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 all prior Supplements.
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 August 14,
1998, the Company had received subscription proceeds of $156,812,335 (15,681,234
Shares), including 182,352 Shares ($1,823,519) 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 $140,800,000. As of August 14, 1998,
the Company had invested or committed for investment approximately $406,200,000
of aggregate net proceeds from its offerings in 322 Properties, in providing
mortgage financing through Mortgage Loans, and in paying acquisition fees and
certain acquisition expenses, leaving approximately $95,700,000 in aggregate net
offering proceeds available for investment in Properties and Mortgage Loans.
BUSINESS
COMPLETED INVESTMENTS
As of August 14, 1998, the Company had invested or committed for
investment approximately $406,200,000 of aggregate net proceeds from its
offerings in 322 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.
August 26, 1998 Prospectus Dated May 12, 1998
<PAGE>
The following tables set forth information for the Properties owned by
the Company as of August 14, 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 19
Boston Market 30
Burger King 9
Charley's Place 2
Chevy's Fresh Mex 5
Darryl's 15
Denny's 4
Einstein Bros. Bagels 2
Golden Corral 33
Ground Round 13
Houlihan's 3
IHOP 11
Jack in the Box 40
KFC 1
Mr. Fable's 1
On The Border 1
Pizza Hut 44
Ponderosa Steak House 2
Popeyes 1
Roadhouse Grill 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 and Ale 18
Taco Bell 1
TGI Friday's 2
Tumbleweed Southwest Mesquite Grill & Bar 7
Wendy's 8
----
Total 322
====
-2-
<PAGE>
State Number of Properties
----- --------------------
Alabama 8
Arizona 12
California 24
Colorado 7
Connecticut 1
Delaware 1
Florida 29
Georgia 14
Idaho 1
Illinois 5
Indiana 5
Iowa 4
Kansas 3
Kentucky 5
Maryland 7
Michigan 8
Minnesota 4
Missouri 9
Nevada 2
New Jersey 6
New Mexico 4
New York 2
North Carolina 10
Ohio 39
Oklahoma 8
Oregon 3
Pennsylvania 7
Rhode Island 1
South Carolina 1
Tennessee 18
Texas 50
Utah 1
Virginia 9
Washington 2
West Virginia 10
Wisconsin 2
----
Total 322
====
PROPERTY ACQUISITIONS
Between March 3, 1998 and August 14, 1998, the Company acquired 78
Properties, including 76 Properties consisting of land and building and two
Properties consisting of building only. In connection with the purchase of these
78 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."
-3-
<PAGE>
The IHOP Property in Hollywood, California, and the Ponderosa Steak
House Property in Blue Springs, Missouri, were acquired from an Affiliate of the
Company. The Affiliate had purchased and temporarily held title to these
Properties in order to facilitate their acquisition by the Company. The
Properties were acquired by the Company for an aggregate purchase price of
approximately $3,977,000, representing the cost of the Properties to the
Affiliates (including carrying costs) due to the fact that the amounts were less
than each Property's appraised value.
In connection with the Wendy's Properties in Knoxville and Seymour,
Tennessee, which are building only, the Company has entered into tri-party
agreements with the lessee and the owner of the land. The tri- party agreements
provide that the ground lessee is responsible for all obligations under the
ground leases and provides certain rights to the Company relating to the
maintenance of its interest in the buildings in the event of a default by the
lessee under the terms of the ground leases.
The purchase prices for the Shoney's Property in Phoenix, Arizona, and
the IHOP Property in Greeley, Colorado, include Construction Fees of $37,500 and
$27,500, respectively, paid to an Affiliate of the Advisor for services provided
in connection with the construction of the Properties. In addition, the purchase
price for the IHOP Property in Greeley, Colorado, includes Development Fees of
$20,500 paid to an Affiliate of the Advisor for services provided in connection
with the development of the Property. The Company considers Construction Fees
and Development Fees, to the extent that they are paid to Affiliates, to be
Acquisition Fees. Such Construction Fees and Development Fees must be approved
by a majority of the Directors (including a majority of the Independent
Directors) not otherwise interested in such transactions, subject to a
determination that such transactions are fair and reasonable to the Company and
on terms and conditions not less favorable to the Company than those available
from unaffiliated third parties and not less favorable than those available from
the Advisor or its Affiliates in transactions with unaffiliated third parties.
See the sections of the Prospectus entitled "Management Compensation" and
"Business - Site Selection and Acquisition of Properties."
The following table sets forth the location of the 78 Properties,
including 76 Properties consisting of land and building and two Properties
consisting of building only, acquired by the Company from March 3, 1998 through
August 14, 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 August 14, 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
(the "Somerset (excluding five-year (4); increases by year, (i) 5% of time after
Property") development renewal options 10% after the fifth annual gross the 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.
-6-
<PAGE>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- --------------------- ------------ -------- --------------- --------------- ----------- -----------
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.
-8-
<PAGE>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- --------------------- ------------ -------- --------------- --------------- ----------- -----------
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.
-9-
<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.
-10-
<PAGE>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- --------------------- ------------ -------- --------------- --------------- ----------- -----------
Arby's (7) $643,757 04/07/98 04/2018; two (8) None at any time
(the "Atlanta #2 (excluding 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.
-11-
<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.
-12-
<PAGE>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- --------------------- ------------ -------- --------------- --------------- ---------- -----------
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.
-13-
<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 Popeyes,
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.
-14-
<PAGE>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- --------------------- ------------ -------- --------------- --------------- ----------- -----------
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.
-16-
<PAGE>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- --------------------- ------------ -------- --------------- --------------- ----------- -----------
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.
-17-
<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.
-18-
<PAGE>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- --------------------- ----------- -------- --------------- --------------- ----------- -----------
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.
-19-
<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.
-20-
<PAGE>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- --------------------- ----------- -------- --------------- --------------- ---------- -----------
Arby's (7) $650,000 05/29/98 05/2018; two $59,735; increases None at any time
(the "Arab Property ") five-year renewal by 4.14% after the after the
Existing restaurant 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.
-21-
<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 renewal by 10% after the year, (i) 6% of after the
(the "Athens 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.
-22-
<PAGE>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- --------------------- ----------- -------- --------------- --------------- ---------- -----------
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.
-23-
<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.
-24-
<PAGE>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ---------------------- ----------- -------- --------------- --------------- ---------- -----------
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 Property term such lease year
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.
-26-
<PAGE>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- --------------------- ----------- -------- --------------- --------------- ---------- -----------
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.
-28-
<PAGE>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- --------------------- ----------- -------- --------------- --------------- ---------- -----------
IHOP (13) $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 (14) $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.
-30-
<PAGE>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- --------------------- ----------- -------- --------------- --------------- ----------- -----------
Wendy's (15) $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 (16) (17) $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.
-32-
<PAGE>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ---------------------- ----------- -------- --------------- --------------- ----------- -----------
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 (17) (18) $1,627,907 06/16/98 06/2018; two $166,860; increases None (19)
(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 and Ale, a Chili's,
an On the Border, a Black-
eyed Pea, a Don Pablo's,
and several local restaurants.
-34-
<PAGE>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- --------------------- ------------ -------- --------------- --------------- ----------- -----------
Bennigan's (17) (18) $1,837,209 06/16/98 06/2018; two $188,314; increases None (19)
(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 (17) (18) $1,604,651 06/16/98 06/2018; two $164,477; increases None (19)
(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.
-36-
<PAGE>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- --------------------- ------------ -------- --------------- --------------- ----------- -----------
Bennigan's (17) (18) $1,697,674 06/16/98 06/2018; two $174,012; increases None (19)
(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 (17) (18) $2,232,558 06/16/98 06/2018; two $228,837; increases None (19)
(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.
-38-
<PAGE>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- --------------------- ------------ -------- --------------- --------------- ----------- -----------
Bennigan's (17) (18) $2,051,163 06/16/98 06/2018; two $210,244; increases None (19)
(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 (17) (18) $1,790,698 06/16/98 06/2018; two $183,547; increases None (19)
(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.
-39-
<PAGE>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- --------------------- ------------ -------- --------------- --------------- ---------- -----------
Bennigan's (17) (18) $1,511,628 06/16/98 06/2018; two $154,942; increases None (19)
(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 and 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 (17) (18) $1,790,698 06/16/98 06/2018; two $183,547; increases None (19)
(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 and Ale, an
Olive Garden, a Red
Lobster, a Longhorn
Steakhouse, a
Shoney's, and a local
restaurant.
-41-
<PAGE>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ---------------------- ------------ -------- --------------- --------------- ----------- -----------
Bennigan's (17) (18) $2,209,302 06/16/98 06/2018; two $226,453; increases None (19)
(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 (17) (18) $1,767,442 06/16/98 06/2018; two $181,163; increases None (19)
(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 and
Ale, and a local
restaurant.
-43-
<PAGE>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------------------- ------------ -------- --------------- --------------- ----------- -----------
Bennigan's (17) (18) $1,674,419 06/16/98 06/2018; two $171,628; increases None (19)
(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 and Ale,
a Denny's, and several
local restaurants.
-44-
<PAGE>
Bennigan's (17) (18) $2,325,581 06/16/98 06/2018; two $238,372; increases None (19)
(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 and 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.
-45-
<PAGE>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------------------- ------------ -------- --------------- --------------- ----------- -----------
Bennigan's (17) (18) $1,581,395 06/16/98 06/2018; two $162,093; increases None (19)
(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 and Ale, and
several local
restaurants.
-46-
<PAGE>
Bennigan's (17) (18) $2,046,512 06/16/98 06/2018; two $209,767; increases None (19)
(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.
-47-
<PAGE>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------------------- ------------ -------- --------------- --------------- ----------- -----------
Bennigan's (17) (18) $1,934,884 06/16/98 06/2018; two $198,326; increases None (19)
(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 (17) (18) $1,172,093 06/16/98 06/2018; two $120,140; increases None (19)
(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.
-49-
<PAGE>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------------------- ------------ -------- --------------- --------------- ------------ -----------
Steak and Ale (17) $1,604,651 06/16/98 06/2018; two $164,477; increases None (19)
(18) ten-year renewal by 10% after the
(the "Altamonte options fifth lease year and
Springs Property ") after every five
Existing restaurant years thereafter
during the lease
The Altamonte Springs term
Property is located on
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 and Ale (17) $1,372,093 06/16/98 06/2018; two $140,640; increases None (19)
(18) ten-year renewal by 10% after the
(the "Austin options fifth lease year and
Property ") after every five
Existing restaurant years thereafter
during the lease
The Austin Property is term
located on the 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.
-51-
<PAGE>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------------------- ------------ -------- --------------- --------------- ----------- -----------
Steak and Ale (17) $1,320,930 06/16/98 06/2018; two $135,395; increases None (19)
(18) ten-year renewal by 10% after the
(the "Birmingham options fifth lease year and
Property ") after every five
Existing restaurant years thereafter
during the lease
The Birmingham Property term
is located on 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 and Ale (17) $1,618,605 06/16/98 06/2018; two $165,907; increases None (19)
(18) ten-year renewal by 10% after the
(the "College Park options fifth lease year and
Property ") after every five
Existing restaurant years thereafter
during the lease
The College Park term
Property is located on
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.
-53-
<PAGE>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------------------- ------------ -------- --------------- --------------- ----------- -----------
Steak and Ale (17) $1,534,884 06/16/98 06/2018; two $157,326; increases None (19)
(18) ten-year renewal by 10% after the
(the "Conroe options fifth lease year and
Property ") after every five
Existing restaurant years thereafter
during the lease
The Conroe Property is term
located on the east side
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 and Ale (17) $1,748,837 06/16/98 06/2018; two $179,256; increases None (19)
(18) ten-year renewal by 10% after the
(the "Greenville #2 options fifth lease year and
Property ") after every five
Existing restaurant years thereafter
during the lease
The Greenville #2 term
Property is located
on 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.
-55-
<PAGE>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------------------- ------------ -------- --------------- --------------- ---------- -----------
Steak and Ale (17) $1,767,442 06/16/98 06/2018; two $181,163; increases None (19)
(18) ten-year renewal by 10% after the
(the "Houston #9 options fifth lease year and
Property ") after every five
Existing restaurant years thereafter
during the lease
The Houston #9 term
Property is located on
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 and Ale (17) $1,837,209 06/16/98 06/2018; two $188,314; increases None (19)
(18) ten-year renewal by 10% after the
(the "Houston #10 options fifth lease year and
Property ") after every five
Existing restaurant years thereafter
during the lease
The Houston #10 term
Property is located on
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.
-57-
<PAGE>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------------------- ------------ -------- --------------- --------------- ----------- -----------
Steak and Ale (17) $1,372,093 06/16/98 06/2018; two $140,640; increases None (19)
(18) ten-year renewal by 10% after the
(the "Huntsville #2 options fifth lease year and
Property ") after every five
Existing restaurant years thereafter
during the lease
The Huntsville #2 term
Property is located on
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 and Ale (17) $1,465,116 06/16/98 06/2018; two $150,174; increases None (19)
(18) ten-year renewal by 10% after the
(the "Jacksonville #6 options fifth lease year and
Property ") after every five
Existing restaurant years thereafter
during the lease
The Jacksonville #6 term
Property is located on
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 an
Olive Garden, a Red
Lobster, a Bennigan's,
a Longhorn
Steakhouse, a
Shoney's, and a local
restaurant.
-59-
<PAGE>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ------------------------ ------------ -------- --------------- --------------- ----------- -----------
Steak and Ale (17) $1,395,349 06/16/98 06/2018; two ten- $143,023; increases None (19)
(18) year renewal by 10% after the
(the "Maitland options fifth lease year and
Property ") after every five
Existing restaurant years thereafter
during the lease
The Maitland Property term
is located on the
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 and Ale (17) $1,418,605 06/16/98 06/2018; two ten- $145,407; increases None (19)
(18) year renewal by 10% after the
(the "Mesquite options fifth lease year and
Property ") after every five
Existing restaurant years thereafter
during the lease
The Mesquite Property term
is located on the east
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.
