UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-28380
CNL AMERICAN PROPERTIES FUND, INC.
(Exact name of registrant as specified in its charter)
Maryland 59-3239115
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
400 East South Street
Orlando, Florida 32801
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (407) 650-1000
Securities registered pursuant to Section 12(b) of
the Act:
Title of each class: Name of exchange on which registered:
None Not Applicable
Securities registered pursuant to Section 12(g) of
the Act:
Common Stock, $0.01 par value per share
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
Aggregate market value of the voting stock held by nonaffiliates of the
registrant: The registrant has made three offerings of shares of common stock
(the "Shares") on Form S-11 under the Securities Act of 1933, as amended. The
number of Shares held by non-affiliates as of March 19, 1999 was 74,656,927.
Since no established market for such Shares exists, there is no market value for
such Shares. Each Share was originally sold at $10 per Share.
The number of shares of common stock outstanding as of March 19, 1999
was 74,676,927.
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DOCUMENTS INCORPORATED BY REFERENCE:
Registrant incorporates by reference portions of the CNL American
Properties Fund, Inc. Definitive Proxy Statement for the 1999 Annual Meeting of
Stockholders (Items 10, 11, 12 and 13 of Part III) to be filed no later than
April 30, 1999.
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PART I
Item 1. Business
CNL American Properties Fund, Inc. is a Maryland corporation that was
organized 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., CNL APF Partners, LP and CNL/Corral South Joint
Venture. In April 1995, the Company commenced a public offering for the sale of
up to 16,500,000 shares ($165,000,000) of common stock (the "Shares") (the
"Initial Offering"). Following the completion of its Initial Offering in
February 1997, the Company commenced an offering of up to 27,500,000 Shares (the
"1997 Offering"). Following the completion of the 1997 Offering in March 1998,
the Company commenced an offering of up to 34,500,000 Shares ("the 1998
Offering"). The Company's 1998 Offering became fully subscribed in December 1998
and proceeds from the last subscriptions were received in January 1999. As of
December 31, 1998, the Company had received aggregate subscription proceeds from
its Initial Offering, 1997 Offering and 1998 Offering of $747,253,675
(74,725,368 Shares), including $5,572,261 (557,226 Shares) issued through the
reinvestment plan.
The Company had adopted a reinvestment plan pursuant to which
stockholders could elect to have the full amount of their cash distributions
from the Company reinvested in additional Shares of common stock of the Company.
In October 1998, the Board of Directors elected to terminate the Company's
reinvestment plan. In October 1998, the Board of Directors also elected to
implement the Company's redemption plan. Under the redemption plan, the Company
elected to redeem Shares, subject to certain conditions and limitations. During
the year ended December 31, 1998, 69,514 Shares were redeemed at $9.20 per Share
($639,528) and retired from Shares outstanding of common stock.
On March 11, 1999, the Company entered into several agreements to
acquire certain affiliates of CNL Group, Inc. (the "Acquisitions"). The
Acquisitions consist of:
Acquisition of Advisor and the CNL Restaurant Financial Services Group.
Pursuant to an Agreement and Plan of Merger with CNL Fund Advisors, Inc. (the
"Advisor"), the Company will become internally advised and acquire complete
acquisition and development and in-house management functions by acquiring the
Advisor. Because the Company has had no employees since its inception, the
Advisor has provided these functions on behalf of the Company and has been
responsible for the day-to-day operations of the Company, including raising
capital, investment analysis, acquisitions, due diligence, asset management and
accounting services.
Additionally, pursuant to an Agreement and Plan of Merger with CNL
Financial Corp. and CNL Financial Services, Inc. (together, the "CNL Restaurant
Financial Services Group" and together with the Advisor, the "CNL Restaurant
Businesses"), the Company will increase its financing capabilities and expand
its mortgage loan portfolio. The CNL Restaurant Financial Services Group makes
and services mortgage loans to operators of national and regional restaurant
chains and securitizes a portion of those loans. As consideration for the
acquisition of the CNL Restaurant Businesses, the Company has agreed to issue
12.3 million Shares.
Acquisition of CNL Income Funds. In order to increase the size of its
restaurant property portfolio, the Company also entered into an Agreement and
Plan of Merger with each of the 18 CNL Income Funds, which are Florida limited
partnerships, engaged in the purchase and triple-net leasing of restaurant
properties (the "Funds"). As consideration for the acquisition of the Funds (and
assuming all of the Funds are acquired), the Company has agreed to issue 61
million Shares. The general partners of each of the Funds plan to hold a special
meeting of the partners during the third quarter of 1999 for each Fund, at which
it will request approval of the acquisition of the Fund by the Company. Limited
parters holding in excess of 50% of each Fund's outstanding limited partnership
interests must approve the Fund's acquisition prior to consummation of the
transaction.
<PAGE>
The Company was formed primarily to acquire restaurant properties (the
"Properties") located across the United States, directly or indirectly through
joint venture or co-tenancy arrangements, to be leased on a long-term
(generally, 15 to 20 years, plus renewal options for an additional 10 to 20
years), "triple-net" basis, which means that the tenant will be responsible for
repairs, maintenance, property taxes, utilities and insurance. As of March 11,
1999, the Company owned a portfolio of 469 Properties located across the United
States which are leased to operators of certain national and regional fast-food,
family-style and casual dining restaurant chains (the "Restaurant Chains"). The
Company structures the leases of its Properties to provide for payment of base
annual rent with (i) automatic increases in base rent and/or (ii) percentage
rent based on gross sales above a certain level. The Company also offers
financing for the purchase of buildings, generally by tenants that lease the
underlying land from the Company (the "Mortgage Loans"). Mortgage Loans are
expected to constitute from 5% to 10% of the Company's total investments. The
Company will re-evaluate this policy in connection with the consummation of the
Acquisitions, as described above. Management believes that the economic effects
of the Mortgage Loans for the purchase of buildings are similar to those of its
leases (generally with full repayment in 15 to 20 years). In addition, the
Company offers furniture, fixtures and equipment (the "Equipment") financing to
operators of Restaurant Chains pursuant to which the Company provides, through
direct financing leases and loans, the Equipment (collectively, the "Secured
Equipment Leases"). The Company has represented that at the end of each quarter,
the value of the Equipment together with any personal property owned by the
Company, in the aggregate, will represent less than 25% of the Company's total
assets. In 1996, the Company obtained a $15,000,000 line of credit and
subsequently amended such line of credit to $35,000,000, which the Company can
use to fund Secured Equipment Leases, to purchase Properties and to provide
Mortgage Loans. The Company anticipates renegotiating and increasing its line of
credit in the first quarter of 1999.
As of December 31, 1998, net proceeds to the Company from its Initial
Offering, 1997 Offering, 1998 Offering and capital contributions from the
Company's Advisor, after deduction of organizational and offering expenses,
totalled $670,336,817. The Company acquired its first Property on June 30, 1995,
and as of December 31, 1998, approximately $549,917,000 of net offering proceeds
had been used to invest, or committed for investment, in (i) 409 Properties
(including 40 Properties on which a restaurant was being constructed or
renovated), (ii) mortgage financing of approximately $19,489,000, (iii)
investments in franchise loan certificates of approximately $16,100,000 and (iv)
acquisition fees to the Advisor totalling $33,595,134 and certain acquisition
expenses. In addition, as of December 31, 1998, the Company had entered into 39
Secured Equipment Leases and entered into ten promissory notes totalling
approximately $19,113,000 with borrowers for equipment financing. As of March
11, 1999, the Company had invested or committed for investment the majority of
the net offering proceeds received from the Initial Offering, 1997 Offering and
1998 Offering. As of March 11, 1999, the Company had acquired 60 additional
Properties (33 of which were under construction), as described below in Item 2.
Properties. As of March 11, 1999, the Company had entered into ten additional
Secured Equipment Leases, entered into five additional promissory notes
totalling approximately $721,000 with borrowers for equipment financing and
entered into one additional promissory note for approximately $783,000 with a
borrower for a Mortgage Loan. The Company currently is negotiating to acquire
additional Properties, but as of March 11, 1999, had not acquired any such
Properties. The Company will use proceeds available from the line of credit and
the remaining net offering proceeds to acquire additional Properties.
Currently, the Company's primary investment objectives are (i) to
preserve, protect, and enhance the Company's assets, (ii) making quarterly
distributions, (iii) obtaining fixed income through the receipt of base rent, as
well as increase the Company's income (and distributions) and provide protection
against inflation through automatic increases in base rent and receipt of
percentage rent, and to obtain fixed income through the receipt of payments from
Mortgage Loans and Secured Equipment Leases, (iv) continuing to qualify as a
REIT for federal income tax purposes and (v) providing stockholders of the
Company with liquidity of their investment (although liquidity cannot be assured
thereby) through listing the Shares of the Company on the New York Stock
Exchange or other national exchange or over-the-counter market ("Listing").
The Company intends, to the extent consistent with the Company's
objective of qualifying as a REIT, to reinvest in additional Properties or
Mortgage Loans any proceeds of the sale of a Property or a Mortgage Loan that
are not required to be distributed to stockholders in order to preserve the
Company's REIT status for federal income tax purposes. Similarly, and to the
extent consistent with REIT qualification, the Company plans to use the proceeds
of the sale of a Secured Equipment Lease to fund additional Secured Equipment
Leases, or to reduce its outstanding indebtedness on the line of credit. The
Company intends to provide stockholders of the Company with liquidity of their
investment, either in whole or in part, through Listing of the Shares of the
Company (although liquidity cannot be assured thereby) no later than in the
fourth quarter of 1999. If Listing occurs, the Company intends to reinvest in
additional Properties, Mortgage Loans and Secured Equipment Leases any net sales
proceeds not required to be distributed to stockholders in order to preserve the
Company's status as a REIT. If Listing does not occur by December 31, 2005, the
Company will undertake the orderly liquidation of the Company and the sale of
the Company's assets and will distribute any net sales proceeds to stockholders.
In addition, the Company will not sell any assets if such sale would not be
consistent with the Company's objective of qualifying as a REIT.
In deciding the precise timing and terms of Property sales, the
Advisor, subject to the approval of the Board of Directors, will consider
factors such as national and local market conditions, potential capital
appreciation, cash flows, and federal income tax considerations. The terms of
certain leases, however, may require the Company to sell a Property at an
earlier time if the tenant exercises its option to purchase a Property after a
specified portion of the lease term has elapsed. The Company will have no
obligation to sell all or any portion of a Property at any particular time,
except as may be required under property or joint venture purchase options
granted to certain tenants. In connection with sales of Properties by the
Company, purchase money obligations may be taken by the Company as part payment
of the sales price. The terms of payment will be affected by custom in the area
in which the Property is located and prevailing economic conditions. When a
purchase money obligation is accepted in lieu of cash upon the sale of a
Property, the Company will continue to have a mortgage on the Property and the
proceeds of the sale will be realized over a period of years rather than at
closing of the sale.
The Company does not anticipate selling the Secured Equipment Leases
prior to expiration of the lease term, except in the event that the Company
undertakes orderly liquidation of its assets. In addition, the Company does not
anticipate selling any Mortgage Loans prior to the expiration of the loan term,
except in the event (i) the Company owns the Property (land only) underlying the
building improvements which secure the Mortgage Loan and the sale of the
Property occurs, or (ii) the Company undertakes an orderly sale of its assets.
The Company will re-evaluate this policy in connection with the consummation of
the Acquisitions, as described above.
Leases
As of December 31, 1998, the Company had acquired, either directly or
through a joint venture arrangement, 409 Properties, which are subject to
long-term, triple-net leases. Although there are variations in the specific
terms of the leases, the following is a summarized description of the general
structure of the Company's leases. The leases of the Properties owned by the
Company and the joint ventures in which the Company is a co-venturer, generally
provide for initial terms ranging from 15 to 20 years and expire between 2006
and 2018. The leases are on a triple-net basis, with the lessee responsible for
all repairs and maintenance, property taxes, insurance and utilities. The leases
of the Properties provide for minimum base annual rental payments (payable in
monthly installments) ranging from approximately $52,000 to $468,000. In
addition, certain leases provide for percentage rent based on sales in excess of
a specified amount. In addition, the majority of the leases provide that,
commencing in specified lease years (generally the sixth lease year), the annual
base rent required under the terms of the lease will increase.
Generally, the leases of the Properties provide for two to five
five-year or ten-year renewal options subject to the same terms and conditions
as the initial lease. Certain lessees also have been granted options to purchase
the Property at the Property's then fair market value after a specified portion
of the lease term has elapsed. The option purchase price may equal the Company's
original cost to purchase the Property (including acquisition costs), plus a
specified percentage from the date of the lease or a specified percentage of the
Company's purchase price, if that amount is greater than the Property's fair
market value at the time the purchase option is exercised.
The leases also generally provide that, in the event the Company wishes
to sell the Property subject to that lease, the Company first must offer the
lessee the right to purchase the Property on the same terms and conditions, and
for the same price, as any offer which the Company has received for the sale of
the Property.
In connection with the acquisition of five Properties acquired during
1998 that are building only, the Company has entered into tri-party agreements
with the tenants and the owners of the land. The tri-party agreements provide
that the tenant is responsible for all obligations under the ground lease and
provide certain rights to the Company to help protect its interest in the
buildings in the event of a default by the tenant under the terms of the ground
lease. In connection with the purchase of one of the Properties that is building
only, the Company has entered into an assignment of an interest in the ground
lease with the landlord of the land. The assignment provides that the ground
lessee is responsible for all obligations under the ground lease and provides
certain rights to the Company relating to the maintenance of its interest in the
building in the event of a default by the lessee under the terms of the ground
lease.
During the period January 1, 1999 through March 11, 1999, the Company
acquired 60 additional Properties (33 of which are under construction). The
leases for these Properties are substantially the same as those described above.
Major Tenants
During 1998, one of the Company's lessees, Foodmaker, Inc. (which
operates and franchises Jack in the Box restaurants), contributed more than ten
percent of the Company's total rental, earned income and interest income
relating to its Properties, Mortgage Loans, Secured Equipment Leases and
Certificates. Foodmaker, Inc. is the lessee under leases relating to 50
restaurants. In addition, two Restaurant Chains, Golden Corral Family Steakhouse
and Jack in the Box, each accounted for more than ten percent of the Company's
total rental, earned income and interest income relating to Properties, Mortgage
Loans, Secured Equipment Leases and Certificates during 1998. Because the
Company has not completed its investment in Properties, Mortgage Loans and
Secured Equipment Leases, it is not possible to determine which lessees,
borrowers or Restaurant Chains will contribute more than ten percent of the
Company's rental, earned income and interest income during 1999 and subsequent
years. In the event that certain lessees, borrowers or Restaurant Chains
contribute more than ten percent of the Company's rental, earned income and
interest income in future years, any failure of such lessees, borrowers or
Restaurant Chains could materially affect the Company's income. As of December
31, 1998, no single lessee or borrower, or group of affiliated lessees or
borrowers leased Properties or was the borrower under Mortgage Loans with an
aggregate carrying value, excluding acquisition fees and certain acquisition
expenses, in excess of 20 percent of total assets of the Company.
Mortgage Loans and Mortgage Loan Securitizations
During 1998, the Company provided mortgage financing of approximately
$2,902,000 evidenced by four mortgage notes which are collateralized by building
improvements on four Properties. The Mortgage Loans bear interest at rates
ranging from 9.5% to 11 percent per annum and are being collected in monthly
installments with maturity dates ranging from 2000 to 2014.
During 1998, the Company invested approximately $16,100,000 of the
offering proceeds in franchise loan certificates (the "Certificates") in a
mortgage loan securitization sponsored by an affiliate of the Company's Advisor.
A securitization is a process of taking what historically has been a non-liquid
asset class and transforming the asset into an underlying liquid security. A
mortgage loan securitization takes a non-liquid financial asset (a group of
mortgage loans) and aggregates these loans together into a pool and creates a
security backed by these loans, which is issued to investors. We believe this
investment 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.
Prior to acquiring the Certificates, the Company engaged a nationally recognized
investment banking firm to evaluate its investment in the Certificates and the
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. The Company invested in securities rated BB
and B as well as a non-rated class.
Secured Equipment Leases
In 1997, the Company entered into two promissory notes with a borrower
for equipment financing, totalling $13,225,000, which are collateralized by
restaurant equipment. Payments of principal and interest were received by the
Company during 1998. In December 1998, additional equipment financing was
provided to this borrower, resulting in two new promissory notes consolidating
the new amounts with the previous amounts loaned in 1997. The two new
(consolidated) promissory notes total the original $13,225,000, bear interest at
a rate of ten percent per annum and will be collected in 84 equal monthly
installments of principal and interest beginning on February 1, 1999. In 1998,
the Company entered into several promissory notes with borrowers for equipment
financing in the aggregate sum of $5,887,512, collateralized by restaurant
equipment. These promissory notes bear interest ranging from ten percent to 11
percent per annum and are being collected in monthly installments with maturity
dates ranging from 1999 to 2006.
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Joint Venture Arrangements
In August 1995 and June 1998, the Company entered into joint venture
arrangements, CNL/Corral South Joint Venture and CNL/Lee Vista Joint Venture,
respectively, with unaffiliated entities for each to purchase and hold one
Property. The joint venture arrangements provide for the Company and its joint
venture partners to share in all costs and benefits associated with the joint
ventures in accordance with their respective percentage interests in the joint
ventures. The Company and its joint venture partners are also jointly and
severally liable for all debts, obligations and other liabilities of the joint
ventures.
CNL/Corral South Joint Venture and CNL/Lee Vista Joint Venture have
initial terms of 15 years and 30 years, respectively, and after the expiration
of the initial terms, continue in existence from year to year unless terminated
at the option of either of the joint venturers or by an event of dissolution.
Events of dissolution include the bankruptcy, insolvency or termination of any
joint venturer, sale of the property owned by a joint venture and mutual
agreement of the Company and its joint venture partners to dissolve the joint
venture.
The Company has management control of CNL/Corral South Joint Venture.
The joint venture agreement restricts each venturer's ability to sell, transfer
or assign its joint venture interest without first offering it for sale to its
joint venture partner, either upon such terms and conditions as to which the
venturers may agree or, in the event the venturers cannot agree, on the same
terms and conditions as any offer from a third party to purchase such joint
venture interest.
The Company shares management control with its joint venture partner
for CNL/Lee Vista Joint Venture. The joint venture agreement restricts each
venturer's ability to sell, encumber or possess any venture property, or to
assign its interest or rights in venture property without the consent of its
joint venture partner. The joint venture agreement also prohibits any partner
from confessing judgment against the joint venture, lending or borrowing money
or entering into any commitment on behalf of the joint venture, or participating
in any act which would make it impossible to carry on the ordinary business of
the joint venture.
As of December 31, 1998, the Company owned an 85.47% interest in
CNL/Corral South Joint Venture. Net cash flows from operations of the joint
venture are distributed to the Company and its joint venture partner in
accordance with each partners' respective interest. Any liquidation proceeds,
after paying joint venture debts and liabilities and funding reserves for
contingent liabilities, will be distributed first to the Company until it has
received a return of its capital contribution, plus a 20 percent return on its
capital contributions, then to the other joint venture partner to the extent of
its positive capital account balance plus 20 percent thereof; and thereafter, in
proportion to each joint venture partners' percentage interest in the joint
venture.
As of December 31, 1998, the Company owned a 55.38% interest in CNL/Lee
Vista Joint Venture. Net cash flows from operations of the joint venture are
distributed to the Company and its joint venture partner in accordance with each
partners' respective interest. Any liquidation proceeds, after paying joint
venture debts and liabilities, paying partners for loans made by them to the
joint venture and funding reserves for contingent liabilities, will be
distributed to each joint venture partner in proportion to their then respective
aggregate unreturned capital contributions.
Certain Management Services
The Advisor provides management services relating to the Company, the
Properties, the Mortgage Loans and the Secured Equipment Lease program pursuant
to an advisory agreement (the "Advisory Agreement") between it and the Company.
Under this agreement, the Advisor is responsible for assisting the Company in
negotiating leases, Mortgage Loans, Secured Equipment Leases and the line of
credit, collecting rental, Mortgage Loan and Secured Equipment Lease payments,
inspecting the Properties and the tenants' books and records, and responding to
tenant inquiries and notices. The Advisor also provides information to the
Company about the status of the leases, the Properties, the Mortgage Loans, the
Secured Equipment Leases and the line of credit. In exchange for these services,
the Advisor is entitled to receive certain fees from the Company. For
supervision of the Properties and Mortgage Loans, the Advisor receives a monthly
asset and mortgage management fee of one-twelfth of .60% of the Company's real
estate asset value and the outstanding principal balance of the Mortgage Loans
as of the end of the proceeding 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. For
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negotiating equipment financing and loans 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 lease or loan (the "Secured Equipment Lease Servicing Fee").
The Advisory Agreement continues until April 19, 1999, and thereafter
may be extended annually upon mutual consent of the Advisor and the Board of
Directors of the Company unless terminated at an earlier date upon 60 days prior
notice by each party.
Borrowing
The Company has a revolving $35,000,000 uncollateralized line of credit
(the "Line of Credit") with a bank that enables the Company to receive advances
under the Line of Credit to provide equipment financing, to purchase and develop
Properties and to fund Mortgage Loans. The advances bear interest at a rate of
LIBOR plus 1.65% or the bank's prime rate, whichever the Company selects at the
time of borrowing. Interest only is repayable monthly until July 31, 1999, at
which time all remaining interest and principal shall be due. The Line of Credit
provides for two one-year renewal options. Advances used to purchase and develop
Properties and to fund Mortgage Loans will be repaid using additional offering
proceeds or refinanced on a long-term basis. The Company will not encumber
Properties in connection with the Line of Credit. The Company anticipates
renegotiating and increasing its Line of Credit in the first quarter of 1999.
During the year ended December 31, 1998, the Company obtained advances
totalling $7,692,040 under the Line of Credit, the proceeds of which were used
to fund 12 Secured Equipment Leases (including four partially funded Secured
Equipment Leases as of December 31, 1998) and to provide equipment financing in
the form of promissory notes as described above in Item 1. Business -- Leases.
The Company expects to obtain additional advances under the Line of Credit to
fund any Secured Equipment Leases entered into in the future. The Company
intends to limit the amount of Secured Equipment Leases it enters into to ten
percent of gross proceeds of its offerings.
