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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, 1997
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 0-12989
COMMERCIAL NET LEASE REALTY, INC.
(Exact name of registrant as specified in its charter
Maryland 56-1431377
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
400 East South Street, Suite 500
Orlando, Florida 32801
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (407) 423-7348
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Name of exchange on which registered
Common Stock, $.01 par value New York Stock Exchange
Securities registered pursuant to section 12(g) of the Act:
None
(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 Sities 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. [ ]
The aggregate market value of voting stock held by non-affiliates of
the registrant as of March 9, 1998, was $475,609,877.
The number of shares of common stock outstanding as of March 9, 1998,
was 28,877,762.
DOCUMENTS INCORPORATED BY REFERENCE:
1. Registrant incorporates by reference portions of the Commercial Net
Lease Realty, Inc. Annual Report to Shareholders for the year ended December 31,
1997 (Items 5, 6, 7 and 8 of Part II).
2. Registrant incorporates by reference portions of the Commercial Net
Lease Realty, Inc. Proxy Statement for the 1998 Annual Meeting of Shareholders
(Items 10, 11, 12 and 13 of Part III).
PART I
Item 1. Business
Commercial Net Lease Realty, Inc., a Maryland corporation (the
"Registrant" or the "Company"), is a real estate investment trust (a "REIT")
formed in 1984 that acquires, develops, owns and manages a diversified portfolio
of high-quality, freestanding properties leased to major retail businesses
generally under full-credit, long-term commercial net leases.
The Company's strategy is to invest in single-tenant, freestanding
retail properties with purchase prices of generally up to $7.5 million, which
typically are located along intensive commercial corridors near traffic
generators, such as regional malls, business developments and major
thoroughfares. Management believes that these types of properties when leased to
high-quality tenants with significant market presence provide attractive
opportunities for a stable current return and the potential for capital
appreciation. In management's view, these types of properties also provide the
Company with flexibility in use and tenant selection when the Properties are
re-let.
The Company will hold its properties until it determines that the sale
or other disposition of the properties is advantageous in view of the Company's
investment objectives. In deciding whether to sell properties, the Company will
consider factors such as potential capital appreciation, net cash flow and
federal income tax considerations.
Properties
During the year ended December 31, 1997, the Company borrowed
$152,600,000 under its credit facility to acquire 47 properties and three
buildings which were developed by the tenant on land parcels owned by the
Company. As of December 31, 1997, the Company owned 236 properties (the
"Properties") that are leased to major businesses, including Academy, Babies "R"
Us, Barnes & Noble, Best Buy, Borders, Burger King, CompUSA, Computer City,
Denny's, Dick's Clothing & Sporting Goods, Eckerd, Food 4 Less, Food Lion,
Golden Corral, Good Guys, Hardee's, Hi-Lo Automotive, HomePlace, International
House of Pancakes, Kash N' Karry, Levitz, Linens 'n Things, Luria's, Marshalls,
Office Depot, OfficeMax, Oshman's, Pier 1 Imports, Robb & Stucky, Scotty's,
Sears, Sports Authority, SuperValu and Waccamaw. The Company's Property
portfolio was 100 percent leased at December 31, 1997.
The Properties are leased under net leases pursuant to which the tenant
typically will bear responsibility for substantially all property costs and
expenses associated with ongoing maintenance and operation. The leases of each
of the Company's Properties require payment of base rent plus, generally, either
percentage rent based on the tenant's gross sales or contractual increases in
base rent.
During 1997, two of the Company's lessees, Eckerd Corporation and
Barnes & Noble Superstores, Inc., each accounted for more than ten percent of
the Company's total rental income (including the Company's share of rental
income from nine properties owned by the Company's unconsolidated partnership).
As of December 31, 1997, Eckerd Corporation and Barnes & Noble Superstores, Inc.
leased 43 Properties and 13 Properties, respectively (including four properties
and one property, respectively, under leases with the Company's unconsolidated
partnership). It is anticipated that, based on the minimum rental payments
required by the leases, Eckerd Corporation and Barnes & Noble Superstores, Inc.
will each continue to account for more than ten percent of the Company's total
rental income in 1998. Any failure of these lessees could materially affect the
Company's income.