-61-
<PAGE>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------------------- ------------ -------- --------------- --------------- ----------- -----------
Steak and Ale (17) $1,674,419 06/16/98 06/2018; two $171,628; increases None (19)
(18) ten-year renewal by 10% after the
(the "Miami options fifth lease year and
Property ") after every five
Existing restaurant years thereafter
during the lease
The Miami Property is term
located on the 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.
-62-
<PAGE>
Steak and Ale (17) $1,604,651 06/16/98 06/2018; two $164,477; increases None (19)
(18) ten-year renewal by 10% after the
(the "Middletown options fifth lease year and
Property ") after every five
Existing restaurant years thereafter
during the lease
The Middletown term
Property is located on
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.
-63-
<PAGE>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ---------------------- ------------ -------- --------------- --------------- ------------ -----------
Steak and Ale (17) $1,558,140 06/16/98 06/2018; two $159,709; increases None (19)
(18) ten-year renewal by 10% after the
(the "Orlando #3 options fifth lease year and
Property ") after every five
Existing restaurant years thereafter
during the lease
The Orlando #3 term
Property is located on
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.
-64-
<PAGE>
Steak and Ale (17) $1,232,558 06/16/98 06/2018; two $126,337; increases None (19)
(18) ten-year renewal by 10% after the
(the "Palm Harbor options fifth lease year and
Property ") after every five
Existing restaurant years thereafter
during the lease
The Palm Harbor term
Property is located on
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.
-65-
<PAGE>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------------------- ------------ -------- --------------- --------------- ----------- -----------
Steak and Ale (17) $1,116,279 06/16/98 06/2018; two ten- $114,419; increases None (19)
(18) year renewal by 10% after the
(the "Pensacola #3 options fifth lease year and
Property ") after every five
Existing restaurant years thereafter
during the lease
The Pensacola #3 term
Property is located on
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.
-66-
<PAGE>
Steak and Ale (17) $1,418,605 06/16/98 06/2018; two ten- $145,407; increases None (19)
(18) year renewal by 10% after the
(the "Tulsa Property ") options fifth lease year and
Existing restaurant after every five
years thereafter
The Tulsa Property is during the lease
located on the term
southeast corner of
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.
-67-
<PAGE>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------------------- ------------ -------- --------------- --------------- ----------- -----------
Ponderosa Steak $1,632,542 06/17/98 06/2013; three $169,376 (6); for each lease at any time
House (20) (3) (6) five-year increases by 10% year, (i) 6% of after the
(the "Johnstown renewal options after the fifth lease annual gross fifth lease
Property ") year and after every sales minus (ii) year
Restaurant to be five years thereafter the minimum
constructed during the lease annual rent for
term such lease year
The Johnstown Property
is located on the north
side of Oakridge Drive
and the south side of
Mall Ring Road, in
Johnstown, Cambria County,
Pennsylvania, in an area
of mixed retail,
commercial, and residential
development. Other fast-
food, family-style, and
casual dining restaurants
located in proximity to the
Johnstown Property include a
McDonald's, a Red Lobster,
a Taco Bell, a Ryan's Family
Steak House, a Perkins, an
Applebee's, an Italian Oven,
a Ground Round, a Long John
Silver's, and a local restaurant.
-68-
<PAGE>
Wendy's (15) (21) $17,525 07/10/98 07/2018; four 10.25% of Total for each lease at the end of
(the "Knoxville #4 (excluding five-year Cost (4) year, (i) 7% of the initial
Property") development renewal options annual gross lease term
Restaurant to be costs) (3) sales times the
constructed Building
Overage
The Knoxville #4 Multiplier (22)
Property is located in minus (ii) the
the Crown Point Plaza minimum
Shopping Center annual rent for
located on the north such lease year
side of Clinton
Highway, east of
Callahan Road, 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 #4 Property
include a KFC, a
Burger King, and a
McDonald's.
-69-
<PAGE>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------------------- ------------ -------- --------------- --------------- ----------- -----------
Black-eyed Pea $1,279,118 07/14/98 07/2013; five $134,307; increases for each lease at any time
(the "Herndon five-year by 10% after the year, 6% of after the
Property ") renewal options ninth lease year and the amount by seventh
Existing restaurant after every five which annual lease year
years thereafter gross sales
The Herndon Property during the lease exceed
is located on the south term $2,200,000
side of Elden Street,
east of the Herndon Central
Business District, in Herndon,
Fairfax County, Virginia, in
an area of mixed retail,
commercial, and residential
development. Other fast-food,
family-style, and casual
dining restaurants located in
proximity to the Herndon
Property include a Burger
King, a Friendly's, a
Fuddruckers, a Pizza Hut,
and several local restaurants.
-70-
<PAGE>
Ponderosa Steak $1,727,272 07/14/98 10/2012; three $179,204; increases for each lease at any time
House (20) five-year by 10% after the year, (i) 6% of after the
(the "Blue Springs renewal options fifth lease year and annual gross fifth lease
Property ") after every five sales minus (ii) year
Existing restaurant years thereafter the minimum
during the lease annual rent for
The Blue Springs term such lease year
Property is located on
the northwest quadrant
of U.S. Highway 40
and State Highway 7,
in Blue Springs,
Jackson 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 Blue
Springs Property include a
Taco Bell, a McDonald's, a
Fazoli's, a Popeyes, a
Little Caesar's, an Arby's,
and a local restaurant.
-71-
<PAGE>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------------------- ------------ -------- --------------- --------------- ----------- -----------
Golden Corral (14) $1,167,283 07/15/98 07/2013; four $125,483 for each lease during the
(the "Clovis five-year year, 5% of first through
Property ") renewal options the amount by seventh
Existing restaurant which annual lease years
gross sales and the
The Clovis Property is exceed tenth
located on the $2,151,383 through
northeast corner of (11) fifteenth
North Prince Street and lease years
Llano Estacado only
Boulevard, in Clovis,
Curry County, New Mexico,
in an area of mixed retail,
commercial, and residential
development. Other fast-
food, family-style, and
casual dining restaurants
located in proximity to the
Clovis Property include a
local restaurant.
-72-
<PAGE>
IHOP (13) $1,243,259 07/20/98 07/2018; three $116,618 None during the
(the "Poughkeepsie five-year eleventh
Property") renewal options lease year
Existing restaurant only
The Poughkeepsie Property
is located on the east side
of South Road, south of
the Poughkeepsie Central
Business District, in
Poughkeepsie, Dutchess County,
New York, in an area of mixed
retail, commercial, and
residential development.
Other fast-food, family-style,
and casual dining restaurants
located in proximity to the
Poughkeepsie Property include
a Denny's, a KFC, a Lone Star
Steakhouse & Saloon, and a
Friendly's.
-73-
<PAGE>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------------------- ------------ -------- --------------- --------------- ------------ -----------
Jack in the Box (5) $1,050,616 07/20/98 07/2016; four $102,435 (6); None at any time
(the "Chandler (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 Chandler Property term
is located on the
southwest quadrant of
Cooper Road and Ray Road,
in Chandler, 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
Chandler Property include a
Subway Sandwich Shop, a
McDonald's, a Taco Bell, and
a local restaurant.
-74-
<PAGE>
Taco Bell $224,967 07/21/98 07/2018; two 10.25% of Total for each lease at any time
(the "Livingston (excluding five-year Cost (4); increases year, (i) 7% of after the
Property") development renewal options by 10% after the annual gross seventh
Restaurant to be costs) (3) fifth lease year and sales minus (ii) lease year
constructed after every five the minimum
years thereafter annual rent for
The Livingston during the lease such lease year
Property is located on term
the east side of West
Main Street, east of the
Livingston Central
Business District, in
Livingston, Overton
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
Livingston Property
include a Sonic Drive-
In, a KFC, and an
Arby's.
-75-
<PAGE>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------------------- ------------ -------- --------------- --------------- ------------ -----------
Jack in the Box (5) $1,005,188 07/23/98 07/2016; four $98,006 (6); None at any time
(the "Lufkin #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 Lufkin #2 term
Property is located on
the southeast corner of
State Highway 94 and F.M.
1271, in Lufkin, Angelina
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
Lufkin #2 Property include a
Dairy Queen.
-76-
<PAGE>
Roadhouse Grill $860,897 07/24/98 07/2011; two 9.90% of Total Cost None at any time
(the "Pensacola #4 (excluding ten-year renewal (4); increases by after the
Property ") development options 10% after the fifth seventh
Restaurant to be costs) (3) lease year and after lease year
renovated every five years
thereafter during the
The Pensacola #4 lease term
Property is located on
the east side of North
Davis Highway, south
of Interstate 10, 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 #4 Property
include a Wendy's, a
Honey Baked Ham, a
Waffle House, a
Fazoli's, a Pizza Hut, a
Darryl's, a Bennigan's,
a Steak and Ale, and
several local
restaurants.
-77-
<PAGE>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------------------- ------------ -------- --------------- --------------- ----------- -----------
Golden Corral (14) $280,312 08/07/98 02/2014; four 10.75% of Total for each lease during the
(the "Dublin (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 Dublin Property is $2,371,369 through
located on the (11) fifteenth
northeast corner of lease years
Shannon Drive and only
U.S. Highway 80, in
Dublin, Laurens
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
Dublin Property
include a Red Lobster,
a Krystal Burger, an
Applebee's, a Chick-
Fil-A, a Wendy's, a
Fazoli's, and several
local restaurants.
-78-
<PAGE>
TGI Friday's $1,602,944 08/12/98 08/2018; four $160,294; increases for each lease at any time
(the "El Paso five-year by 10% after the year, (i) 4.75% after the
Property ") renewal options tenth lease year and of annual gross seventh
Existing restaurant after every five sales minus (ii) lease year
years thereafter the minimum
The El Paso Property during the lease annual rent for
is located on the east term such lease year
side of Lee Trevino
Drive, east of the El
Paso Central Business
District, in El Paso, El
Paso 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 El
Paso Property include
a Popeyes, a Jack in
the Box, and a local
restaurant.
-79-
<PAGE>
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- ----------------------- ------------ -------- --------------- --------------- ----------- -----------
IHOP (13) $408,019 08/14/98 08/2018; three 9.39% of Total Cost None during the
(the "Greeley (excluding five-year (4) eleventh
Property ") development renewal options lease year
Restaurant to be costs) (3) and at the
constructed end of the
initial lease
The Greeley Property term
is located on the
northeast corner of
31st Avenue and 29th
Street, in Greeley,
Weld 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
Greeley Property include a
Perkins, a Red Lobster, and
a local restaurant.
-80-
<PAGE>
Wendy's (15) (21) (3) 08/14/98 08/2018; two 11.98% of Total for each lease at the end of
(the "Seymour five-year Cost (4) year, (i) 7% of the initial
Property") renewal options annual gross lease term
Restaurant to be sales times the
constructed Building
Overage
The Seymour Property Multiplier (23)
is located on the minus (ii) the
southeast corner of minimum
Macon Lane and annual rent for
Chapman Highway, in such lease year
Seymour, Sevier
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
Seymour Property
include a Domino's
Pizza and a Subway
Sandwich Shop.
</TABLE>
-81-
<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 Norcross Property $ 976,000
Pflugerville Property 668,000 Smyrna Property 654,000
Waxahachie Property 558,000 Hollywood Property 988,000
Hutchins Property 680,000 Brunswick Property 1,183,000
Phoenix #4 Property 371,000 Knoxville #3 Property 476,000
Columbus #2 Property 601,000 Orlando #4 Property 1,387,000
Atlanta #2 Property 646,000 Atlanta #3 Property 621,000
Gun Barrel City Property 576,000 Johnstown Property 1,124,000
Nacogdoches Property 674,000 Knoxville #4 Property 479,000
Glendale Property 494,000 Herndon Property 986,000
Warwick Property 699,000 Blue Springs Property 1,132,000
St. Louis Property 761,000 Clovis Property 802,000
Avondale Property 639,000 Poughkeepsie Property 804,000
Columbus #3 Property 730,000 Chandler Property 630,000
Naperville Property 1,360,000 Livingston Property 408,000
Fresno #2 Property 573,000 Lufkin #2 Property 647,000
Arab Property 454,000 Pensacola #4 Property 698,000
Athens Property 978,000 Dublin Property 1,075,000
Conyers Property 227,000 El Paso Property 1,140,000
Doraville Property 826,000 Greeley Property 1,048,000
Jonesboro Property 691,000 Seymour Property 472,000
Marietta #2 Property 895,000
</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, Atlanta #3, Knoxville #4, Livingston, Pensacola #4 and Seymour
Properties, minimum annual rent will become due and payable on the
earlier of (i) a specific number of days (ranging from 120 to 270)
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 and Dublin Properties, minimum annual rent will become due
and payable on the earlier of (i) 180 days after execution of the
lease, (ii) the date the certificate of occupancy for the restaurant is
issued or (iii) the date the restaurant opens for business to the
public. For the Greeley Property, minimum annual rent will become due
and payable on the earlier of (i) the date the certificate of occupancy
for the restaurant is issued or (ii) 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, Atlanta #3, Knoxville #4,
Livingston, Pensacola #4 and Seymour Properties, as described above,
the tenant shall pay monthly interim rent equal to a specified rate per
annum (ranging from 9.90% to 11%) of the amount funded by the Company
in connection
-82-
<PAGE>
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, Dublin and Greeley
Properties, as described above, interim rent equal to a specified rate
per annum (ranging from 9.39% to 10%) 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 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 Opened for business July 7, 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
Johnstown Property 1,632,542 December 14, 1998
Knoxville #4 Property 461,368 November 7, 1998
Chandler Property 1,050,616 January 16, 1999
Livingston Property 603,228 January 17, 1999
Lufkin #2 Property 1,005,188 January 19, 1999
Pensacola #4 Property 1,573,553 April 20, 1999
Dublin Property 1,289,988 February 3, 1999
Greeley Property 1,263,980 November 12, 1998
Seymour Property 454,540 December 12, 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.
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(5) The lessee of the Pflugerville, Waxahachie, Hutchins, Gun Barrel City,
Nacogdoches, St. Louis, Avondale, Fresno #2, Chandler and Lufkin #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.
(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 lessee of the Hollywood, Poughkeepsie and Greeley Properties is the
same unaffiliated lessee.
(14) The lessee of the Brunswick, Clovis and Dublin Properties is the same
unaffiliated lessee.
