; and Columbus, Ohio, respectively. Under the simultaneous exchange
agreement, each replacement Property will continue under the terms of the leases
of the original properties. All closing costs were paid by the tenant. The
Company accounted for these transactions as non-monetary exchanges of similar
productive assets and recorded the acquisitions of the replacement Properties at
the net book value of the original Properties. No gain or loss was recognized
due to these transactions being accounted for as non-monetary exchanges of
similar assets.
SELECTED FINANCIAL DATA
The following table sets forth certain financial information for the
Company, and should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Financial
Statements included in Exhibit B.
<TABLE>
<CAPTION>
May 2,
1994 (Date
of Inception)
Quarter Ended through
March 31, 1998 March 31, 1997 Year Ended December 31, December 31,
(Unaudited) (Unaudited) 1997 1996 1995 1994
-----------------------------------------------------------------------------------------
<S> <C>
Revenues $8,327,804 $2,939,558 $19,457,933 $6,206,684 $659,131 $ -
Net earnings 6,520,029 2,251,842 15,564,456 4,745,962 368,779 -
Cash distributions declared (1) 7,281,343 2,693,357 16,854,297 5,436,072 638,618 -
Funds from operations (2) 7,292,795 2,489,181 17,348,723 5,257,040 469,097 -
Earnings per Share 0.17 0.14 0.66 0.59 0.19 -
Cash distributions declared per
Share 0.19 0.18 0.74 0.71 0.31 -
Weighted average number of
Shares outstanding (3) 39,240,871 15,630,532 23,423,868 8,071,670 1,898,350 -
March 31, 1998 March 31, 1997 December 31, December 31, December 31, December 31,
(Unaudited) (Unaudited) 1997 1996 1995 1994
Total assets $394,757,976 $167,722,361 $339,077,762 $134,825,048 $33,603,084 $929,585
Total stockholders' equity 379,958,008 155,890,787 321,638,101 122,867,427 31,980,648 200,000
</TABLE>
(1) Approximately 13 percent, 25 percent, eight percent, 13
percent and 42 percent of cash distributions ($0.02, $0.05,
$0.06, $0.09 and $0.13 per Share) for the quarters ended March
31,
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<PAGE>
1998 and 1997, and the years ended December 31, 1997, 1996 and
1995, respectively, represent 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 Invested Capital and the Stockholders'
8% Return.
(2) Funds from operations ("FFO"), based on the revised definition
adopted by the Board of Governors of the National Association
of Real Estate Investment Trusts ("NAREIT") and as used
herein, means net earnings determined in accordance with
generally accepted accounting principles ("GAAP"), excluding
gains or losses from debt restructuring and sales of property,
plus depreciation and amortization of real estate assets, and
after adjustments for unconsolidated partnerships and joint
ventures. (Net earnings determined in accordance with GAAP
include the noncash effect of straight-lining rent increases
throughout the lease term and/or rental payments during the
construction of a property prior to the date it is placed in
service. Straight-lining rent is a GAAP convention requiring
real estate companies to report rental revenue based on the
average rent per year over the life of the lease. During the
quarters ended March 31, 1998 and 1997, and the years ended
December 31, 1997, 1996 and 1995, net earnings included
$756,198, $275,492, $1,941,054, $517,067 and $39,142,
respectively, of these amounts.) FFO was developed by NAREIT
as a relative measure of performance and liquidity of an
equity REIT in order to recognize that income-producing real
estate historically has not depreciated on the basis
determined under GAAP. However, FFO (i) does not represent
cash generated from operating activities determined in
accordance with GAAP (which, unlike FFO, generally reflects
all cash effects of transactions and other events that enter
into the determination of net earnings), (ii) is not
necessarily indicative of cash flow available to fund cash
needs and (iii) should not be considered as an alternative to
net earnings determined in accordance with GAAP as an
indication of the Company's operating performance, or to cash
flow from operating activities determined in accordance with
GAAP as a measure of either liquidity or the Company's ability
to make distributions. Accordingly, the Company believes that
in order to facilitate a clear understanding of the
consolidated historical operating results of the Company, FFO
should be considered in conjunction with the Company's net
earnings and cash flows as reported in the accompanying
consolidated financial statements and notes thereto. See
Exhibit B.
(3) The weighted average number of Shares outstanding is based
upon the period the Company was operational.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION OF THE COMPANY
INTRODUCTION
The Company is a Maryland corporation that was organized on May 2,
1994, to acquire Properties, directly or indirectly through Joint Venture or
co-tenancy arrangements, to be leased on a long-term, "triple-net" basis to
operators of certain Restaurant Chains. In addition, the Company provides
Mortgage Loans for the purchase of buildings, generally by borrowers that lease
the underlying land from the Company. To a lesser extent, the Company offers
Secured Equipment Leases to operators of Restaurant Chains. The following
information should be read in conjunction with the section of the Prospectus
entitled "Management's Discussion and Analysis of Financial Condition of the
Company."
LIQUIDITY AND CAPITAL RESOURCES
The Company was formed in May 1994, at which time 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 a public offering for the sale
of up to 16,500,000 Shares of Common Stock ($165,000,000), the net proceeds of
which
-72-
<PAGE>
were used to invest in Properties and Mortgage Loans. Of the 16,500,000 Shares
of Common Stock offered, 1,500,000 Shares ($15,000,000) were available only to
stockholders who elected to participate in the Company's Reinvestment Plan. Upon
completion of its Initial Offering on February 6, 1997, the Company had received
subscription proceeds of $150,591,765 (15,059,177 Shares), including 59,177
Shares ($591,765) issued pursuant to the Company's Reinvestment Plan.
Following the completion of its Initial Offering, the Company commenced
the 1997 Offering of up to 27,500,000 Shares of Common Stock ($275,000,000), the
net proceeds of which were used or will be used to invest in Properties and
Mortgage Loans. Of the 27,500,000 Shares of Common Stock offered, 2,500,000
($25,000,000) were available only to stockholders who elected to participate in
the Company's Reinvestment Plan. Upon completion of its 1997 Offering on March
2, 1998, the Company had received subscription proceeds of $251,872,648
(25,187,265 Shares), including 187,265 Shares ($1,872,648) issued pursuant to
the Company's Reinvestment Plan.
Following the completion of its 1997 Offering, the Company commenced
this offering of up to 34,500,000 Shares of Common Stock ($345,000,000). Of the
34,500,000 Shares of Common Stock being offered, 2,000,000 ($20,000,000) are
available only to stockholders who elect to participate in the Company's
Reinvestment Plan. As of March 31, 1998, the Company had received subscription
proceeds of $25,040,047 (2,504,005 Shares) from this offering, including 81,266
Shares ($812,663) issued pursuant to the Reinvestment Plan.
As of March 31, 1998, the Company had received aggregate subscription
proceeds of $427,504,460 (42,750,446 Shares) from its Initial Offering, 1997
Offering and this offering, including 327,708 Shares ($3,277,076) issued
pursuant to the Reinvestment Plan. Net proceeds to the Company from its Initial
Offering, 1997 Offering, and this offering, after deduction of selling
commissions, marketing support and due diligence expense reimbursement fees, and
organizational and offering expenses, totalled $382,949,112 as of March 31,
1998.
During the quarter ended March 31, 1998, approximately $19,900,000 of
net offering proceeds were used to invest, or committed for investment, in 11
Properties (all of which were under construction or renovation as of March 31,
1998) and to pay acquisition fees to the Advisor totalling $2,959,864, as well
as certain acquisition expenses.
In connection with the 17 Properties under construction or renovation
at March 31, 1998 (six of which were under construction at December 31, 1997),
the Company has entered into various development agreements with tenants which
provide terms and specifications for the construction of buildings. 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 are approximately
$21,894,000, of which approximately $16,659,000 had been incurred as of March
31, 1998. The buildings under construction or renovation as of March 31, 1998,
are expected to be operational by September 1998. In connection with the
purchase of each Property, the Company, as lessor, entered into a long-term
lease agreement.
During the quarter ended March 31, 1998, the Company received advances
totalling $239,986 under the Line of Credit to provide equipment financing. The
balance of the Line of Credit was $2,699,029 as of March 31, 1998. The Company
expects to obtain additional advances under the Line of Credit to fund future
equipment financing requirements and from time to time may purchase Properties
and fund Mortgage Loans.
During the period April 1, 1998 through June 16, 1998, the Company
received subscription proceeds for an additional 7,247,822 Shares ($72,478,219)
of Common Stock. In addition, during the period April 1, 1998 through June 16,
1998, the Company acquired 56 Properties (11 of which are under construction)
for cash at a total cost of approximately $83,183,000, 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 11 Properties under
construction are estimated to be approximately $13,069,000. In connection with
the purchase of each of the 11 Properties, the Company, as lessor, entered into
a long-term lease agreement. The buildings under construction are expected to be
operational by December 1998.
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<PAGE>
In May 1998, the Company sold two of its Properties to tenants for a
total of approximately $1,233,000. The Company intends to reinvest the net sales
proceeds from the sale of these Properties in additional Properties. In
addition, in April and May 1998, a tenant exercised its option under the terms
of its lease agreements to substitute three existing Properties with three
replacement Properties which were approved by the Company. In conjunction
therewith, the Company simultaneously exchanged three Boston Market Properties
in Grand Island, Nebraska; Franklin, Tennessee; and Dubuque, Iowa, for three
replacement Boston Market Properties in Warwick, Rhode Island; Glendale,
Arizona; and Columbus, Ohio, respectively. Under the simultaneous exchange
agreement, each replacement Property will continue under the terms of the leases
of the original properties. All closing costs were paid by the tenant. The
Company accounted for these transactions as non-monetary exchanges of similar
productive assets and recorded the acquisitions of the replacement Properties at
the net book value of the original Properties. No gain or loss was recognized
due to these transactions being accounted for as non-monetary exchanges of
similar assets.
As of June 16, 1998, the Company had received aggregate subscription
proceeds of $499,982,679 (49,998,268 Shares) from the Initial Offering, the 1997
Offering and this offering, including $3,277,028 (327,703 Shares) through its
Reinvestment Plan. As of June 16, 1998, the Company had invested or committed
for investment approximately $375,600,000 of aggregate net offering proceeds in
309 Properties, in providing mortgage financing through Mortgage Loans and in
paying acquisition fees and certain acquisition expenses, leaving approximately
$73,800,000 in aggregate net offering proceeds available for investment in
Properties and Mortgage Loans.