Three of the Company's tenants, HomePlace, Luria's and Levitz (the
"Tenants"), have each filed a voluntary petition for bankruptcy under Chapter 11
of the U.S. Bankruptcy Code. As a result, each of the Tenants has the right to
reject or affirm one or more of its leases with the Company. As of December 31,
1997, HomePlace, Luria's and Levitz leased five, three and one Properties,
respectively, which accounted for 4.5 percent of the Company's total rental and
earned income for the year ended December 31, 1997. In February 1998, Luria's
rejected each of its three leases with the Company.
1
Investment in Subsidiaries
In November 1995, the Company formed two wholly owned subsidiaries, Net
Lease Realty I, Inc. and Net Lease Realty II, Inc. and in June 1997, the Company
formed two wholly-owned subsidiaries, Net Lease Realty III, Inc. and Net Lease
Realty IV, Inc. Net Lease Realty I, Inc. and Net Lease Realty IV, Inc. were
formed to facilitate the acquisition of certain properties. Net Lease Realty II,
Inc. was utilized to facilitate the acquisition of CNL Realty Advisors, Inc.,
the Company's advisor, and Net Lease Realty III, Inc. is the general partner of
and holds a 20 percent interest in Net Lease Institutional Realty, L.P. Each of
the wholly-owned subsidiaries is a qualified real estate investment trust
subsidiary as defined under Internal Revenue Code Section 856(i)(2).
Investment in Partnership
In September 1997, Net Lease Realty III, Inc., a wholly-owned
subsidiary of the Company, entered into a limited partnership arrangement, Net
Lease Institutional Realty L.P. (the "Partnership"), with the Northern Trust
Company, as Trustee of the Retirement Plan for the Chicago Transit Authority
Employees ("CTA") to acquire, own and manage nine properties. Net Lease Realty
III, Inc. is the sole general partner (the "General Partner") with a 20 percent
interest in the Partnership, and CTA is the sole limited partner (the "Limited
Partner") with an 80 percent interest in the Partnership. Pursuant to the
Partnership agreement, the General Partner is responsible for the management of
the Partnership's properties. Net income and losses of the Partnership are to be
allocated to the partners in accordance with their respective percentage
interest in the Partnership. The Partnership secured a $12 million non-recourse
mortgage on the Partnership's nine properties in September 1997 at 7.37%
interest rate.
As of December 31, 1997, the Partnership owned nine properties (the
"Partnership Properties") leased to six major retail tenants. Generally, the
leases of the Partnership Properties provide for initial terms of 15 to 20 years
with annual base rent ranging from $182,600 to $730,400 and building sites
ranging from 11,000 to 54,300 square feet. All of the Partnership Properties are
leased under net leases pursuant to which the tenant typically will bear the
responsibility for substantially all property costs and expenses related to on
going maintenance and operation, including utilities, property taxes and
insurance.
Advisory Services
From July 10, 1992 through December 31, 1997, the Company and CNL
Realty Advisors, Inc. (the "Advisor") were party to an advisory agreement (the
"Advisory Agreement"), pursuant to which the Advisor provided certain
management, advisory and acquisition services. In accordance with the terms of
the Advisory Agreement, the Advisor received an annual fee, payable monthly,
equal to (i) seven percent of funds from operations, as defined below, up to
$10,000,000, (ii) six percent of funds from operations in excess of $10,000,000
but less than $20,000,000 and (iii) five percent of funds from operations in
excess of $20,000,000. For the purposes of the Advisory Agreement, funds from
operations means net income of the Company before advisory fee excluding
depreciation and amortization expense, extraordinary gains and losses,
nonrecurring items of income and expense and non-cash lease accounting
adjustments. Under the Advisory Agreement, the Advisor generally was responsible
for administering the day-to-day investment operations of the Company, including
investment analysis and development, acquisitions, due diligence, and asset
management and accounting services. These duties included collecting rental
payments, inspecting and managing the Properties, assisting the Company in
responding to tenant inquiries and notices, providing information to the Company
about the status of the leases and the Properties, maintaining the Company's
accounting books and records, and preparing and filing various reports, returns
or statements with various regulatory agencies. In addition, the Advisor served
as the Company's consultant in connection with policy decisions to be made by
the Board of Directors, managed the Company's Properties and rendered other
services as the Board of Directors deemed appropriate.