(15) The lessee of the Knoxville #3, Knoxville #4 and Seymour Properties is
the same unaffiliated lessee.
(16) 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.
(17) The lessee of the 18 Bennigan's Properties and the 18 Steak and Ale
Properties is the same unaffiliated lessee.
(18) The Company and the lessee of 17 of the 18 Bennigan's Properties and
the 18 Steak and 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.
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(19) 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.
(20) The lessee of the Johnstown and Blue Springs Property is the same
unaffiliated lessee.
(21) The Company owns the building only for this Property. The Company does
not own the underlying land; although, the Company entered into a
tri-party agreement with the lessee and the landlord of the land in
order to provide the Company with certain rights with respect to the
land on which the building is located.
(22) The "Building Overage Multiplier" is calculated as follows: Building
Overage Multiplier = (purchase price of the building) / (purchase price
of the building + $457,143)
(23) The "Building Overage Multiplier" is calculated as follows: Building
Overage Multiplier = (purchase price of the building) / (purchase price
of the building + $285,714)
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PENDING INVESTMENTS
As of August 14, 1998, the Company had initial commitments to acquire
19 properties with purchase prices aggregating approximately $23,500,000. These
19 properties include 17 properties consisting of land and building and two
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 19 of these properties are expected to
be entered into on substantially the same terms described in "Business --
Description of Property Leases."
In connection with two of the 19 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 property, in order to
provide the Company with certain rights with respect to the land on which the
buildings are located.
PORTFOLIO ACQUISITIONS
As previously reported, the Company formed a special committee (the
"Special Committee") consisting of the Independent Directors for the purpose of
evaluating strategic alternatives designed to maximize stockholder value. The
Special Committee retained the investment banking firms of Merrill Lynch,
Pierce, Fenner & Smith, Incorporated and Smith Barney, Inc. (the "Advising
Firms") to advise the Special Committee regarding its strategic alternatives. On
July 17, 1998, the Advising Firms presented their findings and supporting
financial information to the Special Committee. Based on the reports of the
Advising Firms and its own analyses, on July 20, 1998, the Special Committee
unanimously agreed to present the recommendations described below to the full
Board of Directors. The full Board of Directors unanimously adopted the
recommendations of the Special Committee at a meeting held on July 24, 1998.
In summary, the Special Committee concluded that the best means to
maximize stockholder value would be for the Company to (i) significantly
increase the size of the Company by acquiring from affiliates of the Company's
Advisor portfolios of properties similar to those currently held by the Company;
(ii) become internally advised; (iii) acquire internal real estate development
capability by acquiring the Advisor; (iv) expand its mortgage lending
capabilities by acquiring an affiliate of the Advisor, thus allowing the Company
to offer a full range of financing options to restaurant operators; and (v) list
its common stock on a national stock exchange, assuming market conditions are
favorable.
Recommendation to Acquire CNL Funds' Restaurant Portfolios. The Special
Committee recommended that the Company proceed to take the steps necessary to
offer to acquire for securities of the Company the portfolios of restaurant
properties and certain related restaurant businesses owned by 18 CNL Income
Funds and eight CNL Income & Growth Funds (collectively, the "CNL Funds"). The
CNL Funds are Florida limited partnerships that were formed from 1985 to 1997 by
affiliates of CNL Group, Inc. and currently own or have invested in, in the
aggregate, over 775 restaurant properties. Similar to the restaurant properties
owned by the Company, the restaurant properties owned by the CNL Funds are
generally leased on a triple-net basis to operators of selected national and
regional fast-food, family-style, and casual dining restaurant chains. The
acquisition of the CNL Funds' restaurant portfolios would result in the Company
becoming one of the largest owners of restaurant properties in the United States
with over $1.3 billion in assets.
Recommendation to Acquire CNL Restaurant Related Entities. The Special
Committee also recommended that the Company become an internally advised
restaurant REIT and become a full-service development and financing entity by
acquiring, in exchange for securities of the Company, the restaurant
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related activities conducted by CNL affiliates. The Special Committee
recommended the Company acquire CNL Fund Advisors, Inc. (the "Advisor") and CNL
Financial Corporation ("CFC"). Their businesses are described below.
Since its inception, the Advisor has been the Company's advisor and, as
such, has been responsible for the day-to-day operations of the Company,
including investment analysis, acquisitions, due diligence, asset management and
accounting services. CNL Restaurant Development, Inc., a company which develops
restaurant properties for the Company and some of the CNL Funds, recently was
merged with and into the Advisor. As a result of that merger, the Advisor now
has restaurant development capabilities. The acquisition by the Company of the
Advisor would give the Company internal administrative, management, acquisition
and development capability.
CFC funds mortgage loans on restaurant properties comparable to the
restaurant properties currently owned by the Company. After funding the mortgage
loans, CFC "securitizes" such loans by contributing them to a securitization
entity which subsequently issues trust certificates representing beneficial
ownership interests in the pool of mortgage loans and the proceeds received by
the securitization entity are remitted to CFC. The acquisition of CFC would
permit the Company to significantly expand its mortgage lending capabilities,
thus allowing the Company to offer a full range of financing alternatives to
restaurant operators.
Recommendation to List Company Shares. The Special Committee also
recommended that the Company provide increased liquidity and a trading market
for its securities by listing its common stock on a national stock exchange. The
Special Committee recommended that the Company seek to list its common stock
either concurrently with the acquisitions described above or as shortly
thereafter as market conditions are deemed to be favorable for such listing. The
Special Committee further recommended that the Company evaluate a public
offering of its common stock concurrently with the listing of its shares.
The acquisitions of the CNL Funds' portfolios and the CNL restaurant
related entities are subject to the Company negotiating acceptable purchase
prices and other acquisition terms with each of the sellers and to obtain
approval of the acquisitions by the limited partners of the CNL Funds and the
shareholders of the other CNL restaurant related entities. Accordingly, the
acquisition of such entities is not assured.
In addition, in order to effect the acquisitions, the Company will need
to increase its authorized common stock, which requires the approval of the
Company's stockholders. It is expected that the request for a vote on such
increase will be presented to the stockholders in early 1999. In connection with
such vote, complete information on the proposed transaction will be delivered to
the Company's stockholders. Prior to seeking that vote, the Company will obtain
and furnish to the stockholders an opinion of a third party that the
consideration proposed to be paid by the Company for the acquisitions is 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
August 14, 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.
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Year of Initial Lease
Term Expiration Number of Properties
--------------------- --------------------
2002 1
2006 1
2008 2
2009 1
2010 10
2011 22
2012 39
2013 15
2014 5
2015 31
2016 63
2017 73
2018 58
2022 1
----
Total 322
====
MORTGAGE LOANS
On August 14, 1998, the Company acquired Class F, Glass G and Class H
Franchise Loan Certificates, Series 1998-1, (collectively, the "Certificates")
from CNL Funding 98-1, LP, a mortgage loan securitization entity sponsored by
CNL Financial Corp., an Affiliate of the Advisor ("CFC"). The aggregate purchase
price paid for each of the Class F, Class G and Class H Franchise Loan
Certificates was $3.97 million, $4.42 million and $7.71 million, respectively,
representing an expected blended yield on the Certificates of 12.3 percent. The
Class F and Class G Franchise Loan Certificates have been rated BB and B,
respectively, by two major rating agencies and the Class H Franchise Loan
Certificates will not be rated. Prior to acquiring the Certificates, a
nationally recognized investment banking firm evaluated the Company's investment
in the Certificates and the investment banking firm provided a valuation letter
to the Company that the purchase price paid by the Company was consistent with
the estimated value of the cash flow expected to be generated from the
Certificates. In addition, the Independent Directors unanimously approved the
acquisition of the Certificates as being fair and reasonable to the Company.
CFC originates and services mortgage loans on restaurant properties
comparable to the triple-net leased properties currently owned by the Company.
The underwriting criteria utilized by CFC in connection with originating the
mortgage loans is at least as stringent as the underwriting standards applied by
the Company when determining whether to enter into a lease with a prospective
tenant. After originating the mortgage loans, CFC contributes the loans to a
securitization entity which subsequently issues trust certificates representing
beneficial ownership interests in the pool of mortgage loans and the proceeds
received by the securitization entity (less a placement fee and expenses) are
remitted to CFC. The interests in the pool of loans are either rated by
independent rating agencies or not rated and may be treated as investment grade
or non-investment grade depending on the relative risk of the security, taking
into account such factors as the likelihood of default on the underlying
mortgages constituting the loan pool, the level of subordination of the
interests as compared to other interests issued by the securitization entity,
and the protection afforded by the mortgage obligation in the event of a
bankruptcy or similar proceeding. The Certificates purchased by the Company are
not investment grade or are not rated and therefore constitute an increased
degree of investment risk as compared to investment grade securities. However,
the Board of Directors believes that the acquisition of the Certificates
represents an opportunity for the Company to achieve investment returns similar
to those generated by its triple-net leased restaurant properties. In addition,
the Company has pre-existing triple-net leasing arrangements with the majority
of the borrowers underlying the pool of loans. Finally, the Board of Directors
believes that the investment risk inherent in purchasing the Certificates has
been properly reflected in the purchase price of
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the Certificates. Because of the underwriting standards employed, the Company's
pre-existing relationship with a majority of the obligors on the mortgage loans
underlying the loan pool and the purchase price of the Certificates (relative to
the risk), the Board of Directors believes that the acquisition of the
Certificates currently constitutes an attractive investment opportunity for the
Company. The Company intends to treat the investment in the Certificates as a
Mortgage Loan for the purposes of maintaining its policy that Mortgage Loans
constitute only 5% to 10% of the Company's total investments.
BORROWING
As of August 14, 1998, the Company had funded $26,775,233 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 and July 1998, the Company sold two of its Properties and one of
its Properties to tenants for a total of approximately $1,233,000 and $713,000,
respectively. The Company reinvested the net sales proceeds from the sale of
these Properties in additional Properties.
During the six months ended June 30, 1998, a tenant exercised its
option under the terms of its lease agreements to exchange three existing
Properties with three replacement Properties which were approved by the Company.
In connection therewith, the Company exchanged three Boston Market Properties
with three replacement Boston Market Properties. Under the exchange agreements
for each Property, 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 nonmonetary
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)
Six Months Ended through
June 30, 1998 June 30, 1997 Year Ended December 31, December 31,
(Unaudited) (Unaudited) 1997 1996 1995 1994
------------- ------------- ----------- ---------- -------- -------------
<S> <C>
Revenues $17,629,078 $6,715,234 $19,457,933 $6,206,684 $659,131 $ -
Net earnings 14,015,473 5,227,095 15,564,456 4,745,962 368,779 -
Cash distributions declared (1) 15,992,806 6,282,470 16,854,297 5,436,072 638,618 -
Funds from operations (2) 15,633,534 5,801,102 17,348,723 5,257,040 469,097 -
Earnings per Share 0.32 0.29 0.66 0.59 0.19 -
Cash distributions declared per Share 0.38 0.37 0.74 0.71 0.31 -
Weighted average number of Shares
outstanding (3) 43,166,433 17,826,025 23,423,868 8,071,670 1,898,350 -
June 30, 1998 June 30, 1997 December 31, December 31, December 31, December 31,
(Unaudited) (Unaudited) 1997 1996 1995 1994
----------- ------------- ------------ ------------ ------------ ------------
Total assets $470,119,410 $214,941,742 $339,077,762 $134,825,048 $ 33,603,084 $ 929,585
Total stockholders' equity 456,518,346 197,122,436 321,638,101 122,867,427 31,980,648 200,000
</TABLE>
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(1) Approximately 12 percent, 17 percent, eight percent, 13
percent and 42 percent of cash distributions ($0.05, $0.06,
$0.06, $0.09 and $0.13 per Share) for the six months ended
June 30, 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
six months ended June 30, 1998 and 1997, and the years ended
December 31, 1997, 1996 and 1995, net earnings included
$1,303,987, $616,027, $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 for the year
ended December 31, 1995 is based upon the period the Company
was operational.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION OF THE COMPANY
This information contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Although the Company believes that the expectations
reflected in such forward-looking statements are based upon reasonable
assumptions, the Company's actual results could differ materially from those set
forth in the forward-looking statements. Certain factors that might cause such a
difference include the following: changes in general economic conditions,
changes in real estate conditions, continued availability of proceeds from this
offering, the ability of the Company to invest the proceeds of this offering,
the ability of the Company to locate suitable tenants for its Properties and
borrowers for its Mortgage Loans, and the ability of such tenants and borrowers
to make payments under their respective leases, Secured Equipment Leases or
Mortgage Loans.
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
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
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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 30, 1998, the Company had
received subscription proceeds of $111,835,687 (11,183,568 Shares), including
182,351 Shares ($1,823,518) issued pursuant to the Reinvestment Plan in
connection with this offering.
As of June 30, 1998, the Company had received aggregate subscription
proceeds of $514,300,100 (51,430,010 Shares) from its Initial Offering, 1997
Offering and this offering (collectively, the "Offerings"), including 428,793
Shares ($4,287,931) issued pursuant to the Reinvestment Plan. As of June 30,
1998, net offering proceeds to the Company from its Offerings, after deduction
of selling commissions, marketing support, and due diligence expense
reimbursement fees, and organizational and offering expenses, totalled
$460,525,469. As of June 30, 1998, the Company had invested or committed for
investment approximately $376,061,000 of aggregate net offering proceeds from
its Offerings in 310 Properties (16 of which were under construction or
renovation as of June 30, 1998) in providing mortgage financing through Mortgage
Loans, in paying acquisition fees to the Advisor totalling $23,143,505, as well
as certain acquisition expenses, leaving approximately $84,464,000 in aggregate
net offering proceeds available for investment in Properties and Mortgage Loans.
In connection with the 16 Properties under construction or renovation
at June 30, 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
$20,478,500, of which approximately $15,340,200 had been incurred as of June 30,
1998. The buildings under construction or renovation as of June 30, 1998, are
expected to be operational by December 1998. In connection with the purchase of
each Property, the Company, as lessor, has entered into a long-term lease
agreement.