The Company expects to use uninvested net offering proceeds and
proceeds from borrowing against its Line of Credit to purchase additional
Properties, to fund construction costs relating to the Properties under
construction, to make Mortgage Loans and to fund Secured Equipment Leases.
Competition
The fast-food, family-style and casual dining restaurant business is
characterized by intense competition. The operators of the restaurants located
on the Company's Properties compete with independently owned restaurants,
restaurants which are part of local or regional chains, and restaurants in other
well-known national chains, including those offering different types of food and
service.
Many successful fast-food, family-style and casual dining restaurants
are located in "eating islands", which are areas to which people tend to return
frequently and within which they can diversify their eating habits, because in
many cases local competition may enhance the restaurant's success instead of
detracting from it. Fast-food, family-style and casual dining restaurants
frequently experience better operating results when there are other restaurants
in the same area.
The Company will be in competition with other persons and entities both
to locate suitable Properties to acquire and to locate purchasers for its
Properties. The Company also will compete with other financing sources such as
banks, mortgage lenders and sale/leaseback companies for suitable tenants for
its Properties, borrowers for its Mortgage Loans and lessees and borrowers for
its Secured Equipment Leases.
Employees
Reference is made to Item 10. Directors and Executive Officers of the
Registrant for a listing of the Company's Executive Officers. The Company has no
other employees.
<PAGE>
Item 2. Properties
As of December 31, 1998, the Company owned, either directly or through
a joint venture arrangement, 409 Properties, located in 38 states. Reference is
made to the Schedule of Real Estate and Accumulated Depreciation filed with this
report for a listing of the Properties and their respective costs, including
acquisition fees and certain acquisition expenses.
During the period January 1, 1999 through March 11, 1999, the Company
acquired 60 additional Properties (33 of which were under construction), for
cash at a total cost of approximately $54,283,000, excluding development costs,
acquisition fees and certain acquisition expenses. The leases of these
Properties are substantially the same as the leases described in Item 1.
Business - Leases.
The Company currently is negotiating to acquire additional properties,
but as of March 11, 1999, had not acquired any such properties.
Description of Properties
Land. The Company's Property lot sizes range from approximately 11,500
to 190,000 square feet depending upon building size and local demographic
factors. Sites purchased by the Company are in locations zoned for commercial
use which have been reviewed for traffic patterns and volume.
Buildings. The buildings generally are rectangular and are constructed
from various combinations of stucco, steel, wood, brick and tile. Building sizes
range from approximately 1,300 to 12,700 square feet. Generally, buildings on
Properties owned by the Company are freestanding and are surrounded by paved
parking areas. Buildings are suitable for conversion to various uses, although
modifications may be required prior to use for other than restaurant operations.
Generally, a lessee is required, under the terms of its lease
agreement, to make such capital expenditures as may be reasonably necessary to
refurbish buildings, premises, signs and equipment so as to comply with the
lessee's obligations, if applicable, under the franchise agreement to reflect
the current commercial image of its Restaurant Chain. These capital expenditures
are required to be paid by the lessee during the term of the lease.
As of December 31, 1998, the Company owned 26 Properties that consist
of only building. The Company does not own the underlying land. In connection
with the acquisition of each of these Properties, the Company entered into
either a tri-party agreement with the tenant and the owner of the land or an
assignment of interest in the ground lease with the landlord, as described in
Item 1. Business - Leases.
Leases with Major Tenants. The terms of the leases with the Company's
major tenants as of December 31, 1998 (see Item 1. Business - Major Tenants),
are substantially the same as those described in Item 1. Business - Leases.
Foodmaker, Inc. leases 50 Jack in the Box Properties. The initial term
of each lease is 18 years (expiring between 2011 and 2016) and the aggregate
minimum base annual rent is approximately $5,338,000.
Management considers the Properties to be well-maintained and
sufficient for the Company's operations.
Item 3. Legal Proceedings
Neither the Company, nor its Advisor or any affiliates of the Advisor,
nor any of their respective Properties, is a party to, or subject to, any
material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
None.
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
As of March 11, 1999, there were 32,199 stockholders of record of
common stock. There is no public trading market for the Shares, and even though
the Company intends to list the Shares on the New York Stock Exchange or other
national securities exchange or over-the-counter market no later than in the
fourth quarter of 1999, there is no assurance that listing will occur and if
listing occurs there is no assurance that a public market for the Shares will
develop. In October 1998, the Board of Directors elected to implement the
Company's redemption plan. Under the redemption plan, the Company elected to
redeem Shares, subject to certain conditions and limitations. During the year
ended December 31, 1998, 69,514 Shares were redeemed at $9.20 per Share
($639,528) and retired from Shares outstanding of common stock.
As of December 31, 1998, the offering price per Share was $10.
The Company expects to distribute at least 95% of its real estate
investment trust taxable income to the stockholders pursuant to the provisions
of the Articles of Incorporation. For the years ended December 31, 1998 and
1997, the Company declared cash distributions of $39,449,149 and $16,854,297,
respectively, to stockholders. For federal income tax purposes, 84.87% and
93.33% of distributions paid in 1998 and 1997, respectively, were considered to
be ordinary income and 15.13% and 6.67%, respectively, were considered to be a
return of capital. No amounts distributed to stockholders for the years ended
December 31, 1998 and 1997, are required to be or have been treated by the
Company as a return of capital for purposes of calculating the stockholders'
return on their invested capital. The following table presents total
distributions and distributions per Share:
<TABLE>
<CAPTION>
First Second Third Fourth Year
-------------- ------------- -------------- ------------- --------------
<S> <C>
1998 Quarter
Total distributions declared $7,281,343 $8,711,463 $10,467,640 $12,988,703 $39,449,149
Distributions per Share 0.1906 0.1906 0.1906 0.1906 0.7624
1997 Quarter
Total distributions declared $2,693,357 $3,589,113 $4,597,499 $5,974,328 $16,854,297
Distributions per Share 0.1792 0.1865 0.1885 0.1906 0.7448
</TABLE>
In January, February and March 1999, the Company declared distributions
to stockholders totalling $4,744,904, $4,746,243 and $4,746,243, respectively,
($0.06354 per Share) payable in March 1999.
The Company intends to continue to declare distributions of cash to the
stockholders. The Company expects that future distributions will be declared on
a quarterly basis.
<PAGE>
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994 (1)
--------------- -------------- --------------- --------------- ---------------
<S> <C>
Year ended December 31:
Revenues $ 42,187,037 $19,457,933 $ 6,206,684 $ 659,131 $
--
Net earnings 32,152,408 15,564,456 4,745,962 368,779 --
Cash distributions declared 39,449,149 16,854,297 5,436,072 638,618 --
Funds from operations (2) 37,191,065 17,732,888 5,355,464 471,670 --
Earnings per Share (4) 0.60 0.66 0.59 0.19 --
Cash distributions declared
per Share 0.76 0.74 0.71 0.31 --
Weighted average number of
Shares outstanding (3) 53,296,438 23,423,868 8,071,670 1,898,350 --
At December 31:
Total assets $680,352,013 $339,077,762 $134,825,048 $ 33,603,084 $ 929,585
Total stockholders' equity (4) 660,810,286 321,638,101 122,867,427 31,980,648 200,000
</TABLE>
(1) Selected financial data for 1994 represents the period May 2, 1994
(date of inception) through December 31, 1994.
(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,
plus amortization of direct financing leases 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. This straight-lining 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 years ended
December 31, 1998, 1997, 1996, and 1995, net earnings included
$2,734,767, $1,941,054, $517,067 and $39,142, respectively, of these
amounts.) FFO was restated by the Company for the years ended December
31, 1997, 1996 and 1995 to add back the amortization of direct
financing leases. 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.
(3) The weighted average number of Shares outstanding for 1995 is based
upon the period the Company was operational.
(4) For each of the periods presented, the Company was in the offering and
acquisition stages; therefore, the information presented does not
present a full period during which net offering proceeds have been
fully invested.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
CNL American Properties Fund, Inc. is a Maryland corporation that was
organized 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., CNL APF Partners, LP and CNL/Corral South Joint
Venture. The Company was formed primarily for the purpose of acquiring
properties, 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 selected 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.
The following information, including, without limitation, the Year 2000
compliance disclosure and the interest rate risk management disclosure, that are
not historical facts may be 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, availability of capital from borrowings under
an increased line of credit, the ability of the Company to invest the proceeds
of its offerings of common stock, the ability of the Company to locate suitable
tenants for its properties and borrowers for its Mortgage Loans and the ability
of tenants and borrowers to make payments under their respective leases, Secured
Equipment Leases or Mortgage Loans.
As of December 31, 1998, the Company had investments in 409 Properties
in 38 states, including two Properties through two joint venture arrangements
and 40 Properties which were under construction or renovation.
Liquidity and Capital Resources
The Company was formed in May 1994, at which time the Company received
initial capital contributions of $200,000 for 20,000 shares of common stock from
CNL Fund Advisors, Inc. (the "Advisor"). In April 1995, the Company commenced a
public offering for the sale of up to 16,500,000 shares (the "Shares")
($165,000,000) of common stock (the "Initial Offering"). Following the
completion of its Initial Offering in February 1997, the Company commenced an
offering of up to 27,500,000 Shares of common stock (the "1997 Offering").
Following the completion of the 1997 Offering in March 1998, the Company
commenced an offering of up to 34,500,000 Shares (the "1998 Offering"). The
Company's 1998 Offering became fully subscribed in December 1998 and proceeds
from the last subscriptions were received in January 1999. As of December 31,
1998, the Company had received aggregate subscription proceeds from its Initial
Offering, 1997 Offering and 1998 Offering of $747,253,675 (74,725,368 Shares),
including $5,572,261 (557,226 Shares) issued through the reinvestment plan.
The Company had adopted a reinvestment plan pursuant to which
stockholders could elect to have the full amount of their cash distributions
from the Company reinvested in additional Shares of common stock of the Company.
In October 1998, the Board of Directors elected to terminate the Company's
reinvestment plan. In October 1998, the Board of Directors also elected to
implement the Company's redemption plan. Under the redemption plan, the Company
elected to redeem Shares, subject to certain conditions and limitations. During
the year ended December 31, 1998, 69,514 Shares were redeemed at $9.20 per Share
($639,528) and retired from Shares outstanding of common stock.
As of December 31, 1998, net proceeds to the Company from its Initial
Offering, 1997 Offering, 1998 Offering and capital contributions from the
Advisor, after deduction of stock issuance costs, totalled $670,336,817.
Approximately $549,917,000 of such amount had been used to invest, or committed
for investment, in (i) 409 Properties (including 40 Properties on which a
restaurant was being constructed or renovated) as of December 31, 1998, (ii)
mortgage financing of approximately $19,489,000, (iii) investments in franchise
loan certificates of approximately $16,100,000 and (iv) acquisition fees to the
Advisor totalling $33,595,134 and certain acquisition
<PAGE>
expenses. The Company acquired 23 of the 409 Properties from affiliates for
purchase prices totalling approximately $23,455,000. Each Property acquired from
an affiliate was purchased at a cost no greater than the lesser of the cost of
the Property to the affiliate (including carrying costs) or the Property's
appraised value.
In connection with the 40 Properties under construction at December 31,
1998, the Company has entered into various development agreements with tenants
which provide terms and specifications for the construction of buildings the
tenants have agreed to lease or equipment financing the Company has agreed to
provide. 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 $61,307,000, of which approximately $44,253,000 had been incurred
as of December 31, 1998. The buildings currently under construction are expected
to be operational by June 1999. In connection with the purchase of each
Property, the Company, as lessor, entered into a long-term lease agreement.
As of March 11, 1999, the Company had received the final subscription
proceeds from the 1998 Offering, bringing total subscription proceeds received
to $747,464,410 (74,746,441 Shares), of which $639,528 (69,514 Shares) had been
retired pursuant to the Company's redemption plan, from its Initial Offering,
1997 Offering and 1998 Offering, including $5,572,261 (557,226 Shares) issued
pursuant to the Company's reinvestment plan. Approximately $613,401,000 of such
amount had been used to invest, or committed for investment in (i) 469
Properties as of March 11, 1999, (ii) mortgage financing of approximately
$20,272,000, (iii) investments in franchise loan certificates of approximately
$16,100,000 and (iv) acquisition fees to the Advisor totalling $33,604,618 and
certain acquisition expenses.
The Company expects to use uninvested net offering proceeds and
proceeds from borrowing against its line of credit to purchase additional
Properties, to fund construction costs relating to the Properties under
construction and to make Mortgage Loans. The Company expects to fund the Secured
Equipment Leases with proceeds from the line of credit. The Company intends to
limit equipment financing to ten percent of the aggregate gross offering
proceeds from its offerings. The Company anticipates renegotiating and
increasing its line of credit in the first quarter of 1999. Remaining uninvested
net proceeds from the Company's 1998 Offering combined with a larger, unsecured,
revolving line of credit are expected to provide adequate capital for
investments in Properties, Mortgage Loans and Secured Equipment Leases through
1999.
The Company currently is negotiating to acquire additional Properties,
but as of March 11, 1999, had not acquired any such Properties.
During 1998, the Company sold three Properties to tenants. During 1997,
the Company sold five of its Properties and the equipment relating to two
Secured Equipment Leases to tenants. The Company received net proceeds of
approximately $2,386,000 and $7,252,000 during 1998 and 1997, respectively,
which approximated the carrying value of the Properties and the equipment at the
time of the sales. As a result, no gain or loss was recognized for financial
reporting purposes. The Company used the net sales proceeds relating to the sale
of the equipment to repay amounts previously advanced under its line of credit.
The Company reinvested the proceeds from the sale of Properties in additional
Properties.
During 1998, the Company invested approximately $16,100,000 of the
offering proceeds in franchise loan certificates (the "Certificates") in a
mortgage loan securitization sponsored by an affiliate of the Company's Advisor.
A securitization is a process of taking what historically has been a non-liquid
asset class and transforming the asset into an underlying liquid security. A
mortgage loan securitization takes a non-liquid financial asset (a group of
mortgage loans) and aggregates these loans together into a pool and creates a
security backed by these loans, which is issued to investors. We believe this
investment 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.
Prior to acquiring the Certificates, the Company engaged a nationally recognized
investment banking firm to evaluate its investment in the Certificates and the
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. The Company invested in securities rated BB
and B as well as a non-rated class.
<PAGE>
During 1998, 1997 and 1996, the Company entered into Mortgage Loans in
the principal sum of $2,901,742, $4,200,000 and $12,847,000, respectively,
collateralized by mortgages on the buildings on Properties. The Mortgage Loans
bear interest at rates ranging from 9.50% to 11 percent per annum and are being
collected in monthly installments with maturity dates ranging from 2000 to 2017.
In 1997, the Company entered into two promissory notes with a borrower
for equipment financing, totalling $13,225,000, which are collateralized by
restaurant equipment. Payments of principal and interest were received by the
Company during 1998. In December 1998, additional equipment financing was
provided to this borrower, resulting in two new promissory notes consolidating
the new amounts with the previous amounts loaned in 1997. The two new
(consolidated) promissory notes total the original $13,225,000, bear interest at
a rate of ten percent per annum and will be collected in 84 equal monthly
installments of principal and interest beginning on February 1, 1999. In 1998,
the Company entered into several promissory notes with borrowers for equipment
financing in the aggregate sum of $5,887,512, collateralized by restaurant
equipment. These promissory notes bear interest ranging from ten percent to 11
percent per annum and are being collected in monthly installments with maturity
dates ranging from 1999 to 2006.
In March 1996, the Company entered into a line of credit and security
agreement with a bank, the proceeds of which were to be used by the Company to
fund Secured Equipment Leases. In August 1997, the Company's $15,000,000 line of
credit was amended and restated to enable the Company to receive advances on a
revolving $35,000,000 uncollateralized line of credit (the "Line of Credit") to
provide equipment financing, to purchase and develop Properties and to fund
Mortgage Loans. The advances bear interest at a rate of LIBOR plus 1.65% or the
bank's prime rate, whichever the Company selects at the time of borrowing.
Interest only is repayable monthly until July 31, 1999, at which time all
remaining interest and principal shall be due. The Line of Credit provides for
two one-year renewal options. Advances used to purchase and develop Properties
and to fund Mortgage Loans will be repaid using additional offering proceeds or
refinanced on a long-term basis. The Company will not encumber Properties in
connection with the Line of Credit.
During the years ended December 31, 1998, 1997 and 1996, the Company
obtained advances totalling $7,692,040, $19,721,804 and $3,666,896,
respectively, under the Line of Credit, the proceeds of which were used to fund
Secured Equipment Leases and to pay loan costs. During the years ended December
31, 1998, 1997 and 1996, the Company repaid $8,039, $20,784,577 and $145,080,
respectively, of amounts advanced under the Line of Credit. During 1998 and
1997, the Company used uninvested net offering proceeds and proceeds relating to
the 1997 sale of the equipment described above, to repay amounts advanced under
the Line of Credit. The Company expects to obtain additional advances under the
Line of Credit to fund future equipment financing requirements and to purchase
Properties and to invest in Mortgage Loans.
Properties are and will be leased on a long-term, triple-net basis,
meaning that tenants are generally required to pay all repairs and maintenance,
property taxes, insurance and utilities. Rental payments under the leases are
expected to exceed the Company's operating expenses. For these reasons, no
short-term or long-term liquidity problems currently are anticipated by
management.
Until Properties are acquired, or Mortgage Loans are entered into, net
offering proceeds are held in short-term, highly liquid investments which
management believes to have appropriate safety of principal. This investment
strategy provides high liquidity in order to facilitate the Company's use of
these funds to acquire Properties at such time as Properties suitable for
acquisition are located or to fund Mortgage Loans. At December 31, 1998 and
1997, the Company had $125,207,377 and $49,595,001, respectively, invested in
such short-term investments (including certificates of deposit in the amount of
$2,007,540 and $2,008,224, respectively). The increase in the amount invested in
short-term investments reflects subscription proceeds derived from the sale of
Shares during the year ended December 31, 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 meet Company
expenses and, in management's discretion, to create cash reserves.
During the years ended December 31, 1998, 1997 and 1996, affiliates of
the Company incurred on behalf of the Company $4,228,480, $2,351,244 and
$804,617, respectively, for certain organizational and offering expenses. In
addition, during the years ended December 31, 1998, 1997 and 1996, affiliates of
the Company incurred on behalf of the Company $1,113,580, $514,908 and $206,103,
respectively, for certain acquisition expenses and $924,683, $368,516 and
$243,402, respectively, for certain operating expenses. As of December 31, 1998,
the Company owed the Advisor and its affiliates $1,308,464 for such amounts,
unpaid fees and accounting and administrative expenses.
During the years ended December 31, 1998, 1997 and 1996, the Company
generated cash from operations (which includes cash received from tenants and
interest and other income received, less cash paid for operating expenses) of
$39,116,275, $17,076,214 and $5,482,540, respectively. Based on cash from
operations, the Company declared distributions to the stockholders of
$39,449,149, $16,854,297 and $5,436,072 during 1998, 1997 and 1996,
respectively. In addition, in January, February and March 1999, the Company
declared distributions to its stockholders totalling $4,744,904, $4,746,243 and
$4,746,243, respectively, payable in March 1999. For the years ended December
31, 1998, 1997 and 1996, 84.87%, 93.33% and 90.25%, respectively, of the
distributions received by stockholders were considered to be ordinary income and
15.13%, 6.67% and 9.75%, 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 March 11, 1999, 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 the Property. The Company's
investment strategy of acquiring Properties for cash and leasing them under
triple-net leases to operators who meet specified financial standards is
expected to minimize the Company's operating expenses.
Due to the fact that the Properties are leased on a long-term,
triple-net basis, management does not believe that working capital reserves are
necessary at this time. Management has the right to cause the Company to
maintain reserves if, in their discretion, they determine such reserves are
required to meet the Company's working capital needs.
Management expects that the cash generated from operations will be
adequate to pay operating expenses.
During 1998, 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 Solomon Smith Barney Holdings, Inc.
(the "Advising Firms") to advise the Special Committee regarding its strategic
alternatives. In July 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, the Special Committee unanimously
agreed to present the recommendations described below to the full Board of
Directors and the full Board of Directors unanimously adopted the
recommendations of the Special Committee at a meeting held in July 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 and acquire internal real estate development
capability by acquiring the Advisor, (iii) expand its mortgage lending
capabilities by acquiring two affiliates of the Advisor, thus allowing the
Company to offer a full range of financing options to restaurant operators and
(iv) list its common stock on a national stock exchange, assuming market
conditions are favorable. The Special Committee further recommended that the
Company evaluate conducting 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 affiliates are subject to certain
conditions including certain of the sellers obtaining approval of the
acquisitions by the limited partners. Accordingly, the acquisition of all of the
entities is not assured.
In addition, in order to effect the acquisitions of portfolios of
Properties from affiliates of the Company's Advisor, 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 during 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 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.
<PAGE>
On March 11, 1999, the Company entered into agreements to acquire (i)
the Advisor, (ii) CNL Financial Corp. and CNL Financial Services, Inc.,
affiliates of the Advisor that provide mortgage loans and perform securitization
transactions and (iii) 18 CNL Income Funds, limited partnerships affiliated with
the Advisor whose properties are substantially the same type as the Company's
(the "Income Funds"). In connection therewith, the Company has agreed to issue
7.6 million, 4.7 million and up to 61 million shares of common stock,
respectively. The acquisition of each of the Income Funds is contingent upon
certain conditions, including approval by the Company's stockholders to increase
the number of authorized shares of common stock and approval by a majority of
the limited partners of each Income Fund, as described above.
Results of Operations
As of December 31, 1998, the Company had purchased and entered into
long-term, triple-net leases for 409 Properties. The leases provide for minimum
annual base rental payments and certain leases provide for percentage rent based
on sales in excess of a specified amount. The majority of the leases also
provide that, commencing in generally the sixth lease year, the annual base rent
required under the terms of the leases will increase. In connection therewith,
during the years ended December 31, 1998, 1997 and 1996, the Company earned a
total of $33,129,661, $15,490,615 and $4,357,298, respectively, in rental income
from operating leases, earned income from the direct financing leases and
contingent rental income. The increase during 1998 and 1997, each as compared to
the previous year, was attributable to the Company investing in additional
Properties, Mortgage Loans and Secured Equipment Leases during 1998 and 1997.