The Company currently is negotiating to acquire additional Properties,
but as of June 16, 1998 had not acquired any such Properties.
The Company expects to use uninvested Net Offering Proceeds from this
offering, plus any Net Offering Proceeds from the sale of additional Shares in
this offering, to purchase additional Properties, to fund construction and
renovation costs relating to the Properties under construction and to make
Mortgage Loans. The Company does not intend to use Net Offering Proceeds to fund
Secured Equipment Leases; however, from time to time the Company may use
uninvested Net Offering Proceeds to repay a portion of or all of the balance
outstanding under the Line of Credit pending the investment of such offering
proceeds in Properties or Mortgage Loans in order to reduce the Company's
interest cost during such period. The Company expects to fund the Secured
Equipment Leases with proceeds from the Line of Credit. The number of Properties
to be acquired and Mortgage Loans to be entered into will depend upon the amount
of Net Offering Proceeds available to the Company, although the Company is
expected to have a total portfolio of 670 to 730 Properties if the maximum
number of Shares are sold in this offering. The Company intends to limit
equipment financing to ten percent of the aggregate gross offering proceeds from
its offerings.
Properties are leased on a triple-net basis, meaning that tenants are
generally required to pay all repairs and maintenance, property taxes, insurance
and utilities. Rental payments under the leases are expected to exceed the
Company's Operating Expenses. For these reasons, no short-term or long-term
liquidity problems currently are anticipated by management.
Until Properties are acquired or Mortgage Loans are entered into, Net
Offering Proceeds are held in short-term, highly liquid investments which
management believes to have appropriate safety of principal. This investment
strategy provides high liquidity in order to facilitate the Company's use of
these funds to acquire Properties or to fund Mortgage Loans at such time as
suitable Properties and investments in Mortgage Loans are identified. At March
31, 1998, the Company had $91,674,397 invested in such short-term investments
(including a certificate of deposit in the amount of $2,000,000) as compared to
$49,595,001 (including a certificate of deposit in the amount of $2,000,000) at
December 31, 1997. The increase in the amount invested in short-term investments
is primarily attributable to the receipt of subscription proceeds during the
quarter ended March 31, 1998. These funds will be used primarily to purchase and
develop or renovate Properties (directly or indirectly through joint venture
arrangements), to make Mortgage Loans, to pay offering and acquisition costs, to
pay Distributions to stockholders, to temporarily reduce amounts outstanding
under the Line of Credit pending the investment of Net Offering Proceeds, to pay
Company expenses, and, in management's discretion, to create cash reserves.
-74-
<PAGE>
During the quarters ended March 31, 1998 and 1997, Affiliates of the
Company incurred on behalf of the Company $773,668 and $593,489, respectively,
for certain offering expenses, $207,564 and $220,259, respectively, for certain
acquisition expenses, and $159,137 and $170,039, respectively, for certain
Operating Expenses. As of March 31, 1998, the Company owed the Advisor and its
Affiliates $2,047,740 for such amounts, unpaid fees and administrative expenses.
As of June 16, 1998, 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 the gross proceeds from this offering. As of March 31, 1998,
the Offering Expenses had not exceeded this amount.
During the quarters ended March 31, 1998 and 1997, 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
$8,259,316 and $2,717,456, respectively. Based primarily on cash from
operations, the Company declared and paid Distributions to its stockholders of
$7,280,777 and $2,693,357 during the quarters ended March 31, 1998 and 1997,
respectively. In addition, on April 1, 1998 and May 1, 1998, the Company
declared Distributions to its stockholders totalling $2,728,560 and $2,902,652,
respectively, payable in June 1998. For the quarters ended March 31, 1998 and
1997, approximately 87 and 75 percent, respectively, of the Distributions
received by stockholders were considered to be ordinary income and approximately
13 and 25 percent, respectively, were considered a return of capital for federal
income tax purposes. However, no amounts distributed or to be distributed to the
stockholders as of May 1, 1998, are required to be or have been treated by the
Company as a return of capital for purposes of calculating the Stockholders'
Return on their Invested Capital.
Management believes that the Properties are adequately covered by
insurance. In addition, the Advisor 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 a 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 other Operating Expenses.
Due to the fact that the Properties are leased on a long-term,
triple-net basis, management does not believe that working capital reserves are
necessary at this time. Management has the right to cause the Company to
maintain reserves if, in their discretion, they determine such reserves are
required to meet the Company's working capital needs.
Management expects that the cash generated from operations will be
adequate to pay Operating Expenses.
RESULTS OF OPERATIONS
As of March 31, 1998, the Company and its consolidated joint venture,
CNL/Corral South Joint Venture (hereinafter, collectively referred to as the
"Company"), had purchased and entered into long-term, triple-net leases for 255
Properties. The Property leases provide for minimum base annual rental payments
ranging from approximately $58,900 to $467,500, which are payable in monthly
installments. In addition, certain leases provide for percentage rent based on
sales in excess of a specified amount. The majority of the leases also provide
that, commencing in generally the sixth lease year, the annual base rent
required under the terms of the leases will increase. In connection therewith,
the Company earned $6,678,698 in rental income from operating leases and earned
income from direct financing leases from 255 Properties and 27 Secured Equipment
Leases during the quarter ended March 31, 1998, and $2,089,785 from 105
Properties and 11 Secured Equipment Leases during the quarter ended March 31,
1997. Because the Company has not yet acquired all of its Properties and certain
Properties were under construction as of March 31, 1998, revenues for the
quarter ended March 31, 1998, represent only a portion of revenues which the
Company is expected to earn in future periods.
During the quarters ended March 31, 1998 and 1997, the Company also
earned $1,216,029 and $474,416, respectively, in interest income from promissory
notes relating to Secured Equipment Leases entered into in October 1997, from
investments in money market accounts or other short-term, highly liquid
investments and other income. Interest income is expected to increase as the
Company invests Net Offering Proceeds received in the future relating
-75-
<PAGE>
to this offering in short-term, highly liquid investments pending investment in
Properties and 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 $1,800,007 and $679,823 for the quarters ended March 31, 1998 and 1997,
respectively. Total Operating Expenses increased primarily as a result of the
Company owning additional Properties during the quarter ended March 31, 1998, as
compared to the quarter ended March 31, 1997. General and administrative
expenses as a percentage of total revenues is expected to decrease as the
Company acquires additional Properties, invests in additional Mortgage Loans and
the Properties under construction and renovation become operational. However,
Asset Management Fees and depreciation and amortization expense are expected to
increase as the Company invests in additional Properties and Mortgage Loans.
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." This Statement
requires the reporting of net earnings and all other changes to equity during
the period, except those resulting from investments by owners and distributions
to owners, in a separate statement that begins with net earnings. Currently, the
Company's only component of comprehensive income is net earnings.
CERTAIN TRANSACTIONS
The following presents information from March 3, 1998 through June 16,
1998, unless otherwise noted. For information for the years ended December 31,
1995, 1996 and 1997, and the period January 1, 1998 through March 2, 1998, see
the section of the Prospectus entitled "Certain Transactions."
The Managing Dealer is entitled to receive Selling Commissions
amounting to 7.5% of the total amount raised from the sale of Shares of Common
Stock for services in connection with the offering of Shares, a substantial
portion of which has been or will be paid as commissions to other
broker-dealers. For the period March 3, 1998 through June 16, 1998, the Company
incurred $7,313,870 of such fees in connection with this offering, of which
approximately $6,705,256 was paid by the Managing Dealer as commissions to other
broker-dealers.
In addition, the Managing Dealer is entitled to receive a marketing
support and due diligence expense reimbursement fee equal to 0.5% of the total
amount raised from the sale of Shares, a portion of which may be reallowed to
other broker-dealers. For the period March 3, 1998 through June 16, 1998, the
Company incurred $487,591 of such fees in connection with this offering,
substantially all of which were reallowed to other broker-dealers and from which
all bona fide due diligence expenses were paid.
The Advisor is entitled to receive Acquisition Fees for services in
identifying the Properties and structuring the terms of the acquisition and
leases of the Properties and structuring the terms of the Mortgage Loans equal
to 4.5% of the total amount raised from the sale of Shares. For the period March
3, 1998 through June 16, 1998, the Company incurred $4,388,322 of such fees in
connection with this offering.
For negotiating Secured Equipment Leases and supervising the Secured
Equipment Lease program, the Advisor is entitled to receive from the Company a
one-time Secured Equipment Lease Servicing Fee of two percent of the purchase
price of the Equipment that is the subject of a Secured Equipment Lease. For the
period March 3, 1998 through June 16, 1998, the Company incurred $14,899 in such
fees.
The Company and the Advisor have entered into an Advisory Agreement
pursuant to which the Advisor will receive a monthly Asset Management Fee of
one-twelfth of 0.60% of the Company's Real Estate Asset Value, plus one-twelfth
of 0.60% of the total principal amount of the Company's Mortgage Loans, as of
the end of the preceding month. The 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 Management Fee not taken as to
any fiscal year shall be deferred without
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<PAGE>
interest and may be taken in such other fiscal year as the Advisor shall
determine. For the five months ended May 31, 1998, the Company incurred $624,301
of such fees, $16,398 of which has been capitalized as part of the cost of the
buildings for Properties that have been or are being constructed.
The Advisor and its Affiliates provide administrative services to the
Company (including administrative services in connection with the offering of
Shares) on a day-to-day basis. For the quarter ended March 31, 1998, the Company
incurred a total of $981,842 for these services, $718,948 of such costs
representing stock issuance costs and $262,894 representing general operating
and administrative expenses, including costs related to preparing and
distributing reports required by the Securities and Exchange Commission.
During the quarter ended March 31, 1998, the Company incurred
Construction Fees totalling $60,869 in connection with the acquisition of three
Properties that were constructed or renovated by an Affiliate. Such fees were
included in the purchase prices of the Properties and therefore included in the
basis on which the Company charges rent on the Properties.
The Advisor and the Managing Dealer are wholly owned subsidiaries of
CNL Group, Inc., of which James M. Seneff, Jr., Chairman of the Board and Chief
Executive Officer of the Company, and his spouse are the sole stockholders.
All of these fees were paid in accordance with the provisions of the
Company's Articles of Incorporation.