Historically, the Company did not have a large enough asset base to
provide the economies of scale needed to efficiently support the extensive
general and administrative expenses of an in-house management team. As a result,
the Advisor had incurred the full expense of a management and acquisition team
while receiving advisory and acquisition fees that have offset this expense. In
1997, however, due to the Company's historical and anticipated growth,
management believed that the efficiencies derived from being externally advised
had diminished and that it would be more cost effective to become
self-administered. As a result, on May 15, 1997, the Board of Directors of the
Company unanimously approved an agreement and plan of merger with the Advisor,
which when approved
2
by the stockholders of the Company on December 18, 1997 at the 1997 annual
meeting of stockholders, resulted in the Company becoming a self-administered
and self-managed real estate investment trust (the "Advisor Transaction"). The
Advisor Transaction was completed on January 1, 1998. The Agreement and Plan of
Merger provided for the merger of the Advisor into a wholly owned subsidiary of
the Company pursuant to which all of the outstanding common stock of the Advisor
was exchanged for 220,000 shares of common stock of the Company and the right,
based upon the Company's continued growth in assets for a period of up to five
years, to receive up to 1,980,000 additional shares of the Company's common
stock. In addition, upon the consummation of the Advisor Transaction, all
personnel employed by the Advisor became employees of the Company. Following
consummation of the Advisor Transaction, the Advisory Agreement (as defined
above) and the obligation of the Company to pay any fees thereunder was
terminated. For a complete description of the Advisor Transaction, see the
Company's Proxy Statement dated November 13, 1997 for the Company's 1997 annual
meeting of stockholders.
Competition
The Company generally competes with other REIT's, real estate limited
partnerships and other investors, including but not limited to, insurance
companies, pension funds and financial institutions, in the acquisition,
leasing, financing and disposition of investments in net-leased retail
properties.
Employees
Reference is made to Item 10. Directors and Executive Officers of the
Registrant for a listing of the Company's Executive Officers.
Item 2. Properties
As of December 31, 1997, the Company owned 236 Properties located in 36
states that are leased to 48 major retail tenants. 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.
Description of Properties
Land. The Company's Property sites range from approximately 12,000 to
583,000 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. Land costs range from
approximately $36,500 to $6,200,000.
Buildings. The buildings generally are rectangular, single-story
structures constructed from various combinations of stucco, steel, wood, brick
and tile. Building sizes range from approximately 1,000 to 82,000 square feet.
Building costs range from approximately $195,000 to $7,082,000 for each
Property, depending upon the size of the building and the site and the area in
which the Property is located. Generally, the Properties owned by the Company
are freestanding, with paved parking areas.
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. Generally, the leases of the Properties owned by the
Company provide for initial terms of 15 to 20 years. As of December 31, 1997,
the average remaining lease term was approximately 14 years. The Properties are
generally leased under net leases pursuant to which the tenant typically will
bear responsibility for substantially all property costs and expenses associated
with ongoing maintenance and operation, including utilities, property taxes and
insurance. In addition, the majority of the Company's leases provide that the
tenant is responsible for roof and structural repairs. The leases of the
Properties provide for annual base rental payments (payable in monthly
installments) ranging from $21,000 to $1,032,000. Generally, the leases provide
for either percentage rent or contractual increases in annual rent. Leases which
provide for contractual increases in annual rent generally have increases which
range from six to 12 percent after every five years of the lease term. In
addition, for those leases which provide for the payment of percentage rent,
such rent
3
is generally one to eight percent of the tenants' annual gross sales, less the
amount of annual base rent payable in that lease year. As of December 31, 1997,
leases representing approximately 83 percent of annual base rent include
contractual increases, leases representing approximately 31 percent of annual
base rent include percentage rent provisions and leases representing
approximately 22 percent of annual base rent include both contractual and
percentage rent provisions.