In June 1998, the Company entered into a joint venture arrangement,
CNL/Lee Vista Joint Venture, with a third party to construct and hold one
restaurant property. As of June 30, 1998, the Company had contributed $112,847
to pay for construction relating to the Property owned by the Joint Venture. The
Company has agreed to contribute approximately $1,303,900 in additional
construction costs to the Joint Venture. When construction is completed, the
Company expects to have an approximate 68 percent interest in the profits and
losses of the Joint Venture.
During the six months ended June 30, 1998, the Company received
advances totalling $2,979,403 under the Line of Credit to provide equipment
financing. The balance of the Line of Credit was $5,438,446 as of June 30, 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 obtain
additional advances to purchase Properties and fund Mortgage Loans.
On June 30, 1998, the Company entered into a promissory note with a
borrower for equipment financing for $2,200,000, which is collateralized by
restaurant equipment. The promissory note bears interest at a rate of ten
percent per annum and will be collected in consecutive monthly installments of
principal and interest of $36,523 beginning July 1, 1998, with a balloon payment
due September 15, 1998 for the remaining unpaid balance.
During the six months ended June 30, 1998, a tenant exercised its
option under the terms of its lease agreements to exchange three existing
Properties for three replacement Properties which were approved by the Company.
In connection therewith, the Company exchanged three Boston Market Properties
with three replacement Boston Market Properties. Under the exchange agreements
for each Property, 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 nonmonetary 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 nonmonetary
exchanges of similar assets.
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In addition, in May 1998, the Company sold two Properties to third
parties. The Company received net sales proceeds of approximately $1,233,700
which approximated the carrying value of the Properties at the time of sale. As
a result, no gain or loss was recognized for financial reporting purposes.
During the period July 1, 1998 through August 14, 1998, the Company
received subscription proceeds for an additional 4,497,665 Shares ($44,976,648)
of Common Stock.
In addition, during the period July 1, 1998 through August 14, 1998,
the Company acquired 13 Properties (eight of which are under construction or
renovation) for cash at a total cost of approximately $10,883,000, 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 eight
Properties under construction or renovation are estimated to be approximately
$7,702,000. In connection with the purchase of each of the 13 Properties, the
Company, as lessor, entered into a long-term lease agreement. The buildings
under construction or renovation are expected to be operational or renovated by
April 1999.
As of August 14, 1998, the Company had received aggregate subscription
proceeds of $559,276,748 (55,927,675 Shares) from the Offerings, including
$4,287,932 (428,793 Shares) through its Reinvestment Plan. As of August 14,
1998, the Company had invested or committed for investment approximately
$406,200,000 of aggregate net offering proceeds in 322 Properties in providing
mortgage financing through Mortgage Loans and in paying acquisition fees and
certain acquisition expenses, leaving approximately $95,700,000 in aggregate net
offering proceeds available for investment in Properties and Mortgage Loans.
Additionally, the Company currently is negotiating to acquire
additional Properties, but as of August 14, 1998 had not acquired any such
Properties.
The Company expects to use uninvested Net Offering Proceeds, plus any
Net Offering Proceeds from the sale of additional Shares, to purchase additional
Properties, to fund construction 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 and will be leased on a triple-net basis, meaning that
tenants are generally required to pay all repairs and maintenance, property
taxes, insurance and utilities. Rental payments under the leases are expected to
exceed the Company's Operating Expenses. For these reasons, no short-term or
long-term liquidity problems currently are anticipated by management.
Until Properties are acquired or Mortgage Loans are entered into, Net
Offering Proceeds are held in short-term, highly liquid investments which
management believes to have appropriate safety of principal. This investment
strategy provides high liquidity in order to facilitate the Company's use of
these funds to acquire Properties or to fund Mortgage Loans at such time as
suitable Properties and investments in Mortgage Loans are identified. At June
30, 1998 and December 31, 1997, the Company had $78,377,384 and $49,595,001,
respectively, invested in such short-term investments (including certificates of
deposit in the amount of $2,008,304 and $2,008,224, respectively). The increase
in the amount invested in short-term investments is primarily attributable to
the receipt of subscription proceeds during the six months ended June 30, 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.
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<PAGE>
During the six months ended June 30, 1998 and 1997, the Advisor and its
Affiliates incurred on behalf of the Company $2,190,143 and $1,361,009,
respectively, for certain offering expenses, $536,646 and $329,237,
respectively, for certain acquisition expenses, and $380,705 and $236,639,
respectively, for certain Operating Expenses. As of June 30, 1998 and 1997, the
Company owed the Advisor and its Affiliates $1,395,030 and $1,516,794,
respectively, for such amounts, unpaid fees and administrative expenses. As of
August 1, 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 June 30, 1998, the
Offering Expenses had not exceeded this amount.
During the six months ended June 30, 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
$16,592,789 and $6,314,003, respectively. Based on cash from operations, the
Company declared and paid Distributions to its stockholders of $15,992,806 and
$6,282,470 during the six months ended June 30, 1998 and 1997, respectively. In
addition, on July 1, 1998 and August 1, 1998, the Company declared Distributions
to its stockholders totalling $3,283,093 and $3,466,888, respectively, payable
in September 1998. For the six months ended June 30, 1998 and 1997,
approximately 86 and 92 percent, respectively, of the Distributions received by
stockholders were considered to be ordinary income and approximately 14 and
eight 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 August 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.
The Company formed a special committee (the "Special Committee")
consisting of the Independent Directors for the purpose of evaluating strategic
alternatives designed to maximize stockholder value. The Special Committee
retained the investment banking firms of Merrill Lynch, Pierce, Fenner & Smith,
Incorporated and Smith Barney, Inc. (the "Advising Firms") to advise the Special
Committee regarding its strategic alternatives. On July 17, 1998, the Advising
Firms presented their findings and supporting financial information to the
Special Committee. Based on the reports of the Advising Firms and its own
analyses, on July 20, 1998, the Special Committee unanimously agreed to present
the recommendations described below to the full Board of Directors. The full
Board of Directors unanimously adopted the recommendations of the Special
Committee at a meeting held on July 24, 1998.
In summary, the Special Committee concluded that the best means to
maximize stockholder value would be for the Company to (i) significantly
increase the size of the Company by acquiring from affiliates of the Company's
Advisor portfolios of properties similar to those currently held by the Company;
(ii) become internally advised; (iii) acquire internal real estate development
capability by acquiring the Advisor; (iv) expand its mortgage lending
capabilities by acquiring an affiliate of the Advisor, thus allowing the Company
to offer a full range of financing options to restaurant operators; and (v) list
its common stock on a national stock exchange, assuming market conditions are
favorable.
The Special Committee recommended that the Company seek to list its
common stock either concurrently with the acquisitions described below or as
shortly thereafter as market conditions are deemed to be favorable for such
listing. The Special Committee further recommended that the Company evaluate a
public offering of its
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<PAGE>
common stock concurrently with the listing of its shares.
The acquisitions of portfolios of restaurant properties and certain
related restaurant businesses owned by 18 CNL Income Funds and eight CNL Income
& Growth Funds (collectively, the "CNL Funds") and the acquisitions of CNL
restaurant related entities are subject to the Company negotiating acceptable
purchase prices and other acquisition terms with each of the sellers and to
obtain approval of the acquisitions by the limited partners of the CNL Funds and
the shareholders of other CNL restaurant related entities. Accordingly, the
acquisition of such entities is not assured.
In addition, in order to effect the acquisitions, the Company will need
to increase its authorized common stock, which requires the approval of the
Company's stockholders. It is expected that the request for a vote on such
increase will be presented to the stockholders in early 1999. In connection with
such vote, complete information on the proposed transaction will be delivered to
the Company's stockholders. Prior to seeking that vote, the Company will obtain
and furnish to the stockholders an opinion of a third party that the
consideration proposed to be paid by the Company for the acquisitions is fair to
the Company from a financial point of view.
RESULTS OF OPERATIONS
As of June 30, 1998, the Company had purchased and entered into
long-term, triple-net leases for 310 Properties.
The Property leases provide for minimum base annual rental payments
ranging from approximately $61,900 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 $13,816,443 in rental income from operating leases and earned
income from direct financing leases from 310 Properties and 28 Secured Equipment
Leases during the six months ended June 30, 1998, and $4,965,297 from 143
Properties and 12 Secured Equipment Leases during the six months ended June 30,
1997 ($7,137,745 and $2,875,572 of which was earned during the quarters ended
June 30, 1998 and 1997, respectively). Because the Company has not yet acquired
all of its Properties and certain Properties were under construction as of June
30, 1998, revenues for the six months ended June 30, 1998, represent only a
portion of revenues which the Company is expected to earn in future periods.
As of June 30, 1998 and 1997, the Company had mortgage notes receivable
with carrying values of $17,451,841 and $17,737,107, respectively. In connection
therewith, the Company earned $864,049 and $815,192 in interest income relating
to such Mortgage Loans during the six months ended June 30, 1998 and 1997,
respectively, $430,972 and $439,835 of which was earned during the quarters
ended June 30, 1998 and 1997, respectively. The increase during the six months
ended June 30, 1998, as compared to the six months ended June 30, 1997, was
attributable to the Company entering into a new promissory note in March 1997 in
connection with an additional Mortgage Loan.
During the six months ended June 30, 1998 and 1997, the Company also
earned $2,966,816 and $934,745, respectively, in interest and other income,
$1,750,787 and $460,329 of which was earned during the quarters ended June 30,
1998 and 1997, respectively, from promissory notes relating to Secured Equipment
Leases entered into in October 1997 and June 1998, 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 subscription
proceeds received in the future relating 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.
-94-
<PAGE>
Operating Expenses, including depreciation and amortization expense,
were $3,429,561 and $1,472,413 for the six months ended June 30, 1998 and 1997,
respectively, of which $1,629,554 and $792,590 were incurred for the quarters
ended June 30, 1998 and 1997, respectively. Total Operating Expenses increased
primarily as a result of the Company owning additional Properties during the
quarter and six months ended June 30, 1998, as compared to the quarter and six
months ended June 30, 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.
In March 1998, the Emerging Issues Task Force of the Financial
Accounting Standards Board ("FASB") reached a consensus in EITF 97-11, entitled
"Accounting for Internal Costs Relating to Real Estate Property Acquisitions."
EITF 97-11 provides that internal costs of identifying and acquiring operating
Property should be expensed as incurred. Due to the fact that the Company does
not have an internal acquisitions function and instead, contracts these services
from an external advisor, the effectiveness of EITF 97-11 had no material effect
on the Company's financial position or results of operations.
In May 1998, the Emerging Issues Task Force of the FASB reached a
consensus in EITF 98-9, entitled "Accounting for Contingent Rent in the Interim
Financial Periods." Management of the Company does not expect that the
conclusions reached in this consensus will have a material effect on the
Company's financial position or results of operations.
In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("FAS 133"). FAS 133 is effective for all fiscal quarters of all
fiscal years beginning after June 15, 1999 (January 1, 2000 for the Company).
FAS 133 requires that all derivative instruments be recorded on the balance
sheet at their fair value. Changes in the fair value of derivatives are recorded
each period in current earnings or other comprehensive income, depending on
whether a derivative is designated as part of a hedge transaction and, if it is,
the type of hedge transaction. Management of the Company anticipates that, due
to its limited use of derivative instruments, the adoption of FAS 133 will not
have a significant effect on the Company's results of operations or its
financial position.
CERTAIN TRANSACTIONS
The following presents information from March 3, 1998 through August
14, 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 August 14, 1998, the
Company incurred $11,760,925 of such fees in connection with this offering, of
which approximately $11,020,800 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 August 14, 1998, the
Company incurred $784,062 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.
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<PAGE>
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 August 14, 1998, the Company incurred $7,056,555 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 August 14, 1998, the Company incurred $44,426 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 interest and may be taken in such
other fiscal year as the Advisor shall determine. For the six months ended June
30, 1998, the Company incurred $756,791 of such fees, $26,931 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 six months ended June 30, 1998, the
Company incurred a total of $1,866,814 for these services, $1,378,104 of such
costs representing stock issuance costs and $488,710 representing general
operating and administrative expenses, including costs related to preparing and
distributing reports required by the Securities and Exchange Commission.
During the six months ended June 30, 1998, the Company incurred
Construction Fees totalling $68,759 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.
PRIOR PERFORMANCE INFORMATION
The information presented in this section represents the historical
experience of certain real estate programs organized by certain officers and
directors of the Advisor. INVESTORS IN THE COMPANY SHOULD NOT ASSUME THAT THEY
WILL EXPERIENCE RETURNS, IF ANY, COMPARABLE TO THOSE EXPERIENCED BY INVESTORS IN
SUCH PRIOR REAL ESTATE PROGRAMS. INVESTORS WHO PURCHASE SHARES IN THE COMPANY
WILL NOT THEREBY ACQUIRE ANY OWNERSHIP INTEREST IN ANY PARTNERSHIPS TO WHICH THE
FOLLOWING INFORMATION RELATES.
Two Directors of the Company, Robert A. Bourne and James M. Seneff,
Jr., individually or with others have served as general partners of 88 and 89
real estate limited partnerships, respectively, including the 18 publicly
offered CNL Income Fund partnerships, which purchased properties similar to
those to be acquired by the Company, listed in the table below. None of these
limited partnerships has been audited by the IRS. Of course, there is no
guarantee that the Company will not be audited. Based on an analysis of the
operating results of the prior partnerships, the general partners of these
partnerships believe that each of such partnerships has met or is meeting its
principal investment objectives in a timely manner.
-96-
<PAGE>
CNL Realty Corporation, which was organized as a Florida corporation in
November 1985 and whose sole stockholders are Messrs. Bourne and Seneff,
currently serves as the corporate general partner with Messrs. Bourne and Seneff
as individual general partners of 18 CNL Income Fund limited partnerships, all
of which were organized to invest in fast-food, family-style and, in the case of
two of the partnerships, casual dining restaurant properties and have investment
objectives similar to those of the Company. As of June 30, 1998, the 18
partnerships had raised a total of $615,000,000 from a total of 48,862
investors, and had invested in 713 fast-food, family-style or casual dining
restaurant properties. Certain additional information relating to the offerings
and investment history of the 18 public partnerships is set forth below.