DISTRIBUTION POLICY
DISTRIBUTIONS
The following table reflects the total Distributions and Distributions
per Share declared and paid by the Company for each month since the Company
commenced operations.
<TABLE>
<CAPTION>
1995 1996 1997 1998
---- ---- ---- ----
Month Total Per Share Total Per Share Total Per Share Total Per Share
- ----- ----------- ------------------- -------------------- --------- --------- ---------
<S> <C>
January $ - $ - $225,354 $0.058300 $ 827,978 $0.059375 $2,299,704 $0.063540
February - - 255,649 0.058300 884,806 0.059375 2,423,262 0.063540
March - - 287,805 0.058300 980,573 0.060416 2,558,377 0.063540
April - - 323,721 0.058300 1,091,142 0.061458
May - - 368,155 0.058300 1,202,718 0.062500
June 15,148 0.030000 407,803 0.058300 1,295,253 0.062500
July 30,682 0.030000 458,586 0.059375 1,403,187 0.062500
August 57,739 0.035000 517,960 0.059375 1,516,980 0.062500
September 84,467 0.050000 558,394 0.059375 1,677,332 0.063540
October 104,733 0.050000 615,914 0.059375 1,844,923 0.063540
November 155,665 0.058300 683,907 0.059375 1,991,289 0.063540
December 190,184 0.058300 732,824 0.059375 2,138,116 0.063540
</TABLE>
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
quarter
-77-
<PAGE>
ended March 31, 1998 and the years ended December 31, 1997, 1996 and 1995, the
Company declared and made Distributions totalling $7,281,343, $16,854,297,
$5,436,072 and $638,618, respectively, of which 87%, 93.33%, 90.25% and 59.82%,
respectively, of such amounts were characterized as ordinary income and 13%,
6.67%, 9.75% and 40.18%, respectively, were characterized as return of capital
for federal income tax purposes. In addition, in April, May and June 1998, the
Company declared distributions to its stockholders totalling $2,728,806,
$2,902,508 and $3,080,149, respectively, payable in June 1998. However, no
amounts distributed to stockholders as of March 31, 1998, 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. Due to the fact
that the Company had not acquired all of its Properties and was still in its
offering period as of March 31, 1998, 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 in kind shall not be permitted, except for distributions of
readily marketable securities; distributions of beneficial interests in a
liquidating trust established for the dissolution of the Company and the
liquidation of its assets in accordance with the terms of the Articles of
Incorporation; or distributions of in-kind property as long as the Directors (i)
advise each stockholder of the risks associated with direct ownership of the
property; (ii) offer each stockholder the election of receiving in-kind property
distributions; and (iii) distribute in-kind property only to those stockholders
who accept the Directors' offer.
SUMMARY OF THE
ARTICLES OF INCORPORATION AND BYLAWS
DESCRIPTION OF CAPITAL STOCK
At the Company's annual meeting of stockholders held on May 4, 1998,
the stockholders approved amendments to the Company's Amended and Restated
Articles of Incorporation increasing the number of authorized shares of capital
stock from 156,000,000 shares (consisting of 75,000,000 shares of Common Stock,
3,000,000 shares of Preferred Stock and 78,000,000 Excess Shares) to 206,000,000
shares (consisting of 125,000,000 shares of Common Stock, 3,000,000 shares of
Preferred Stock and 78,000,000 Excess Shares). As of June 16, 1998, the Company
had 50,018,268 shares of Common Stock outstanding (including 20,000 issued to
the Advisor prior to the commencement of the Initial Offering and 327,703 issued
pursuant to the Reinvestment Plan) and no Preferred Stock or Excess Shares
outstanding.
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<PAGE>
EXHIBIT B
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
AND
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OF
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
THE PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS AND THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS INCLUDED IN THIS EXHIBIT B
UPDATE EXHIBIT B TO THE PROSPECTUS, DATED MAY
12, 1998.
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
INDEX TO UPDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Pro Forma Consolidated Financial Information (unaudited):
Pro Forma Consolidated Balance Sheet as of March 31, 1998 B-2
Pro Forma Consolidated Statement of Earnings for the quarter ended March 31, 1998 B-3
Pro Forma Consolidated Statement of Earnings for the year ended December 31, 1997 B-4
Notes to Pro Forma Consolidated Financial Statements for the quarter ended March 31,
1998 and the year ended December 31, 1997 B-5
Updated Unaudited Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets as of March 31, 1998 and December 31, 1997 B-9
Condensed Consolidated Statements of Earnings for the quarters ended March 31, 1998
and 1997 B-10
Condensed Consolidated Statements of Stockholders' Equity for the quarter
ended March 31, 1998 and the year ended December 31, 1997 B-11
Condensed Consolidated Statements of Cash Flows for the quarters ended March 31, 1998
and 1997 B-12
Notes to Condensed Consolidated Financial Statements for the quarters ended March 31,
1998 and 1997 B-14
</TABLE>
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following Pro Forma Consolidated Balance Sheet of the Company gives
effect to (i) property acquisition transactions from inception through March 31,
1998, including the receipt of $427,504,460 in gross offering proceeds from the
sale of 42,750,446 shares of common stock and the application of such proceeds
to purchase 255 properties (including 190 properties which consist of land and
building, one property through a joint venture arrangement which consists of
land and building, 20 properties which consist of building only and 44
properties which consist of land only), 17 of which were under construction at
March 31, 1998, to provide mortgage financing to the lessees of the 44
properties consisting of land only, and to pay organizational and offering
expenses, acquisition fees and miscellaneous acquisition expenses, (ii) the
receipt of $72,478,219 in gross offering proceeds from the sale of 7,247,822
additional shares of common stock during the period April 1, 1998 through June
16, 1998, (iii) the receipt of net sales proceeds in the amount of $1,233,479
relating to the sale of two properties (both on which a restaurant was being
developed) during the period April 1, 1998 through June 16, 1998 (iv) the
application of such funds and $48,083,010 of cash and cash equivalents at March
31, 1998 to purchase 56 additional properties acquired during the period April
1, 1998 through June 16, 1998 (11 of which are under construction and consist of
land and building and 45 which consist of land and building), to pay additional
costs for the 17 properties under construction at March 31, 1998, to pay
offering expenses, acquisition fees and miscellaneous acquisition expenses, (v)
the acquisition of an interest in a joint venture to own real property and (vi)
the application of such funds to purchase ten properties, including five
properties consisting of land and building and five properties consisting of
building only, for which the Company has made initial commitments to acquire as
of June 16, 1998, all as reflected in the pro forma adjustments described in the
related notes. The Pro Forma Consolidated Balance Sheet as of March 31, 1998,
includes the transactions described in (i) above from the historical
consolidated balance sheet, adjusted to give effect to the transactions in (ii),
(iii), (iv), (v) and (vi) above, as if they had occurred on March 31, 1998.
The Pro Forma Consolidated Statements of Earnings for the quarter ended
March 31, 1998 and the year ended December 31, 1997, include the historical
operating results of the properties described in (i) above from the dates of
their acquisitions plus operating results for four of the properties that were
acquired by the Company during the period January 1, 1997 through June 16, 1998,
and had a previous rental history prior to the Company's acquisition of such
properties, from (A) the later of (1) the date the property became operational
as a rental property by the previous owner or (2) January 1, 1997, 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 properties
acquired by the Company during the period January 1, 1997 through June 16, 1998,
or the properties for which the Company has made initial commitments to acquire
as of June 16, 1998, due to the fact that these properties did not have a
previous rental history.
This pro forma consolidated financial information is presented for
informational purposes only and does not purport to be indicative of the
Company's financial results or condition if the various events and transactions
reflected therein had occurred on the dates, or been in effect during the
periods, indicated. This pro forma consolidated financial information should not
be viewed as predictive of the Company's financial results or conditions in the
future.
B-1
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
<TABLE>
<CAPTION>
Pro Forma
ASSETS Historical Adjustments Pro Forma
<S> <C>
Land and buildings on operating
leases, less accumulated
depreciation $214,371,528 $ 30,704,096 (a)
5,794,643 (b)
(1,233,479)(c) $249,636,788
Net investment in direct
financing leases (e) 50,282,444 62,627,546 (a)
6,374,107 (b) 119,284,097
Investment in joint venture - 1,508,650 (d) 1,508,650
Cash and cash equivalents 89,666,093 (35,101,071)(a)
(11,550,000)(b)
1,233,479 (c)
(1,431,939)(d) 42,816,562
Certificates of deposit 2,008,304 2,008,304
Receivables, less allowance for
doubtful accounts of $51,835
and $99,964 respectively 499,194 499,194
Mortgage notes receivable 17,537,978 17,537,978
Equipment notes receivable 13,005,058 13,005,058
Accrued rental income 2,410,494 2,410,494
Other assets 4,976,883 (1,484,158)(a)
(618,750)(b)
(76,711)(d) 2,797,264
------------ ------------ ------------
$394,757,976 $ 56,746,413 $451,504,389
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Line of credit $ 2,699,029 $ 2,699,029
Accrued construction costs
payable 7,759,202 $ (7,759,202)(a) -
Accounts payable and other
accrued expenses 319,573 319,573
Due to related parties 2,047,740 2,047,740
Rents paid in advance 871,957 871,957
Deferred rental income 776,016 776,016
Other payables 42,359 42,359
------------- ------------ -----------
Total liabilities 14,515,876 ( 7,759,202) 6,756,674
------------- ------------ -----------
Minority interest 284,092 284,092
------------- ------------ ------------
Stockholders' equity:
Preferred stock, without par
value. Authorized and unissued
3,000,000 shares - -
Excess shares, $0.01 par value per
share. Authorized and unissued
78,000,000 shares - -
Common stock, $0.01 par value per
share. Authorized 75,000,000
shares; issued and outstanding
42,770,446 shares; issued and
outstanding, as adjusted,
50,018,268 shares 427,704 72,478 (a) 500,182
Capital in excess of par value 382,541,408 64,433,137 (a) 446,974,545
Accumulated distributions in
excess of net earnings (3,011,104) (3,011,104)
------------ ------------ ------------
379,958,008 64,505,615 444,463,623
------------ ------------ ------------
$394,757,976 $ 56,746,413 $451,504,389
============ ============ ============
</TABLE>
See accompanying notes to unaudited pro forma consolidated
financial statements.