Generally, the leases of the Properties provide for two, three or four
five-year renewal options subject to the same terms and conditions as the
initial lease. Some of the leases also 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.
During 1997, two of the Company's lessees, Eckerd Corporation
(drugstore) and Barnes & Noble Superstores, Inc. (bookstore) each accounted for
more than ten percent of the Company's total rental income (including the
Company's share of rental income from the Partnership Properties. As of December
31, 1997, Eckerd Corporation and Barnes & Noble Superstores, Inc. leased 43 and
13 Properties, respectively (including four properties and one property,
respectively, under leases with the Partnership).
As of December 31, 1997, two of the Company's lessees, Eckerd
Corporation and Barnes & Noble Superstores, Inc., leased Properties representing
11.6% and 10.6%, respectively, of total assets. For information regarding the
results of operations and financial condition of these two entities, refer to
their Annual Reports on Forms 10-K as filed with the Securities and Exchange
Commission for the year ended February 1, 1997.
The Company generally competes with other REIT's, real estate limited
partnerships and other investors, including but not limited to, insurance
companies, pension funds and financial institutions in the acquisition leasing
financing and disposition of investments in net-leased retail properties.
Investments in real property create a potential for environmental
liability on the part of the owner of such property from the presence or
discharge of hazardous substances on the property. It is the Company's policy,
as a part of its acquisition due diligence process, to obtain a Phase I
environmental site assessment for each property and where warranted, a Phase II
environmental site assessment. Phase I assessments involve site reconnaissance
and review of regulatory files identifying potential areas of concern, whereas
Phase II assessments involve some degree of soil and/or groundwater testing. The
Company may acquire a property whose environmental site assessment indicates
that a problem or potential problem exists, subject to a determination of the
level of risk and potential cost of remediation. In such cases, the Company
requires the seller and/or tenant to (i) remediate the problem prior to the
Company's acquiring the property, (ii) indemnify the Company for environmental
liabilities or (iii) agree to other arrangements deemed appropriate by the
Company to address environmental conditions at the property. The Company has 14
properties currently under some level of environmental remediation. The seller
or the tenant is generally contractually responsible for the cost of the
environmental remediation for each of these properties.
The Company's principal executive offices are located at 400 E. South
Street, Suite 500, Orlando, Florida 32801.
Item 3. Legal Proceedings
The Company is a defendant in a law suit filed on December 20, 1994, in
the Circuit Court, Knox County, Tennessee, and in the Circuit Court, Greene
County, Tennessee, by the surviving spouse of a patron of the Company's Property
in Tusculum, Tennessee. The plaintiff is alleging that the Company was negligent
in the design and control of the parking lot on the Company's Property and is
seeking damages of $2,500,000. Management intends to vigorously contest these
claims and to seek full indemnification from the tenant. Management believes
that, if the Company were to be held liable for any damages, such damages would
be covered by insurance.
4
The Company is not a party to any other pending legal proceedings
which, in the opinion of the Company and its general counsel, is likely to have
a material adverse effect upon the Company's business or financial condition.
5
PART II
Item 4. Submission of Matters to a Vote of Security Holders
On December 18, 1997, the Company held its Annual Meeting of
Shareholders (the "Annual Meeting"). At the Annual Meeting, the following
nominees were elected to the Board of Directors of the Company: Messrs. Edward
Clark (22,295,249 voted for and 1,763,157 abstained), Willoughby T. Cox, Jr.
(22,298,014 voted for and 1,760,392 abstained), Clifford R. Hinkle (22,299,014
voted for and 1,758,849 abstained), Ted B. Lanier (22,276,413 voted for and
1,791,993 abstained), Robert A. Bourne (22,299,853 voted for and 1,758,553
abstained), James M. Seneff, Jr. (22,306,303 voted for and 1,752,103 abstained).
In addition, the Shareholders voted to approve the Merger of CNL Realty
Advisors, Inc. with and into Net Lease Realty II, Inc., a wholly-owned
subsidiary of the Company (16,961,917 voted for, 216,667 voted against and
231,533 abstained) and to approve authorization of 90,000,000 shares of common
stock (23,400,061 voted for, 425,126 voted against and 173,540 abstained).