<TABLE>
<CAPTION>
Date 90% of Net
Number of Proceeds Fully
Maximum Limited Invested or
Name of Offering Partnership Committed to
Partnership Amount (1) Date Closed Units Sold Investment (2)
- ----------- ---------- ----------- ---------- --------------
<S> <C>
CNL Income $15,000,000 December 31, 1986 30,000 December 1986
Fund, Ltd. (30,000 units)
CNL Income $25,000,000 August 21, 1987 50,000 November 1987
Fund II, Ltd. (50,000 units)
CNL Income $25,000,000 April 29, 1988 50,000 June 1988
Fund III, Ltd. (50,000 units)
CNL Income $30,000,000 December 6, 1988 60,000 February 1989
Fund IV, Ltd. (60,000 units)
CNL Income $25,000,000 June 7, 1989 50,000 December 1989
Fund V, Ltd. (50,000 units)
CNL Income $35,000,000 January 19, 1990 70,000 May 1990
Fund VI, Ltd. (70,000 units)
CNL Income $30,000,000 August 1, 1990 30,000,000 January 1991
Fund VII, Ltd. (30,000,000 units)
CNL Income $35,000,000 March 7, 1991 35,000,000 September 1991
Fund VIII, Ltd. (35,000,000 units)
CNL Income $35,000,000 September 6, 1991 3,500,000 November 1991
Fund IX, Ltd. (3,500,000 units)
CNL Income $40,000,000 April 22, 1992 4,000,000 June 1992
Fund X, Ltd. (4,000,000 units)
CNL Income $40,000,000 October 8, 1992 4,000,000 September 1992
Fund XI, Ltd. (4,000,000 units)
CNL Income $45,000,000 April 15, 1993 4,500,000 July 1993
Fund XII, Ltd. (4,500,000 units)
CNL Income $40,000,000 September 13, 1993 4,000,000 August 1993
Fund XIII, Ltd. (4,000,000 units)
CNL Income $45,000,000 March 23, 1994 4,500,000 May 1994
Fund XIV, Ltd. (4,500,000 units)
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<PAGE>
CNL Income $40,000,000 September 22, 1994 4,000,000 December 1994
Fund XV, Ltd. (4,000,000 units)
CNL Income $45,000,000 July 18, 1995 4,500,000 August 1995
Fund XVI, Ltd. (4,500,000 units)
CNL Income $30,000,000 October 10, 1996 3,000,000 December 1996
Fund XVII, Ltd. (3,000,000 units)
CNL Income $35,000,000 February 6, 1998 3,500,000 December 1997
Fund XVIII, Ltd. (3,500,000 units)
</TABLE>
- ----------------
(1) The amount stated includes the exercise by the general partners of each
partnership of their option to increase by $5,000,000 the maximum size of
the offering of CNL Income Fund, Ltd., CNL Income Fund II, Ltd., CNL Income
Fund III, Ltd., CNL Income Fund IV, Ltd., CNL Income Fund VI, Ltd., CNL
Income Fund VIII, Ltd., CNL Income Fund X, Ltd., CNL Income Fund XII, Ltd.,
CNL Income Fund XIV, Ltd., CNL Income Fund XVI, Ltd, and CNL Income Fund
XVIII, Ltd.
(2) For a description of the property acquisitions by these limited
partnerships, see the table set forth on the following page.
As of June 30, 1998, Mr. Seneff and Mr. Bourne, directly or through
affiliated entities, also had served as joint general partners of 69 nonpublic
real estate limited partnerships. The offerings of 68 of these 69 nonpublic
limited partnerships had terminated as of June 30, 1998. These 68 partnerships
raised a total of $170,327,353 from approximately 4,241 investors, and
purchased, directly or through participation in a joint venture or limited
partnership, interests in a total of 206 projects as of June 30, 1998. These 206
projects consist of 19 apartment projects (comprising 11% of the total amount
raised by all 68 partnerships), 13 office buildings (comprising 5% of the total
amount raised by all 68 partnerships), 159 fast-food, family-style or casual
dining restaurant property and business investments (comprising 68% of the total
amount raised by all 68 partnerships), one condominium development (comprising
.5% of the total amount raised by all 68 partnerships), four hotels/motels
(comprising 5% of the total amount raised by all 68 partnerships), eight
commercial/retail properties (comprising 10% of the total amount raised by all
68 partnerships), and two tracts of undeveloped land (comprising .5% of the
total amount raised by all 68 partnerships). The offering of the one remaining
nonpublic limited partnership (offering totalling $15,000,000) had raised
$13,637,500 from 263 investors (approximately 90.91% of the total offering
amount) as of June 30, 1998.
Mr. Bourne also has served, without Mr. Seneff, as a general partner of
one additional nonpublic real estate limited partnership program which raised a
total of $600,000 from 13 investors and purchased, through participation in a
limited partnership, one apartment building located in Georgia with a purchase
price of $1,712,000.
Mr. Seneff also has served, without Mr. Bourne, as a general partner of
two additional nonpublic real estate limited partnerships which raised a total
of $240,000 from 12 investors and purchased two office buildings with an
aggregate purchase price of $928,390. Both of the office buildings are located
in Florida.
Of the 89 real estate limited partnerships whose offerings had closed
as of June 30, 1998 (including 18 CNL Income Fund limited partnerships) in which
Mr. Seneff and/or Mr. Bourne serve or have served as general partners in the
past, 38 invested in restaurant properties leased on a "triple-net" basis,
including seven which also invested in franchised restaurant businesses
(accounting for approximately 93% of the total amount raised by all 89 real
estate limited partnerships).
-98-
<PAGE>
The following table sets forth summary information, as of June 30,
1998, regarding property acquisitions by the 18 limited partnerships that,
either individually or through a joint venture or partnership arrangement,
acquired restaurant properties and that have investment objectives similar to
those of the Company.
<TABLE>
<CAPTION>
Name of Type of Method of Type of
Partnership Property Location Financing Program
- ----------- -------- -------- --------- -------
<S> <C>
CNL Income 22 fast-food or AL, AZ, CA, FL, All cash Public
Fund, Ltd. family-style GA, LA, MD, OK,
restaurants PA, TX, VA, WA
CNL Income 49 fast-food or AL, AZ, CO, FL, All cash Public
Fund II, Ltd. family-style GA, IL, IN, KS, LA,
restaurants MI, MN, MO, NC,
NM, OH, TN, TX,
WA, WY
CNL Income 37 fast-food or AZ, CA, CO, FL, All cash Public
Fund III, Ltd. family-style GA, IA, IL, IN, KS,
restaurants KY, MD, MI, MN,
MO, NC, NE, OK,
TX
CNL Income 45 fast-food or AL, DC, FL, GA, All cash Public
Fund IV, Ltd. family-style IL, IN, KS, MA,
restaurants MD, MI, MS, NC,
OH, PA, TN, TX,
VA
CNL Income 35 fast-food or AZ, FL, GA, IL, IN, All cash Public
Fund V, Ltd. family-style MI, NH, NY, OH,
restaurants SC, TN, TX, UT,
WA
CNL Income 55 fast-food or AR, AZ, FL, GA, All cash Public
Fund VI, Ltd. family-style IL, IN, KS, MA, MI,
restaurants MN, NC, NE, NM,
NY, OH, OK, PA,
TN, TX, VA, WA,
WY
CNL Income 49 fast-food or AZ, CO, FL, GA, All cash Public
Fund VII, Ltd. family-style IN, LA, MI, MN,
restaurants NC, OH, SC, TN,
TX, UT, WA
CNL Income 42 fast-food or AZ, FL, IN, LA, All cash Public
Fund VIII, Ltd. family-style MI, MN, NC, NY,
restaurants OH, TN, TX, VA
CNL Income 43 fast-food or AL, CO, FL, GA, All cash Public
Fund IX, Ltd. family-style IL, IN, LA, MI,
restaurants MN, MS, NC, NH,
NY, OH, SC, TN,
TX
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<PAGE>
CNL Income 51 fast-food or AL, CA, CO, FL, All cash Public
Fund X, Ltd. family-style ID, IL, LA, MI,
restaurants MO, MT, NC, NH,
NM, NY, OH, PA,
SC, TN, TX
CNL Income 40 fast-food or AL, AZ, CA, CO, All cash Public
Fund XI, Ltd. family-style CT, FL, KS, LA,
restaurants MA, MI, MS, NC,
NH, NM, OH, OK,
PA, SC, TX, VA,
WA
CNL Income 49 fast-food or AL, AZ, CA, FL, All cash Public
Fund XII, Ltd. family-style GA, LA, MO, MS,
restaurants NC, NM, OH, SC,
TN, TX, WA
CNL Income 50 fast-food or AL, AR, AZ, CA, All cash Public
Fund XIII, Ltd. family-style CO, FL, GA, IN,
restaurants KS, LA, MD, NC,
OH, PA, SC, TN,
TX, VA
CNL Income 64 fast-food or AL, AZ, CO, FL, All cash Public
Fund XIV, Ltd. family-style GA, KS, LA, MN,
restaurants MO, MS, NC, NJ,
NV, OH, SC, TN,
TX, VA
CNL Income 55 fast-food or AL, CA, FL, GA, All cash Public
Fund XV, Ltd. family-style KS, KY, MN, MO,
restaurants MS, NC, NJ, NM,
OH, OK, PA, SC,
TN, TX, VA
CNL Income 47 fast-food or AZ, CA, CO, DC, All cash Public
Fund XVI, Ltd. family-style FL, GA, ID, IN, KS,
restaurants MN, MO, NC, NM,
NV, OH, TN, TX,
UT, WI
CNL Income 29 fast-food, CA, FL, GA, IL, IN, All cash Public
Fund XVII, Ltd. family-style or MI, NC, NV, OH,
casual dining SC, TN, TX
restaurants
CNL Income 23 fast-food, AZ, CA, FL, GA, All cash Public
Fund XVIII, Ltd. family-style or IL, KY, MD, MN,
casual dining NC, NV, NY, OH,
restaurants TN, TX
</TABLE>
--------------------------------------------
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<PAGE>
A more detailed description of the acquisitions by real estate limited
partnerships sponsored by Messrs. Bourne and Seneff is set forth in prior
performance Table VI, included in Part II of the registration statement filed
with the Securities and Exchange Commission for this offering. A copy of Table
VI is available to stockholders from the Company upon request, free of charge.
In addition, upon request to the Company, the Company will provide, without
charge, a copy of the most recent Annual Report on Form 10-K filed with the
Securities and Exchange Commission for CNL Income Fund, Ltd., CNL Income Fund
II, Ltd., CNL Income Fund III, Ltd., CNL Income Fund IV, Ltd., CNL Income Fund
V, Ltd., CNL Income Fund VI, Ltd., CNL Income Fund VII, Ltd., CNL Income Fund
VIII, Ltd., CNL Income Fund IX, Ltd., CNL Income Fund X, Ltd., CNL Income Fund
XI, Ltd., CNL Income Fund XII, Ltd., CNL Income Fund XIII, Ltd., CNL Income Fund
XIV, Ltd., CNL Income Fund XV, Ltd., CNL Income Fund XVI, Ltd., CNL Income Fund
XVII, Ltd., and CNL Income Fund XVIII, Ltd., as well as a copy, for a reasonable
fee, of the exhibits filed with such reports.
In order to provide potential purchasers of Shares in the Company with
information to enable them to evaluate the prior experience of the Messrs.
Seneff and Bourne as general partners of real estate limited partnerships,
including those set forth in the foregoing table, certain financial and other
information concerning those limited partnerships with investment objectives
similar to one or more of the Company's investment objectives in which Messrs.
Seneff and Bourne are general partners is provided in the Prior Performance
Tables included as Exhibit C to the Prospectus. Information about the previous
public partnerships, the offerings of which became fully subscribed between
January 1993 and December 1997, is included therein. Potential stockholders are
encouraged to examine the Prior Performance Tables in Exhibit C (in Table III)
to the Prospectus, which include information as to the operating results of
these prior partnerships, for more detailed information concerning the
experience of Messrs.
Seneff and Bourne.
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 2,728,806 0.063540
May - - 368,155 0.058300 1,202,718 0.062500 2,902,508 0.063540
June 15,148 0.030000 407,803 0.058300 1,295,253 0.062500 3,080,149 0.063540
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.
-101-
<PAGE>
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 six months ended June 30, 1998 and the years
ended December 31, 1997, 1996 and 1995, the Company declared and made
Distributions totalling $15,992,806, $16,854,297, $5,436,072 and $638,618,
respectively, of which 86%, 93.33%, 90.25% and 59.82%, respectively, of such
amounts were characterized as ordinary income and 14%, 6.67%, 9.75% and 40.18%,
respectively, were characterized as return of capital for federal income tax
purposes. In addition, in July and August 1998, the Company declared
distributions to its stockholders totalling $3,283,093 and $3,466,888,
respectively, payable in September 1998. However, no amounts distributed to
stockholders as of June 30, 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 June
30, 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 August 14, 1998, the
Company had 55,947,675 shares of Common Stock outstanding (including 20,000
issued to the Advisor prior to the commencement of the Initial Offering and
428,793 issued pursuant to the Reinvestment Plan) and no Preferred Stock or
Excess Shares outstanding.