B-2
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
QUARTER ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
<S> <C>
Revenues:
Rental income from
operating leases $ 5,316,026 $ 36,914 (1) $ 5,352,940
Earned income from
direct financing leases (6) 1,362,672 26,311 (1) 1,388,983
Interest income from
mortgage notes receivable 433,077 433,077
Other interest income 1,205,687 (38,305)(2) 1,167,382
Other income 10,342 10,342
----------- --------- -----------
8,327,804 24,920 8,352,724
----------- --------- -----------
Expenses:
General operating and
administrative 499,388 499,388
Professional services 52,939 52,939
Asset management fees
to related party 362,659 6,790 (3) 369,449
State taxes 105,523 105,523
Depreciation and amortization 779,498 779,498
----------- --------- -----------
1,800,007 6,790 1,806,797
----------- --------- -----------
Earnings Before Minority
Interest in Income of
Consolidated Joint Venture 6,527,797 18,130 6,545,927
Minority Interest in Income of
Consolidated Joint Venture (7,768) (7,768)
----------- --------- -----------
Net Earnings $ 6,520,029 $ 18,130 $ 6,538,159
=========== ========= ===========
Earnings Per Share of
Common Stock (Basic
and Diluted) (5) $ 0.17 $ 0.17
=========== ===========
Weighted Average Number of
Shares of Common Stock
Outstanding (5) 39,240,871 39,240,871
=========== ===========
</TABLE>
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, 1997
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
<S> <C>
Revenues:
Rental income from
operating leases $12,457,200 $ 100,361 (1) $12,557,561
Earned income from
direct financing leases (6) 3,033,415 56,640 (1) 3,090,055
Interest income from
mortgage notes receivable 1,687,456 1,687,456
Other interest income 2,254,375 (58,190)(2) 2,196,185
Other income 25,487 25,487
----------- --------- -----------
19,457,933 98,811 19,556,744
----------- ---------- -----------
Expenses:
General operating and
administrative 944,763 944,763
Professional services 65,962 65,962
Asset and mortgage management
fees to related party 804,879 8,296 (3) 813,175
State taxes 251,358 251,358
Depreciation and amortization 1,795,062 4,321 (4) 1,799,383
----------- --------- -----------
3,862,024 12,617 3,874,641
----------- --------- -----------
Earnings Before Minority
Interest in Income of
Consolidated Joint Venture 15,595,909 86,194 15,682,103
Minority Interest in Income of
Consolidated Joint Venture (31,453) (31,453)
----------- --------- -----------
Net Earnings $15,564,456 $ 86,194 $15,650,650
=========== ========= ===========
Earnings Per Share of
Common Stock (Basic
and Diluted) (5) $ 0.66 $ 0.67
=========== ===========
Weighted Average Number of
Shares of Common Stock
Outstanding (5) 23,423,868 23,423,868
=========== ===========
</TABLE>
See accompanying notes to unaudited pro forma consolidated
financial statements.
B-4
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED MARCH 31, 1998
AND THE YEAR ENDED DECEMBER 31, 1997
Pro Forma Consolidated Balance Sheet:
(a) Represents gross proceeds of $72,478,219 from the issuance of 7,247,822
shares of common stock during the period April 1, 1998 through June 16,
1998 and $35,101,071 of cash and cash equivalents used (i) to acquire
56 properties (11 of which are under construction and consist of land
and building and 45 which consist of land and building) for
$82,939,968, (ii) to fund estimated construction costs of $13,405,198
($7,759,202 of which was accrued as construction costs payable at March
31, 1998) relating to 17 wholly owned properties under construction at
March 31, 1998, (iii) to pay acquisition fees of $3,261,520 and
reclassify from other assets $1,484,158 of acquisition fees previously
incurred relating to the acquired properties and (iv) to pay selling
commissions and offering expenses (stock issuance costs) of $7,972,604,
which have been netted against capital in excess of par value.
The pro forma adjustment to land and buildings on operating leases and
net investment in direct financing leases as a result of the above
transactions were as follows:
<TABLE>
<CAPTION>
Estimated purchase
price (including
construction and
closing costs) Acquisition fees
and additional allocated to
construction costs property Total
<S> <C>
Arby's in Columbus, OH $ 973,987 $ 52,178 $ 1,026,165
Arby's in Atlanta, GA 1,225,727 65,664 1,291,391
Jack in the Box in Nacogdoches, TX 999,170 53,527 1,052,697
Jack in the Box in Gun Barrel City, TX 811,391 43,467 854,858
Jack in the Box in St. Louis, MO 1,149,508 61,581 1,211,089
Jack in the Box in Avondale, AZ 1,174,798 62,936 1,237,734
Chevy's Fresh Mex in Naperville, IL 2,200,000 117,857 2,317,857
Jack in the Box in Fresno, CA 972,341 52,090 1,024,431
Arby's in Arab, AL 649,250 34,781 684,031
Sonny's Real Pit Bar-B-Q in Athens, GA 1,534,616 82,212 1,616,828
Sonny's Real Pit Bar-B-Q in Conyers, GA 933,377 50,002 983,379
Sonny's Real Pit Bar-B-Q in Doraville, GA 1,349,107 72,274 1,421,381
Sonny's Real Pit Bar-B-Q in Jonesboro, GA 1,118,137 59,900 1,178,037
Sonny's Real Pit Bar-B-Q in Marietta, GA 1,364,908 73,120 1,438,028
Sonny's Real Pit Bar-B-Q in Norcross, GA 1,633,464 87,507 1,720,971
Sonny's Real Pit Bar-B-Q in Smyrna, GA 1,233,578 66,085 1,299,663
IHOP in Hollywood, CA 2,263,201 121,243 2,384,444
Golden Corral in Brunswick, GA 1,554,107 83,256 1,637,363
Wendy's in Knoxville, TN 960,054 51,431 1,011,485
Burger King in Atlanta, GA 922,967 49,445 972,412
18 Steak & Ale and 17 Bennigan's
restaurants 57,916,280 3,102,658 61,018,938
17 wholly owned properties under
construction at March 31, 1998 5,645,996 302,464 5,948,460
----------- ----------- -----------
$88,585,964 $ 4,745,678 $93,331,642
=========== =========== ===========
Adjustment classified as follows:
Land and buildings on operating leases $30,704,096
Net investment in direct financing leases 62,627,546
----------
$93,331,642
==========
</TABLE>
B-5
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED
FOR QUARTER ENDED MARCH 31, 1998 AND
THE YEAR ENDED DECEMBER 31, 1997
Pro Forma Consolidated Balance Sheet - Continued:
(b) Represents the use of the Company's net offering proceeds to acquire
ten properties (including five properties consisting of land and
building and five properties consisting of building only) for which the
Company had made initial commitments to purchase as of June 16, 1998,
for an estimated cost of $11,550,000, and the allocation of $618,750 of
acquisition fees to these ten properties. See "Business Pending
Investments."
The pro forma adjustment to land and buildings on operating leases and
net investment in direct financing leases as a result of the above
commitments were as follows:
<TABLE>
<CAPTION>
Estimated purchase
price (including
construction and
closing costs) Acquisition fees
and additional allocated to
construction costs property Total
<S> <C>
Initial commitments to acquire ten
properties as of June 16, 1998 $11,550,000 $ 618,750 $12,168,750
=========== =========== ===========
Adjustment classified as follows:
Land and buildings on operating leases $ 5,794,643
Net investment in direct financing leases 6,374,107
-----------
$12,168,750
===========
</TABLE>
(c) Represents net sales proceeds in the amount of $1,233,479 received in
conjunction with the sale of two properties (both on which a restaurant
was being developed), which were sold at approximately net carrying
value.
(d) Represents the use of the Company's net offering proceeds to acquire an
approximate 68 percent interest in CNL/Lee Vista Joint Venture which
owns a Bennigan's property in Orlando, Florida.
<TABLE>
<CAPTION>
Estimated contri-
bution to joint
venture (including
construction and Acquisition fees
closing costs) allocated to
and additional investment in
construction costs joint venture Total
<S> <C>
Approximate 68 percent contribution
to joint venture $1,431,939 $ 76,711 $1,508,650
========== =========== ==========
</TABLE>
(e) 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 payments received.
B-6
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED
FOR THE QUARTER ENDED MARCH 31, 1998 AND
THE YEAR ENDED DECEMBER 31, 1997
Pro Forma Consolidated Statements of Earnings:
(1) Represents rental income from operating leases and earned income from
direct financing leases for four of the properties acquired during the
period January 1, 1997 through June 16, 1998, which had a previous
rental history prior to the acquisition of the property by the Company
(the "Pro Forma Properties "), for the period commencing (A) the later
of (i) the date the Pro Forma Property became operational as a rental
property by the previous owner or (ii) January 1, 1997, 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
four Pro Forma Properties was acquired from an affiliate who had
purchased and temporarily held title to the property. The
noncancellable leases for the Pro Forma Properties in place during the
period the affiliate owned the properties were assigned to the Company
at the time the Company acquired the properties. The following presents
the actual date the Pro Forma Properties were acquired or placed in
service by the Company as compared to the date the Pro Forma Properties
were treated as becoming operational as a rental property for purposes
of the Pro Forma Consolidated Statement of Earnings.
<TABLE>
<CAPTION>
Date Pro Forma
Date Placed Property Became
in Service Operational as
By the Company Rental Property
<S> <C>
Burger King in Kent, OH February 1997 December 1996
Golden Corral in
Hopkinsville, KY February 1997 February 1997
Jack in the Box in
Folsom, CA October 1997 September 1997
IHOP in Hollywood, CA June 1998 June 1997
</TABLE>
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 1997 and 1998 that the previous owners held the
properties, no pro forma adjustment was made for percentage rental
income for the quarter ended March 31, 1998 and year ended December 31,
1997.
(2) 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) the later of (i) the dates the Pro
Forma Properties became operational as rental properties by the
previous owners or (ii) January 1, 1997, through (B) the earlier of (i)
the actual dates of acquisition by the Company or (ii) 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 from interest bearing accounts was earned at a rate of
approximately four percent per annum by the Company during the quarter
ended March 31, 1998 and year ended December 31, 1997.