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Information responsive to this Item is contained in the section
captioned "Share Price and Dividend Data" on page 27 of the Registrant's Annual
Report to Shareholders for the year ended December 31, 1997; the information in
such section is filed as an exhibit to this report and the cited portion of
which is incorporated herein by reference.
Item 6. Selected Financial Data
Information responsive to this Item is contained in the section
captioned "Historical Financial Highlights" on page four of the Registrant's
Annual Report to Shareholders for the year ended December 31, 1997; the
information in such section is filed as an exhibit to this report and the cited
portion of which is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Information responsive to this Item is contained in the section
captioned "Management's Discussion and Analysis of Financial Condition and
Results of Operations" on pages six through 11 of the Registrant's Annual Report
to Shareholders for the year ended December 31, 1997; the information in such
section is filed as an exhibit to this report and the cited portion of which is
incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
Certain information responsive to this Item is contained in the section
captioned "Consolidated Quarterly Financial Data" on page 26 of the Registrant's
Annual Report to Shareholders for the year ended December 31, 1997; the
information in such section is filed as an exhibit to this report and the cited
portion of which is incorporated herein by reference. The financial statements
of the Registrant, together with the report thereon of KPMG Peat Marwick LLP,
appearing in the Annual Report to Shareholders for the year ended December 31,
1997, are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
6
PART III
Item 10. Directors and Executive Officers of the Registrant
Reference is made to the Registrant's definitive proxy statement to be
filed with the Commission pursuant to Regulation 14(a); information responsible
to this Item is contained in the sections thereof captioned "Proposal I:
Election of Directors - Nominees" and "Proposal I: Election of Directors -
Executive Officers" and "Security Ownership," and the information in such
sections is incorporated herein by reference.
Item 11. Executive Compensation
Reference is made to the Registrant's definitive proxy statement to be
filed with the Commission pursuant to Regulation 14(a); information responsive
to this Item is contained in the section thereof captioned "Proposal I: Election
of Directors - Compensation of Directors" and "Proposal I: Executive
Compensation," and the information in such sections is incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Reference is made to the Registrant's definitive proxy statement to be
filed with the Commission pursuant to Regulation 14(a); information responsive
to this Item is contained in the section thereof captioned "Security Ownership,"
and the information in such section is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Reference is made to the Registrant's definitive proxy statement to be
filed with the Commission pursuant to Regulation 14(a); information responsive
to this Item is contained in the section thereof captioned "Certain
Transactions," and the information in such section is incorporated herein by
reference.
7
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. Financial Statements
Independent Auditors' Report
Consolidated Balance Sheets as of December 31, 1997 and 1996
Consolidated Statements of Earnings for the years ended
December 31, 1997, 1996 and 1995
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
2. Financial Statement Schedule
Report of Independent Auditors' on Supplementary Information
Schedule III - Real Estate and Accumulated Depreciation as of
December 31, 1997
Notes to Schedule III - Real Estate and Accumulated
Depreciation as of December 31, 1997
All other schedules are omitted because they are not
applicable or because the required information is shown in the
financial statements or the notes thereto.
3. Exhibits
3.1 Articles of Incorporation of the Registrant (filed as
Exhibit 3.3(i) to the Registrant's Registration Statement
No. 1-11290 on Form 8-B, and incorporated herein by ref-
erence).
3.2 Bylaws of the Registrant, (filed as Exhibit 3(ii) to Amend-
ment No. 2 to the Registrant's Registration No. 33-83110 on
Form S-3, and incorporated herein by reference).
3.3 Articles of Amendment to the Articles of Incorporation
of the Registrant (filed as Exhibit 3.3 to the Registrant's
Form 10-Q for the quarter ended June 30, 1996, and incor-
porated herein by reference).
3.4 Articles of Amendment to the Articles of Incorporation
of the Registrant (filed as Exhibit 3.4 to the Registrant's
Current Report on Form 8-K dated February 18, 1998, and
filed with the Securities and Exchange Commission on
February 19, 1998, and incorporated herein by reference).