-102-
<PAGE>
EXHIBIT B
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
AND
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OF
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
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 SUBSIDIARIES
INDEX TO UPDATED FINANCIAL STATEMENTS
Page
----
Pro Forma Consolidated Financial Information (unaudited):
Pro Forma Consolidated Balance Sheet as of June 30, 1998 B-2
Pro Forma Consolidated Statement of Earnings for the six
months ended June 30, 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 six months ended June 30, 1998 and the year ended
December 31, 1997 B-5
Updated Unaudited Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets as of June 30, 1998
and December 31, 1997 B-9
Condensed Consolidated Statements of Earnings for the six
months ended June 30, 1998 and 1997 B-10
Condensed Consolidated Statements of Stockholders' Equity
for the six months ended June 30, 1998 and the year
ended December 31, 1997 B-11
Condensed Consolidated Statements of Cash Flows for the
six months ended June 30, 1998 and 1997 B-12
Notes to Condensed Consolidated Financial Statements for
the six months ended June 30, 1998 and 1997 B-14
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following Pro Forma Consolidated Balance Sheet of the Company gives
effect to (i) property acquisition transactions from inception through June 30,
1998, including the receipt of $514,300,100 in gross offering proceeds from the
sale of 51,430,010 shares of common stock and the application of such proceeds
to purchase 310 properties (including 243 properties which consist of land and
building, two properties through joint venture arrangements which consist of
land and building, 21 properties which consist of building only and 44
properties which consist of land only), 16 of which were under construction at
June 30, 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
$44,976,648 in gross offering proceeds from the sale of 4,497,665 additional
shares of common stock during the period July 1, 1998 through August 14, 1998,
(iii) the receipt of net sales proceeds in the amount of $1,152,262 relating to
the sale of one property (on which a restaurant was being developed) during the
period July 1, 1998 through August 14, 1998, (iv) the application of such funds
and $26,724,531 of cash and cash equivalents at June 30, 1998 to purchase 13
additional properties acquired during the period July 1, 1998 through August 14,
1998 (eight of which are under construction and consist of land and building,
one which is under construction and consists of building only and four which
consist of land and building), to pay additional costs for the 16 properties
under construction at June 30, 1998, to invest in franchise loan certificates,
and to pay offering expenses, acquisition fees and miscellaneous acquisition
expenses, and (v) the application of such funds to purchase 19 properties,
including 17 properties consisting of land and building and two properties
consisting of building only, for which the Company has made initial commitments
to acquire as of August 14, 1998, all as reflected in the pro forma adjustments
described in the related notes. The Pro Forma Consolidated Balance Sheet as of
June 30, 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) and (v) above, as if they had occurred on June
30, 1998.
The Pro Forma Consolidated Statements of Earnings for the six months
ended June 30, 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 five of the properties that were
acquired by the Company during the period January 1, 1997 through August 14,
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
August 14, 1998, or the properties for which the Company has made initial
commitments to acquire as of August 14, 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 SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1998
<TABLE>
<CAPTION>
Pro Forma
ASSETS Historical Adjustments Pro Forma
------ ---------- ----------- ---------
<S> <C>
Land and buildings on operating
leases, less accumulated
depreciation $236,704,020 $ 16,907,936 (a)
22,199,348 (b)
(1,152,262)(c) $274,659,042
Net investment in direct
financing leases (f) 114,426,551 3,522,637 (a)
2,582,300 (b) 120,531,488
Investment in joint venture 112,847 1,395,803 (d) 1,508,650
Cash and cash equivalents 76,369,080 14,236,234 (a)
(23,512,000)(b)
1,152,262 (c)
(1,326,323)(d)
(16,122,442)(e) 50,796,811
Certificates of deposit 2,008,304 2,008,304
Receivables, less allowance for
doubtful accounts of $200,361
and $99,964 respectively 390,005 390,005
Mortgage notes receivable 17,451,841 17,451,841
Equipment notes receivable 14,863,570 14,863,570
Other investments - 16,986,144 (e) 16,986,144
Accrued rental income 2,835,802 2,835,802
Other assets 4,957,390 979,168 (a)
(1,269,648)(b)
(69,480)(d)
(863,702)(e) 3,733,728
------------ ------------- ------------
$470,119,410 $ 35,645,975 $505,765,385
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Line of credit $ 5,438,446 $ 5,438,446
Accrued construction costs payable 4,471,616 $ (4,471,616)(a) -
Accounts payable and accrued
expenses 158,872 158,872
Due to related parties 1,395,080 1,395,080
Rents paid in advance 822,999 822,999
Deferred rental income 980,974 88,374 (a) 1,069,348
Other payables 49,848 49,848
------------- ------------ -----------
Total liabilities 13,317,835 (4,383,242) 8,934,593
------------- ------------ -----------
Minority interest 283,229 283,229
------------- ------------ -----------
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 125,000,000
shares; issued and outstanding
51,450,010 shares; issued and
outstanding, as adjusted,
55,947,675 shares 514,500 44,977 (a) 559,477
Capital in excess of par value 460,230,969 39,984,240 (a) 500,215,209
Accumulated distributions in
excess of net earnings (4,227,123) (4,227,123)
------------ ----------- ------------
Total stockholders' equity 456,518,346 40,029,217 496,547,563
------------ ----------- ------------
$470,119,410 $35,645,975 $505,765,385
============ =========== ============
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements.
B-2
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C>
Revenues:
Rental income from
operating leases $11,012,231 $ 79,137 (1) $11,091,368
Earned income from
direct financing leases (6) 2,795,390 26,311 (1) 2,821,701
Interest income from
mortgage notes receivable 864,049 864,049
Other interest and income 2,957,408 (72,602)(2) 2,884,806
----------- --------- -----------
17,629,078 32,846 17,661,924
----------- --------- -----------
Expenses:
General operating and
administrative 971,727 971,727
Professional services 65,108 65,108
Asset management fees
to related party 729,860 9,277 (3) 739,137
State and other taxes 182,703 182,703
Depreciation and amortization 1,648,827 8,894 (4) 1,657,721
----------- --------- -----------
3,598,225 18,171 3,616,396
----------- --------- -----------
Earnings Before Minority
Interest in Income of
Consolidated Joint Venture 14,030,853 14,675 14,045,528
Minority Interest in Income of
Consolidated Joint Venture (15,380) (15,380)
----------- --------- -----------
Net Earnings $14,015,473 $ 14,675 $14,030,148
=========== ========= ===========
Earnings Per Share of
Common Stock (Basic
and Diluted) (5) $ 0.32 $ 0.33
=========== ===========
Weighted Average Number of
Shares of Common Stock
Outstanding (5) 43,166,433 43,166,433
=========== ===========
</TABLE>
See accompanying notes to unaudited pro forma consolidated
financial statements.
B-3
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
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 SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND THE YEAR ENDED DECEMBER 31, 1997
Pro Forma Consolidated Balance Sheet:
(a) Represents gross proceeds of $44,976,648 from the issuance of 4,497,665
shares of common stock during the period July 1, 1998 through August
14, 1998 and the receipt of $88,374 of rental income during
construction (capitalized as deferred rental income) used (i) to
acquire 13 properties (eight of which are under construction and
consist of land and building, one of which is under construction and
consists of building only and four of which consist of land and
building) for $14,597,518, (ii) to fund estimated construction costs of
$9,259,890 ($4,471,616 of which was accrued as construction costs
payable at June 30, 1998) relating to 16 wholly owned properties under
construction at June 30, 1998, (iii) to pay acquisition fees of
$2,023,949 ($1,044,781 of which was allocated to properties and
$979,168 of which was classified as other assets and will be allocated
to future properties) and (iv) to pay selling commissions and offering
expenses (stock issuance costs) of $4,947,431, which have been netted
against capital in excess of par value, leaving $14,236,234 in cash and
cash equivalents available for future investment.
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>
Wendy's in Knoxville, TN $ 454,930 $ 24,566 $ 479,496
Black-eyed Pea in Herndon, VA 1,278,118 69,018 1,347,136
Ponderosa in Blue Springs, MO 1,729,053 93,369 1,822,422
Golden Corral in Clovis, NM 1,164,741 62,896 1,227,637
IHOP in Poughkeepsie, NY 1,239,713 66,944 1,306,657
Jack in the Box in Chandler, AZ 1,050,116 56,706 1,106,822
Taco Bell in Livingston, TN 576,560 31,134 607,694
Jack in the Box in Lufkin, TX 1,004,688 54,253 1,058,941
Roadhouse Grill in Pensacola, FL 1,506,841 81,369 1,588,210
Golden Corral in Dublin, GA 1,288,271 69,566 1,357,837
TGI Friday's in El Paso, TX 1,596,707 86,222 1,682,929
IHOP in Greeley, CO 1,259,628 68,020 1,327,648
Wendy's in Seymour, TN 448,152 24,200 472,352
16 wholly owned properties under
construction at June 30, 1998 4,788,274 256,518 5,044,792
----------- ----------- -----------
$19,385,792 $ 1,044,781 $20,430,573
=========== =========== ===========
Adjustment classified as follows:
Land and buildings on operating leases $16,907,936
Net investment in direct financing leases 3,522,637
-----------
$20,430,573
===========
</TABLE>
B-5
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED
FOR THE SIX MONTHS ENDED JUNE 30, 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 19
properties (including 17 properties consisting of land and building and
two properties consisting of building only) for which the Company had
made initial commitments to purchase as of August 14, 1998, for an
estimated cost of $23,512,000, and the allocation of $1,269,648 of
acquisition fees to these 19 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 19
properties as of August 14, 1998 $23,512,000 $ 1,269,648 $24,781,648
=========== =========== ===========
Adjustment classified as follows:
Land and buildings on operating leases $22,199,348
Net investment in direct financing leases 2,582,300
-----------
$24,781,648
===========
</TABLE>
(c) Represents net sales proceeds in the amount of $1,152,262 received in
conjunction with the sale of one property (on which a restaurant was
being developed), which was sold at approximately net carrying value.
(d) Represents the use of the Company's net offering proceeds in accordance
with the joint venture agreement of CNL/Lee Vista Joint Venture, to
fund estimated construction costs of $1,326,323 relating to the
property owned by the joint venture and the allocation of $69,480 of
acquisition fees to this joint venture. The Company accounts for its
approximate 68 percent interest in this joint venture under the equity
method because it shares control with the other joint venture partner.
(e) Represents the use of the Company's net proceeds in the amount of
$16,122,442 to acquire Class F, Class G and Class H Franchise Loan
Certificates, Series 1998-1 from CNL Funding 98-1, LP, a mortgage loan
securitization entity sponsored by an affiliate of the advisor of the
Company, and the allocation of $863,702 of acquisition fees to this
investment.
(f) 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 SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED
FOR THE SIX MONTHS ENDED JUNE 30, 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 five of the properties acquired during the
period January 1, 1997 through August 14, 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.
Date Pro Forma
Date Placed Property Became
in Service Operational as
By the Company Rental Property
-------------- ---------------
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
Ponderosa in Blue Springs, MO July 1998 April 1998
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 six months ended June 30, 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 six
months ended June 30, 1998 and year ended December 31, 1997.
B-7
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED
FOR THE SIX MONTHS ENDED JUNE 30, 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
$7,371,000 and $5,642,000 for the Pro Forma Properties for the six
months ended June 30, 1998 and the year ended December 31, 1997,
respectively), 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 six
months ended June 30, 1998 and the year ended December 31, 1997.
(6) See Note (f) under "Pro Forma Consolidated Balance Sheet" for a
description of direct financing leases.
B-8
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
ASSETS 1998 1997
------------ ------------
Land and buildings on operating leases,
less accumulated depreciation $236,704,020 $205,338,186
Net investment in direct financing leases 114,426,551 47,613,595
Investment in joint venture 112,847 -
Cash and cash equivalents 76,369,080 47,586,777
Certificates of deposit 2,008,304 2,008,224
Receivables, less allowance for doubtful
accounts of $200,361 and $99,964,
respectively 390,005 635,796
Mortgage notes receivable 17,451,841 17,622,010
Equipment notes receivable 14,863,570 13,548,044
Accrued rental income 2,835,802 1,772,261
Other assets 4,957,390 2,952,869
------------ ------------
$470,119,410 $339,077,762
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Line of credit $ 5,438,446 $ 2,459,043
Accrued construction costs payable 4,471,616 10,978,211
Accounts payable and accrued expenses 158,872 1,060,497
Due to related parties 1,395,080 1,524,294
Rents paid in advance 822,999 517,428
Deferred rental income 980,974 557,576
Other payables 49,848 56,878
------------ ------------
Total liabilities 13,317,835 17,153,927
------------ ------------
Minority interest 283,229 285,734
------------ ------------
Commitments (Note 12)
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 125,000,000 and 75,000,000
shares, respectively, issued and
outstanding 51,450,010 and 36,192,971,
respectively 514,500 361,930
Capital in excess of par value 460,230,969 323,525,961
Accumulated distributions in excess of
net earnings (4,227,123) (2,249,790)
------------ ------------
Total stockholders' equity 456,518,346 321,638,101
------------ ------------
$470,119,410 $339,077,762
============ ============
See accompanying notes to condensed consolidated financial statements.