B-7
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED
FOR THE QUARTER ENDED MARCH 31, 1998 AND
THE YEAR ENDED DECEMBER 31, 1997
Pro Forma Consolidated Statements of Earnings - Continued:
(3) Represents incremental increase in asset management fees relating to
the Pro Forma Properties for the period commencing (A) the later of (i)
the date the Pro Forma Properties became operational as rental
properties by the previous owners or (ii) January 1, 1997, 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
$5,642,000 for the Pro Forma Properties for the quarter ended March 31,
1998 and the year ended December 31, 1997), as defined in the Company's
prospectus.
(4) 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.
(5) Historical earnings per share were calculated based upon the weighted
average number of shares of common stock outstanding during the quarter
ended March 31, 1998 and the year ended December 31, 1997.
(6) See Note (e) under "Pro Forma Consolidated Balance Sheet" for a
description of direct financing leases.
B-8
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
ASSETS 1998 1997
------------ --------
Land and buildings on operating leases,
less accumulated depreciation $214,371,528 $205,338,186
Net investment in direct financing leases 50,282,444 47,613,595
Cash and cash equivalents 89,666,093 47,586,777
Certificates of deposit 2,008,304 2,008,224
Receivables, less allowance for doubtful
accounts, of $51,835 and $99,964,
respectively 499,194 635,796
Mortgage notes receivable 17,537,978 17,622,010
Equipment notes receivable 13,005,058 13,548,044
Accrued rental income 2,410,494 1,772,261
Other assets 4,976,883 2,952,869
------------ ------------
$394,757,976 $339,077,762
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Line of credit $ 2,699,029 $ 2,459,043
Accrued construction costs payable 7,759,202 10,978,211
Accounts payable and accrued expenses 319,573 1,060,497
Due to related parties 2,047,740 1,524,294
Rents paid in advance 871,957 517,428
Deferred rental income 776,016 557,576
Other payables 42,359 56,878
------------ ------------
Total liabilities 14,515,876 17,153,927
------------ ------------
Minority interest 284,092 285,734
------------ ------------
Commitments (Note 10)
Stockholders' equity:
Preferred stock, without par value.
Authorized and unissued 3,000,000
shares - -
Excess shares, $0.01 par value per share.
Authorized and unissued 78,000,000
shares - -
Common stock, $0.01 par value per share.
Authorized 75,000,000 shares, issued
and outstanding 42,770,446 and
36,192,971, respectively 427,704 361,930
Capital in excess of par value 382,541,408 323,525,961
Accumulated distributions in excess of
net earnings (3,011,104) (2,249,790)
------------ ------------
Total stockholders' equity 379,958,008 321,638,101
------------ ------------
$394,757,976 $339,077,762
============ ============
See accompanying notes to condensed
consolidated financial statements.
B-9
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
Quarter Ended
March 31,
1998 1997
---------- -------
Revenues:
Rental income from operating
leases $5,316,026 $1,643,074
Earned income from direct
financing leases 1,362,672 446,711
Interest income from mortgage
notes receivable 433,077 375,357
Other interest 1,205,687 465,494
Other income 10,342 8,922
---------- ----------
8,327,804 2,939,558
---------- ----------
Expenses:
General operating and administrative 499,388 255,456
Professional services 52,939 38,463
Asset management fees to related
party 362,659 110,516
State taxes 105,523 35,350
Depreciation and amortization 779,498 240,038
---------- ----------
1,800,007 679,823
---------- ----------
Earnings Before Minority Interest in
Income of Consolidated Joint Venture 6,527,797 2,259,735
Minority Interest in Income of
Consolidated Joint Venture (7,768) (7,893)
---------- ----------
Net Earnings $6,520,029 $2,251,842
========== ==========
Earnings Per Share of Common Stock
(Basic and Diluted) $ 0.17 $ 0.14
========== ==========
Weighted Average Number of Shares of
Common Stock Outstanding 39,240,871 15,630,532
========== ==========
See accompanying notes to condensed
consolidated financial statements.
B-10
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Quarter Ended March 31, 1998 and
Year Ended December 31, 1997
<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, 1996 13,944,715 $139,447 $123,687,929 $ (959,949) $122,867,427
Subscriptions
received for
common stock
through public
offering and
distribution
reinvestment
plan 22,248,256 222,483 222,260,077 - 222,482,560
Stock issuance
costs - - (22,422,045) - (22,422,045)
Net earnings - - - 15,564,456 15,564,456
Distributions
declared and
paid ($0.74
per share) - - - (16,854,297) (16,854,297)
---------- -------- ------------ ------------ ------------
Balance at
December 31, 1997 36,192,971 361,930 323,525,961 (2,249,790) 321,638,101
Subscriptions
received for
common stock
through public
offering and
distribution
reinvestment
plan 6,577,475 65,774 65,708,978 - 65,774,752
Stock issuance
costs - - (6,693,531) - (6,693,531)
Net earnings - - - 6,520,029 6,520,029
Distributions
declared and
paid ($0.19
per share) - - - (7,281,343) (7,281,343)
---------- -------- ------------ ------------ ------------
Balance at
March 31, 1998 42,770,446 $427,704 $382,541,408 $ (3,011,104) $379,958,008
========== ======== ============ ============ ============
</TABLE>
See accompanying notes to condensed
consolidated financial statements.
B-11
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Quarter Ended
March 31,
1998 1997
------------ --------
Increase (Decrease) in Cash and Cash
Equivalents:
Net Cash Provided by Operating
Activities $ 8,259,316 $ 2,717,456
------------ ------------
Cash Flows From Investing Activities:
Additions to land and buildings
on operating leases (14,814,884) (23,400,414)
Investment in direct financing
leases (959,100) (5,206,508)
Increase in restricted cash - (231,787)
Investment in mortgage notes
receivable - (4,443,982)
Collection on mortgage notes
receivable 72,547 49,471
Investment in equipment notes
receivable (703,600) -
Collection on equipment notes
receivable 327,329 -
Increase in other assets (1,937,674) (95,969)
------------ ------------
Net cash used in investing
activities (18,015,382) (33,329,189)
------------ ------------
Cash Flows From Financing Activities:
Reimbursement of acquisition and
stock issuance costs paid by
related parties on behalf of the
Company (651,133) (768,733)
Proceeds from borrowing on line
of credit 239,986 2,207,299
Payment on line of credit - (259,466)
Subscriptions received from
stockholders 65,774,752 37,768,445
Distribution to minority interest (8,481) (8,547)
Distributions to stockholders (7,281,343) (2,693,357)
Payment of stock issuance costs (6,142,369) (4,003,576)
Other (96,030) 52,500
------------ ------------
Net cash provided by
financing activities 51,835,382 32,294,565
------------ ------------
Net Increase in Cash and Cash Equivalents 42,079,316 1,682,832
Cash and Cash Equivalents at Beginning
of Quarter 47,586,777 42,450,088
------------ ------------
Cash and Cash Equivalents at End
of Quarter $ 89,666,093 $ 44,132,920
============ ============
See accompanying notes to condensed
consolidated financial statements.
B-12
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Quarter Ended
March 31,
1998 1997
------------ --------
Supplemental Schedule of Non-Cash
Investing and Financing Activities:
Related parties paid certain
acquisition and stock issuance
costs on behalf of the Company
as follows:
Acquisition costs $ 207,564 $ 220,259
Stock issuance costs 773,668 593,489
------------ ------------
$ 981,232 $ 813,748
============ ============
See accompanying notes to condensed
consolidated financial statements.
B-13
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS Quarters Ended March 31, 1998
and 1997
1. Organization and Nature of Business:
CNL American Properties Fund, Inc. (the "Company") was organized in
Maryland on May 2, 1994, primarily for the purpose of acquiring,
directly or indirectly through joint venture or co-tenancy
arrangements, restaurant properties (the "Properties") to be leased on
a long-term, triple-net basis to operators of certain national and
regional fast-food, family-style and casual dining restaurant chains.
The Company also provides financing (the "Mortgage Loans") for the
purchase of buildings, generally by tenants that lease the underlying
land from the Company. In addition, the Company offers furniture,
fixtures and equipment financing through leases or loans (the "Secured
Equipment Leases") to operators of restaurant chains.
2. Basis of Presentation:
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with the instructions to Form 10-Q and
do not include all of the information and note disclosures required by
generally accepted accounting principles. The financial statements
reflect all adjustments, consisting of normal recurring adjustments,
which are, in the opinion of management, necessary to a fair statement
of the results for the interim periods presented. Operating results for
the quarter ended March 31, 1998, may not be indicative of the results
that may be expected for the year ending December 31, 1998. Amounts as
of December 31, 1997, 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, 1997.
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 balances and transactions have been eliminated.
Certain items in the prior year's financial statements have been
reclassified to conform with the 1998 presentation. These
reclassifications had no effect on stockholders' equity or net
earnings.
B-14
<PAGE>
B-15
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED Quarters Ended
March 31, 1998 and 1997
2. Basis of Presentation - Continued:
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." This
Statement requires the reporting of net earnings and all other changes
to equity during the period, except those resulting from investments by
owners and distributions to owners, in a separate statement that begins
with net earnings. Currently, the Company's only component of
comprehensive income is net earnings.
3. Public Offerings:
The Company completed its offering of up to 27,500,000 shares of common
stock ($275,000,000) (the "1997 Offering"), which included 2,000,000
shares ($20,000,000) available only to stockholders who elected to
participate in the Company's reinvestment plan, on March 2, 1998.
Following the completion of the 1997 Offering, the Company commenced an
offering of up to 34,500,000 shares of common stock ($345,000,000) (the
"1998 Offering"). Of the 34,500,000 shares of common stock being
offered, 2,000,000 ($20,000,000) are available only to stockholders who
elect to participate in the Company's reinvestment plan. Net proceeds
from the 1998 Offering will be invested in additional Properties and
Mortgage Loans.
4. Leases:
The Company leases its land, buildings and equipment 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." For Property leases classified as direct financing leases, the
building portions of the majority of the leases are accounted for as
direct financing leases while the land portions of these leases are
accounted for as operating leases. The Company's Secured Equipment
Leases that are financed through leases are recorded as direct
financing leases.