Because the Company has not yet invested all of its net offering proceeds and
because it intends to make additional investments in Properties, Mortgage Loans
and Secured Equipment Leases, revenues for the years ended December 31, 1998,
1997 and 1996, represent only a portion of revenues which the Company is
expected to earn during future years in which the Company has completed
additional investments and the Company's Properties are operational (and other
investments in place) for the full period.
During the years ended December 31, 1998, 1997 and 1996, the Company
earned $3,085,518, $2,010,500 and $1,069,349, respectively, in interest income
from Mortgage Loans and equipment financing. The increase during the years ended
December 31, 1998 and 1997, each as compared to the previous year, is
attributable to investing in additional loans collateralized by Properties and
equipment during 1998 and 1997, as described above in "Liquidity and Capital
Resources."
During 1998, one of the Company's lessees, Foodmaker, Inc., contributed
more than ten percent of the Company's total rental, earned income and interest
income relating to its Properties, Mortgage Loans, Secured Equipment Leases and
Certificates. Foodmaker, Inc. is the lessee under leases relating to 50
restaurants. In addition, two restaurant chains, Golden Corral Family Steakhouse
and Jack in the Box, each accounted for more than ten percent of the Company's
total rental, earned income and interest income relating to Properties, Mortgage
Loans, Secured Equipment Leases and Certificates during 1998. Because the
Company has not completed its investment in Properties, Secured Equipment Leases
and Mortgage Loans as yet, it is not possible to determine which lessees,
borrowers or restaurant chains will contribute more than ten percent of the
Company's rental and interest income during 1999 and subsequent years. In the
event that certain lessees, borrowers or restaurant chains contribute more than
ten percent of the Company's rental, earned income and interest income in future
years, any failure of such lessees, borrowers or restaurant chains could
materially affect the Company's income.
In October 1998, Boston Chicken, Inc. and its affiliates, tenants of 27
Boston Market Properties, filed a voluntary petition for bankruptcy protection
under Chapter 11 of the U.S. Bankruptcy Code; two additional Boston Market
operators, tenants in three additional Boston Market Properties, also filed
voluntary petitions for bankruptcy protection. As a result of these filings for
bankruptcy, these tenants have the legal right to reject or affirm one or more
leases with the Company. To date the restaurants on 13 of these Properties have
been closed. Of the 13 Properties with closed restaurants, 12 leases have been
rejected, accounting for approximately three percent of the Company's rental,
earned and interest income for the year ended December 31, 1998. While the
tenants have not rejected or affirmed the remaining 18 leases, there can be no
assurance that some or all of these leases will not be rejected in the future.
The lost revenues resulting from the rejection of all 30 leases could have an
adverse effect on the results and operations of the Company if the Company is
unable to re-lease the Properties in a timely manner. Currently, the Company is
actively marketing the 13 closed Properties to existing and prospective clients
and local and regional restaurant operators.
<PAGE>
During the years ended December 31, 1998, 1997 and 1996, the Company
earned $5,899,028, $1,931,331 and $773,404, respectively, in investment and
interest income from investments in the Certificates, money market accounts or
other short-term, highly liquid investments. The increase in investment and
interest income is primarily attributable to the receipt of subscription
proceeds from the 1998 Offering that are being temporarily invested in money
market accounts or short-term, highly liquid investments pending investment in
Properties and Mortgage Loans. The increase was also attributable to the
investment in the Certificates during 1998, as described above in "Liquidity and
Capital Resources." As net offering proceeds are invested in Properties and used
to make Mortgage Loans, interest income from investments in money market
accounts or other short-term, highly liquid investments is expected to decrease.
Operating expenses, including depreciation and amortization expense,
were $9,408,957, $3,862,024 and $1,430,795 for the years ended December 31,
1998, 1997 and 1996, respectively. Total operating expenses increased during
each of the years ended December 31, 1998 and 1997, each as compared to the
prior year, primarily as a result of the Company having invested in additional
Properties, Mortgage Loans and Secured Equipment Leases during each year.
Operating expenses for the year ended December 31, 1998, include a provision for
uncollectible mortgage notes of $636,614 relating to two promissory notes with a
borrower due to financial difficulties the borrower is experiencing. 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 Secured Equipment Leases and the Properties under
construction become operational. However, asset and mortgage management fees and
depreciation and amortization expense are expected to increase as the Company
invests in additional Properties and Mortgage Loans.
During the year ended December 31, 1998, the Company recorded
provisions for losses on land and buildings in the amount of $611,534 for
financial reporting purposes relating to two Shoney's Properties and two Boston
Market Properties. The tenants of these Properties experienced financial
difficulties and ceased payment of rents under the terms of their lease
agreements. The allowances represent the difference between the carrying value
of the Properties at December 31, 1998 and the estimated net realizable value
for these Properties.
The Company has made an election under Section 856(c) of the Internal
Revenue Code of 1986, as amended (the "Code"), to be taxed as a REIT under the
Code beginning with its taxable year ended December 31, 1995. As a REIT, for
federal income tax purposes, the Company generally will not be subject to
federal income tax on income that it distributes to its stockholders. If the
Company fails to qualify as a REIT in any taxable year, it will be subject to
federal income tax on its taxable income at regular corporate rates and will not
be eligible to make a new election until the fifth taxable year following the
year for which the revocation or termination is effective. Such an event could
materially affect the Company's net income. However, the Company believes that
it is organized and operates in such a manner as to qualify for treatment as a
REIT for the years ended December 31, 1998, 1997 and 1996. In addition, the
Company intends to continue to operate the Company so as to remain qualified as
a REIT for federal income tax purposes.
Generally, the Company's leases as of December 31, 1998, are triple-net
leases and contain provisions that management believes will mitigate the adverse
effect of inflation. Such provisions include clauses requiring the payment of
percentage rent based on certain restaurant sales above a specified level and/or
automatic increases in base rent at specified times during the term of the
lease. Management expects that increases in restaurant sales volumes due to
inflation and real sales growth should result in an increase in rental income
over time. Continued inflation also may cause capital appreciation of the
Company's Properties. Inflation and changing prices, however, also may have an
adverse impact on the sales of the restaurants and on potential capital
appreciation of the Properties.
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 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
<PAGE>
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 interest rate swaps, the adoption of FAS 133 will not have a significant
effect on the Company's results of operations or its financial position.
Year 2000
The Year 2000 problem is the result of information technology systems
and embedded systems (products which are made with microprocessor (computer)
chips such as HVAC systems, physical security systems and elevators) using a
two-digit format, as opposed to four digits, to indicate the year. Such
information technology and embedded systems may be unable to properly recognize
and process date-sensitive information beginning January 1, 2000.
The Company currently does not have any information technology systems.
The Advisor of the Company provides all services requiring the use of
information technology systems pursuant to a management agreement with the
Company. The maintenance of embedded systems, if any, at the Company's
Properties is the responsibility of the tenants of the Properties in accordance
with the terms of the Company's leases. The Advisor and its affiliates have
established a team dedicated to reviewing the internal information technology
systems used in the operation of the Company, and the information technology and
embedded systems and the Year 2000 compliance plans of the Company's tenants,
significant suppliers, financial institutions and transfer agent.
The information technology infrastructure of the Advisor and its
affiliates consists of a network of personal computers and servers that were
obtained from major suppliers. The Advisor and its affiliates utilize various
administrative and financial software applications on that infrastructure to
perform the business functions of the Company. The inability of the Advisor and
its affiliates to identify and timely correct material Year 2000 deficiencies in
the software and/or infrastructure could result in an interruption in, or
failure of, certain of the Company's business activities or operations.
Accordingly, the Advisor and its affiliates have requested and are evaluating
documentation from the suppliers of the software and infrastructure of the
Advisor and its affiliates regarding the Year 2000 compliance of their products
that are used in the business activities or operations of the Company. The
Advisor and its affiliates have not yet received sufficient certifications to be
assured that the suppliers have fully considered and mitigated any potential
material impact of the Year 2000 deficiencies. The costs expected to be incurred
by the Advisor and its affiliates to become Year 2000 compliant will be incurred
by the Advisor and its affiliates; therefore, these costs will have no impact on
the Company's financial position or results of operations.
The Company has material third party relationships with its tenants,
financial institutions and transfer agent. The Company depends on its tenants
for rents and cash flows, its financial institutions for availability of cash
and its transfer agent to maintain and track investor information. If any of
these third parties are unable to meet their obligations to the Company because
of the Year 2000 deficiencies, such a failure may have a material impact on the
Company. Accordingly, the Advisor and its affiliates have requested and are
evaluating documentation from the Company's tenants, financial institutions and
transfer agent relating to their Year 2000 compliance plans. The Advisor and its
affiliates have not yet received sufficient certifications to be assured that
the tenants, financial institutions and transfer agent have fully considered and
mitigated any potential material impact of the Year 2000 deficiencies.
Therefore, the Advisor and its affiliates do not, at this time, know of the
potential costs to the Company of any adverse impact or effect of any Year 2000
deficiencies by these third parties.
The Advisor and its affiliates currently expect that all Year 2000
compliance testing and any necessary remedial measures on the information
technology systems used in the business activities and operations of the Company
will be completed prior to June 30, 1999. Based on the progress the Advisor and
its affiliates have made in identifying and addressing the Company's Year 2000
issues and the plan and timeline to complete the compliance program, the Advisor
and its affiliates do not foresee significant risks associated with the
Company's Year 2000 compliance at this time. Because the Advisor and its
affiliates are still evaluating the status of the information technology systems
used in business activities and operations of the Company and the systems of the
third parties with which the Company conducts its business, the Advisor and its
affiliates have not yet developed a comprehensive contingency plan and are
unable to identify "the most reasonably likely worst case scenario" at this
time. If the Advisor and its affiliates identify significant risks related to
the Company's Year 2000 compliance or if the Company's Year 2000 compliance
program's progress deviates substantially from the anticipated timeline, the
Advisor and its affiliates will develop appropriate contingency plans.
<PAGE>
Interest Rate Risk
The Company has provided fixed rate Mortgage Loans and equipment
financing to borrowers. The Company has also invested in Certificates with fixed
and adjustable rates. Management believes that the estimated fair value of the
Mortgage Loans, equipment financing and Certificates at December 31, 1998
approximated the outstanding principal amounts. The Company is exposed to equity
loss in the event of changes in interest rates. The following table presents the
expected cash flows of principal that are sensitive to these changes.
<TABLE>
<CAPTION>
Mortgage and equipment notes Certificates
Fixed Rates Fixed Rates Floating Rates
----------------------------------- ---------------- -- ------------------
<S> <C>
1999 $ 3,923,380 $ 0 $ 0
2000 5,913,062 0 0
2001 2,226,757 0 0
2002 2,463,159 0 0
2003 2,798,068 0 0
Thereafter 20,411,249 9,514,215 6,568,839
=============== ============== ==============
$37,735,675 $9,514,215 $6,568,839
=============== ============== ==============
</TABLE>
As of December 31, 1998, the Company had $10,143,044 outstanding under
its Line of Credit. In connection with entering into this Line of Credit, the
Company entered into interest rate swap agreements with a commercial bank to
reduce the impact of changes in interest rates on its floating rate long-term
debt. These agreements effectively change the Company's interest rate exposure
on notional amounts totalling approximately $2,110,000 of the outstanding
floating rate notes to fixed rates ranging from 8.75% to nine percent per annum.
The notional amounts of the interest rate swap agreements amortize over the
period of the agreements which approximate the term of the related notes. As of
December 31, 1998, the notional balance was approximately $1,339,900. The
Company is exposed to credit loss in the event of nonperformance by the other
party to the interest rate swap agreements; however, the Company does not
anticipate nonperformance by the counterparty. Management does not believe the
impact of any payments of a termination penalty, in the event the Company
determines to terminate the swap agreements prior to the end of their respective
terms, would be material to the Company's financial position or results of
operations.
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
This information is described above in Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations.
<PAGE>
Report of Independent Accountants
To the Board of Directors
CNL American Properties Fund, Inc.
In our opinion, the consolidated financial statements listed in the index
appearing under item 14(a)(1) present fairly, in all material respects, the
financial position of CNL American Properties Fund, Inc. (a Maryland
corporation) and its subsidiaries at December 31, 1998 and 1997, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1998 in conformity with generally accepted accounting
principles. In addition, in our opinion, the financial statement schedules
listed in the index appearing under item 14(a)(2) present fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements. These financial statements
and financial statement schedules are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements and financial statement schedules based on our audits. We conducted
our audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
Orlando, Florida
January 29, 1999, except for Note 17 for which the date is March 11, 1999
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
1998 1997
--------------- ---------------
<S> <C>
ASSETS
Land and buildings on operating
leases, less accumulated
depreciation and allowance
for loss on land and buildings $393,339,334 $205,338,186
Net investment in direct financing leases 91,675,650 47,613,595
Investment in joint venture 988,078 --
Mortgage notes receivable 19,631,693 17,622,010
Equipment notes receivable 19,377,380 13,548,044
Other investments 16,201,014 --
Cash and cash equivalents 123,199,837 47,586,777
Certificates of deposit 2,007,540 2,008,224
Receivables, less allowance for doubtful accounts
of $1,069,024 and $99,964, respectively 526,650 635,796
Accrued rental income 3,959,913 1,772,261
Intangibles and other assets 9,444,924 2,952,869
---------------- -----------------
$680,352,013 $339,077,762
================ =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Line of credit $10,143,044 $ 2,459,043
Accrued construction costs payable 4,170,410 10,978,211
Accounts payable and accrued expenses 1,035,436 1,060,497
Due to related parties 1,308,464 1,524,294
Rents paid in advance 954,271 517,428
Deferred rental income 1,189,883 557,576
Other payables 458,402 56,878
---------------- -----------------
Total liabilities 19,259,910 17,153,927
---------------- -----------------
Minority interest 281,817 285,734
---------------- -----------------
Commitments (Note 16)
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
74,745,368 and 36,192,971, respectively, outstanding
74,675,854 and 36,192,971, respectively 746,759 361,930
Capital in excess of par value 669,610,058 323,525,961
Accumulated distributions in excess of net earnings (9,546,531 ) (2,249,790 )
---------------- -----------------
Total stockholders' equity 660,810,286 321,638,101
---------------- -----------------
$680,352,013 $339,077,762
================ =================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997 1996
-------------- -------------- -------------
<S> <C>
Revenues:
Rental income from operating leases $26,688,864 $12,457,200 $3,731,806
Earned income from direct financing leases 6,440,797 3,033,415 625,492
Interest income from mortgage and equipment
notes receivable 3,085,518 2,010,500 1,069,349
Investment and interest income 5,899,028 1,931,331 773,404
Other income 72,830 25,487 6,633
--------------- --------------- --------------
42,187,037 19,457,933 6,206,684
--------------- --------------- --------------
Expenses:
General operating and administrative 2,955,535 1,010,725 601,540
Asset management fees to related party 1,851,004 804,879 251,200
State and other taxes 548,320 251,358 56,184
Depreciation and amortization 4,054,098 1,795,062 521,871
--------------- --------------- --------------
9,408,957 3,862,024 1,430,795
--------------- --------------- --------------
Earnings Before Minority Interest in Income of
Consolidated Joint Venture, Equity in Earnings
of Unconsolidated Joint Venture and Provision
for Loss on Land and Buildings 32,778,080 15,595,909 4,775,889
Minority Interest in Income of
Consolidated Joint Venture (30,156 ) (31,453 ) (29,927 )
Equity in Earnings of Unconsolidated
Joint Venture 16,018 -- --
Provision for Loss on Land and Buildings (611,534 ) -- --
--------------- --------------- --------------
Net Earnings $32,152,408 $15,564,456 $4,745,962
=============== =============== ==============
Earnings Per Share of Common
Stock (Basic and Diluted) $ 0.60 $ 0.66 $ 0.59
=============== =============== ==============
Weighted Average Number of Shares
of Common Stock Outstanding 53,296,438 23,423,868 8,071,670
=============== =============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Accumulated
Common Stock Capital in distributions
--------------------------
Number Par excess of in excess of
of shares value par value net earnings Total
------------- --------- ------------- --------------- -------------
<S> <C>
Balance at December 31, 1995 3,865,416 $ 38,654 $32,211,833 $ (269,839 ) $31,980,648
Subscriptions received for common
stock through public offering and
distribution reinvestment plan 10,079,299 100,793 100,692,198 -- 100,792,991
Stock issuance costs -- -- (9,216,102 ) -- (9,216,102 )
Net earnings -- -- -- 4,745,962 4,745,962
Distributions declared and
paid ($0.71 per share) -- -- -- (5,436,072 ) (5,436,072 )
------------- ---------- --------------- ------------- ---------------
Balance at December 31, 1996 13,944,715 139,447 123,687,929 (959,949 ) 122,867,427
Subscriptions received for common
stock through public offerings 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 offerings and
distribution reinvestment plan 38,552,397 385,524 385,138,442 -- 385,523,966
Retirement of common stock (69,514 ) (695 ) (638,833 ) -- (639,528 )
Stock issuance costs -- -- (38,415,512 ) -- (38,415,512 )
Net earnings -- -- -- 32,152,408 32,152,408
Distributions declared and
paid ($0.76 per share) -- -- -- (39,449,149 ) (39,449,149 )
------------- ---------- --------------- ------------- ---------------
Balance at December 31, 1998 74,675,854 $746,759 $669,610,058 $ (9,546,531 ) $660,810,286
============= ========== =============== ============= ===============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997 1996
--------------- --------------- ---------------
<S> <C>
Increase (Decrease) in Cash and Cash Equivalents:
Cash Flows from Operating Activities:
Cash received from tenants $ 34,275,767 $ 15,440,803 $ 4,543,506
Distributions from unconsolidated joint venture 578 -- --
Cash paid for expenses (4,326,169 ) (1,903,876 ) (928,001 )
Interest received 9,166,099 3,539,287 1,867,035
--------------- ---------------- ----------------
Net cash provided by operating activities 39,116,275 17,076,214 5,482,540
--------------- ---------------- ----------------
Cash Flows from Investing Activities:
Additions to land and buildings on operating leases (200,101,667 ) (143,542,667 ) (36,104,148 )
Investment in direct financing leases (47,115,435 ) (39,155,974 ) (13,372,621 )
Proceeds from sale of buildings and
equipment under direct financing leases 2,385,941 7,251,510 --
Investment in joint venture (974,696 ) -- --
Purchase of other investments (16,083,055 ) -- --
Investment in certificates of deposit -- (2,000,000 ) --
Investment in mortgage notes receivable (2,886,648 ) (4,401,982 ) (13,547,264 )
Collection on mortgage notes receivable 291,990 250,732 133,850
Investment in equipment notes receivable (7,837,750 ) (12,521,401 ) --
Collection on equipment notes receivable 1,263,633 -- --
Increase in intangibles and other assets (6,281,069 ) -- (1,103,896 )
--------------- ---------------- ----------------
Net cash used in investing activities (277,338,756 ) (194,119,782 ) (63,994,079 )
--------------- ---------------- ----------------
Cash Flows from Financing Activities:
Reimbursement of acquisition and stock
issuance costs paid by related parties on
behalf of the Company (4,574,925 ) (2,857,352 ) (939,798 )
Proceeds from borrowing on line of credit 7,692,040 19,721,804 3,666,896
Payment on line of credit (8,039 ) (20,784,577 ) (145,080 )
Contribution from minority interest of
consolidated joint venture -- -- 97,419
Subscriptions received from stockholders 385,523,966 222,482,560 100,792,991
Retirement of shares of common stock (639,528 ) -- --
Distributions to minority interest (34,073 ) (34,020 ) (39,121 )
Distributions to stockholders (39,449,149 ) (16,854,297 ) (5,439,404 )
Payment of stock issuance costs (34,579,650 ) (19,542,862 ) (8,486,188 )
Other (95,101 ) 49,001 (54,533 )
--------------- ---------------- ----------------
Net cash provided by financing activities 313,835,541 182,180,257 89,453,182
--------------- ---------------- ----------------
Net Increase in Cash and Cash Equivalents 75,613,060 5,136,689 30,941,643
Cash and Cash Equivalents at Beginning of Year 47,586,777 42,450,088 11,508,445
--------------- ---------------- ----------------
Cash and Cash Equivalents at End of Year $ 123,199,837 $47,586,777 $42,450,088
=============== ================ ================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997 1996
-------------- ------------- --------------
<S> <C>
Reconciliation of Net Earnings to Net Cash
Provided by Operating Activities:
Net earnings $32,152,408 $15,564,456 $ 4,745,962
=============== ============== ==============
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Provision for uncollectible mortgage notes 636,614 -- --
Depreciation 4,042,290 1,784,268 511,078
Amortization 11,808 10,794 69,886
Provision for loss on land and buildings 611,534 -- --
Equity in earnings of joint venture,
net of distributions (15,440 ) -- --
Decrease (increase) in receivables 262,958 (905,339 ) (160,984 )
Decrease in net investment in direct financing
leases 1,971,634 1,130,095 259,740
Increase in accrued rental income (2,187,652 ) (1,350,185 ) (382,934 )
Increase in intangibles and other assets (29,477 ) (6,869 ) (4,293 )
Increase (decrease) in accounts payable and
accrued expenses 404,161 153,223 (2,896 )
Increase (decrease) in due to related parties,
excluding reimbursement of acquisition,
deferred offering and stock issuance costs
paid on behalf of the Company 31,255 15,466 (30,929 )
Increase in rents paid in advance 436,843 398,528 93,549
Increase in deferred rental income 693,372 221,727 335,849
Increase in other payables 63,811 28,597 18,585
Increase in minority interest 30,156 31,453 29,927
--------------- -------------- --------------
Total adjustments 6,963,867 1,511,758 736,578
--------------- -------------- --------------
Net Cash Provided by Operating Activities $39,116,275 $17,076,214 $ 5,482,540
=============== ============== ==============
Supplemental Schedule of Non-Cash Investing
and Financing Activities:
Related parties paid certain acquisition,
deferred offering and stock
issuance costs on behalf of the
Company as follows:
Acquisition costs $ 1,113,580 $ 514,908 $ 206,103
Deferred offering costs -- -- 466,405
Stock issuance costs 4,228,480 2,351,244 338,212
--------------- -------------- --------------
$ 5,342,060 $ 2,866,152 $ 1,010,720
=============== ============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1998, 1997 and 1996
1. Significant Accounting Policies:
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 selected 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.