B-9
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---------- ---------- ----------- --------
<S> <C>
Revenues:
Rental income from
operating leases $5,696,205 $2,363,731 $11,012,231 $ 4,006,805
Earned income from
direct financing
leases 1,432,718 511,781 2,795,390 958,492
Interest income from
mortgage notes
receivable 430,972 439,835 864,049 815,192
Other interest and
income 1,741,379 460,329 2,957,408 934,745
---------- ---------- ----------- -----------
9,301,274 3,775,676 17,629,078 6,715,234
---------- ---------- ----------- -----------
Expenses:
General operating and
administrative 472,339 225,755 971,727 481,211
Professional services 12,169 6,216 65,108 44,679
Asset and mortgage
management fees to
related party 367,201 148,740 729,860 259,256
State and other taxes 77,180 72,513 182,703 107,863
Depreciation and
amortization 869,329 339,366 1,648,827 579,404
---------- ---------- ----------- -----------
1,798,218 792,590 3,598,225 1,472,413
---------- ---------- ----------- -----------
Earnings Before Minority
Interest in Income of
Consolidated Joint
Venture 7,503,056 2,983,086 14,030,853 5,242,821
Minority Interest in
Income of Consolidated
Joint Venture (7,612) (7,833) (15,380) (15,726)
---------- ---------- ----------- -----------
Net Earnings $7,495,444 $2,975,253 $14,015,473 $ 5,227,095
========== ========== =========== ===========
Earnings Per Share of
Common Stock (Basic
and Diluted) $ 0.16 $ 0.15 $ 0.32 $ 0.29
========== ========== =========== ===========
Weighted Average Number
of Shares of Common
Stock Outstanding 47,048,769 19,997,391 43,166,433 17,826,025
========== ========== =========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
B-10
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Six Months Ended June 30, 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 15,257,039 152,570 152,417,821 - 152,570,391
Stock issuance
costs - - (15,712,813) - (15,712,813)
Net earnings - - - 14,015,473 14,015,473
Distributions
declared and
paid ($0.38
per share) - - - (15,992,806) (15,992,806)
---------- -------- ------------ ------------ ------------
Balance at
June 30, 1998 51,450,010 $514,500 $460,230,969 $ (4,227,123) $456,518,346
========== ======== ============ ============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
B-11
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
1998 1997
------------ -----------
Increase (Decrease) in Cash and Cash
Equivalents:
Net Cash Provided by Operating
Activities $ 16,600,953 $ 6,314,003
------------ ------------
Cash Flows From Investing Activities:
Additions to land and buildings
on operating leases (36,742,586) (75,111,847)
Increase in net investment in
direct financing leases (71,360,700) (14,391,675)
Proceeds from sale of buildings and
equipment under direct financing
leases 1,233,679 6,216,357
Investment in mortgage notes
receivable - (4,401,982)
Collection on mortgage notes
receivable 147,051 117,192
Investment in equipment notes
receivable (2,903,600) -
Collection on equipment notes
receivable 666,633 -
Investment in joint venture (112,847) -
Increase in other assets (1,845,005) -
------------ -----------
Net cash used in investing
activities (110,917,375) (87,571,955)
------------ ------------
Cash Flows From Financing Activities:
Reimbursement of acquisition and
stock issuance costs paid by
related parties on behalf of
the Company (2,570,126) (1,524,434)
Proceeds from borrowing on line
of credit 2,979,403 2,888,163
Payment on line of credit - (1,653,321)
Subscriptions received from
stockholders 152,570,391 84,646,030
Distributions to minority interest (16,956) (17,035)
Distributions to stockholders (15,992,806) (6,282,470)
Payment of stock issuance costs (13,840,339) (8,145,622)
Other (30,842) (6,101)
------------ ------------
Net cash provided by
financing activities 123,098,725 69,905,210
------------ ------------
Net Increase (Decrease) in Cash and Cash
Equivalents 28,782,303 (11,352,742)
Cash and Cash Equivalents at Beginning
of Period 47,586,777 42,450,088
------------ ------------
Cash and Cash Equivalents at End
of Period $ 76,369,080 $ 31,097,346
============ ============
See accompanying notes to condensed consolidated financial statements.
B-12
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Six Months Ended
June 30,
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 $ 536,646 $ 329,237
Stock issuance costs 2,190,143 1,361,009
------------ ------------
$ 2,726,789 $ 1,690,246
============ ============
Land and buildings under operating
leases exchanged for land and
buildings under operating leases $ 2,754,419 $ -
============ ===========
See accompanying notes to condensed consolidated financial statements.
B-13
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS Quarters and Six Months Ended June 30,
1998 and 1997
1. Organization and Nature of Business:
CNL American Properties Fund, Inc. was organized in Maryland on May 2,
1994. CNL APF GP Corp. and CNL APF LP Corp., organized in Delaware in
May 1998, are wholly owned subsidiaries of CNL American Properties
Fund, Inc. CNL APF Partners, LP is a Delaware limited partnership
formed in May 1998. CNL APF GP Corp. and CNL APF LP Corp. are the
general and limited partners, respectively, of CNL APF Partners, LP.
The term "Company" includes, unless the text otherwise requires, CNL
American Properties Fund, Inc., CNL APF GP Corp., CNL APF LP Corp. and
CNL APF Partners, LP. The Company was formed 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 and six months ended June 30, 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.
B-14
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
CONTINUED Quarters and Six Months Ended June 30,
1998 and 1997
2. Basis of Presentation - Continued:
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. The
Company accounts for its 13.11% interest in CNL/Lee Vista Joint Venture
using the equity method because it shares control with the other joint
venture partner.
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.
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.
In March 1998, the Emerging Issues Task Force of the Financial
Accounting Standards Board ("FASB")reached a consensus in EITF 97-11,
entitled "Accounting for Internal Costs Relating to Real Estate
Property Acquisitions." EITF 97-11 provides that internal costs of
identifying and acquiring operating Property should be expensed as
incurred. Due to the fact that the Company does not have an internal
acquisitions function and instead, contracts these services from an
external advisor, the effectiveness of EITF 97-11 had no material
effect on the Company's financial position or results of operations.
In May 1998, the Emerging Issues Task Force of the FASB reached a
consensus in EITF 98-9, entitled "Accounting for Contingent Rent in the
Interim Financial Periods." Management of the Company does not expect
that the consensus will have a material effect on the Company's
financial position or results
of operations.
In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("FAS 133"). FAS 133 is effective for all fiscal quarters
of all fiscal years beginning after June 15, 1999 (January 1, 2000) for
the Company). FAS 133 requires that all derivative instruments be
B-15
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
CONTINUED Quarters and Six Months Ended June 30,
1998 and 1997
2. Basis of Presentation - Continued:
recorded on the balance sheet at their fair value. Changes in the fair
value of derivatives are recorded each period in current earnings or
other comprehensive income, depending on whether a derivative is
designated as part of a hedge transaction and, if it is, the type of
hedge transaction. Management of the Company anticipates that, due to
its limited use of derivative instruments, the adoption of FAS 133 will
not have a significant effect on the Company's results of operations or
its financial position.
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 2,500,000
shares ($25,000,000) 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 the majority 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 SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
CONTINUED Quarters and Six Months Ended June 30,
1998 and 1997
5. Land and Buildings on Operating Leases:
In April 1998, a tenant exercised its option under the terms of three
lease agreements to exchange three existing Properties for three
replacement Properties which were approved by the Company. In
connection therewith, the Company exchanged three Boston Market
Properties with three replacement Boston Market Properties. Under the
exchange agreements for each Property, 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 nonmonetary 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 nonmonetary exchanges of
similar assets.
In May 1998, the Company sold two Properties to third parties. The
Company received net sales proceeds of approximately $1,233,700 which
approximated the carrying value of the Properties at the time of sale.
As a result, no gain or loss was recognized for financial reporting
purposes.
Land and buildings on operating leases consisted of the following at:
June 30, December 31,
1998 1997
------------ ------------
Land $123,029,085 $106,616,360
Buildings 110,119,194 95,518,149
------------ ------------
233,148,279 202,134,509
Less accumulated
depreciation (4,013,726) (2,395,665)
------------ ------------
229,134,553 199,738,844
Construction in
progress 7,569,467 5,599,342
------------ ------------
$236,704,020 $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 six months ended June 30,
1998 and 1997, the Company recognized $1,303,987 and $616,027,
respectively, of such rental income, $547,789 and $340,535 of which was
earned during the quarters ended June 30, 1998 and 1997, respectively.
B-17
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
CONTINUED Quarters and Six Months Ended June 30,
1998 and 1997
5. Land and Buildings on Operating Leases - Continued:
The following is a schedule of future minimum lease payments to be
received on the noncancellable operating leases at June 30, 1998:
1998 $ 10,758,915
1999 21,604,111
2000 21,635,017
2001 21,857,055
2002 22,662,800
Thereafter 308,075,082
------------
$406,592,980
============
Since leases are renewable at the option of the tenant, the above table
only presents future minimum lease payments due during the initial
lease terms. In addition, this table does not include any amounts for
future contingent rents which may be received on the leases based on
the percentage of the tenant's gross sales. These amounts do not
include minimum lease payments that will become due when Properties
under development are completed (see Note 12).
6. Net Investment in Direct Financing Leases:
The following lists the components of the net investment in direct
financing leases at:
June 30, December 31,
1998 1997
------------ ------------
Minimum lease payments
receivable $244,507,445 $ 98,121,853
Estimated residual
values 44,073,688 6,889,570
Secured Equipment Lease
interest receivable 73,092 67,614
Less unearned income (174,227,674) (57,465,442)
------------ ------------
Net investment in
direct financing
leases $114,426,551 $ 47,613,595
============ ============
B-18
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
CONTINUED Quarters and Six Months Ended June 30,
1998 and 1997
6. Net Investment in Direct Financing Leases - Continued:
The following is a schedule of future minimum lease payments to be
received on the direct financing leases at June 30, 1998:
1998 $ 6,684,243
1999 13,442,657
2000 13,591,188
2001 13,363,121
2002 13,265,990
Thereafter 184,160,246
------------
$244,507,445
============
The above table does not include future minimum lease payments for
renewal periods or contingent rental payments that may become due in
future periods (see Note 5).
7. Equipment Notes Receivable:
On June 30, 1998, the Company entered into a promissory note with a
borrower for equipment financing for $2,200,000, which is
collateralized by restaurant equipment. The promissory note bears
interest at a rate of ten percent per annum and will be collected in
consecutive monthly installments of principal and interest of $36,523
beginning July 1, 1998, with a balloon payment due September 15, 1998
for the remaining unpaid balance.
Equipment notes receivable consisted of the following at June 30:
1998 1997
----------- -----------
Outstanding principal $14,758,367 $13,225,000
Accrued interest income 105,203 323,044
----------- -----------
$14,863,570 $13,548,044
=========== ===========
Management believes that the estimated fair value of equipment notes
receivable at June 30, 1998 and December 31, 1997 approximated the
outstanding principal amount based on estimated current rates at which
similar loans would be made to borrowers with similar credit and for
similar maturities.
B-19
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
CONTINUED Quarters and Six Months Ended June 30,
1998 and 1997
8. Investment in Joint Venture:
In June 1998, the Company entered into a joint venture arrangement,
CNL/Lee Vista Joint Venture, with a third party to construct and hold
one restaurant property. As of June 30, 1998, the Company had
contributed $112,847 to pay for construction relating to the Property
owned by the joint venture. The Company has agreed to contribute
approximately $1,303,900 in additional construction costs to the joint
venture. When construction is completed, the Company expects to have an
approximate 68 percent interest in the profits and losses of the joint
venture. The Company accounts for its investment in this joint venture
under the equity method because it shares control with the other joint
venture partner.
The following presents the condensed financial information for the
joint venture at:
June 30, December 31,
1998 1997
-------- ------------
Land on operating leases
and construction in
progress $928,515 $ -
Cash 1,145 -
Receivables 10,441 -
Liabilities 133,341 -
Partners' capital 806,760 -
The Company did not recognize any income from this joint venture
because the Property owned by the joint venture was not operational as
of June 30, 1998.
9. 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
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.
B-20
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
CONTINUED Quarters and Six Months Ended June 30,
1998 and 1997
9. Stock Issuance Costs - Continued:
During the six months ended June 30, 1998 and the year ended December
31, 1997, the Company incurred $15,712,813 and $22,422,045,
respectively, in stock issuance costs, including $12,205,631 and
$17,798,605, respectively, in commissions and marketing support and due
diligence expense reimbursement fees (see Note 11). The stock issuance
costs have been charged to stockholders' equity subject to the three
percent cap described above.
10. Distributions:
For the six months ended June 30, 1998 and 1997, approximately 86 and
92 percent, respectively, of the distributions paid to stockholders
were considered ordinary income and approximately 14 and eight percent,
respectively, were considered a return of capital to stockholders for
federal income tax purposes. No amounts distributed to the stockholders
for the six months ended June 30, 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 six
months ended June 30, 1998 may not be indicative of the results that
may be expected for the year ending December 31, 1998.
11. Related Party Transactions:
During the six months ended June 30, 1998 and 1997, the Company
incurred $11,442,779 and $6,344,702, respectively, in selling
commissions due to CNL Securities Corp. for services in connection with
the offering of shares. A substantial portion of these amounts
($10,689,329 and $5,848,410) were paid by CNL Securities Corp. as
commissions to other broker-dealers, during the six months ended June
30, 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 six months ended June
30, 1998 and 1997, the Company incurred $762,852 and $422,980,
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.
B-21
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
CONTINUED Quarters and Six Months Ended June 30,
1998 and 1997
11. Related Party Transactions - Continued:
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 six months ended June 30, 1998 and 1997, the
Company incurred $6,865,668 and $3,806,821, respectively, of such fees.
Such fees are included in land and buildings on operating leases, net
investment in direct financing leases, mortgage notes receivable,
investment in joint venture 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 six months ended June 30, 1998 and 1997, the
Company incurred $68,759 and $178,879, respectively, of such fees
relating to three Properties.
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 six months ended June 30, 1998 and 1997, the Company
incurred $36,899 and $54,598, 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 deferred
without interest and may be taken in such other fiscal year as the
Advisor shall determine. During the six months ended June 30, 1998 and
1997, the Company incurred $756,791 and $300,656, respectively, of such
fees, of which $26,931 and $41,400, respectively, was capitalized as
part of the cost of the buildings for Properties under construction.
B-22
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
CONTINUED Quarters and Six Months Ended June 30,
1998 and 1997
11. Related Party Transactions - Continued:
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 six
months ended June 30:
1998 1997
---------- ----------
Stock issuance costs $1,378,104 $ 757,096
General operating and
administrative expenses 488,710 269,208
---------- ----------
$1,866,814 1,026,304
========== ==========
For the six months ended June 30, 1998 and 1997, the Company acquired
one and two Properties, respectively, for approximately $2,248,600 and
$1,773,300, respectively, 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.
B-23
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
CONTINUED Quarters and Six Months Ended June 30,
1998 and 1997
11. Related Party Transactions - Continued:
The due to related parties consisted of the following at:
June 30, December 31,
1998 1997
---------- ------------
Due to the Advisor:
Expenditures incurred
on behalf of the
Company and accounting
and administrative
services $ 380,642 $ 126,205
Acquisition fees 367,520 386,972
---------- ----------
748,162 513,177
---------- ----------
Due to CNL Securities Corp:
Commissions 606,082 940,520
Marketing support and due
diligence expense reim-
bursement fees 40,836 63,097
---------- ----------
646,918 1,003,617
---------- ----------
Due to other affiliates - 7,500
---------- ----------
$1,395,080 $1,524,294
========== ==========
12. 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 $20,478,500, of which approximately $15,340,200
in land and other costs had been incurred as of June 30, 1998. The
buildings currently under construction or renovation are expected to be
operational by December 1998. In connection with the purchase of each
Property, the Company, as lessor, has entered into a long-term lease
agreement.
The Company entered into an agreement with a tenant to sell the
Property to be developed in Arvada, Colorado. The anticipated sales
price is approximately equal to the Company's cost attributable to the
Property.