B-16
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED Quarters Ended
March 31, 1998 and 1997
5. Land and Buildings on Operating Leases:
Land and buildings on operating leases consisted of the following at:
March 31, December 31,
1998 1997
Land $112,747,202 $106,616,360
Buildings 96,874,529 95,518,149
------------ ------------
209,621,731 202,134,509
Less accumulated
depreciation (3,168,431) (2,395,665)
------------ ------------
206,453,300 199,738,844
Construction in
progress 7,918,228 5,599,342
------------ ------------
$214,371,528 $205,338,186
============ ============
Some leases provide for scheduled rent increases throughout the lease
term and/or rental payments during the construction of a Property prior
to the date it is placed in service. Such amounts are recognized on a
straight-line basis over the terms of the leases commencing on the date
the Property is placed in service. For the quarters ended March 31,
1998 and 1997, the Company recognized $756,198 and $275,492,
respectively, of such rental income.
The following is a schedule of future minimum lease payments to be
received on the noncancellable operating leases at March 31, 1998:
1998 $ 14,679,890
1999 19,468,074
2000 19,497,885
2001 19,724,779
2002 20,522,634
Thereafter 271,873,412
------------
$365,766,674
Since leases are renewable at the option of the tenant, the above table
only presents future minimum lease payments due during the initial
lease terms. In addition, this table does not include any amounts for
future contingent rents which may be received on the leases based on
the percentage of the tenant's gross sales. These amounts do not
include minimum lease payments that will become due when Properties
under development are completed (See Note 10).
B-17
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED Quarters Ended
March 31, 1998 and 1997
6. Net Investment in Direct Financing Leases:
The following lists the components of the net investment in direct
financing leases at:
March 31, December 31,
1998 1997
Minimum lease payments
receivable $102,219,286 $ 98,121,853
Estimated residual
values 7,169,937 6,889,570
Interest receivable on
Secured Equipment
Leases 68,946 67,614
Less unearned income (59,175,725) (57,465,442)
------------ ------------
Net investment in
direct financing
leases $ 50,282,444 $ 47,613,595
============ ============
The following is a schedule of future minimum lease payments to be
received on the direct financing leases at March 31, 1998:
1998 $ 5,433,997
1999 7,245,320
2000 7,297,374
2001 7,069,306
2002 6,972,175
Thereafter 68,201,114
------------
$102,219,286
The above table does not include future minimum lease payments for
renewal periods or for contingent rental payments that may become due
in future periods (see Note 5).
7. Stock Issuance Costs:
The Company has incurred certain expenses in connection with the public
offerings of its shares of common stock, 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 offerings. CNL Fund Advisors,
Inc. (the "Advisor") has agreed to pay all organizational and offering
B-18
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED Quarters Ended
March 31, 1998 and 1997
7. Stock Issuance Costs - Continued:
expenses (excluding commissions and marketing support and due diligence
expense reimbursement fees) which exceed three percent of the gross
offering proceeds received from the current offering of shares of
common stock of the Company.
During the quarter ended March 31, 1998 and the year ended December 31,
1997, the Company incurred $6,693,531 and $22,422,045, respectively, in
stock issuance costs, including $5,261,980 and $17,798,605,
respectively, in commissions and marketing support and due diligence
expense reimbursement fees (see Note 9). The stock issuance costs have
been charged to stockholders' equity subject to the three percent cap
described above.
8. Distributions:
For the quarters ended March 31, 1998 and 1997, approximately 87 and 75
percent, respectively, of the distributions paid to stockholders were
considered ordinary income and approximately 13 and 25 percent,
respectively, were considered a return of capital to stockholders for
federal income tax purposes. No amounts distributed to the stockholders
for the quarters ended March 31, 1998 and 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. The
characterization for tax purposes of distributions declared for the
quarter ended March 31, 1998 may not be indicative of the results that
may be expected for the year ending December 31, 1998.
9. Related Party Transactions:
During the quarters ended March 31, 1998 and March 31, 1997, the
Company incurred $4,933,106 and $2,832,633, respectively, in selling
commissions due to CNL Securities Corp. for services in connection with
the offering of shares. Substantial portions of these amounts,
$4,616,072 and $2,576,708 were paid by CNL Securities Corp. as
commissions to other broker-dealers, during the quarters ended March
31, 1998 and 1997, respectively.
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 re-allowed to other broker-dealers. During the quarters ended March
31, 1998 and March
B-19
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED Quarters Ended
March 31, 1998 and 1997
9. Related Party Transactions - Continued:
31, 1997, the Company incurred $328,874 and $188,842, respectively, of
such fees, the majority of which was reallowed to other broker-dealers
and from which all bona fide due diligence expenses were paid.
The Advisor is entitled to receive acquisition fees for services in
identifying the Properties and structuring the terms of the acquisition
and leases of these 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 quarters ended March 31, 1998 and March 31, 1997,
the Company incurred $2,959,864 and $1,699,580, respectively, of such
fees. Such fees are included in land and buildings on operating leases,
net investment in direct financing leases, mortgage notes receivable
and other assets.
In connection with the acquisition of Properties that are being or have
been constructed or renovated by affiliates, subject to approval by the
Company's Board of Directors, the Company may incur development or
construction management fees payable to affiliates of the Company. Such
fees are included in the purchase price of the Properties and are
therefore included in the basis on which the Company charges rent on
the Properties. During the quarters ended March 31, 1998 and 1997, the
Company incurred $60,869 of such fees relating to three Properties and
$129,379 of such fees relating to two Properties, respectively.
For negotiating Secured Equipment Leases and supervising the Secured
Equipment Lease program, the Advisor is entitled to receive a one-time
Secured Equipment Lease servicing fee of two percent of the purchase
price of the equipment that is the subject of a Secured Equipment
Lease. During the quarters ended March 31, 1998 and 1997, the Company
incurred $4,471 and $41,281, respectively, in Secured Equipment Lease
servicing fees.
The Company and the Advisor have entered into an advisory agreement
pursuant to which the Advisor will receive a monthly asset management
fee of one-twelfth of 0.60% of the Company's real estate asset value
and the outstanding principal balance 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
B-20
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED Quarters Ended
March 31, 1998 and 1997
9. Related Party Transactions - Continued:
deferred without interest and may be taken in such other fiscal year as
the Advisor shall determine. During the quarters ended March 31, 1998
and 1997, the Company incurred $365,675 and $127,458, respectively, of
such fees, of which $3,015 and $16,942, respectively, was capitalized
as part of the cost of the buildings for Properties under construction.
The Advisor and its affiliates provide various administrative services
to the Company, including services related to accounting; financial,
tax and regulatory compliance and reporting; lease and loan compliance;
stockholder distributions and reporting; due diligence and marketing;
and investor relations (including administrative services in connection
with the offering of shares), on a day-to-day basis. The expenses
incurred for these services were classified as follows for the quarters
ended March 31:
1998 1997
--------- -------
Stock issuance costs $ 718,948 $ 288,747
General operating and
administrative expenses 262,894 108,003
--------- ---------
$ 981,842 $ 396,750
========= =========
For the quarter ended March 31, 1997, the Company acquired two
Properties for approximately $1,773,300 from affiliates of the Company.
The affiliates had purchased and temporarily held title to the
Properties in order to facilitate the acquisition of the Properties by
the Company. The Properties were acquired at a cost no greater than the
lesser of the cost of each Property to the affiliate, including its
carrying costs, or the Property's appraised value. No Properties were
acquired from affiliates during the quarter ended March 31, 1998.
B-21
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED Quarters Ended
March 31, 1998 and 1997
9. Related Party Transactions - Continued:
The due to related parties consisted of the following at:
March 31, December 31,
1998 1997
Due to the Advisor:
Expenditures incurred
on behalf of the
Company and accounting
and administrative
services $ 822,234 $ 126,205
Acquisition fees 589,452 386,972
---------- ----------
1,411,686 513,177
---------- ----------
Due to CNL Securities Corp:
Commissions 595,809 940,520
Marketing support and due
diligence expense reim-
bursement fees 40,245 63,097
---------- ----------
636,054 1,003,617
---------- ----------
Due to other affiliates - 7,500
---------- ----------
$2,047,740 $1,524,294
========== ==========
10. Commitments:
The Company has entered into various development agreements with
tenants which provide terms and specifications for the construction or
renovation of buildings the tenants have agreed to lease. The
agreements provide a maximum amount of development costs (including the
purchase price of the land and closing costs) to be paid by the
Company. The aggregate maximum development costs the Company has agreed
to pay is approximately $21,894,000, of which approximately $16,659,000
in land and other costs had been incurred as of March 31, 1998. The
buildings currently under construction or renovation are expected to be
operational by September 1998. In connection with the purchase of each
Property, the Company, as lessor, entered into a long-term lease
agreement.
The Company entered into an agreement with an affiliate of the tenant
to sell a property to be developed in Indian Head Park, Illinois. The
anticipated sales price is approximately equal to the Company's cost
attributable to the property.
B-22
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED Quarters Ended
March 31, 1998 and 1997
11. Subsequent Events:
During the period April 1, 1998 through May 1, 1998, the Company
received subscription proceeds for an additional 2,911,837 shares
($29,118,371) of common stock.
On April 1, 1998 and May 1, 1998, the Company declared distributions of
$2,728,560 and $2,902,652, respectively, or $0.06354 per share of
common stock, payable in June 1998 to stockholders of record on April
1, 1998 and May 1, 1998, respectively.
During the period April 1, 1998 through May 1, 1998, the Company
acquired six Properties (all of which are under construction) for cash
at a total cost of approximately $5,192,000. In connection with the
purchase of each of the six Properties, the Company, as lessor, entered
into a long-term lease agreement. The buildings under construction are
expected to be operational by October 1998.
In April 1998, a tenant exercised its option under the terms of its
lease agreements, to substitute two existing Properties with two
replacement Properties which were approved by the Company. In
conjunction therewith, the Company simultaneously exchanged the two
Boston Market Properties in Grand Island, Nebraska and Franklin,
Tennessee with two replacement Boston Market Properties in Warwick,
Rhode Island and Glendale, Arizona, respectively. Under the
simultaneous exchange agreement, each replacement Property in Warwick,
Rhode Island and Glendale, Arizona will continue under the terms of the
leases of the original properties. All closing costs were paid by the
tenant. The Company accounted for these as non-monetary exchanges of
similar productive assets and recorded the acquisitions of the
replacement Properties in Warwick, Rhode Island and Glendale, Arizona
at the net book value of the original Properties in Grand Island,
Nebraska and Franklin, Tennessee, respectively. No gain or loss was
recognized due to these being accounted for as non-monetary exchanges
of similar assets.