Principles of Consolidation - 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. The Company accounts for its 55.38%
interest in CNL/Lee Vista Joint Venture using the equity method because
it shares control with the other joint venture partner. All significant
intercompany balances and transactions have been eliminated.
Real Estate and Lease Accounting - The Company records the acquisition
of land, buildings and equipment at cost, including acquisition and
closing costs. In addition, interest costs incurred during construction
are capitalized. Land and buildings are generally leased to unrelated
third parties on a triple-net basis, whereby the tenant is generally
responsible for all operating expenses relating to the Property,
including property taxes, insurance, maintenance and repairs. In
addition, the Company offers equipment financing through leases or
loans. The Property leases are accounted for using either the direct
financing or the operating method. The Secured Equipment Leases are
accounted for using the direct financing method. Such methods are
described below:
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997 and 1996
1. Significant Accounting Policies - Continued:
Direct financing method - The leases accounted for using the
direct financing method are recorded at their net investment
(which at the inception of the lease generally represents the
cost of the asset) (Note 5). Unearned income is deferred and
amortized to income over the lease terms so as to produce a
constant periodic rate of return on the Company's net
investment in the leases.
Operating method - Land and building leases accounted for
using the operating method are recorded at cost, revenue is
recognized as rentals are earned and depreciation is charged
to operations as incurred. Buildings are depreciated on the
straight-line method over their estimated useful lives of 30
years. When scheduled rentals (including rental payments, if
any, required during the construction of a Property) vary
during the lease term, income is recognized on a straight-line
basis so as to produce a constant periodic rent over the lease
term commencing on the date the Property is placed in service.
Accrued rental income represents the aggregate amount of
income recognized on a straight-line basis in excess of
scheduled rental payments to date. In contrast, deferred
rental income represents the aggregate amount of scheduled
rental payments to date (including rental payments due during
construction and prior to the Property being placed in
service) in excess of income recognized on a straight-line
basis over the lease term commencing on the date the Property
is placed in service.
When the Properties or equipment are sold, the related cost and
accumulated depreciation for operating leases and the net investment
for direct financing leases, plus any accrued rental income or deferred
rental income, will be removed from the accounts and any gains or
losses from sales will be reflected in income. Management reviews its
Properties for impairment whenever events or changes in circumstances
indicate that the carrying amount of the assets may not be recoverable
through operations. Management determines whether an impairment in
value has occurred by comparing the estimated future undiscounted cash
flows, including the residual value of the Property, with the carrying
cost of the individual Property. If an impairment is indicated, the
assets are adjusted to their fair value.
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997 and 1996
1. Significant Accounting Policies - Continued:
Mortgage Loans - The Company accounts for loan origination fees and
costs incurred in connection with Mortgage Loans in accordance with
Statement of Financial Accounting Standards No. 91, "Accounting for
Nonrefundable Fees and Costs Associated with Originating or Acquiring
Loans and Initial Direct Costs of Leases." This statement requires the
deferral of loan origination fees and the capitalization of direct loan
costs. The costs capitalized, net of the fees deferred, are amortized
to interest income as an adjustment of yield over the life of the
loans. The unpaid principal and accrued interest on the Mortgage Loans,
plus the unamortized balance of such fees and costs are included in
mortgage notes receivable (see Note 7). Provisions for uncollectible
mortgage notes are established whenever it appears that future
collection of principal on specific mortgage notes appears doubtful.
The provision for uncollectible mortgage notes represents the
difference between the carrying value at December 31 and the net
realizable value management expects to receive relating to the mortgage
note.
Other Investments - The Company determines the appropriate
classification of other investments at the time of purchase and
reevaluates such designation at each balance sheet date. Other
investments have been classified as available for sale and are carried
at fair value, with unrealized holding gains and losses, if any,
reported as a separate component of stockholders' equity and in the
statement of comprehensive earnings, as applicable.
Cash and Cash Equivalents - The Company considers all highly liquid
investments with a maturity of three months or less when purchased to
be cash equivalents. Cash and cash equivalents consist of demand
deposits at commercial banks, money market funds (some of which are
backed by government securities) and certificates of deposit (with
maturities of three months or less when purchased). Cash equivalents
are stated at cost plus accrued interest, which approximates market
value.
Cash accounts maintained on behalf of the Company in demand deposits at
commercial banks, money market funds and certificates of deposit may
exceed federally insured levels; however, the Company has not
experienced any losses in such accounts. The Company limits investment
of temporary cash investments to financial institutions with high
credit standing; therefore, management believes it is not exposed to
any significant credit risk on cash and cash equivalents.
Organization Costs - Organization costs are amortized over five years
using the straight-line method and are included in intangibles and
other assets. As of December 31, 1998 and 1997, accumulated
amortization totalled $14,318 and $10,318, respectively.
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997 and 1996
1. Significant Accounting Policies - Continued:
Loan Costs - Loan costs incurred in connection with the Company's
$35,000,000 line of credit have been capitalized and are being
amortized over the term of the loan commitment using the effective
interest method. Income or expense associated with interest rate swap
agreements related to the line of credit is recognized on the accrual
basis as earned or incurred through an adjustment to interest expense.
Loan costs are included in intangibles and other assets. As of December
31, 1998 and 1997, the Company had aggregate gross loan costs of
$100,634. As of December 31, 1998 and 1997, accumulated amortization
totalled $88,000 and $61,783, respectively.
Income Taxes - The Company has made an election to be taxed as a real
estate investment trust ("REIT") under Sections 856 through 860 of the
Internal Revenue Code of 1986, as amended, and related regulations. The
Company generally will not be subject to federal corporate income taxes
on amounts distributed to stockholders, providing it distributes at
least 95 percent of its REIT taxable income and meets certain other
requirements for qualifying as a REIT. Accordingly, no provision for
federal income taxes has been made in the accompanying consolidated
financial statements. Notwithstanding the Company's qualification for
taxation as a REIT, the Company is subject to certain state taxes on
its income and property.
Earnings Per Share - Basic earnings per share are calculated based upon
net earnings (income available to common stockholders) divided by the
weighted average number of shares of common stock outstanding during
the reporting period. The Company does not have any dilutive potential
common shares.
Use of Estimates - Management of the Company has made a number of
estimates and assumptions relating to the reporting of assets and
liabilities and the disclosure of contingent assets and liabilities to
prepare these financial statements in conformity with generally
accepted accounting principles. Actual results could differ from those
estimates.
Reclassification - Certain items in the prior years' financial
statements have been reclassified to conform with the 1998
presentation. These reclassifications had no effect on stockholders'
equity or net earnings.
New Accounting Standards - 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.
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997 and 1996
1. Significant Accounting Policies - Continued:
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 interest rate swaps, the adoption of FAS 133 will
not have a significant effect on the Company's results of operations or
its financial position.
2. Public Offerings:
The Company's public offering of 34,500,000 shares ($345,000,000) of
common stock (the "1998 Offering") became fully subscribed in December
1998 and the last subscription was received in January 1999. Prior to
the 1998 Offering, the Company received proceeds from its initial
offering (the "Initial Offering"), of $150,591,765 (15,059,177 shares),
including $591,765 (59,177 shares) issued pursuant to the Company's
reinvestment plan, and received proceeds from its first follow-on
offering (the "1997 Offering") of $251,872,648 (25,187,265 shares),
including $1,872,648 (187,265 shares) issued pursuant to the Company's
reinvestment plan.
3. Leases:
The Company leases its land, buildings and equipment to operators of
national and regional fast-food, family-style and casual dining
restaurants. The leases are accounted for under the provisions of
Statement of Financial Accounting Standards No. 13, "Accounting for
Leases." For Property leases classified as direct financing leases, the
building portions of the majority of the leases are accounted for as
direct financing leases while the land portions of these leases are
generally accounted for as operating leases. Substantially, all
Property leases have initial terms of 15 to 20 years (expiring between
2006 and 2018) and provide for minimum rentals. In addition, the
majority of the Property leases provide for contingent rentals and/or
scheduled rent increases over the terms of the leases. Each tenant also
pays all property taxes and assessments, fully maintains the interior
and exterior of the building and carries insurance coverage for public
liability, property damage, fire and extended coverage. The lease
options for the Property leases generally allow tenants to renew the
leases for two to four successive five-year periods subject to the same
terms and conditions
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997 and 1996
3. Leases - Continued:
as the initial lease. Most leases also allow the tenant to purchase the
Property at the greater of the Company's purchase price plus a
specified percentage of such purchase price or fair market value after
a specified portion of the lease has elapsed.
The Secured Equipment Leases recorded as direct financing leases as of
December 31, 1998 provide for minimum rentals payable monthly and
generally have lease terms ranging from four to seven years. The
Secured Equipment Leases generally include an option for the lessee to
acquire the equipment at the end of the lease term for a nominal fee.
4. Land and Buildings on Operating Leases:
Land and buildings on operating leases consisted of the following at
December 31:
<TABLE>
<CAPTION>
1998 1997
------------------ -----------------
<S> <C>
Land $210,451,742 $106,616,360
Buildings 169,708,652 95,518,149
------------------ -----------------
380,160,394 202,134,509
Less accumulated depreciation (6,242,782 ) (2,395,665 )
------------------ -----------------
373,917,612 199,738,844
Construction in progress 20,033,256 5,599,342
------------------ -----------------
393,950,868 205,338,186
Less allowance for loss on
land and buildings (611,534 ) --
------------------ -----------------
$393,339,334 $205,338,186
================== =================
</TABLE>
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 years ended December 31,
1998, 1997 and 1996, the Company recognized $2,734,767 (net of $351,177
in reserves and $666,596 in write-offs), $1,941,054 and $517,067,
respectively, of such rental income.
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997 and 1996
4. Land and Buildings on Operating Leases - Continued:
During 1998, the Company sold three Properties to tenants. During 1997,
the Company sold five of its Properties and the equipment relating to
two Secured Equipment Leases to tenants. The Company received net
proceeds of approximately $2,386,000 and $7,252,000 during 1998 and
1997, respectively, which approximated the carrying value of the
Properties and the net investment in the direct financing leases for
the equipment at the time of the sales. As a result, no gain or loss
was recognized for financial reporting purposes. The Company used the
net sales proceeds relating to the sale of the equipment to repay
amounts previously advanced under its line of credit (see Note 10). The
Company reinvested the proceeds from the sale of Properties in
additional Properties.
During 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 Properties with three
replacement 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.
At December 31, 1998, the Company recorded provisions for losses on
land and buildings totalling $611,534 for financial reporting purposes
relating to two Shoney's Properties and two Boston Market Properties.
The tenants of these Properties experienced financial difficulties and
ceased payment of rents under the terms of their lease agreements. The
allowances represent the difference between the carrying value of the
Properties at December 31, 1998 and the estimated net realizable value
for these Properties.
The following is a schedule of future minimum lease payments to be
received on the noncancellable operating leases at December 31, 1998:
1999 $31,434,445
2000 31,470,924
2001 31,671,570
2002 32,416,670
2003 33,586,967
Thereafter 461,430,511
------------------
$622,011,087
==================
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997 and 1996
4. Land and Buildings on Operating Leases - Continued:
Since lease renewal periods are exercisable 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 rentals which may be received
on the leases based on a percentage of the tenant's gross sales. These
amounts also do not include minimum lease payments that will become due
when Properties under development are completed (see Note 16).
5. Net Investment in Direct Financing Leases:
The following lists the components of net investment in direct
financing leases at December 31:
<TABLE>
<CAPTION>
1998 1997
------------------ ------------------
<S> <C>
Minimum lease payments
receivable $186,515,403 $98,121,853
Estimated residual values 17,680,858 6,889,570
Interest receivable from
Secured Equipment Leases 81,690 67,614
Less unearned income (112,602,301 ) (57,465,442 )
------------------ ------------------
Net investment in direct
financing leases $91,675,650 $47,613,595
================== ==================
</TABLE>
The following is a schedule of future minimum lease payments to be
received on direct financing leases at December 31, 1998:
1999 $11,883,992
2000 12,078,426
2001 11,850,358
2002 11,753,228
2003 11,536,216
Thereafter 127,413,183
------------------
$186,515,403
==================
The above table does not include future minimum lease payments for
renewal periods or for contingent rental payments that may become due
in future periods (see Note 3).
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997 and 1996
6. 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 December 31, 1998, the Company had
contributed $868,953 to pay for construction relating to the Property
owned by the joint venture. The Company has agreed to contribute
approximately $646,000 to complete its funding to the joint venture.
When funding 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. As of December 31, 1998, the Company had a 55.38% interest in
this joint venture.
The following presents the condensed financial information for the
joint venture at:
<TABLE>
<CAPTION>
December 31,
1998 1997
--------------------- -------------------
<S> <C>
Land and building on operating
lease, less accumulated
depreciation $2,207,874 $ --
Other assets 31,757 --
Liabilities 647,066 --
Partners' capital 1,592,565 --
Revenues 36,767 --
Net income 28,682 --
</TABLE>
At December 31, 1998, the difference between the Company's carrying
amount of its investment in joint venture and the underlying equity in
the net assets of the joint venture was $104,698, less accumulated
amortization of $1,013. This amount is being amortized on a
straight-line basis over 30 years, the term of the joint venture
agreement.
7. Mortgage Notes Receivable:
During 1997, in connection with the acquisition of land for nine
Properties, the Company entered into a Mortgage Loan in the principal
sum of $4,200,000, collateralized by a mortgage on the buildings on the
nine Properties and two additional buildings. The Mortgage Loan bears
interest at a rate of 10.5% per annum and is being collected in 240
equal monthly installments.
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997 and 1996
7. Mortgage Notes Receivable - Continued:
During 1998, the Company accepted four Mortgage Loans in the aggregate
principal sum of $2,901,742, collateralized by mortgages on the
buildings of four Properties. These Mortgage Loans bear interest at
rates ranging from 9.5% to 11 percent per annum and are being collected
in monthly installments with maturity dates ranging from 2000 to 2014.
Mortgage notes receivable consisted of the following at December 31:
<TABLE>
<CAPTION>
1998 1997
--------------- ----------------
<S> <C>
Outstanding principal $19,272,171 $16,662,418
Accrued interest income 79,034 118,887
Deferred financing income (95,575 ) (85,448 )
Unamortized loan costs 1,012,677 926,153
Provision for uncollectible
mortgage notes (636,614 ) --
--------------- ----------------
$19,631,693 $17,622,010
=============== ================
</TABLE>
Management believes that the estimated fair value of mortgage notes
receivable at December 31, 1998 and 1997 approximated the outstanding
principal amount, net of the provision for uncollectible mortgage
notes, based on estimated current rates at which similar loans would be
made to borrowers with similar credit and for similar maturities.
8. Equipment Notes Receivable:
In October 1997, the Company entered into two promissory notes with a
borrower for equipment financing totalling $13,225,000, which are
collateralized by restaurant equipment. Payments of principal and
interest were collected during 1998. In December 1998, additional
equipment financing was provided to this borrower, resulting in two new
promissory notes consolidating the new amounts with the previous
amounts loaned in 1997. The two new (consolidated) promissory notes
total the original $13,225,000, bear interest at a rate of ten percent
per annum and will be collected in 84 equal monthly installments of
principal and interest beginning on February 1, 1999.
In 1998, the Company also entered into several promissory notes with
several borrowers for equipment financing for a total of $5,887,512,
which are collateralized by restaurant equipment. The promissory notes
bear interest at rates ranging from ten percent to 11 percent per annum
and are being collected in monthly installments with maturity dates
ranging from 1999 to 2006.
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997 and 1996
8. Equipment Notes Receivable - Continued:
Equipment notes receivable consisted of the following at December 31:
<TABLE>
<CAPTION>
1998 1997
--------------- ----------------
<S> <C>
Outstanding principal $19,100,118 $13,225,000
Accrued interest income 119,113 323,044
Deferred financing income (4,344 ) --
Unamortized loan costs 162,493 --
--------------- ----------------
$19,377,380 $13,548,044
=============== ================
</TABLE>
Management believes that the estimated fair value of equipment notes
receivable at December 31, 1998 and 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.
9. Other Investments:
In August 1998, the Company acquired an investment in the Class F,
Class 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.
("CFC"), an affiliate of CNL Fund Advisors, Inc., the advisor to the
Company (the "Advisor"). CFC originated and serviced mortgage loans on
restaurant properties comparable to the triple-net leased properties
currently owned by the Company. After originating the mortgage loans,
CFC contributed the loans to CNL Funding 98-1, LP, the securitization
entity which subsequently issued the Certificates representing
beneficial ownership interests in the pool of mortgage loans.
The Company paid an aggregate purchase price of approximately
$16,100,000 for the Certificates. The Company classified the
investments in these Certificates as available for sale for accounting
purposes. At December 31, 1998, the estimated fair value of the
Certificates approximated their carrying value; therefore, the Company
did not record any unrealized gains or losses relating to its
investment in Certificates. The investment in Certificates balance at
December 31, 1998 includes $117,959 of accrued interest.
The Company acquired Class F-1, Class G-1 and Class H-1 Certificates
with fixed pass through rates of 8.4% per annum and an effective yield
of 11.6% per annum for the year ended December 31, 1998. Monthly
payments of interest on these Certificates commenced in September 1998
and monthly payments of principal and interest are scheduled to be made
during the period September 2012 through June 2017.
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997 and 1996
9. Other Investments - Continued:
The Company also acquired Class F-2, Class G-2 and Class H-2
Certificates with adjustable pass through rates of LIBOR (defined as
the per annum London Interbank Offered Rate for 30 day dollar deposits)
plus 2.25% per annum (7.33% at December 31, 1998) and an effective
yield of 11.3% per annum for the year ended December 31, 1998. Monthly
payments of interest on these Certificates commenced in September 1998
and monthly payments of principal and interest are scheduled to be made
during the period April 2012 through March 2017.
10. Line of Credit:
In March 1996, the Company entered into a $15,000,000 line of credit
and security agreement with a bank, the proceeds of which were to be
used by the Company to offer Secured Equipment Leases. In August 1997,
the Company's $15,000,000 line of credit was amended and restated to
enable the Company to receive advances on a revolving $35,000,000
uncollateralized line of credit (the "Line of Credit") to provide
equipment financing, to purchase and develop Properties and to fund
Mortgage Loans. The advances bear interest at a rate of LIBOR plus
1.65% or the bank's prime rate, whichever the Company selects at the
time of borrowing. Interest only is repayable monthly until July 31,
1999, at which time all remaining interest and principal shall be due.
The Line of Credit provides for two one-year renewal options.
As of December 31, 1998 and 1997, $10,143,044 and $2,459,043,
respectively, of principal was outstanding relating to the Line of
Credit. As of December 31, 1998 and 1997, the interest rates on amounts
outstanding under the Line of Credit were 7.2743% and 7.6187% (LIBOR
plus 1.65%), respectively. The weighted average interest rates on the
Line of Credit were 7.2256% and 7.7290% for the years ended December
31, 1998 and 1997, respectively. The Company believes, based on current
terms, that the carrying value of its Line of Credit at December 31,
1998 and 1997 approximated fair value. The terms of the Line of Credit
include financial covenants which provide for the maintenance of
certain financial ratios. The Company was in compliance with such
covenants as of December 31, 1998.
During 1996, the Company entered into interest rate swap agreements
with a commercial bank to reduce the impact of changes in interest
rates on its floating rate debt. The agreements effectively change the
Company's interest rate exposure on notional amounts totalling
approximately $2,110,000 of the outstanding floating rate notes to
fixed rates ranging from 8.75% to nine percent per annum. The notional
amounts of the interest rate swap agreements amortize over the period
of the agreements which approximate the term of
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997 and 1996
10. Line of Credit - Continued:
the related notes. As of December 31, 1998, the notional balance was
approximately $1,339,900 and the fair values of the interest rate swaps
were a liability of approximately $43,600. The Company is exposed to
credit loss in the event of nonperformance by the other party to the
interest rate swap agreements; however, the Company does not anticipate
nonperformance by the counterparty.
Interest costs (including amortization of loan costs) incurred for the
years ended December 31, 1998, 1997 and 1996 were $402,292, $544,788
and $127,012, respectively, all of which were capitalized as part of
the cost of buildings under construction. For the years ended December
31, 1998, 1997 and 1996, the Company paid interest of $338,569,
$502,680 and $91,757, respectively.
11. Redemption of Shares:
In October 1998, the Board of Directors elected to implement the
Company's redemption plan. Under the redemption plan, the Company
elected to redeem shares, subject to certain conditions and
limitations. During the year ended December 31, 1998, 69,514 shares
were redeemed at $9.20 per share ($639,528) and retired from shares
outstanding of common stock.
12. 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.
During the years ended December 31, 1998, 1997 and 1996, the Company
incurred $38,415,512, $22,422,045 and $9,216,102, respectively, in
stock issuance costs, including $31,142,123, $17,798,605 and
$8,063,439, respectively, in commissions, marketing support and due
diligence expense reimbursement fees and soliciting dealer servicing
fees (see Note 14).
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997 and 1996
13. Distributions:
For the years ended December 31, 1998, 1997 and 1996, 84.87%, 93.33%
and 90.25%, respectively, of the distributions received by stockholders
were considered to be ordinary income and 15.13%, 6.67% and 9.75%,
respectively, were considered a return of capital for federal income
tax purposes. No amounts distributed to stockholders for the years
ended December 31, 1998, 1997 and 1996 are required to be or have been
treated by the Company as a return of capital for purposes of
calculating the stockholders' return on their invested capital.
14. Related Party Transactions:
Certain directors and officers of the Company hold similar positions
with the Advisor and the managing dealer of the Company's common stock
offerings, CNL Securities Corp.
CNL Securities Corp. is entitled to receive selling commissions
amounting to 7.5% of the total amount raised from the sale of shares
for services in connection with the Company's offerings of shares, a
substantial portion of which has been or will be paid as commissions to
other broker-dealers. During the years ended December 31, 1998, 1997
and 1996, the Company incurred $28,914,297, $16,686,192 and $7,559,474,
respectively, of such fees, of which approximately $26,033,000,
$15,563,500 and $7,059,000, respectively, was paid by CNL Securities
Corp. as commissions to other broker-dealers.