B-24
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
CONTINUED Quarters and Six Months Ended June 30,
1998 and 1997
13. Subsequent Events:
During the period July 1, 1998 through August 3, 1998, the Company
received subscription proceeds for an additional 3,228,977 shares
($32,289,773) of common stock.
On July 1, 1998 and August 1, 1998, the Company declared distributions
of $3,283,093 and $3,466,888, respectively, or $0.06354 per share of
common stock, payable in September 1998 to stockholders of record on
July 1, 1998 and August 1, 1998, respectively.
During the period July 1, 1998 through August 3, 1998, the Company
acquired nine Properties (five of which are under construction) for
cash at a total cost of approximately $8,578,900. In connection with
the purchase of each of the nine Properties, the Company, as lessor,
entered into a long-term lease agreement. The buildings under
construction or renovation are expected to be operational or renovated
by April 1999.
The Company formed a special committee (the "Special Committee")
consisting of the independent directors for the purpose of evaluating
strategic alternatives designed to maximize stockholder value. The
Special Committee retained the investment banking firms of Merrill
Lynch, Pierce, Fenner & Smith, Incorporated and Smith Barney, Inc. (the
"Advising Firms") to advise the Special Committee regarding its
strategic alternatives. On July 17, 1998, the Advising Firms presented
their findings and supporting financial information to the Special
Committee. Based on the reports of the Advising Firms and its own
analyses, on July 20, 1998, the Special Committee unanimously agreed to
present the recommendations described below to the full Board of
Directors. The full Board of Directors unanimously adopted the
recommendations of the Special Committee at a meeting held on July 24,
1998.
In summary, the Special Committee concluded that the best means to
maximize stockholder value would be for the Company to (i)
significantly increase the size of the Company by acquiring from
affiliates of the Company's Advisor portfolios of Properties similar to
those currently held by the Company; (ii) become internally advised;
(iii) acquire internal real estate development capability by acquiring
the Advisor; (iv) expand its mortgage lending capabilities by acquiring
an affiliate of the Advisor, thus allowing the Company to offer a full
range of financing options to restaurant operators; and (v) list its
common stock on a national stock exchange, assuming market conditions
are favorable.
B-25
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
CONTINUED Quarters and Six Months Ended June 30,
1998 and 1997
13. Subsequent Events - Continued:
The Special Committee recommended that the Company seek to list its
common stock either concurrently with the acquisitions described below
or as shortly thereafter as market conditions are deemed to be
favorable for such listing. The Special Committee further recommended
that the Company evaluate a public offering of its common stock
concurrently with the listing of its shares.
The acquisitions of portfolios of restaurant properties and certain
related restaurant businesses owned by 18 CNL Income Funds and eight
CNL Income & Growth Funds (collectively, the "CNL Funds") and the
acquisitions of CNL restaurant related entities are subject to the
Company negotiating acceptable purchase prices and other acquisition
terms with each of the sellers and to obtain approval of the
acquisitions by the limited partners of the CNL Funds and the
shareholders of the other CNL restaurant related entities. Accordingly,
the acquisition of such entities is not assured.
In addition, in order to effect the acquisitions, the Company will need
to increase its authorized common stock, which requires the approval of
the Company's stockholders. It is expected that the request for a vote
on such increase will be presented to the stockholders in early 1999.
In connection with such vote, complete information on the proposed
transaction will be delivered to the Company's stockholders. Prior to
seeking that vote, the Company will obtain and furnish to the
stockholders an opinion of a third party that the consideration
proposed to be paid by the Company for the acquisitions is fair to the
Company from a financial point of view.
B-26
<PAGE>
EXHIBIT E
STATEMENT OF ESTIMATED TAXABLE OPERATING RESULTS
BEFORE DIVIDENDS PAID DEDUCTION
OF
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
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 AUGUST 14, 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 August 14, 1998, and the total of all properties for
which the Company had an initial commitment as of August 14, 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 Expense (2)(5) (6) (6) (6) (6)
Estimated Taxable Operating
Results Before Dividends
Paid Deduction (6) (6) (6) (6)
See Footnotes
E-1
<PAGE>
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)
-------------- ------------------- ------------------ -----------------------
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 Expense (2)(5) (6) (6) (6) (6)
Estimated Taxable Operating
Results Before Dividends
Paid Deduction (6) (6) (6) (6)
See Footnotes
E-2
<PAGE>
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)
------------------- ---------------- --------------- -----------------
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 Expense (2)(5) (6) (12,667) (17,921) (6)
-------- -------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction (6) $ 77,422 $61,486 (6)
======== =======
See Footnotes
E-3
<PAGE>
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)
---------------- ------------------- -------------- -----------------
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 Expense (2)(5) (6) (18,725) (34,884) (6)
-------- --------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction (6) $ 73,149 $147,958 (6)
======== ========
See Footnotes
E-4
<PAGE>
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)
------------ ---------------- ---------------- ------------------
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 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
======= ======== ======= ========
See Footnotes
E-5
<PAGE>
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
Jonesboro, GA (10) Marietta #2, GA (10) Norcross, GA (10) Smyrna, GA (10)
------------------ -------------------- ----------------- ----------------
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 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
======== ======== ======== ========
See Footnotes
E-6
<PAGE>
IHOP Golden Corral Wendy's Bennigan's
Hollywood, CA (11) Brunswick, GA (12) Knoxville #3, TN (13) Orlando #4, FL (14)(15)
------------------ ------------------ --------------------- -----------------------
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 Expense (2)(5) (25,327) (6) (6) (6)
--------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction $174,783 (6) (6) (6)
========
See Footnotes
E-7
<PAGE>
Burger King Bennigan's Bennigan's Bennigan's
Atlanta #3, GA Bedford #3, OH (14) Clearwater, FL (14) Colorado Springs #2, CO (14)
-------------- ------------------- ------------------- ----------------------------
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 Expense (2)(5) (6) - - -
-------- -------- -------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction (6) $146,748 $165,616 $144,651
======== ======== ========
See Footnotes
E-8
<PAGE>
Bennigan's Bennigan's Bennigan's Bennigan's
Englewood #1, CO (14) Englewood #2, NJ (14) Florham Park, NJ (14) Houston #8, TX (14)
--------------------- --------------------- --------------------- -------------------
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 Expense (2)(5) - - - -
-------- -------- -------- -------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction $153,037 $201,254 $184,902 $161,423
======== ======== ======== ========
See Footnotes
E-9
<PAGE>
Bennigan's Bennigan's Bennigan's Bennigan's
Jacksonville #4, FL (14) Jacksonville #5, NJ (14) Mount Laurel, NJ (14) N. Richland Hills, TX (14)
------------------------ ------------------------ --------------------- --------------------------
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 Expense (2)(5) - - - -
-------- -------- -------- -------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction $136,266 $161,423 $199,157 $159,326
======== ======== ======== ========
See Footnotes
E-10
<PAGE>
Bennigan's Bennigan's Bennigan's Bennigan's
Oklahoma City #2, OK (14) Orlando #2, FL (14) Pensacola #2, FL (14) St. Louis Park, MN (14)
------------------------- ------------------- --------------------- -----------------------
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 Expense (2)(5) - - - -
-------- -------- -------- -------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction $150,940 $209,640 $142,555 $184,482
======== ======== ======== ========
See Footnotes
E-11
<PAGE>
Bennigan's Bennigan's Steak and Ale Steak and Ale
Tampa #4, FL (14) Winston-Salem #2, NC (14) Altamonte Springs, FL (14) Austin, TX (14)
----------------- ------------------------- -------------------------- ---------------
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 Expense (2)(5) - - - -
-------- -------- -------- -------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction $174,421 $105,658 $144,651 $123,687
======== ======== ======== ========
See Footnotes
E-12
<PAGE>
Steak and Ale Steak and Ale Steak and Ale Steak and Ale
Birmingham, AL (14) College Park, GA (14) Conroe, TX (14) Greenville #2, SC (14)
------------------- --------------------- --------------- ----------------------
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 Expense (2)(5) - - - -
-------- -------- -------- -------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction $119,074 $145,909 $138,363 $157,649
======== ======== ======== ========
See Footnotes
E-13
<PAGE>
Steak and Ale Steak and Ale Steak and Ale Steak and Ale
Houston #9, TX (14) Houston #10, TX (14) Huntsville #2, AL (14) Jacksonville #6, FL (14)
------------------- -------------------- ---------------------- ------------------------
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 Expense (2)(5) - - - -
-------- -------- -------- -------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction $159,326 $165,616 $123,687 $132,072
======== ======== ======== ========
See Footnotes
E-14
<PAGE>
Steak and Ale Steak and Ale Steak and Ale Steak and Ale
Maitland, FL (14) Mesquite, TX (14) Miami, FL (14) Middletown, NJ, TX (14)
----------------- ----------------- -------------- -----------------------
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 Expense (2)(5) - - - -
-------- -------- -------- -------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction $125,784 $127,880 $150,940 $144,651
======== ======== ======== ========
See Footnotes
E-15
<PAGE>
Steak and Ale Steak and Ale Steak and Ale Steak and Ale
Orlando #3, FL (14) Palm Harbor, FL (14) Pensacola #3, FL (14) Tulsa, OK (14)
------------------- -------------------- --------------------- --------------
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 Expense (2)(5) - - - -
-------- -------- -------- -------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction $140,458 $111,109 $100,627 $127,880
======== ======== ======== ========
See Footnotes
E-16
<PAGE>
Ponderosa Steak House Wendy's Black-eyed Pea Ponderosa Steak House
Johnstown, PA (16) Knoxville #4, TN (13) Herndon, VA Blue Springs, MO (16)
--------------------- --------------------- -------------- ---------------------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction:
Rental income (1) (6) (6) $134,307 $179,204
Earned income (2) (6) (6) - -
Asset Management Fees (3) (6) (6) (7,669) (10,374)
General and Administrative
Expenses (4) (6) (6) (8,327) (11,111)
-------- --------
Estimated Cash Available from
Operations (6) (6) 118,311 157,719
Depreciation Expense (2)(5) (6) (6) (25,278) (29,038)
-------- --------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction (6) (6) $ 93,033 $128,681
======== ========
See Footnotes
E-17
<PAGE>
Golden Corral IHOP Jack in the Box Taco Bell
Clovis, NM (12) Poughkeepsie, NY (11) Chandler, AZ (7) Livingston, TN
--------------- --------------------- ---------------- --------------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction:
Rental income (1) $125,483 $116,618 (6) (6)
Earned income (2) - - (6) (6)
Asset Management Fees (3) (6,988) (7,438) (6) (6)
General and Administrative
Expenses (4) (7,780) (7,230) (6) (6)
-------- --------
Estimated Cash Available from
Operations 110,715 101,950 (6) (6)
Depreciation Expense (2)(5) (20,576) (20,603) (6) (6)
-------- --------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction $ 90,139 $ 81,347 (6) (6)
======== ========
See Footnotes
E-18
<PAGE>
Jack in the Box Roadhouse Grill Golden Corral TGI Friday's
Lufkin #2, TX (7) Pensacola #4, FL Dublin, GA (12) El Paso, TX
----------------- ---------------- --------------- -----------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction:
Rental income (1) (6) (6) (6) $160,294
Earned income (2) (6) (6) (6) -
Asset Management Fees (3) (6) (6) (6) (9,580)
General and Administrative
Expenses (4) (6) (6) (6) (9,938)
--------
Estimated Cash Available from
Operations (6) (6) (6) 140,776
Depreciation Expense (2)(5)(18) (6) (6) (6) (29,219)
--------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction (6) (6) (6) $111,557
========
See Footnotes
E-19
<PAGE>
IHOP Wendy's Completed Investments Pending Investments
Greeley, CO (11) Seymour, TN (13) Total Total (17)
---------------- ---------------- --------------------- ---------------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction:
Rental income (1) (6) (6) $2,386,349 $1,746,056
Earned income (2) (6) (6) 5,936,421 -
Asset Management Fees (3) (6) (6) (491,878) (98,772)
General and Administrative
Expenses (4) (6) (6) (516,012) (108,255)
---------- ----------
Estimated Cash Available from
Operations (6) (6) 7,314,880 1,539,029
Depreciation Expense (2)(5)(18) (6) (6) (380,466) (260,333)
---------- ----------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction (6) (6) $6,934,414 $1,278,696
========== ==========
See Footnotes
E-20
<PAGE>
Grand Total
-----------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction:
Rental income (1) $4,132,405
Earned income (2) 5,936,421
Asset Management Fees (3) (590,650)
General and Administrative
Expenses (4) (624,267)
----------
Estimated Cash Available from
Operations 8,853,909
Depreciation Expense (2)(5) (640,799)
----------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction $8,213,110
==========
</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 and 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.
(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.
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(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 Opened for business July 7, 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
Johnstown Property December 14, 1998
Knoxville #4 Property November 7, 1998
Chandler Property January 16, 1999
Livingston Property January 17, 1999
Lufkin #2 Property January 19, 1999
Pensacola #4 Property April 20, 1999
Dublin Property February 3, 1999
Greeley Property November 12, 1998
Seymour Property December 12, 1998
The Company anticipates the pending investments that are construction
properties will generally be operational within 180 days after
acquisition.
(7) The lessee of the Pflugerville, Waxahachie, Hutchins, Gun Barrel City,
Nacogdoches, St. Louis, Avondale, Fresno #2, Chandler and Lufkin #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.
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(11) The lessee of the Hollywood, Poughkeepsie and Greeley Properties is the
same unaffiliated lessee.
(12) The lessee of the Brunswick, Clovis and Dublin Properties is the same
unaffiliated lessee.
(13) The lessee of the Knoxville #3, Knoxville #4 and Seymour Properties is
the same unaffiliated lessee.
(14) The lessee of the 18 Bennigan's Properties and the 18 Steak and Ale
Properties is the same unaffiliated lessee.
(15) 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.
(16) The lessee of the Johnstown and Blue Springs Properties is the same
unaffiliated lessee.
(17) Information relating to the 12 pending investments that are existing is
based on estimated purchase prices for each of the 12 properties. The
remaining seven properties that will be under construction once they
are acquired are not included.
(18) 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.
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