B-23
<PAGE>
EXHIBIT E
STATEMENT OF ESTIMATED TAXABLE OPERATING RESULTS
BEFORE DIVIDENDS PAID DEDUCTION
OF
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARY
THE STATEMENT OF ESTIMATED
TAXABLE OPERATING RESULTS BEFORE
DIVIDENDS PAID DEDUCTION UPDATES
EXHIBIT E TO THE PROSPECTUS, DATED
MAY 12, 1998.
<PAGE>
STATEMENT OF ESTIMATED TAXABLE OPERATING RESULTS
BEFORE DIVIDENDS PAID DEDUCTION
CNL AMERICAN PROPERTIES FUND, INC.
PROPERTIES ACQUIRED FROM MARCH 3, 1998
THROUGH JUNE 16, 1998
For the Year Ended December 31, 1997 (Unaudited)
The following schedule presents unaudited estimated taxable operating
results before dividends paid deduction of each Property acquired by the Company
from March 3, 1998 through June 16, 1998, and the total of all properties for
which the Company had an initial commitment as of June 16, 1998. The statement
presents unaudited estimated taxable operating results for each acquired
Property that was operational (or in the case of pending investments, the total
of all properties that were operational), as if the Property had been acquired
and operational on January 1, 1997 through December 31, 1997. 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.
COMPLETED INVESTMENTS:
<TABLE>
<CAPTION>
Ruby Tuesday Jack in the Box Jack in the Box Jack in the Box
Somerset, KY Pflugerville, TX (7) Waxahachie, TX (7) Hutchins, TX (7)
<S> <C>
Estimated Taxable Operating
Results Before Dividends
Paid Deduction:
Rental income (1) (6) (6) (6) (6)
Earned income (2) (6) (6) (6) (6)
Asset Management Fees (3) (6) (6) (6) (6)
General and Administrative
Expenses (4) (6) (6) (6) (6)
Estimated Cash Available from
Operations (6) (6) (6) (6)
Depreciation and Amortization
Expense (2)(5) (6) (6) (6) (6)
Estimated Taxable Operating
Results Before Dividends
Paid Deduction (6) (6) (6) (6)
</TABLE>
See Footnotes
E-1
<PAGE>
<TABLE>
<CAPTION>
Shoney's Arby's Arby's Jack in the Box
Phoenix #4, AZ Columbus #2, OH (8) Atlanta #2, GA (8) Gun Barrel City, TX (7)
-------------- ------------------- ------------------ -----------------------
<S> <C>
Estimated Taxable Operating
Results Before Dividends
Paid Deduction:
Rental income (1) (6) (6) (6) (6)
Earned income (2) (6) (6) (6) (6)
Asset Management Fees (3) (6) (6) (6) (6)
General and Administrative
Expenses (4) (6) (6) (6) (6)
Estimated Cash Available from
Operations (6) (6) (6) (6)
Depreciation and Amortization
Expense (2)(5) (6) (6) (6) (6)
Estimated Taxable Operating
Results Before Dividends
Paid Deduction (6) (6) (6) (6)
</TABLE>
See Footnotes
E-2
<PAGE>
<TABLE>
<CAPTION>
Jack in the Box Boston Market Boston Market Jack in the Box
Nacogdoches, TX (7) Glendale, AZ (9) Warwick, RI (9) St. Louis, MO (7)
<S> <C>
Estimated Taxable Operating
Results Before Dividends
Paid Deduction:
Rental income (1) (6) $102,164 $90,048 (6)
Earned income (2) (6) - - (6)
Asset Management Fees (3) (6) (5,741) (5,058) (6)
General and Administrative
Expenses (4) (6) (6,334) (5,583) (6)
-------- ------
Estimated Cash Available from
Operations (6) 90,089 79,407 (6)
Depreciation and Amortization
Expense (2)(5) (6) (12,667) (17,921) (6)
-------- -------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction (6) $ 77,422 $61,486 (6)
======== =======
</TABLE>
See Footnotes
E-3
<PAGE>
<TABLE>
<CAPTION>
Jack in the Box Boston Market Chevy's Fresh Mex Jack in the Box
Avondale, AZ (7) Columbus #3, OH (9) Naperville, IL Fresno #2, CA (7)
<S> <C>
Estimated Taxable Operating
Results Before Dividends
Paid Deduction:
Rental income (1) (6) $104,185 $209,000 (6)
Earned income (2) (6) - - (6)
Asset Management Fees (3) (6) (5,852) (13,200) (6)
General and Administrative
Expenses (4) (6) (6,459) (12,958) (6)
-------- --------
Estimated Cash Available from
Operations (6) 91,874 182,842 (6)
Depreciation and Amortization
Expense (2)(5) (6) (18,725) (34,884) (6)
-------- --------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction (6) $ 73,149 $147,958 (6)
======== ========
</TABLE>
See Footnotes
E-4
<PAGE>
<TABLE>
<CAPTION>
Sonny's Real Pit Sonny's Real Pit Sonny's Real Pit
Arby's Bar-B-Q Bar-B-Q Bar-B-Q
Arab, AL (8) Athens, GA (10) Conyers, GA (10) Doraville, GA (10)
------------ ---------------- ---------------- ------------------
<S> <C>
Estimated Taxable Operating
Results Before Dividends
Paid Deduction:
Rental income (1) $59,735 $147,247 $89,240 $129,398
Earned income (2) - - - -
Asset Management Fees (3) (3,896) (9,208) (5,600) (8,095)
General and Administrative
Expenses (4) (3,704) (9,129) (5,533) (8,023)
------- -------- ------- --------
Estimated Cash Available from
Operations 52,135 128,910 78,107 113,280
Depreciation and Amortization
Expense (2)(5) (11,647) (25,077) (5,829) (21,187)
------- -------- ------- --------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction $40,488 $103,833 $72,278 $ 92,093
======= ======== ======= ========
</TABLE>
See Footnotes
E-5
<PAGE>
<TABLE>
<CAPTION>
Sonny's Real Pit Sonny's Real Pit Sonny's Real Pit Sonny's Real Pit
Bar-B-Q Bar-B-Q Bar-B-Q Bar-B-Q
onesboro, GA (10) Marietta #2, GA (10) Norcross, GA (10) Smyrna, GA (10)
----------------- -------------------- ----------------- ----------------
<S> <C>
Estimated Taxable Operating
Results Before Dividends
Paid Deduction:
Rental income (1) $107,088 $129,398 $156,884 $118,243
Earned income (2) - - - -
Asset Management Fees (3) (6,709) (8,189) (9,801) (7,401)
General and Administrative
Expenses (4) (6,639) (8,023) (9,727) (7,331)
-------- -------- -------- --------
Estimated Cash Available from
Operations 93,740 113,186 137,356 103,511
Depreciation and Amortization
Expense (2)(5) (17,727) (22,961) (25,020) (16,780)
-------- -------- -------- --------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction $ 76,013 $ 90,225 $112,336 $ 86,731
======== ======== ======== ========
</TABLE>
See Footnotes
E-6
<PAGE>
<TABLE>
<CAPTION>
IHOP Golden Corral Wendy's Bennigan's
Hollywood, CA Brunswick, GA Knoxville #3, TN Orlando #4, FL (11)(12)
<S> <C>
Estimated Taxable Operating
Results Before Dividends
Paid Deduction:
Rental income (1) $227,813 (6) (6) (6)
Earned income (2) - (6) (6) (6)
Asset Management Fees (3) (13,579) (6) (6) (6)
General and Administrative
Expenses (4) (14,124) (6) (6) (6)
--------
Estimated Cash Available from
Operations 200,110 (6) (6) (6)
Depreciation and Amortization
Expense (2)(5) (25,327) (6) (6) (6)
--------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction $174,783 (6) (6) (6)
========
</TABLE>
See Footnotes
E-7
<PAGE>
<TABLE>
<CAPTION>
Burger King Bennigan's Bennigan's Bennigan's
Atlanta #3, GA Bedford #3, OH (11) Clearwater, FL (11) Colorado Springs #2, CO (11)
-------------- ------------------- ------------------- ----------------------------
<S> <C>
Estimated Taxable Operating
Results Before Dividends
Paid Deduction:
Rental income (1) (6) $ - $ - $ -
Earned income (2) (6) 166,860 188,314 164,477
Asset Management Fees (3) (6) (9,767) (11,023) (9,628)
General and Administrative
Expenses (4) (6) (10,345) (11,675) (10,198)
-------- -------- --------
Estimated Cash Available from
Operations (6) 146,748 165,616 144,651
Depreciation and Amortization
Expense (2)(5) (6) - - -
-------- -------- -------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction (6) $146,748 $165,616 $144,651
======== ======== ========
</TABLE>
See Footnotes
E-8
<PAGE>
<TABLE>
<CAPTION>
Bennigan's Bennigan's Bennigan's Bennigan's
Englewood #1, CO (11) Englewood #2, NJ (11) Florham Park, NJ (11) Houston #8, TX (11)
--------------------- --------------------- --------------------- -------------------
<S> <C>
Estimated Taxable Operating
Results Before Dividends
Paid Deduction:
Rental income (1) $ - $ - $ - $ -
Earned income (2) 174,012 228,837 210,244 183,547
Asset Management Fees (3) (10,186) (13,395) (12,307) (10,744)
General and Administrative
Expenses (4) (10,789) (14,188) (13,035) (11,380)
-------- -------- -------- --------
Estimated Cash Available from
Operations 153,037 201,254 184,902 161,423
Depreciation and Amortization
Expense (2)(5) - - - -
-------- -------- -------- -------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction $153,037 $201,254 $184,902 $161,423
======== ======== ======== ========
</TABLE>
See Footnotes
E-9
<PAGE>
<TABLE>
<CAPTION>
Bennigan's Bennigan's Bennigan's Bennigan's
Jacksonville #4, FL (11) Jacksonville #5, NJ (11) Mount Laurel, NJ (11) N. Richland Hills, TX (11)
------------------------ ------------------------ --------------------- --------------------------
<S> <C>
Estimated Taxable Operating
Results Before Dividends
Paid Deduction:
Rental income (1) $ - $ - $ - $ -
Earned income (2) 154,942 183,547 226,453 181,163
Asset Management Fees (3) (9,070) (10,744) (13,256) (10,605)
General and Administrative
Expenses (4) (9,606) (11,380) (14,040) (11,232)
-------- -------- -------- --------
Estimated Cash Available from
Operations 136,266 161,423 199,157 159,326
Depreciation and Amortization
Expense (2)(5) - - - -
-------- -------- -------- -------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction $136,266 $161,423 $199,157 $159,326
======== ======== ======== ========
</TABLE>
See Footnotes
E-10
<PAGE>
<TABLE>
<CAPTION>
Bennigan's Bennigan's Bennigan's Bennigan's
Oklahoma City #2, OK (11) Orlando #2, FL (11) Pensacola #2, FL (11) St. Louis Park, MN (11)
------------------------- ------------------- --------------------- -----------------------