In addition, CNL Securities Corp. is entitled to receive a marketing
support and due diligence expense reimbursement fee equal to 0.5% of
the total amount raised from the sale of shares, a portion of which may
be reallowed to other broker-dealers. During the years ended December
31, 1998, 1997 and 1996, the Company incurred $1,927,620, $1,112,413
and $503,965, 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.
CNL Securities Corp. is also entitled to receive, in connection with
each common stock offering, a soliciting dealer servicing fee payable
annually by the Company beginning on December 31 of the year following
the year in which the offering terminates in the amount of 0.20% of the
stockholders' investment in the Company. CNL Securities Corp. in turn
may reallow all or a portion of such fee to broker-dealers whose
clients purchased shares in such offering and held shares on such date.
As of December 31, 1998, the Company had incurred $300,206 of such fees
relating to the Initial Offering which terminated in February 1997. No
such fees were incurred during the years ended December 31, 1997 and
1996.
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997 and 1996
14. 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 the Properties and structuring the terms of the Mortgage
Loans equal to 4.5% of the total amount raised from the sale of shares.
During the years ended December 31, 1998, 1997 and 1996, the Company
incurred $17,317,297, $10,011,715 and $4,535,685, 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 1998, the Board of Directors approved an amendment to the advisory
agreement between the Company and the Advisor providing for the payment
of acquisition fees to the Advisor for acquisitions made by the Company
after the completion of the 1998 Offering and the investment of all of
the proceeds received by the Company from the 1998 Offering (the
"Offering Completion Date"). After the Offering Completion Date, the
Company intends to continue to expand its Property portfolio by
acquiring additional Properties using funds from its Line of Credit. To
the extent the Company uses funds from its Line of Credit to acquire
Properties after the Offering Completion Date, the Company will pay the
Advisor an acquisition fee equal to 4.5% of the purchase price paid by
the Company. As of December 31, 1998, the Company had not used funds
from its Line of Credit to acquire Properties because it had net
offering proceeds available for investment.
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 years ended December 31, 1998, 1997 and
1996, the Company incurred $229,153, $387,728 and $166,695,
respectively, of such amounts relating to six, six and four Properties,
respectively.
In connection with the acquisition of Properties that are being or have
been renovated, subject to approval by the Company's Board of
Directors, the Company may incur advisory 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 year ended December 31,
1998, the Company incurred $67,389 of such fees relating to three
Properties. No such fees were incurred for the years ended December 31,
1997 and 1996.
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997 and 1996
14. Related Party Transactions - Continued:
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 years ended December 31, 1998, 1997 and 1996, the
Company incurred $54,998, $87,665 and $70,070, 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 years ended December 31, 1998, 1997
and 1996, the Company incurred $1,911,128, $881,668 and $278,902
respectively, of such fees, $60,124, $76,789 and $27,702, respectively,
of which has been capitalized as part of the cost of buildings for
Properties that have been or are being constructed.
Prior to such time, if any, as shares of the Company's common stock are
listed on a national securities exchange or over-the-counter market,
the Advisor is entitled to receive a deferred, subordinated real estate
disposition fee, payable upon the sale of one or more Properties based
on the lesser of one-half of a competitive real estate commission or
three percent of the sales price if the Advisor provides a substantial
amount of services in connection with the sale. However, if the sales
proceeds are reinvested in a replacement property, no such real estate
disposition fees will be incurred until such replacement property is
sold and the net sales proceeds are distributed. The real estate
disposition fee is payable only after the stockholders receive
distributions equal to the sum of an annual, aggregate, cumulative,
noncompounded eight percent return on their invested capital
("Stockholders' 8% Return") plus their aggregate invested capital. As
of December 31, 1998, no deferred, subordinated real estate disposition
fees had been incurred.
A subordinated share of net sales proceeds will be paid to the Advisor
upon the sale of Company assets in an amount equal to ten percent of
net sales proceeds. However, if net sales proceeds are reinvested in
replacement Properties or replacement Secured Equipment Leases, no such
share of net sales proceeds will be paid to the Advisor until such
replacement Property or Secured Equipment Lease is sold. This amount
will be payable only after the stockholders receive distributions equal
to the sum of the stockholders' aggregate invested capital and the
Stockholders' 8% Return. As of December 31, 1998, no such payments had
been made to the Advisor.
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997 and 1996
14. Related Party Transactions - Continued:
The Advisor and its affiliates provide accounting and administrative
services to the Company on a day-to-day basis as well as services in
connection with the offering of shares. For the years ended December
31, 1998, 1997 and 1996, expenses incurred for these services were
classified as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------------- ---------------- ----------------
<S> <C>
Stock issuance costs $ 3,103,046 $ 1,676,226 $ 769,225
General operating
and administrative
expenses 1,189,471 556,240 334,603
---------------- ---------------- ----------------
$ 4,292,517 $ 2,232,466 $ 1,103,828
================ ================ ================
</TABLE>
During the years ended December 31, 1998, 1997 and 1996, the Company
acquired five, five and four Properties, respectively, for
approximately $8,770,000, $5,450,000 and $2,610,000, respectively, from
affiliates of the Company. The affiliates had purchased and temporarily
held title to these Properties in order to facilitate the acquisition
of the Properties by the Company. Each Property was acquired at a cost
no greater than the lesser of the cost of the Property to the
affiliate, including carrying costs, or the Property's appraised value.
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997 and 1996
14. Related Party Transactions - Continued:
The due to related parties consisted of the following at December 31:
<TABLE>
<CAPTION>
1998 1997
--------------- ---------------
<S> <C>
Due to the Advisor:
Expenditures incurred
on behalf of the Company
and accounting and
administrative services $1,238,148 $ 126,205
Acquisition fees 39,788 386,972
--------------- ---------------
1,277,936 513,177
--------------- ---------------
Due to CNL Securities Corp:
Commissions 30,528 940,520
Marketing support and due
diligence expense reim-
bursement fees -- 63,097
--------------- ---------------
30,528 1,003,617
--------------- ---------------
Due to other affiliates -- 7,500
--------------- ---------------
$1,308,464 $1,524,294
=============== ===============
</TABLE>
15. Concentration of Credit Risk:
The following schedule presents rental, earned and interest income from
individual lessees or borrowers, or affiliated groups of lessees or
borrowers, each representing more than ten percent of the Company's
total rental, earned income and interest income from its Properties,
Mortgage Loans, Secured Equipment Leases and Certificates for each of
the years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
--------------- -------------- --------------
<S> <C>
Foodmaker, Inc. $4,101,214 $1,980,338 $ N/A
Houlihan's Restaurants, Inc. N/A 1,847,574 N/A
Golden Corral Corporation N/A N/A 577,003
Castle Hill Holdings V, L.L.C.,
Castle Hill Holdings VI, L.L.C.
and Castle Hill Holdings VII,
L.L.C. N/A 2,636,004 1,699,986
</TABLE>
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997 and 1996
15. Concentration of Credit Risk - Continued:
In addition, the following schedule presents total rental, earned
income and interest income from individual restaurant chains, each
representing more than ten percent of the Company's total rental,
earned income and interest income from its Properties, Mortgage Loans,
Secured Equipment Leases and Certificates for each of the years ended
December 31:
<TABLE>
<CAPTION>
1998 1997 1996
--------------- -------------- --------------
<S> <C>
Golden Corral Family Steakhouse
Restaurants $4,373,687 $2,531,941 $1,459,349
Jack in the Box 4,101,214 1,980,338 N/A
Pizza Hut N/A 2,636,004 1,699,986
Boston Market N/A 2,338,949 547,590
</TABLE>
The information denoted by N/A indicates that for each period
presented, the tenant or group of affiliated tenants and the chains did
not represent more than ten percent of the Company's total rental,
earned income and interest income.
Although the Company's Properties are geographically diverse throughout
the United States and the Company's lessees and borrowers operate a
variety of restaurant concepts, failure of any one of these restaurant
chains or any one of these lessees or borrowers that contributes more
than ten percent of the Company's rental, earned and interest income
could significantly impact the results of operations of the Company if
the Company is not able to re-lease the Properties in a timely manner.
16. Commitments:
The Company has entered into various development agreements with
tenants which provide terms and specifications for the construction of
buildings the tenants have agreed to lease or equipment financing the
Company has agreed to provide. 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
$61,307,000, of which approximately $44,253,000 in land and other costs
had been incurred as of December 31, 1998. The buildings currently
under construction are expected to be operational by June 1999. In
connection with the purchase of each Property, the Company, as lessor,
entered into a long-term lease agreement. The general terms of the
lease agreements are substantially the same as those described in Note
3.
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997 and 1996
17. Subsequent Events:
During the period January 1, 1999 through March 11, 1999, the Company
received the last subscription proceeds for 21,073 shares ($210,735) of
common stock relating to the 1998 Offering.
On January 1, February 1 and March 1, 1999, the Company declared
distributions of $4,744,904, $4,746,243 and $4,746,243, respectively,
or $0.06354 per share of common stock, payable in March 1999, to
stockholders of record on January 1, February1 and March 1, 1999,
respectively.
During the period January 1, 1999 through March 11, 1999, the Company
acquired 60 Properties (33 on which restaurants are being constructed
or renovated) for cash at a total cost of approximately $54,283,000.
The buildings under construction are expected to be operational by
September 1999. In connection with the purchase of each Property, the
Company as lessor, has entered into a long-term, triple-net lease
agreement.
On March 11, 1999, the Company entered into agreements to acquire (i)
the Advisor, (ii) CNL Financial Corp. and CNL Financial Services, Inc.,
affiliates of the Advisor that provide mortgage loans and perform
securitization transactions and (iii) 18 CNL Income Funds, limited
partnerships affiliated with the Advisor whose properties are
substantially the same type as the Company's (the "Income Funds"). In
connection therewith, the Company has agreed to issue 7.6 million, 4.7
million and up to 61 million shares of common stock, respectively. The
acquisition of each of the Income Funds is contingent upon certain
conditions, including approval by the Company's stockholders to
increase the number of authorized shares of common stock and approval
by a majority of the limited partners of each Income Fund.
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by this Item is incorporated by reference to
the Company's Definitive Proxy Statement to be filed with the Commission for its
annual stockholders' meeting to be held on May 13, 1999.
Item 11. Executive Compensation
The information required by this Item is incorporated by reference to
the Company's Definitive Proxy Statement to be filed with the Commission for its
annual stockholders' meeting to be held on May 13, 1999.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this Item is incorporated by reference to
the Company's Definitive Proxy Statement to be filed with the Commission for its
annual stockholders' meeting to be held on May 13, 1999.
Item 13. Certain Relationships and Related Transactions
The information required by this Item is incorporated by reference to
the Company's Definitive Proxy Statement to be filed with the Commission for its
annual stockholders' meeting to be held on May 13, 1999.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this report.
1. Consolidated Financial Statements
Report of Independent Accountants
Consolidated Balance Sheets at December 31, 1998 and 1997
Consolidated Statements of Earnings for the years ended
December 31, 1998, 1997 and 1996.
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1998, 1997 and 1996.
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996.
Notes to Consolidated Financial Statements
<PAGE>
2. Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts for the years
ended December 31, 1998, 1997 and 1996
Schedule III - Real Estate and Accumulated Depreciation at
December 31, 1998
Notes to Schedule III - Real Estate and Accumulated
Depreciation at December 31, 1998
Schedule IV - Mortgage Loans on Real Estate at December 31,
1998
All other Schedules are omitted as the required information is
inapplicable or is presented in the financial statements or
notes thereto.
3. Exhibits
3.1 CNL American Properties Fund, Inc. Amended and
Restated Articles of Incorporation, as amended
(Included as Exhibit 3.1 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended
June 30, 1998 and incorporated herein by reference.)
3.2 CNL American Properties Fund, Inc. Amended and
Restated Bylaws (Included as Exhibit 3.2 to
Registration Statement No. 333-37657 on Form S-11 and
incorporated herein by reference.)
4.1 Form of Stock Certificate (Included as Exhibit 4.5 to
Registration Statement No. 33-78790 on Form S-11 and
incorporated herein by reference.)
10.1 Advisory Agreement, dated as of April 24, 1998,
between CNL American Properties Fund, Inc. and CNL
Fund Advisors, Inc. (Included as Exhibit 10.10 to
Registration Statement No. 333-37657 on Form S-11 and
incorporated herein by reference.)
10.2 Form of Indemnification Agreement dated as of April
18, 1995, between CNL American Properties Fund, Inc.
and each of James M. Seneff, Jr., Robert A. Bourne,
G. Richard Hostetter, J. Joseph Kruse, Richard C.
Huseman, John T. Walker, Jeanne A. Wall, Lynn E. Rose
and Edgar J. McDougall, and dated as of January 27,
1997 between CNL American Properties Fund, Inc. and
Steven D. Shackelford, and dated as of February 18,
1998, between CNL American Properties Fund, Inc. and
Curtis B. McWilliams (Included as Exhibit 10.9 to
Registration Statement No. 333-15411 and incorporated
herein by reference.)
10.3 Agreement of Limited Partnership of CNL APF Partners,
LP (Included as Exhibit 10.4 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended
June 30, 1998 and incorporated herein by reference.)
21 Subsidiaries of the Registrant (Filed herewith.)
27 Financial Data Schedule (Filed herewith.)
(b) The Registrant filed no reports on Form 8-K during the period October
1, 1998 through December 31, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 29th day of
March, 1999.
CNL AMERICAN PROPERTIES FUND, INC.
By: CURTIS B. McWILLIAMS
President
/s/ Curtis B. McWilliams
--------------------------
CURTIS B. McWILLIAMS
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C>
/s/ James M. Seneff, Jr. Chairman of the Board and Chief March 29, 1999
- --------------------------------------
James M. Seneff, Jr. Executive Officer (Principal
Executive Officer)
/s/ Robert A. Bourne Vice Chairman of the Board and March 29, 1999
- --------------------------------------
Robert A. Bourne Treasurer
/s/ Steven D. Shackelford Chief Financial Officer (Principal March 29, 1999
Steven D. Shackelford Financial and Accounting Officer)
/s/ G. Richard Hostetter Independent Director March 29, 1999
- --------------------------------------
G. Richard Hostetter
/s/ J. Joseph Kruse Independent Director March 29, 1999
- ---------------------------------------
J. Joseph Kruse
/s/ Richard C. Huseman Independent Director March 29, 1999
- ------------------------------------
Richard C. Huseman
</TABLE>
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Additions Deductions
------------------------------ ------------------------
Balance at Charged Charged to Deemed Balance
Beginning to Other Uncollec- Collec- at End
Year Description of Year Costs and Accounts tible ted of Year
Expenses
-------- ---------------- ------------ ------------ --------------- ----------- --------- ------------
<S> <C>
1996 Allowance for
doubtful
accounts $ -- $ -- $ 2,857 (b) $ -- (c) $ -- $ 2,857
(a)
============ ============ =============== =========== ========= ============
1997 Allowance for
doubtful
accounts $ 2,857 $ -- $ 97,745 (b) $ -- (c) $ 638 $ 99,964
(a)
============ ============ =============== =========== ========= ============
1998 Allowance for
doubtful
accounts $ 99,964 $ 636,614 $ 1,324,980 (b) $ -- (c) $ 4,743 $ 2,056,815
(a)
============ ============ =============== =========== ========= ============
</TABLE>
(a) Deducted from receivables on the balance sheet.
(b) Reduction of rental and other income.
<PAGE>
<TABLE>
<CAPTION>
CNL AMERICAN PROPERTIES FUND, INC.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
<S> <C>
Costs Capitalized
Subsequent To
Initial Cost Acquisition
---------------------------- ---------------------
Encum- Buildings and Improve- Carrying
brances Land Improvements ments Costs
--------- ------------- ------------ --------- ---------
Properties the Company
has invested in Under
Operating Leases:
Applebee's Restaurants:
Antioch, Tennessee - 609,696 770,331 - -
Clarksville, Tennessee - 556,070 983,010 - -
Columbia, Tennessee - 625,868 936,068 - -
Cookeville, Tennessee - 489,867 1,003,630 - -
Hendersonville, Tennessee - 549,651 966,628 - -
Hermitage, Tennessee - 735,272 827,474 - -
Hopkinsville, Kentucky - 390,058 943,019 - -
Lebanon, Tennessee - 568,168 925,046 - -
Madison, Tennessee - 740,165 835,996 - -
Montclair, California - 874,094 - 880,494 -
Salinas, California - 786,475 - - -
Arby's Restaurants:
Arab, Alabama - 230,720 455,946 - -
Atlanta, Georgia - 648,459 - 683,390 -
Avon, Indiana - 338,486 497,282 - -
Canton, Georgia - 586,477 - 604,508 -
Columbus, Ohio - 441,770 - 621,014 -
Columbus, Ohio - 483,660 - 459,387 -
Grand Rapids, Michigan (k) - 289,183 - - -
Greensboro, North Carolina - 363,478 404,650 - -
Greenville, North Carolina - 277,986 490,143 - -
Jacksonville, Florida - 463,047 - 621,088 -
Jonesville, North Carolina - 228,364 539,764 - -
Kendallville, Indiana - 276,567 505,359 - -
Kernersville, North Carolina - 273,325 413,077 - -
Kinston, North Carolina - 268,545 485,160 - -
Lexington, North Carolina - 320,924 463,347 - -
Redford, Michigan - 402,516 - 390,699 -
Vancouver, Washington - 702,830 - 13,611 -
Whitehall, Ohio - 512,258 - 267,103 -
Barb Wires Steakhouse and
Saloon Restaurants:
Lawrence, Kansas - 493,489 - - -
Bennigan's Restaurants:
Arvada, Colorado - 714,194 1,302,733 - -
Bedford, Texas - 768,333 - - -
Clearwater, Florida - 900,038 - - -
Colorado Springs, Colorado - 794,255 - - -
Englewood, Colorado - 665,141 - - -
Englewood, New Jersey - 1,460,179 901,042 - -
Florham Park, New Jersey - 1,077,645 - - -
Houston, Texas - 908,502 - - -
Jacksonville, Florida - 779,387 - - -
Jacksonville, Florida - 832,557 - - -
Mount Laurel, New Jersey - 1,305,939 1,030,685 - -
North Richland Hills, Texas - 886,048 - - -
Ocala, Florida - 687,614 - 1,064,050 -
Oklahoma City, Oklahoma - 756,750 - - -
Orlando, Florida - 1,585,461 874,143 - -
Pensacola, Florida - 692,093 - - -
Saint Louis Park, Minnesota - 885,111 - - -
Tampa, Florida - 734,245 - - -
Woodridge, Illinois - 789,680 - - -
Big Boy Restaurants:
Benton Harbor, Michigan - 168,548 - 715,504 -
Mansfield, Ohio - 366,727 - 618,096 -
Saint Clairsville, Ohio - 437,235 - 609,391 -
Black-eyed Pea Restaurants:
Glendale, Arizona - 746,437 - 501,072 -
Grapevine, Texas - 883,196 - 108,843 -
Herndon, Virginia - 362,141 989,635 - -
Hillsboro, Texas - 404,155 - - -
Killeen, Texas - 447,582 - 17,358 -
McKinney, Texas - 758,796 - 13,869 -
Mesa, Arizona - 784,939 - - -
Mesa, Arizona - 788,311 - 10,933 -
Norman, Oklahoma - 527,388 - 166,992 -
Boston Market Restaurants:
Atlanta, Georgia - 774,448 - 507,587 -
Baltimore, Maryland - 585,818 - 866,641 -
Cedar Park, Texas - 569,782 - 294,878 -
Chanhassen, Minnesota - 376,929 639,875 - -
Collinsville, Illinois - 507,544 - 328,353 -
Columbus, Ohio - 353,608 606,470 - -
Corvallis, Oregon - 365,784 - 605,763 -
Edgewater, Colorado (o) - 320,463 627,371 - -
Ellisville, Missouri - 396,377 - 681,847 -
Florissant, Missouri - 705,522 - 626,845 -
Gambrills, Maryland - 667,992 - 661,776 -
Glendale, Arizona - 566,562 403,730 - -
Golden Valley, Minnesota - 665,422 - 481,311 -
Hoover, Alabama - 493,536 619,786 - -
Indianapolis, Indiana - 885,567 - 648,755 -
Jessup, Maryland (n) - 631,336 - 675,111 -
Lansing, Michigan - 515,827 - 572,706 -
LaQuinta, California - 688,147 - 351,810 -
Liberty, Missouri - 469,041 - 336,295 -
Newport News, Virginia - 473,596 586,377 - -
Riverdale, Maryland - 526,092 - 504,483 -
Rockwall, Texas - 528,118 - 340,297 -
Saint Joseph, Missouri - 378,786 - 388,489 -
San Antonio, Texas - 482,361 - 316,135 -
Stafford, Texas - 448,185 681,598 - -
Taylorsville, Utah - 889,562 - 487,475 -
Upland, California - 788,248 209,449 - -
Vacaville, California - 751,576 - 757,026 -
Waldorf, Maryland - 651,867 - 775,634 -
Warwick, Rhode Island - 234,685 589,367 - -
Burger King Restaurants:
Atlanta, Georgia - 394,422 - - -
Burbank, Illinois - 543,095 - 620,617 -
Chattanooga, Tennessee - 680,192 - 575,426 -
Chattanooga, Tennessee - 769,842 - 411,012 -
Chicago, Illinois - 917,717 - 784,590 -
Highland, Indiana - 672,815 - 621,133 -
Kent, Ohio - 233,468 689,696 - -
Oak Lawn, Illinois - 1,211,346 - 829,339 -
Ooltewah, Tennessee - 546,261 - 714,114 -
Charley's Restaurants:
King of Prussia, Pennsylvania - 965,223 549,565 - -
McLean, Virginia - 944,585 689,363 - -
Chevy's Fresh Mex Restaurants:
Arapahoe, Colorado - 986,426 1,680,312 - -
Beaverton, Oregon - 938,162 1,681,670 - -
Greenbelt, Maryland - 945,234 1,475,339 - -
Lake Oswego, Oregon - 963,047 1,505,671 - -
Las Vegas, Nevada - 1,156,847 1,188,272 - -
Naperville, Illinois - 960,779 1,365,563 - -
Darryl's Restaurants:
Evansville, Indiana - 563,479 - - -
Hampton, Virginia - 698,367 570,468 - -
Huntsville, Alabama - 777,842 663,941 - -
Knoxville, Tennessee - 589,574 - - -
Louisville, Kentucky - 647,375 - - -
Mobile, Alabama - 495,195 - - -
Montgomery, Alabama - 346,380 - - -
Nashville, Tennessee - 513,218 - - -
Orlando, Florida - 1,485,631 772,853 - -
Pensacola, Florida - 389,394 - - -
Raleigh, North Carolina - 840,525 505,176 - -
Raleigh, North Carolina - 1,131,164 719,865 - -
Richmond, Virginia - 618,125 - - -
Richmond, Virginia - 311,196 - - -
Winston-Salem, North Carolina - 436,867 - - -
Denny's Restaurants:
McKinney, Texas - 439,961 - - -
Pasadena, Texas - 466,555 506,094 - -
Shawnee, Oklahoma - 528,090 625,653 - -
Tampa, Florida - 397,302 - - -
Einstein Brothers' Bagels
Restaurants:
Dearborn, Michigan - 464,957 - 178,078 -
Springfield, Virginia - 628,804 - 36,311 -
Fazoli's Restaurant:
Southaven, Mississippi - 485,648 - 172,318 -
Golden Corral Family
Steakhouse Restaurants:
Brunswick, Georgia - 456,629 - 1,170,630 -
Carlsbad, New Mexico - 384,221 - 643,854 -
Cleburne, Texas - 359,455 - 653,853 -
Clovis, New Mexico - 426,349 805,517 - -
Columbia, Missouri - 848,187 - 664,399 -
Columbia, Tennessee - 442,218 - 930,207 -
Columbus, Ohio - 1,031,098 - 1,092,939 -
Corpus Christi, Texas - 576,548 - 934,918 -
Corsicana, Texas - 349,227 699,756 - -
Council Bluffs, Iowa - 546,078 - 993,149 -
Dover, Delaware - 1,043,108 - 977,508 -
Dublin, Georgia - 324,046 - 833,316 -
Dubuque, Iowa - 564,242 - 1,056,315 -
Duncan, Oklahoma - 161,390 - 1,028,945 -
Edmond, Oklahoma - 569,664 - 1,017,781 -
Enid, Oklahoma - 364,536 - 865,147 -
Fort Dodge, Iowa - 320,852 - 763,705 -
Fort Walton Beach, Florida - 590,538 - 1,176,436 -
Fort Worth, Texas - 640,320 898,171 - -
Hopkinsville, Kentucky - 456,646 - 861,803 -
Jacksonville, Florida - 615,554 - 1,184,073 -
Jacksonville, Florida - 541,264 - 1,173,738 -
Liberty, Missouri - 409,153 - 943,712 -
Lufkin, Texas - 479,197 - 954,051 -
Moberly , Missouri - 374,230 - 838,342 -
Mobile, Alabama - 428,841 - 1,031,457 -
Muskogee, Oklahoma - 395,839 - 887,540 -
Olathe, Kansas - 548,821 - 1,099,448 -
Omaha, Nebraska - 570,111 - 845,896 -
Palatka, Florida - 322,433 - 987,385 -
Pensacola, Florida - 634,108 - 21,570 -
Port Richey, Florida - 626,999 - 1,130,692 -
Tampa, Florida - 825,650 - 1,161,192 -
Universal City, Texas - 357,429 - 650,249 -
Winchester, Kentucky - 303,633 - 970,489 -
Ground Round Restaurants:
Allentown, Pennsylvania - 405,631 884,954 - -
Cincinnati, Ohio - 282,099 534,632 - -
Crystal, Minnesota - 370,667 431,642 - -
Dubuque, Iowa - 693,733 810,458 - -
Ewing , New Jersey - 371,254 685,847 - -
Gloucester, New Jersey - 422,489 528,849 - -
Janesville, Wisconsin - 451,235 548,178 - -
Kalamazoo, Michigan - 287,331 712,081 - -
Nanuet, New York - 375,116 605,067 - -
Parma, Ohio - 388,699 793,475 - -
Reading, Pennsylvania - 728,574 793,410 - -
Waterloo, Iowa - 436,471 659,089 - -
Wauwatosa, Wisconsin - 627,680 804,399 - -
Houlihan's Restaurants:
Bethel Park, Pennsylvania - 846,183 595,601 - -
Langhorne, Pennsylvania - 817,039 648,765 - -
Plymouth Meeting, Pennsylvania - 1,181,460 908,880 - -
International House of Pancakes
Restaurants:
Castle Rock, Colorado - 541,312 - 92,804 -
Clarksville, Tennessee - 375,987 964,430 - -
Elk Grove, California - 584,766 - - -
Fairfax, Virginia - 1,096,763 705,345 - -
Fort Worth, Texas - 575,285 802,974 - -
Greeley, Colorado - 416,115 - 756,717 -
Greenville, South Carolina - 476,847 961,606 - -
Hollywood, California - 1,407,002 - - -
Homewood, Alabama - 545,112 1,029,900 - -
Houston, Texas - 645,365 856,532 - -
Kansas City, Missouri - 512,481 831,202 - -
Killeen, Texas - 380,687 775,713 - -
Lake Jackson, Texas - 460,167 802,640 - -
Leesburg, Virginia - 665,015 580,798 - -
Leon Valley, Texas - 593,624 918,024 - -
Loveland, Colorado - 488,259 - - -
Murfreesboro, Tennessee - 647,414 871,268 - -
Port Arthur, Texas - 382,950 957,912 - -
Poughkeepsie, New York - 504,533 806,624 - -
Pueblo, Colorado - 387,562 891,943 - -
Roseville, Michigan - 282,868 843,648 - -
Southaven, Mississippi - 579,175 1,176,434 - -
Stockbridge, Georgia - 765,743 707,406 - -
Victoria, Texas - 319,237 - - -
Jack In the Box Restaurants:
Allen, Texas - 710,749 - 721,843 -
Avondale, Arizona - 605,063 - 649,514 -
Bacliff, Texas - 419,488 - 697,861 -
Chandler, Arizona - 481,456 - 636,588 -
Chandler, Arizona - 603,735 - 595,803 -
Channelview, Texas - 361,238 - 711,595 -
Corinth, Texas - 396,864 - 620,042 -
Dallas, Texas - 369,886 - 513,533 -
Enumclaw, Washington - 124,468 - 773,506 -
Florissant, Missouri - 389,265 - 779,211 -
Folsum, California - 635,343 703,067 - -
Fresno, California - 286,850 - 606,547 -
Fresno, California - 462,813 - 573,816 -
Garland, Texas - 382,042 - 613,690 -
Gun Barrel City, Texas - 284,046 - 577,029 -
Hollister, California - 537,223 - 592,536 -
Houston, Texas - 370,342 - 548,107 -
Houston, Texas - 420,521 - 543,338 -
Houston, Texas - 545,485 - 527,020 -
Houston, Texas - 403,002 610,815 - -
Houston, Texas - 375,776 - 643,445 -
Humble, Texas - 437,667 - 591,877 -
Humble, Texas - 390,509 - 596,872 -
Hutchins, Texas - 272,937 - 688,400 -
Kent, Washington - 737,038 - 604,806 -
Kingsburg, California - 415,880 - 649,681 -
Las Vegas, Nevada - 730,674 - 600,180 -
Los Angeles, California - 603,354 602,630 - -
Los Angeles, California - 911,754 - 581,552 -
Los Angeles, California - 740,616 678,189 - -
Los Angeles, California - 853,821 - 635,185 -
Los Angeles, California - 1,075,983 - 589,694 -
Lufkin, Texas - 418,351 - 651,064 -
Lufkin, Texas - 363,616 - 773,187 -
Moscow, Idaho - 217,851 - 751,664 -
Murietta, California - 387,455 - 625,933 -
Nacogdoches, Texas - 383,591 - 675,860 -
Ontario, California - 769,900 - 785,757 -
Oxnard, California - 681,663 - 642,924 -
Palmdale, California - 631,275 - 567,912 -
Pflugerville, Texas - 717,246 - 688,066 -
Saint Louis, Missouri - 474,296 - 759,049 -
San Antonio, Texas - 274,012 - 777,712 -
San Antonio, Texas - 310,793 - 690,785 -
Tacoma, Washington - 494,273 - 741,964 -
Tigard, Oregon - 383,921 - 874,164 -
Waxahachie, Texas - 477,580 - 566,856 -
Weatherford, Texas - 464,245 - 779,235 -
West Sacramento, California - 523,089 - 617,131 -
Woodland, California - 358,130 - 668,383 -
Kentucky Fried Chicken
Restaurant:
Putnam, Connecticut - 301,723 - - -
Little Lake Bryan Land:
Orlando, Florida - 4,846,660 - - -
Mister Fables Restaurant:
Grand Rapids, Michigan - 320,594 559,433 - -
Pizza Hut Restaurants:
Adrian, Michigan - 242,239 - - -
Beaver, West Virginia - 212,053 - - -
Beckley, West Virginia - 209,432 - - -
Bedford, Ohio - 174,721 - - -
Belle, West Virginia - 46,737 - - -
Bluefield, West Virginia - 120,449 - - -
Bolivar, Ohio - 190,009 - - -
Bowling Green, Ohio - 200,442 - - -
Bowling Green, Ohio - 135,831 - - -
Carrolton, Ohio - 187,082 - - -
Cleveland, Ohio - 126,494 - - -
Cleveland, Ohio - 116,849 - - -
Cleveland, Ohio - 226,163 - - -
Cross Lanes, West Virginia - 215,881 - - -
Defiance, Ohio - 242,239 - - -
Dover, Ohio - 245,145 - - -
East Cleveland, Ohio - 194,012 - - -
Euclid, Ohio - 202,050 - - -
Fairview Park, Ohio - 142,570 - - -
Huntington, West Virginia - 212,093 - - -
Hurricane, West Virginia - 180,803 - - -
Lambertville, Michigan - 99,166 - - -
Marietta, Ohio - 169,454 - - -
Mayfield Heights, Ohio - 202,552 - - -
Middleburg Heights, Ohio - 216,518 - - -
Millersburg, Ohio - 213,090 - - -
Milton, West Virginia - 99,815 - - -
Monroe, Michigan - 152,215 - - -
New Philadelphia, Ohio - 149,206 - - -
New Philadelphia, Ohio - 223,981 - - -
North Olmstead, Ohio - 259,922 - - -
Norwalk, Ohio - 261,529 - - -
Ronceverte, West Virginia - 99,733 - - -
Sandusky, Ohio - 259,922 - - -
Seven Hills, Ohio - 239,023 - - -
Steubenville, Ohio - 228,199 - - -
Strongsville, Ohio - 186,476 - - -
Toledo, Ohio - 128,604 - - -
Toledo, Ohio - 194,097 - - -
Toledo, Ohio - 208,480 - - -
Toledo, Ohio - 176,170 - - -
Toledo, Ohio - 197,227 - - -
Uhrichsville, Ohio - 279,779 - - -
Wellsburg, West Virginia - 167,170 - - -
Pollo Tropical Restaurants:
Coral Springs, Florida - 852,746 1,108,491 - -
Davie, Florida - 712,865 873,395 - -
Fort Lauderdale, Florida - 397,878 923,975 - -
Lake Worth, Florida - 435,465 915,232 - -
Miami, Florida - 918,258 764,150 - -
Miami, Florida - 654,766 1,195,901 - -
Miami, Florida - 683,560 614,256 - -
Miami, Florida - 789,680 604,283 - -
Miami, Florida - 911,013 1,011,766 - -
Miami, Florida - 1,244,893 918,257 - -
Sunrise, Florida - 569,436 968,749 - -
Ponderosa Restaurants:
Blue Springs, Missouri - 691,797 1,136,902 - -
Johnstown, Pennsylvania - 599,391 - 1,159,989 -
Popeye's Chicken Restaurant:
Thomasville, Georgia - 113,780 407,429 - -
Valdosta, Georgia - 158,880 378,057 - -
Roadhouse Grill Restaurants:
Brandon, Florida - 913,244 - 170,962 -
Clearwater, Florida - 1,336,881 - 10,055 -
Jacksonville, Florida - 369,914 - 1,554,300 -
Pensacola, Florida - 895,539 - 300,903 -
Ruby Tuesday's Restaurants:
Coral Springs, Florida - 698,778 - 14,657 -
Lakeland, Florida - 574,441 742,781 - -
London, Kentucky - 354,415 - - -
Orange City, Florida - 695,999 - 11,089 -
Somerset, Kentucky - 545,612 - 868,606 -
Ruth's Chris Steak House
Restaurant:
Tampa, Florida - 1,076,442 1,062,751 - -
Ryan's Family Steak House
Restaurant:
Spring Hill, Florida - 591,371 - 1,175,273 -
Shoney's Restaurants:
Indian Harbor Beach, Florida (m) - 309,101 - 420,246 -
Las Vegas, Nevada - 656,263 - - -
Guadalupe, Arizona - 623,709 - - -
Phoenix, Arizona (p) - 469,721 - 85,872 -
Sonny's Real Pit Bar-B-Q
Restaurants:
Athens, Georgia - 628,688 962,524 - -
Conyers, Georgia - 371,021 593,171 - -
Doraville, Georgia - 585,461 812,822 - -
Jonesboro, Georgia - 478,006 679,114 - -
Marietta, Georgia - 527,572 870,710 - -
Norcross, Georgia - 734,105 961,287 - -
Smyrna, Georgia - 634,379 643,323 - -
Steak and Ale Restaurants:
Altamonte Springs, Florida - 1,006,396 690,731 - -
Austin, Texas - 705,557 - - -
Birmingham, Alabama - 715,432 - - -
College Park, Georgia - 802,361 - - -
Conroe, Texas - 590,733 - - -
Greenville, South Carolina - 670,594 - - -
Houston, Texas - 776,694 - - -
Houston, Texas - 964,354 - - -
Huntsville, Alabama - 641,125 - - -
Jacksonville, Florida - 670,491 - - -
Maitland, Florida - 684,164 - - -
Memphis, Tennessee - 810,316 798,412 - -
Mesquite, Texas - 592,342 - - -
Miami, Florida - 594,142 - - -
Middletown, New Jersey - 933,759 763,368 - -
Norcorss, Georgia - 740,132 - - -
Orlando, Florida - 922,679 725,256 - -
Palm Harbor, Florida - 487,021 - - -
Pensacola, Florida - 354,419 - - -
Tulsa, Oklahoma - 433,713 - - -
Taco Bell Restaurants:
Livingston, Tennessee - 212,438 - - -
Saint Louis, Missouri - 308,915 351,160 - -
Saint Louis, Missouri - 349,637 - - -
TGI Friday's Restaurants:
El Paso, Texas - 599,160 - - -
Independence, Missouri - 857,404 - 896,945 -
Mesa, Arizona - 914,342 - - -
San Diego, California - 2,386,592 - 1,432,281 -
TropiGrill Restaurants:
Altamonte Springs, Florida - 548,886 700,856 - -
Orlando, Florida - 618,372 631,370 - -
Tumbleweed Southwest Mesquite
Bar & Grill Restaurants:
Clarksville, Tennessee - 608,642 - - -
Cookeville, Tennessee - 511,084 - - -
Hermitage, Tennessee - 519,259 - 939,819 -
Murfreesboro, Tennessee - 514,900 - - -
Nashville, Tennessee - 420,176 - - -
Wendy's Old Fashioned
Hamburgers Restaurants:
Camarillo, California - 640,066 - 688,918 -
Knoxville, Tennessee - 358,027 - 444,622 -
Knoxville, Tennessee - 555,886 - 435,037 -
Westlake Village, California - 842,158 - 622,125 -
------------- ------------- ------------ ---------
$210,451,742 $93,495,475 $96,246,433 -
============= ============ ============ =========
Properties of Joint Venture in Which
the Company has a 55.38% Interest and
has Invested in Under an Operating Lease
Bennigan's Restaurant
Orlando, FLorida $ 706,411 - $ 1,508,767 -
============= ============= =========== ==========
Properties the Company
has Invested in Under
Direct Financing Leases:
Applebee's Restaurants:
Salinas, California - - - 794,058 -
Tullahoma, Tennessee - 324,362 1,009,364 - -
Arby's Restaurants:
Grand Rapids, Michigan (k) - - - 957,945 -
Barb Wires Steakhouse and
Saloon Restaurants:
Lawrence, Kansas - - 1,022,607 - -
Bennigan's Restaurants:
Bedford, Texas - - 954,774 - -
Clearwater, Florida - - 1,043,049 - -
Colorado Springs, Colorado - - 902,872 - -
Englewood, Colorado - - 1,131,082 - -
Florham Park, New Jersey - - 1,092,401 - -
Houston, Texas - - 985,394 - -
Jacksonville, Florida - - 819,356 - -
Jacksonville, Florida - - 1,061,339 - -
North Richland Hills, Texas - - 983,252 - -
Oklahoma City, Oklahoma - - 1,015,084 - -
Pensacola, Florida - - 980,438 - -
Saint Louis Park, Minnesota - - 1,280,033 - -
Tampa, Florida - - 1,312,146 - -
Winston-Salem, North Carolina - 247,828 992,551 - -
Woodridge, Illinois - - 991,688 - -
Black-eyed Pea Restaurant:
Albuquerque, New Mexico - - 705,746 - -
Albuquerque, New Mexico - - 704,757 - -
Bedford, Texas - - 655,028 - -
Dallas, Texas - - 655,011 - -
Dallas, Texas - - 698,827 - -
Forestville, Maryland - - 681,034 - -
Fort Worth, Texas - - 655,014 - -
Hillsboro, Texas - - - 811,120 -
Houston, Texas - - 685,977 - -
Mesa, Arizona - - 906,740 - -
Oklahoma City, Oklahoma - - 651,523 - -
Phoenix, Arizona - - 677,681 - -
Phoenix, Arizona - - 677,805 - -
Phoenix, Arizona - - 682,141 - -
Scottsdale, Arizona - - - 823,188 -
Tucson, Arizona - - 678,333 - -
Waco, Texas - - 699,815 - -
Wichita, Kansas - - 698,827 - -
Burger King Restaurant:
Atlanta, Georgia - - 609,693 - -
Darryl's Restaurants:
Evansville, Indiana - - 974,401 - -
Knoxville, Tennessee - - 709,047 - -
Louisville, Kentucky - - 915,201 - -
Mobile, Alabama - - 1,009,042 - -
Montgomery, Alabama - - 952,382 - -
Nashville, Tennessee - - 736,400 - -
Pensacola, Florida - - 725,709 - -