<S> <C>
Estimated Taxable Operating
Results Before Dividends
Paid Deduction:
Rental income (1) $ - $ - $ - $ -
Earned income (2) 171,628 238,372 162,093 209,767
Asset Management Fees (3) (10,047) (13,953) (9,488) (12,279)
General and Administrative
Expenses (4) (10,641) (14,779) (10,050) (13,006)
-------- -------- -------- --------
Estimated Cash Available from
Operations 150,940 209,640 142,555 184,482
Depreciation and Amortization
Expense (2)(5) - - - -
-------- -------- -------- -------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction $150,940 $209,640 $142,555 $184,482
======== ======== ======== ========
</TABLE>
See Footnotes
E-11
<PAGE>
<TABLE>
<CAPTION>
Bennigan's Bennigan's Steak & Ale Steak & Ale
Tampa #4, FL (11) Winston-Salem #2, NC (11) Altamonte Springs, FL (11) Austin, TX (11)
----------------- ------------------------- -------------------------- ---------------
<S> <C>
Estimated Taxable Operating
Results Before Dividends
Paid Deduction:
Rental income (1) $ - $ - $ - $ -
Earned income (2) 198,326 120,140 164,477 140,640
Asset Management Fees (3) (11,609) (7,033) (9,628) (8,233)
General and Administrative
Expenses (4) (12,296) (7,449) (10,198) (8,720)
-------- -------- -------- --------
Estimated Cash Available from
Operations 174,421 105,658 144,651 123,687
Depreciation and Amortization
Expense (2)(5) - - - -
-------- -------- -------- -------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction $174,421 $105,658 $144,651 $123,687
======== ======== ======== ========
</TABLE>
See Footnotes
E-12
<PAGE>
<TABLE>
<CAPTION>
Steak & Ale Steak & Ale Steak & Ale Steak & Ale
Birmingham, AL (11) College Park, GA (11) Conroe, TX (11) Greenville #2, SC (11)
------------------- --------------------- --------------- ----------------------
<S> <C>
Estimated Taxable Operating
Results Before Dividends
Paid Deduction:
Rental income (1) $ - $ - $ - $ -
Earned income (2) 135,395 165,907 157,326 179,256
Asset Management Fees (3) (7,926) (9,712) (9,209) (10,493)
General and Administrative
Expenses (4) (8,395) (10,286) (9,754) (11,114)
-------- -------- -------- --------
Estimated Cash Available from
Operations 119,074 145,909 138,363 157,649
Depreciation and Amortization
Expense (2)(5) - - - -
-------- -------- -------- -------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction $119,074 $145,909 $138,363 $157,649
======== ======== ======== ========
</TABLE>
See Footnotes
E-13
<PAGE>
<TABLE>
<CAPTION>
Steak & Ale Steak & Ale Steak & Ale Steak & Ale
Houston #9, TX (11) Houston #10, TX (11) Huntsville #2, AL (11) Jacksonville #6, FL (11)
------------------- -------------------- ---------------------- ------------------------
<S> <C>
Estimated Taxable Operating
Results Before Dividends
Paid Deduction:
Rental income (1) $ - $ - $ - $ -
Earned income (2) 181,163 188,314 140,640 150,174
Asset Management Fees (3) (10,605) (11,023) (8,233) (8,791)
General and Administrative
Expenses (4) (11,232) (11,675) (8,720) (9,311)
-------- -------- -------- -------
Estimated Cash Available from
Operations 159,326 165,616 123,687 132,072
Depreciation and Amortization
Expense (2)(5) - - - -
-------- -------- -------- -------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction $159,326 $165,616 $123,687 $132,072
======== ======== ======== ========
</TABLE>
See Footnotes
E-14
<PAGE>
<TABLE>
<CAPTION>
Steak & Ale Steak & Ale Steak & Ale Steak & Ale
Maitland, FL (11) Mesquite, TX (11) Miami, FL (11) Middletown, NJ, TX (11)
----------------- ----------------- -------------- -----------------------
<S> <C>
Estimated Taxable Operating
Results Before Dividends
Paid Deduction:
Rental income (1) $ - $ - $ - $ -
Earned income (2) 143,023 145,407 171,628 164,477
Asset Management Fees (3) (8,372) (8,512) (10,047) (9,628)
General and Administrative
Expenses (4) (8,867) (9,015) (10,641) (10,198)
-------- -------- -------- --------
Estimated Cash Available from
Operations 125,784 127,880 150,940 144,651
Depreciation and Amortization
Expense (2)(5) - - - -
-------- -------- -------- -------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction $125,784 $127,880 $150,940 $144,651
======== ======== ======== ========
</TABLE>
See Footnotes
E-15
<PAGE>
<TABLE>
<CAPTION>
Steak & Ale Steak & Ale Steak & Ale Steak & Ale
Orlando #3, FL (11) Palm Harbor, FL (11) Pensacola #3, FL (11) Tulsa, OK (11)
<S> <C>
Estimated Taxable Operating
Results Before Dividends
Paid Deduction:
Rental income (1) $ - $ - $ - $ -
Earned income (2) 159,709 126,337 114,419 145,407
Asset Management Fees (3) (9,349) (7,395) (6,698) (8,512)
General and Administrative
Expenses (4) (9,902) (7,833) (7,094) (9,015)
-------- -------- -------- --------
Estimated Cash Available from
Operations 140,458 111,109 100,627 127,880
Depreciation and Amortization
Expense (2)(5) - - - -
-------- -------- -------- -------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction $140,458 $111,109 $100,627 $127,880
======== ======== ======== ========
</TABLE>
See Footnotes
E-16
<PAGE>
<TABLE>
<CAPTION>
Completed Investments Pending Investments
Total Total (13) Grand Total
<S> <C>
Estimated Taxable Operating
Results Before Dividends
Paid Deduction:
Rental income (1) $1,670,443 $613,720 $2,284,163
Earned income (2) 5,936,421 - 5,936,421
Asset Management Fees (3) (449,829) (33,300) (483,129)
General and Administrative
Expenses (4) (471,626) (38,051) (509,677)
---------- -------- ----------
Estimated Cash Available from
Operations 6,685,409 542,369 7,227,778
Depreciation and Amortization
Expense (2)(5)(14) (255,752) (95,253) (351,005)
---------- -------- ----------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction $6,429,657 $447,116 $6,876,773
========== ======== ==========
</TABLE>
FOOTNOTES:
(1) Base rent does not include percentage rents which become due if
specified levels of gross receipts are achieved.
(2) The Company will account for 17 of the 18 Bennigan's Properties and the
18 Steak & Ale Properties as capital leases for federal tax purposes;
therefore, the Company will not be entitled to depreciation expense on
such properties. For leases accounted for as capital 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.
(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) Estimated at 6.2% of gross rental income or in the case of pending
investments, estimated gross rental income, based on the previous
experience of the Company and of Affiliates of the Advisor with 18
public limited partnerships which own properties similar to those owned
by the Company. Amount does not include soliciting dealer servicing fee
due to the fact that such fee will not be incurred until December 31 of
the year following the year in which the offering terminates.
E-17
<PAGE>
(5) The estimated federal tax basis of the depreciable portion (the
building portion) of each Property acquired has been depreciated on the
straight-line method over 39 years.
(6) The Property is under construction for the period presented. The
development agreements or lease addendums for the Properties which are
to be constructed, provide that construction must be completed no later
than the dates set forth below:
Property Estimated Final Completion Date
Somerset Property July 1, 1998
Pflugerville Property August 31, 1998
Waxahachie Property September 9, 1998
Hutchins Property September 12, 1998
Phoenix #4 Property September 20, 1998
Columbus #2 Property October 3, 1998
Atlanta #2 Property October 4, 1998
Gun Barrel City Property October 10, 1998
Nacogdoches Property October 10, 1998
St. Louis Property October 11, 1998
Avondale Property October 27, 1998
Fresno #2 Property November 18, 1998
Brunswick Property December 2, 1998
Knoxville #3 Property October 3, 1998
Orlando #4 Property December 5, 1998
Atlanta #3 Property December 6, 1998
The Company anticipates the pending investments that are construction
properties will be operational within 180 days after acquisition.
(7) The lessee of the Pflugerville, Waxahachie, Hutchins, Gun Barrel City,
Nacogdoches, St. Louis, Avondale and Fresno #2 Properties is the same
unaffiliated lessee.
(8) The lessee of the Columbus #2, Atlanta #2 and Arab Properties is the
same unaffiliated lessee.
(9) The lessee of the Glendale, Warwick and Columbus #3 Properties is the
same unaffiliated lessee.
(10) The lessee of the Athens, Conyers, Doraville, Jonesboro, Marietta #2,
Norcross and Smyrna Properties is the same unaffiliated lessee.
(11) The lessee of the 18 Bennigan's Properties and the 18 Steak & Ale
Properties is the same unaffiliated lessee.
(12) The Company acquired an interest in CNL/Lee Vista 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 an approximate 68% interest in the CNL/Lee
Vista Joint Venture upon completion of construction.
E-18
<PAGE>
(13) Information relating to the five pending investments that are existing
is based on estimated purchase prices for each of the five properties.
The remaining five properties that will be under construction once they
are acquired are not included.
(14) For pending investments which consist of land and building, for
purposes of calculating depreciation, the allocation of the estimated
cost of the property between land and building is based upon the
average allocation of the actual cost of properties (consisting of both
land and building) acquired by the Company as of December 31, 1997.
E-19