Richmond, Virginia - - 775,617 - -
Richmond, Virginia - - 650,175 - -
Winston-Salem, North Carolina - - 812,752 - -
Denny's Restaurants:
McKinney, Texas - - - 655,052 -
Tampa, Florida - - - 715,957 -
Golden Corral Family
Steakhouse Restaurants:
Brooklyn, Ohio - - 1,044,311 - -
Eastlake, Ohio - 256,332 1,473,307 - -
International House of
Pancakes Restaurants:
Anderson, South Carolina - - 957,414 - -
Crestwood, Illinois - - 935,262 - -
Elk Grove, California - - 1,039,584 - -
Hollywood, California - - 994,845 - -
Loveland, Colorado - - 963,597 - -
Maryville, Tennessee - 243,825 963,231 - -
Victoria, Texas - - 814,015 - -
Kentucky Fried Chicken
Restaurant:
Putnam, Connecticut - - 530,846 - -
On the Border Restaurant:
San Antonio, Texas - - - 1,305,217 -
Popeye's Chicken Restaurant:
Starke, Florida - 208,910 - 427,067 -
Ruby Tuesday's Restaurant:
London, Kentucky - - - 845,249 -
Shoney's Restaurants:
Guadalupe, Arizona - - - 949,343 -
Las Vegas, Nevada - - - 1,184,901 -
Steak and Ale Restaurants:
Austin, Texas - - 745,609 - -
Birmingham, Alabama - - 681,623 - -
College Park, Georgia - - 909,525 - -
Conroe, Texas - - 1,032,606 - -
Greenville, South Carolina - - 1,180,342 - -
Houston, Texas - - 1,092,606 - -
Houston, Texas - - 978,733 - -
Huntsville, Alabama - - 810,041 - -
Jacksonville, Florida - - 879,060 - -
Maitland, Florida - - 791,599 - -
Mesquite, Texas - - 908,017 - -
Miami, Florida - - 1,176,774 - -
Norcorss, Georgia - - 966,814 - -
Palm Harbor, Florida - - 816,569 - -
Pensacola, Florida - - 826,191 - -
Tulsa, Oklahoma - - 1,067,543 - -
Taco Bell Restaurants:
Livingston, Tennessee - - - 436,198 -
Saint Louis, Missouri - - 471,686 - -
TGI Friday's Restaurants:
El Paso, Texas - - 1,089,566 - -
Mesa, Arizona - - - 1,440,217 -
Tumbleweed Southwest Mesquite
Bar & Grill Restaurants:
Clarksville, Tennessee - - - 937,562 -
Cookeville, Tennessee - - 1,029,717 - -
Hendersonville, Tennessee - 782,282 - - -
Murfreesboro, Tennessee - 976,699 - - -
Nashville, Tennessee - - 949,367 - -
Wendy's Old Fashioned
Hamburgers Restaurants:
Carmel Mountain, California - 594,856 - - -
Knoxville, Tennessee - - - 453,380 -
San Diego, California - - - 590,058 -
Sevierville, Tennessee - - - 531,726 -
Seymour, Tennessee - - - 460,693 -
============= ============ ============ =========
$1,281,257 $68,036,345 $14,318,931 -
============= ============ ============ =========
Gross Amount at Which Life on Which
Carried at Close of Period (b)(m)(n)(o)(p) Depreciation in
----------------------------------------------------- Date Latest Income
Buildings and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
----------- ------------- ------------ ------------ --------- -------- -------------
609,696 770,331 1,380,027 9,093 1991 08/98 (e)
556,070 983,010 1,539,080 11,603 1995 08/98 (e)
625,868 936,068 1,561,936 11,049 1996 08/98 (e)
489,867 1,003,630 1,493,497 11,847 1993 08/98 (e)
549,651 966,628 1,516,279 11,410 1994 08/98 (e)
735,272 827,474 1,562,746 9,767 1992 08/98 (e)
390,058 943,019 1,333,077 11,131 1997 08/98 (e)
568,168 925,046 1,493,214 10,919 1998 08/98 (e)
740,165 835,996 1,576,161 9,868 1995 08/98 (e)
874,094 880,494 1,754,588 30,362 1997 08/96 (e)
786,475 (g) 786,475 (h) 1997 09/96 (h)
230,720 455,946 686,666 8,973 1988 05/98 (e)
648,459 683,390 1,331,849 9,315 1998 04/98 (e)
338,486 497,282 835,768 37,921 1996 09/96 (e)
586,477 604,508 1,190,985 939 1998 08/98 (e)
441,770 621,014 1,062,784 9,542 1998 04/98 (e)
483,660 459,387 943,047 (c) (d) 09/98 (c)
289,183 (g) 289,183 (h) 1995 08/95 (h)
363,478 404,650 768,128 19,004 1990 08/97 (e)
277,986 490,143 768,129 23,019 1995 08/97 (e)
463,047 621,088 1,084,135 12,327 1998 02/98 (e)
228,364 539,764 768,128 25,349 1995 08/97 (e)
276,567 505,359 781,926 41,767 1995 07/96 (e)
273,325 413,077 686,402 19,400 1994 08/97 (e)
268,545 485,160 753,705 22,785 1995 08/97 (e)
320,924 463,347 784,271 22,607 1992 07/97 (e)
402,516 390,699 793,215 (c) (d) 09/98 (c)
702,830 13,611 716,441 (c) (d) 12/98 (c)
512,258 267,103 779,361 756 1998 09/98 (e)
493,489 (g) 493,489 (h) 1994 08/97 (h)
714,194 1,302,733 2,016,927 75,963 1997 04/97 (e)
768,333 (g) 768,333 (h) 1986 06/98 (h)
900,038 (g) 900,038 (h) 1979 06/98 (h)
794,255 (g) 794,255 (h) 1979 06/98 (h)
665,141 (g) 665,141 (h) 1984 06/98 (h)
1,460,179 901,042 2,361,221 16,313 1982 06/98 (e)
1,077,645 (g) 1,077,645 (h) 1983 06/98 (h)
908,502 (g) 908,502 (h) 1979 06/98 (h)
779,387 (g) 779,387 (h) 1983 06/98 (h)
832,557 (g) 832,557 (h) 1981 06/98 (h)
1,305,939 1,030,685 2,336,624 18,661 1982 06/98 (e)
886,048 (g) 886,048 (h) 1979 06/98 (h)
687,614 1,064,050 1,751,664 (c) (d) 09/98 (c)
756,750 (g) 756,750 (h) 1986 06/98 (h)
1,585,461 874,143 2,459,604 15,826 1978 06/98 (e)
692,093 (g) 692,093 (h) 1983 06/98 (h)
885,111 (g) 885,111 (h) 1976 06/98 (h)
734,245 (g) 734,245 (h) 1980 06/98 (h)
789,680 (g) 789,680 (h) 1987 12/98 (h)
168,548 715,504 884,052 (c) (d) 12/98 (c)
366,727 618,096 984,823 (c) (d) 12/98 (c)
437,235 609,391 1,046,626 (c) (d) 12/98 (c)
746,437 501,072 1,247,509 (c) (d) 08/98 (c)
883,196 108,843 992,039 (c) (d) 12/98 (c)
362,141 989,635 1,351,776 15,387 1996 07/98 (e)
404,155 (g) 404,155 (h) 1996 06/96 (h)
447,582 17,358 464,940 (c) (d) 12/98 (c)
758,796 13,869 772,665 (c) (d) 12/98 (c)
784,939 (g) 784,939 (h) 1994 09/97 (h)
788,311 10,933 799,244 (c) (d) 11/98 (c)
527,388 166,992 694,380 (c) (d) 11/98 (c)
774,448 507,587 1,282,035 28,902 1997 12/96 (e)
585,818 866,641 1,452,459 39,513 1997 05/97 (e)
569,782 294,878 864,660 14,067 1997 04/97 (e)
376,929 639,875 1,016,804 67,201 1995 11/95 (e)
507,544 328,353 835,897 16,080 1997 04/97 (e)
353,608 606,470 960,078 14,295 1997 05/98 (e)
365,784 605,763 971,547 45,197 1996 07/96 (e)
320,463 627,371 947,834 28,604 1997 08/97 (e)
396,377 681,847 1,078,224 52,924 1996 06/96 (e)
705,522 626,845 1,332,367 41,961 1996 09/96 (e)
667,992 661,776 1,329,768 29,750 1997 05/97 (e)
566,562 403,730 970,292 10,508 1997 04/98 (e)
665,422 481,311 1,146,733 36,175 1996 06/96 (e)
493,536 619,786 1,113,322 27,296 1997 09/97 (e)
885,567 648,755 1,534,322 28,750 1997 04/97 (e)
631,336 675,111 1,306,447 33,062 1997 05/97 (e)
515,827 572,706 1,088,533 23,850 1997 05/97 (e)
688,147 351,810 1,039,957 24,106 1996 09/96 (e)
469,041 336,295 805,336 15,345 1997 04/97 (e)
473,596 586,377 1,059,973 28,556 1997 07/97 (e)
526,092 504,483 1,030,575 20,778 1997 05/97 (e)
528,118 340,297 868,415 24,738 1996 07/96 (e)
378,786 388,489 767,275 26,431 1996 12/96 (e)
482,361 316,135 798,496 13,345 1997 04/97 (e)
448,185 681,598 1,129,783 34,064 1997 07/97 (e)
889,562 487,475 1,377,037 25,386 1997 04/97 (e)
788,248 209,449 997,697 16,619 1996 07/96 (e)
751,576 757,026 1,508,602 37,074 1997 05/97 (e)
651,867 775,634 1,427,501 37,985 1997 05/97 (e)
234,685 589,367 824,052 15,291 1994 04/98 (e)
394,422 (g) 394,422 (h) 1998 06/98 (h)
543,095 620,617 1,163,712 49,649 1996 03/96 (e)
680,192 575,426 1,255,618 31,584 1997 12/96 (e)
769,842 411,012 1,180,854 21,812 1997 02/97 (e)
917,717 784,590 1,702,307 48,061 1996 10/96 (e)
672,815 621,133 1,293,948 49,180 1996 04/96 (e)
233,468 689,696 923,164 43,822 1970 02/97 (e)
1,211,346 829,339 2,040,685 63,242 1996 03/96 (e)
546,261 714,114 1,260,375 33,908 1997 04/97 (e)
965,223 549,565 1,514,788 28,482 1977 06/97 (e)
944,585 689,363 1,633,948 35,727 1971 06/97 (e)
986,426 1,680,312 2,666,738 56,164 1994 12/97 (e)
938,162 1,681,670 2,619,832 56,209 1995 12/97 (e)
945,234 1,475,339 2,420,573 49,313 1994 12/97 (e)
963,047 1,505,671 2,468,718 50,327 1995 12/97 (e)
1,156,847 1,188,272 2,345,119 326 1997 12/98 (e)
960,779 1,365,563 2,326,342 28,621 1990 05/98 (e)
563,479 (g) 563,479 (h) 1983 06/97 (h)
698,367 570,468 1,268,835 29,565 1983 06/97 (e)
777,842 663,941 1,441,783 34,410 1981 06/97 (e)
589,574 (g) 589,574 (h) 1983 06/97 (h)
647,375 (g) 647,375 (h) 1983 06/97 (h)
495,195 (g) 495,195 (h) 1983 06/97 (h)
346,380 (g) 346,380 (h) 1984 06/97 (h)
513,218 (g) 513,218 (h) 1981 06/97 (h)
1,485,631 772,853 2,258,484 40,054 1983 06/97 (e)
389,394 (g) 389,394 (h) 1983 06/97 (h)
840,525 505,176 1,345,701 26,182 1980 06/97 (e)
1,131,164 719,865 1,851,029 37,308 1972 06/97 (e)
618,125 (g) 618,125 (h) 1982 06/97 (h)
311,196 (g) 311,196 (h) 1982 06/97 (h)
436,867 (g) 436,867 (h) 1978 06/97 (h)
439,961 (g) 439,961 (h) 1996 06/96 (h)
466,555 506,094 972,649 56,000 1981 09/95 (e)
528,090 625,653 1,153,743 69,225 1987 09/95 (e)
397,302 (g) 397,302 (h) 1997 02/97 (h)
464,957 178,078 643,035 8,737 1997 04/97 (e)
628,804 36,311 665,115 1,798 1997 05/97 (e)
485,648 172,318 657,966 (c) (d) 11/98 (c)
456,629 1,170,630 1,627,259 10,717 1998 06/98 (e)
384,221 643,854 1,028,075 71,877 1995 08/95 (e)
359,455 653,853 1,013,308 70,190 1995 08/95 (e)
426,349 805,517 1,231,866 12,451 1997 07/98 (e)
848,187 664,399 1,512,586 (c) (d) 11/98 (c)
442,218 930,207 1,372,425 32,076 1996 12/96 (e)
1,031,098 1,092,939 2,124,037 112,853 1995 11/95 (e)
576,548 934,918 1,511,466 39,555 1997 05/97 (e)
349,227 699,756 1,048,983 79,209 1995 08/95 (e)
546,078 993,149 1,539,227 11,723 1998 12/97 (e)
1,043,108 977,508 2,020,616 106,622 1995 08/95 (e)
324,046 833,316 1,157,362 (c) (d) 08/98 (c)
564,242 1,056,315 1,620,557 14,398 1998 01/98 (e)
161,390 1,028,945 1,190,335 37,201 1997 08/97 (e)
569,664 1,017,781 1,587,445 15,267 1998 01/98 (e)
364,536 865,147 1,229,683 31,830 1997 06/97 (e)
320,852 763,705 1,084,557 (c) (d) 11/98 (c)
590,538 1,176,436 1,766,974 38,324 1997 08/97 (e)
640,320 898,171 1,538,491 100,911 1995 08/95 (e)
456,646 861,803 1,318,449 29,717 1996 02/97 (e)
615,554 1,184,073 1,799,627 50,082 1997 05/97 (e)
541,264 1,173,738 1,715,002 51,904 1997 06/97 (e)
409,153 943,712 1,352,865 37,488 1997 06/97 (e)
479,197 954,051 1,433,248 64,044 1997 11/96 (e)
374,230 838,342 1,212,572 46,055 1997 12/96 (e)
428,841 1,031,457 1,460,298 34,568 1997 09/97 (e)
395,839 887,540 1,283,379 20,061 1997 12/97 (e)
548,821 1,099,448 1,648,269 25,553 1997 10/97 (e)
570,111 845,896 1,416,007 (c) (d) 10/98 (c)
322,433 987,385 1,309,818 33,357 1997 09/97 (e)
634,108 21,570 655,678 (c) (d) 12/98 (c)
626,999 1,130,692 1,757,691 86,015 1996 05/96 (e)
825,650 1,161,192 1,986,842 112,169 1995 08/95 (e)
357,429 650,249 1,007,678 71,928 1995 08/95 (e)
303,633 970,489 1,274,122 50,830 1997 02/97 (e)
405,631 884,954 1,290,585 35,398 1983 10/97 (e)
282,099 534,632 816,731 21,385 1981 10/97 (e)
370,667 431,642 802,309 17,266 1981 10/97 (e)
693,733 810,458 1,504,191 32,418 1982 10/97 (e)
371,254 685,847 1,057,101 25,617 1979 11/97 (e)
422,489 528,849 951,338 21,154 1981 10/97 (e)
451,235 548,178 999,413 21,927 1982 10/97 (e)
287,331 712,081 999,412 28,483 1980 10/97 (e)
375,116 605,067 980,183 21,827 1982 12/97 (e)
388,699 793,475 1,182,174 31,739 1977 10/97 (e)
728,574 793,410 1,521,984 31,736 1982 10/97 (e)
436,471 659,089 1,095,560 26,364 1982 10/97 (e)
627,680 804,399 1,432,079 32,176 1977 10/97 (e)
846,183 595,601 1,441,784 30,868 1972 06/97 (e)
817,039 648,765 1,465,804 33,623 1976 06/97 (e)
1,181,460 908,880 2,090,340 47,104 1974 06/97 (e)
541,312 92,804 634,116 (c) (d) 11/98 (c)
375,987 964,430 1,340,417 1,233 1997 12/98 (e)
584,766 (g) 584,766 (h) 1997 08/97 (h)
1,096,763 705,345 1,802,108 36,105 1995 06/97 (e)
575,285 802,974 1,378,259 7,205 1997 09/98 (e)
416,115 756,717 1,172,832 (c) (d) 08/98 (c)
476,847 961,606 1,438,453 263 1998 12/98 (e)
1,407,002 (g) 1,407,002 (h) 1996 06/98 (h)
545,112 1,029,900 1,575,012 1,317 1996 12/98 (e)
645,365 856,532 1,501,897 42,807 1996 07/97 (e)
512,481 831,202 1,343,683 7,458 1998 09/98 (e)
380,687 775,713 1,156,400 6,960 1997 09/98 (e)
460,167 802,640 1,262,807 36,522 1997 08/97 (e)
665,015 580,798 1,245,813 31,215 1994 05/97 (e)
593,624 918,024 1,511,648 335 1997 12/98 (e)
488,259 (g) 488,259 (h) 1997 08/97 (h)
647,414 871,268 1,518,682 716 1998 12/98 (e)
382,950 957,912 1,340,862 262 1997 12/98 (e)
504,533 806,624 1,311,157 12,099 1996 07/98 (e)
387,562 891,943 1,279,505 1,222 1997 12/98 (e)
282,868 843,648 1,126,516 693 1997 12/98 (e)
579,175 1,176,434 1,755,609 322 1997 12/98 (e)
765,743 707,406 1,473,149 35,354 1997 07/97 (e)
319,237 (g) 319,237 (h) 1997 08/97 (h)
710,749 721,843 1,432,592 (c) (d) 12/98 (c)
605,063 649,514 1,254,577 8,497 1998 04/98 (e)
419,488 697,861 1,117,349 32,838 1997 04/97 (e)
481,456 636,588 1,118,044 5,537 1998 07/98 (e)
603,735 595,803 1,199,538 (c) (d) 12/98 (c)
361,238 711,595 1,072,833 30,300 1997 07/97 (e)
396,864 620,042 1,016,906 26,684 1997 06/97 (e)
369,886 513,533 883,419 31,644 1997 12/96 (e)
124,468 773,506 897,974 36,609 1997 04/97 (e)
389,265 779,211 1,168,476 22,256 1997 10/97 (e)
635,343 703,067 1,338,410 28,315 1997 10/97 (e)
286,850 606,547 893,397 26,990 1997 05/97 (e)
462,813 573,816 1,036,629 7,140 1998 05/98 (e)
382,042 613,690 995,732 25,795 1997 07/97 (e)
284,046 577,029 861,075 11,725 1998 04/98 (e)
537,223 592,536 1,129,759 34,172 1997 01/97 (e)
370,342 548,107 918,449 31,810 1997 02/97 (e)
420,521 543,338 963,859 28,060 1997 03/97 (e)
545,485 527,020 1,072,505 49,766 1996 11/95 (e)
403,002 610,815 1,013,817 46,290 1996 07/96 (e)
375,776 643,445 1,019,221 48,655 1996 07/96 (e)
437,667 591,877 1,029,544 45,458 1996 06/96 (e)
390,509 596,872 987,381 37,921 1997 02/97 (e)
272,937 688,400 961,337 15,748 1998 03/98 (e)
737,038 604,806 1,341,844 34,549 1997 01/97 (e)
415,880 649,681 1,065,561 37,349 1997 01/97 (e)
730,674 600,180 1,330,854 36,291 1997 01/97 (e)
603,354 602,630 1,205,984 70,360 1986 06/95 (e)
911,754 581,552 1,493,306 32,105 1997 01/97 (e)
740,616 678,189 1,418,805 22,730 1997 12/97 (e)
853,821 635,185 1,489,006 12,755 1998 02/98 (e)
1,075,983 589,694 1,665,677 (c) (d) 12/98 (c)
418,351 651,064 1,069,415 5,663 1998 07/98 (e)
363,616 773,187 1,136,803 (c) (d) 12/98 (c)
217,851 751,664 969,515 43,212 1992 01/97 (e)
387,455 625,933 1,013,388 35,813 1997 01/97 (e)
383,591 675,860 1,059,451 14,289 1998 04/98 (e)
769,900 785,757 1,555,657 (c) (d) 12/98 (c)
681,663 642,924 1,324,587 32,073 1997 04/97 (e)
631,275 567,912 1,199,187 30,626 1997 02/97 (e)
717,246 688,066 1,405,312 11,531 1998 03/98 (e)
474,296 759,049 1,233,345 7,504 1998 04/98 (e)
274,012 777,712 1,051,724 (c) (d) 12/98 (c)
310,793 690,785 1,001,578 (c) (d) 12/98 (c)
494,273 741,964 1,236,237 (c) (d) 12/98 (c)
383,921 874,164 1,258,085 (c) (d) 12/98 (c)
477,580 566,856 1,044,436 13,071 1998 03/98 (e)
464,245 779,235 1,243,480 (c) (d) 12/98 (c)
523,089 617,131 1,140,220 25,883 1997 07/97 (e)
358,130 668,383 1,026,513 27,407 1997 07/97 (e)
301,723 (g) 301,723 (h) 1997 07/97 (h)
4,846,660 - 4,846,660 - (q) 09/98 (q)
320,594 559,433 880,027 52,009 1967 03/96 (e)
242,239 - 242,239 (f) 1989 01/96 (f)
212,053 - 212,053 (f) 1986 05/96 (f)
209,432 - 209,432 (f) 1978 05/96 (f)
174,721 - 174,721 (f) 1975 01/96 (f)
46,737 - 46,737 (f) 1980 05/96 (f)
120,449 - 120,449 (f) 1986 05/96 (f)
190,009 - 190,009 (f) 1996 03/97 (f)
200,442 - 200,442 (f) 1985 01/96 (f)
135,831 - 135,831 (f) 1992 12/96 (f)
187,082 - 187,082 (f) 1990 03/97 (f)
126,494 - 126,494 (f) 1986 01/96 (f)
116,849 - 116,849 (f) 1978 01/96 (f)
226,163 - 226,163 (f) 1987 01/96 (f)
215,881 - 215,881 (f) 1990 05/96 (f)
242,239 - 242,239 (f) 1977 01/96 (f)
245,145 - 245,145 (f) 1975 05/97 (f)
194,012 - 194,012 (f) 1986 01/96 (f)
202,050 - 202,050 (f) 1983 01/96 (f)
142,570 - 142,570 (f) 1996 01/96 (f)
212,093 - 212,093 (f) 1978 05/96 (f)
180,803 - 180,803 (f) 1978 05/96 (f)
99,166 - 99,166 (f) 1994 01/96 (f)
169,454 - 169,454 (f) 1986 05/96 (f)
202,552 - 202,552 (f) 1980 04/96 (f)
216,518 - 216,518 (f) 1975 01/96 (f)
213,090 - 213,090 (f) 1989 03/97 (f)
99,815 - 99,815 (f) 1986 05/96 (f)
152,215 - 152,215 (f) 1994 01/96 (f)
149,206 - 149,206 (f) 1975 03/97 (f)
223,981 - 223,981 (f) 1983 03/97 (f)
259,922 - 259,922 (f) 1976 01/96 (f)
261,529 - 261,529 (f) 1993 01/96 (f)
99,733 - 99,733 (f) 1991 05/96 (f)
259,922 - 259,922 (f) 1978 01/96 (f)
239,023 - 239,023 (f) 1983 01/96 (f)
228,199 - 228,199 (f) 1983 03/97 (f)
186,476 - 186,476 (f) 1976 04/96 (f)
128,604 - 128,604 (f) 1988 04/96 (f)
194,097 - 194,097 (f) 1993 12/96 (f)
208,480 - 208,480 (f) 1975 01/96 (f)
176,170 - 176,170 (f) 1985 01/96 (f)
197,227 - 197,227 (f) 1978 01/96 (f)
279,779 - 279,779 (f) 1983 03/97 (f)
167,170 - 167,170 (f) 1980 03/97 (f)
852,746 1,108,491 1,961,237 9,339 1994 09/98 (e)
712,865 873,395 1,586,260 7,358 1993 09/98 (e)
397,878 923,975 1,321,853 7,784 1996 09/98 (e)
435,465 915,232 1,350,697 7,711 1994 09/98 (e)
918,258 764,150 1,682,408 6,996 1995 09/98 (e)
654,766 1,195,901 1,850,667 10,949 1994 09/98 (e)
683,560 614,256 1,297,816 5,624 1995 09/98 (e)
789,680 604,283 1,393,963 5,532 1995 09/98 (e)
911,013 1,011,766 1,922,779 9,263 1993 09/98 (e)
1,244,893 918,257 2,163,150 755 1994 12/98 (e)
569,436 968,749 1,538,185 8,161 1994 09/98 (e)
691,797 1,136,902 1,828,699 17,677 1997 07/98 (e)
599,391 1,159,989 1,759,380 4,131 1998 06/98 (e)
113,780 407,429 521,209 3,432 1998 09/98 (e)
158,880 378,057 536,937 3,703 1998 09/98 (e)
913,244 170,962 1,084,206 (c) (d) 11/98 (c)
1,336,881 10,055 1,346,936 (c) (d) 12/98 (c)
369,914 1,554,300 1,924,214 3,265 1998 09/98 (e)
895,539 300,903 1,196,442 (c) (d) 07/98 (c)
698,778 14,657 713,435 (c) (d) 11/98 (c)
574,441 742,781 1,317,222 2,985 1998 11/98 (e)
354,415 (g) 354,415 (h) 1997 08/97 (h)
695,999 11,089 707,088 (c) (d) 12/98 (c)
545,612 868,606 1,414,218 14,060 1998 03/98 (e)
1,076,442 1,062,751 2,139,193 55,661 1996 06/97 (e)
591,371 1,175,273 1,766,644 77,681 1996 09/96 (e)
309,101 420,246 729,347 25,320 1997 01/97 (e)
656,263 (g) 656,263 (h) 1997 08/97 (h)
623,709 (g) 623,709 (h) 1997 04/97 (h)
469,721 85,872 555,593 (c) (d) 03/98 (c)
628,688 962,524 1,591,212 18,591 1981 06/98 (e)
371,021 593,171 964,192 11,457 1994 06/98 (e)
585,461 812,822 1,398,283 15,700 1990 06/98 (e)
478,006 679,114 1,157,120 13,117 1988 06/98 (e)
527,572 870,710 1,398,282 16,818 1988 06/98 (e)
734,105 961,287 1,695,392 18,567 1986 06/98 (e)
634,379 643,323 1,277,702 12,426 1981 06/98 (e)
1,006,396 690,731 1,697,127 12,506 1979 06/98 (e)
705,557 (g) 705,557 (h) 1969 06/98 (h)
715,432 (g) 715,432 (h) 1993 06/98 (h)
802,361 (g) 802,361 (h) 1973 06/98 (h)
590,733 (g) 590,733 (h) 1993 06/98 (h)
670,594 (g) 670,594 (h) 1976 06/98 (h)
776,694 (g) 776,694 (h) 1972 06/98 (h)
964,354 (g) 964,354 (h) 1973 06/98 (h)
641,125 (g) 641,125 (h) 1974 06/98 (h)
670,491 (g) 670,491 (h) 1977 06/98 (h)
684,164 (g) 684,164 (h) 1969 06/98 (h)
810,316 798,412 1,608,728 1,021 1979 12/98 (e)
592,342 (g) 592,342 (h) 1988 06/98 (h)
594,142 (g) 594,142 (h) 1974 06/98 (h)
933,759 763,368 1,697,127 13,821 1985 06/98 (e)
740,132 (g) 740,132 (h) 1984 12/98 (h)
922,679 725,256 1,647,935 13,131 1978 06/98 (e)
487,021 (g) 487,021 (h) 1983 06/98 (h)
354,419 (g) 354,419 (h) 1978 06/98 (h)
433,713 (g) 433,713 (h) 1969 06/98 (h)
212,438 (g) 212,438 (h) 1998 07/98 (h)
308,915 351,160 660,075 2,341 1991 10/98 (e)
349,637 (g) 349,637 (h) 1991 10/98 (h)
599,160 (g) 599,160 (h) 1992 08/98 (h)
857,404 896,945 1,754,349 (c) (d) 11/98 (c)
914,342 (g) 914,342 (h) 1997 09/97 (h)
2,386,592 1,432,281 3,818,873 (c) (d) 11/98 (c)
548,886 700,856 1,249,742 5,904 1994 09/98 (e)
618,372 631,370 1,249,742 5,319 1994 09/98 (e)
608,642 (g) 608,642 (h) 1998 02/98 (h)
511,084 (g) 511,084 (h) 1994 08/97 (h)
519,259 939,819 1,459,078 (c) (d) 02/98 (c)
514,900 (g) 514,900 (h) 1995 08/97 (h)
420,176 (g) 420,176 (h) 1978 08/97 (h)
640,066 688,918 1,328,984 55,507 1996 06/96 (e)
358,027 444,622 802,649 33,123 1996 05/96 (e)
555,886 435,037 990,923 5,135 1998 06/98 (e)
842,158 622,125 1,464,283 12,869 1998 11/97 (e)
- ------------ ------------- ------------- ------------
$210,451,742 $189,741,908 $400,193,650 $6,242,783
============ ============= ============= ============
$ 706,411 $ 1,508,767 $ 2,215,178 $ 7,304 1998 06/98 (e)
============ ============= ============= ============
(g) (g) (g) (h) 1997 09/96 (h)
(g) (g) (g) (i) 1995 08/98 (i)
(g) (g) (g) (h) 1995 08/95 (h)
(g) (g) (g) (h) 1994 08/97 (h)
(g) (g) (g) (h) 1986 06/98 (h)
(g) (g) (g) (h) 1979 06/98 (h)
(g) (g) (g) (h) 1979 06/98 (h)
(g) (g) (g) (h) 1984 06/98 (h)
(g) (g) (g) (h) 1983 06/98 (h)
(g) (g) (g) (h) 1979 06/98 (h)
(g) (g) (g) (h) 1983 06/98 (h)
(g) (g) (g) (h) 1981 06/98 (h)
(g) (g) (g) (h) 1979 06/98 (h)
(g) (g) (g) (h) 1986 06/98 (h)
(g) (g) (g) (h) 1983 06/98 (h)
(g) (g) (g) (h) 1976 06/98 (h)
(g) (g) (g) (h) 1980 06/98 (h)
(g) (g) (g) (i) 1982 06/98 (i)
(g) (g) (g) (h) 1987 12/98 (h)
(j) (g) (g) (h) 1993 10/97 (h)
(j) (g) (g) (h) 1993 10/97 (h)
(j) (g) (g) (h) 1993 03/97 (h)
(j) (g) (g) (h) 1996 03/97 (h)
(j) (g) (g) (h) 1991 10/97 (h)
(j) (g) (g) (h) 1989 10/97 (h)
(j) (g) (g) (h) 1991 03/97 (h)
(g) (g) (g) (h) 1996 06/96 (h)
(j) (g) (g) (h) 1990 10/97 (h)
(g) (g) (g) (h) 1994 09/97 (h)
(j) (g) (g) (h) 1992 03/97 (h)
(j) (g) (g) (h) 1991 09/97 (h)
(j) (g) (g) (h) 1993 09/97 (h)
(j) (g) (g) (h) 1994 09/97 (h)
(j) (g) (g) (h) 1997 04/97 (h)
(j) (g) (g) (h) 1995 09/97 (h)
(j) (g) (g) (h) 1991 10/97 (h)
(j) (g) (g) (h) 1992 10/97 (h)
(g) (g) (g) (h) 1998 06/98 (h)
(g) (g) (g) (h) 1983 06/97 (h)
(g) (g) (g) (h) 1983 06/97 (h)
(g) (g) (g) (h) 1983 06/97 (h)
(g) (g) (g) (h) 1983 06/97 (h)
(g) (g) (g) (h) 1984 06/97 (h)
(g) (g) (g) (h) 1981 06/97 (h)
(g) (g) (g) (h) 1983 06/97 (h)
(g) (g) (g) (h) 1982 06/97 (h)
(g) (g) (g) (h) 1982 06/97 (h)
(g) (g) (g) (h) 1978 06/97 (h)
(g) (g) (g) (h) 1996 06/96 (h)
(g) (g) (g) (h) 1997 02/97 (h)
(j) (g) (g) (h) 1995 08/96 (h)
(g) (g) (g) (i) 1996 12/96 (i)
(j) (g) (g) (h) 1997 10/98 (h)
(j) (g) (g) (h) 1996 11/98 (h)
(g) (g) (g) (h) 1997 08/97 (h)
(g) (g) (g) (h) 1996 06/98 (h)
(g) (g) (g) (h) 1997 08/97 (h)
(g) (g) (g) (i) 1997 12/98 (i)
(g) (g) (g) (h) 1997 08/97 (h)
(g) (g) (g) (h) 1997 07/97 (h)
(j) (g) (g) (h) 1997 10/97 (h)
(g) (g) (g) (i) 1997 05/97 (i)
(g) (g) (g) (h) 1997 08/97 (h)
(g) (g) (g) (h) 1997 04/97 (h)
(g) (g) (g) (h) 1997 08/97 (h)
(g) (g) (g) (h) 1969 06/98 (h)
(g) (g) (g) (h) 1993 06/98 (h)
(g) (g) (g) (h) 1973 06/98 (h)
(g) (g) (g) (h) 1993 06/98 (h)
(g) (g) (g) (h) 1976 06/98 (h)
(g) (g) (g) (h) 1972 06/98 (h)
(g) (g) (g) (h) 1973 06/98 (h)
(g) (g) (g) (h) 1974 06/98 (h)
(g) (g) (g) (h) 1977 06/98 (h)
(g) (g) (g) (h) 1969 06/98 (h)
(g) (g) (g) (h) 1988 06/98 (h)
(g) (g) (g) (h) 1974 06/98 (h)
(g) (g) (g) (h) 1984 12/98 (h)
(g) (g) (g) (h) 1983 06/98 (h)
(g) (g) (g) (h) 1978 06/98 (h)
(g) (g) (g) (h) 1969 06/98 (h)
(g) (g) (g) (h) 1998 07/98 (h)
(g) (g) (g) (h) 1991 10/98 (h)
(g) (g) (g) (h) 1992 08/98 (h)
(g) (g) (g) (h) 1997 09/97 (h)
(g) (g) (g) (h) 1998 02/98 (h)
(g) (g) (g) (h) 1994 08/97 (h)
(j) (g) (g) (h) 1974 08/97 (h)
(g) (g) (g) (h) 1995 08/97 (h)
(g) (g) (g) (h) 1978 08/97 (h)
(j) (g) (g) (h) 1997 10/98 (h)
(j) (g) (g) (h) 1998 07/98 (h)
(j) (g) (g) (h) 1996 10/96 (h)
(j) (g) (g) (h) 1996 06/96 (h)
(j) (g) (g) (h) 1998 08/98 (h)
</TABLE>
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC. AND SUBSIDIARIES
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
(a) Transactions in real estate and accumulated depreciation during 1998,
1997 and 1996 are summarized as follows:
<TABLE>
<CAPTION>
Cost Accumulated
(b)(m)(n)(o)(p) Depreciation
----------------- ----------------
<S> <C>
Properties the Company has Invested
in Under Operating Leases:
Balance, December 31, 1995 $ 19,824,044 $ 100,318
Acquisitions (l) 41,030,498 --
Depreciation expense (e) -- 511,078
----------------- ----------------
Balance, December 31, 1996 60,854,542 611,396
Acquisitions (l) 146,879,309 --
Depreciation expense (e) -- 1,784,269
----------------- ----------------
Balance, December 31, 1997 207,733,851 2,395,665
Acquisitions (l) 192,459,799 --
Depreciation expense (e) -- 3,847,117
----------------- ----------------
Balance, December 31, 1998 $ 400,193,650 $ 6,242,782
================= ================
Property of Joint Venture in Which
the Company has a 55.38%
Interest and has Invested
in Under an Operating Lease:
Balance, December 31, 1997 $ -- $ --
Acquisition 2,215,177 --
Depreciation expense -- 7,303
----------------- ----------------
Balance, December 31, 1998 $ 2,215,177 $ 7,303
================= ================
</TABLE>
(b) As of December 31, 1998, 1997 and 1996, the aggregate cost of the
Properties owned by the Company and its subsidiaries for federal income
tax purposes was $418,427,587, $248,050,936 and $73,144,286,
respectively. All of the leases are treated as operating leases for
federal income tax purposes.
(c) Property was not placed in service as of December 31, 1998; therefore,
no depreciation was taken.
(d) Scheduled for completion in 1999.
(e) Depreciation expense is computed for buildings and improvements based
upon estimated lives of 30 years.
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC. AND SUBSIDIARIES
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 1998
(f) The building portion of this Property is owned by the tenant;
therefore, depreciation is not applicable.
(g) For financial reporting purposes, certain components of the lease
relating to land and/or building have been recorded as a direct
financing lease. Accordingly, costs relating to these components of
this lease are not shown.
(h) For financial reporting purposes, the portion of this lease relating to
the building has been recorded as direct financing lease. The cost of
the building has been included in net investment in direct financing
leases; therefore, depreciation is not applicable.
(i) For financial reporting purposes, the lease for the land and building
has been recorded as direct financing lease. The cost of the land and
building has been included in net investment in direct financing
leases; therefore, depreciation is not applicable.
(j) The Company owns the building only relating to this Property. This
Property is subject to a ground lease between the tenant and an
unaffiliated third party. In connection therewith, the Company entered
into either a tri-party agreement with the tenant and the owner of the
land or an assignment of interest in the ground lease with the landlord
of the land. The tri-party agreement or assignment of interest each
provide that the tenant is responsible for all obligations under the
ground lease and provide certain rights to the Company to help protect
its interest in the building in the event of a default by the tenant
under the terms of the ground lease.
(k) The restaurant on the property in Grand Rapids, Michigan, was converted
from a Kenny Rogers' Roasters restaurant to an Arby's restaurant in
1998.
(l) During the years ended December 31, 1998, 1997 and 1996, the Company
(i) incurred acquisition fees totalling $17,317,297, $10,011,715 and
$4,535,685, respectively, paid to the Advisor, (ii) purchased land and
buildings from affiliates of the Company for an aggregate cost of
approximately $8,770,000, $5,450,000 and $2,610,000, respectively, and
(iii) paid development or construction management fees to affiliates of
the Company totalling $229,153, $387,728 and $166,695 during the years
ended December 31, 1998, 1997 and 1996, respectively. Such amounts are
included in land and buildings on operating leases, net investment in
direct financing leases and other assets at December 31, 1998, 1997 and
1996.
(m) For financial reporting purposes, the undepreciated cost of the
Property in Indian Harbor Beach, Florida, was written down to its net
realizable value due to an anticipated impairment in value. The Company
recognized the impairment by recording an allowance for loss on
building in the amount of $52,327 at December 31, 1998. The impairment
at December 31, 1998 represents the difference between the Property's
carrying value and the property manager's estimate of the net
realizable value of the Property based on an anticipated sales price to
an interested third party. The cost of the Property presented on this
schedule is the gross amount at which the Property was carried at
December 31, 1998, excluding the allowance for loss on building.
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC. AND SUBSIDIARIES
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 1998
(n) For financial reporting purposes, the undepreciated cost of the
Property in Jessup, Maryland, was written down to its net realizable
value due to an anticipated impairment in value. The Company recognized
the impairment by recording an allowance for loss on building in the
amount of $342,385 at December 31, 1998. The impairment at December 31,
1998 represents the difference between the Property's carrying value
and the property manager's estimate of the net realizable value of the
Property based on an anticipated sales price to an interested third
party. The cost of the Property presented on this schedule is the gross
amount at which the Property was carried at December 31, 1998,
excluding the allowance for loss on building.
(o) For financial reporting purposes, the undepreciated cost of the
Property in Edgewater, Colorado, was written down to its net realizable
value due to an anticipated impairment in value. The Company recognized
the impairment by recording an allowance for loss on building in the
amount of $86,229 at December 31, 1998. The impairment at December 31,
1998 represents the difference between the Property's carrying value
and the property manager's estimate of the net realizable value of the
Property based on an anticipated sales price to an interested third
party. The cost of the Property presented on this schedule is the gross
amount at which the Property was carried at December 31, 1998,
excluding the allowance for loss on building.
(p) For financial reporting purposes, the undepreciated cost of the
Property in Phoenix, Arizona, was written down to its net realizable
value due to an anticipated impairment in value. The Company recognized
the impairment by recording an allowance for loss on land and
construction work in progress in the amount of $130,593 at December 31,
1998. The impairment at December 31, 1998 represents the difference
between the Property's carrying value and the property manager's
estimate of the net realizable value of the Property based on an
anticipated sales price to an interested third party. The cost of the
Property presented on this schedule is the gross amount at which the
Property was carried at December 31, 1998, excluding the allowance for
loss on land and construction work in progress.
(q) The Company owns a parcel of land on which restaurants will be
constructed during 1999.
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC. AND SUBSIDIARIES
SCEDULE IV - MORTGAGE LOANS ON REAL ESTATE
December 31,1998
<TABLE>
<CAPTION>
Principal
Amount
of Loans
Subject to
Final Periodic Face Carrying Delinquent
Interest Maturity Payment Prior Amount of Amount of Principal
Description Rate Date Terms Liens Mortgages Mortgages or Interest
----------- -------- -------- -------- ------ ------------ ----------- -------------
<S> <C>
Castle Hill Holdings V, L.L.C.
First Mortgages 10.75% January, 2016 (1) $ - $8,475,000 $8,520,313 $ -
Pizza Hut Restaurants:
Adrian, MI
Bedford, OH
Bowling Green, OH
Cleveland, OH
Cleveland, OH
Cleveland, OH
Defiance, OH
East Cleveland, OH
Euclid, OH
Fairview Park, OH
Lambertville, MI
Mayfield Heights, OH
Middleburg Heights, OH
Monroe, MI
North Olmstead, OH
Norwalk, OH
Sandusky, OH
Seven Hills, OH
Strongsville, OH
Toledo, OH
Toledo, OH
Toledo, OH
Toledo, OH
Castle Hill Holdings VI, L.L.C.
First Mortgages 10.75% June, 2016 (1) - 3,888,000 3,950,844 -
Pizza Hut Restaurants:
Beaver, WV
Beckley, WV
Belle, WV
Bluefield, WV
Cross Lanes, WV
Huntington, WV
Hurricane, WV
Marietta, OH
Milton, WV
Ronceverte, WV
Castle Hill Holdings VII, L.L.C.
First Mortgages 10.75% January, 2017 (1) - 484,000 267,175 (5) -
Pizza Hut Restaurants:
Bowling Green, OH
Toledo, OH
Castle Hill Holdings VII
(Phase II), L.L.C.
First Mortgages 10.50% April, 2017 (2) - 4,200,000 3,879,129 (6) -
Pizza Hut Restaurants:
Bolivar, OH
Carrollton, OH
Dover, OH
Millersburg, OH
New Philadelphia, OH
New Philadelphia, OH
Steubenville, OH
Uhrichsville, OH
Weirton, WV
Wellsburg, WV
Wintersville, OH
GenXMex Foods, Inc.
First Mortgage
Taco Bell Restaurant:
Saint Peters, MO 9.50% September, 2005 (3) - 545,000 551,667 -
GenXMex Foods, Inc.
First Mortgage
Taco Bell Restaurant:
Saint Louis, MO 9.50% September, 2005 (3) - 545,000 551,667 -
S & H Tyson's Property, L.L.C.
First Mortgage
Sam & Harry's Restaurant:
Tyson's Corner, VA 11.00% November, 2000 (4) - 1,575,000 1,662,037 -
Completely Casual, Inc.
First Mortgage
Ruby Tuesday's Restaurant:
Lexington, KY 11.00% June, 2014 (4) - 236,742 248,861 -
======== =========== ============ ========
Total $ - $19,948,742 $19,631,693 $ -
======== =========== ============ ========
(1) Equal monthly payments of principal and interest at an annual rate of 10.75%.
(2) Equal monthly payments of principal and interest at an annual rate of 10.50%.
(3) Equal monthly payments of principal and interest at an annual rate of 9.50%.
(4) Equal monthly payments of interest only at an annual rate of 11.00%.
(5) Includes provision for uncollectible mortgage notes of $226,088.
(6) Includes provision for uncollectible mortgage notes of $410,526.
(7) The tax carrying value of the notes is $19,631,693.
(8) The changes in the carrying amounts are summarized as follows:
1998 1997 1996
----------- ----------- -----------
Balance at beginning of period $17,622,010 $13,389,607 $ -
New mortgage loans 2,901,742 4,200,000 12,847,000
Accrued interest (39,853) 83,601 35,286
Collection of principal (291,990) (250,732) (133,850)
Deferred financing income (10,126) (39,180) (46,268)
Unamortized loan costs 86,524 238,714 687,439
Provision for uncollectible mortgag (636,614) - -
============ =========== ============
Balance at end of period $19,631,693 17,622,010 13,389,607
============ =========== ============
</TABLE>
<PAGE>
EXHIBITS
<PAGE>
EXHIBIT INDEX
Exhibit Number
3.1 CNL American Properties Fund, Inc. Amended and Restated
Articles of Incorporation, as amended (Included as Exhibit 3.1
to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998 and incorporated herein by
reference.)
3.2 CNL American Properties Fund, Inc. Amended and Restated Bylaws
(Included as Exhibit 3.2 to Registration Statement No.
333-37657 on Form S-11 and incorporated herein by reference.)
4.1 Form of Stock Certificate (Included as Exhibit 4.5 to
Registration Statement No. 33-78790 on Form S-11 and
incorporated herein by reference.)
10.1 Advisory Agreement, dated as of April 24, 1998, between CNL
American Properties Fund, Inc. and CNL Fund Advisors, Inc.
(Included as Exhibit 10.10 to Registration Statement No.
333-37657 on Form S-11 and incorporated herein by reference.)
10.2 Form of Indemnification Agreement dated as of April 18, 1995,
between CNL American Properties Fund, Inc. and each of James
M. Seneff, Jr., Robert A. Bourne, G. Richard Hostetter, J.
Joseph Kruse, Richard C. Huseman, John T. Walker, Jeanne A.
Wall, Lynn E. Rose and Edgar J. McDougall, and dated as of
January 27, 1997 between CNL American Properties Fund, Inc.
and Steven D. Shackelford, and dated as of February 18, 1998,
between CNL American Properties Fund, Inc. and Curtis B.
McWilliams (Included as Exhibit 10.9 to Registration Statement
No. 333-15411 and incorporated herein by reference.)
10.3 Agreement of Limited Partnership of CNL APF Partners, LP
(Included as Exhibit 10.4 to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1998 and
incorporated herein by reference.)
21 Subsidiaries of the Registrant (Filed herewith.)
27 Financial Data Schedule (Filed herewith.)
Exhibit 21
Subsidiaries of the Registrant
<PAGE>
Subsidiaries of CNL American Properties Fund, Inc.
- -- CFA Acquisition Corp. (100% ownership)
- -- CFS Acquisition Corp. (100% ownership)
- -- CFC Acquisition Corp. (100% ownership)
- -- CNL APF GP Corp. (100% ownership), which owns 20% of CNL APF Partners,
L.P.
- -- CNL APF LP Corp. (100% ownership), which owns 80% of CNL APF Partners,
L.P.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet of CNL American Properties Fund, Inc. at December 31, 1998, and its
statement of income for the year then ended and is qualified in its entirety by
reference to the Form 10-K of CNL American Properties Fund, Inc. for the year
ended December 31, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> year
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 125,207,377<F2>
<SECURITIES> 16,201,014
<RECEIVABLES> 1,595,674
<ALLOWANCES> 1,069,024
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 399,582,116
<DEPRECIATION> 6,242,782
<TOTAL-ASSETS> 680,352,013
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 746,759
<OTHER-SE> 660,063,527
<TOTAL-LIABILITY-AND-EQUITY> 680,352,013
<SALES> 0
<TOTAL-REVENUES> 42,187,037
<CGS> 0
<TOTAL-COSTS> 9,408,957
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 32,152,408
<INCOME-TAX> 0
<INCOME-CONTINUING> 32,152,408
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,152,408
<EPS-PRIMARY> 0.60
<EPS-DILUTED> 0.60
<FN>
<F1>Due to the nature of its industry, CNL American Properties Fund, Inc. has an
unclassified balance sheet; therefore, no values are shown above for current
assets and current liabilities.
<F2>Includes $2,007,540 in certificates of deposit.
</FN>
</TABLE>