4 Specimen Certificate of Common Stock, par value $.01 per
share, of the Registrant (filed as Exhibit 3.4 to the
Registrant's Registration Statement No. 1-11290 on Form 8-B
and incorporated herein by reference).
8
10.1 Letter Agreement dated July 10, 1992, amending Stock Purchase
Agreement dated January 23, 1992 (filed as Exhibit 10.34 to
the Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1992, and incorporated herein by reference).
10.2 Advisory Agreement between Registrant and CNL Realty Advisors,
Inc. effective as of April 1, 1993 and renewed January 1, 1997
(filed as Exhibit 10.04 to Amendment No. 1 to the Registrant's
Registration Statement No. 33-61214 on Form S-2, and incor-
porated herein by reference).
10.3 1992 Commercial Net Lease Realty, Inc. Stock Option Plan
(filed as Exhibit No. 10(x) to the Registrant's Registration
Statement No. 33-83110 on Form S-3, and incorporated herein by
reference).
10.4 Second Amended and Restated Line of Credit and Security
Agreement, dated December 7, 1995, among Registrant, certain
lenders listed therein and First Union National Bank of
Florida, as the Agent, relating to a $100,000,000 loan (filed
as Exhibit 10.14 to the Registrant's Current Report on Form
8-K dated January 18, 1996, and incorporated herein by
reference).
10.5 Secured Promissory Note, dated December 14, 1995, among
Registrant and Principal Mutual Life Insurance Company
relating to a $13,150,000 loan (filed as Exhibit 10.15 to the
Registrant's Current Report on Form 8-K dated January 18,
1996, and incorporated herein by reference).
10.6 Mortgage and Security Agreement, dated December 14, 1995,
among Registrant and Principal Mutual Life Insurance Company
relating to a $13,150,000 loan (filed as Exhibit 10.16 to the
Registrant's Current Report on Form 8-K dated January 18,
1996, and incorporated herein by reference).
10.7 Loan Agreement, dated January 19, 1996, among Registrant and
Principal Mutual Life Insurance Company relating to a
$39,450,000 loan (filed as Exhibit 10.12 to the Registrant's
Annual Report on Form 10-K for the year ended December 31,
1995, and incorporated herein by reference).
10.8 Secured Promissory Note, dated January 19, 1996, among
Registrant and Principal Mutual Life Insurance Company
relating to a $39,450,000 loan (filed as Exhibit 10.13 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995, and incorporated herein by reference).
10.9 Third Amended and Restated Line of Credit and Security
Agreement, dated September 3, 1996, by and among Registrant,
certain lenders and First Union National Bank of Florida, as
the Agent, relating to a $150,000,000 loan (filed as Exhibit
10.11 to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1996, and incorporated herein
by reference).
10.10 Second Renewal and Modification Promissory Note, dated
September 3, 1996, by and among Registrant and First Union
National Bank of Florida, as the Agent, relating to
$150,000,000 loan (filed as Exhibit 10.12 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended September
30, 1996, and incorporated herein by reference).
10.11 Agreement and Plan of Merger dated May 15, 1997, by and among
Commercial Net Lease Realty, Inc. and Net Lease Realty II,
Inc. and CNL Realty Advisors, Inc. and the Stockholders of CNL
Realty Advisors, Inc. (filed as Exhibit 10.1 to the
Registrant's Current Report on Form 8-K dated May 16, 1997,
and incorporated herein by reference).
10.12 Fourth Amended and Restated Line of Credit and Security
Agreement, dated August 6, 1997, by and among Registrant,
certain lenders and First Union National Bank, as the Agent,
relating to a $200,000,000 loan (filed as Exhibit 10 to the
Registrant's Current Report on Form 8-K dated September 12,
1997, and incorporated herein by reference).
13 Annual Report to Shareholders for the year ended December 31,
1997 (previously filed).
9
23 Consent of Independent Accountants dated March 16, 1998
(previously filed).
(b) The Registrant filed one report on Form 8-K on December 19, 1997, for
the purpose of incorporating certain items by reference into its
registration statement on Form S-3 dated December 19, 1997, and one
report on form 8-K on December 22, 1997, reporting the approval by the
stockholders of the Registrant of the Agreement and Plan of Merger by
and among the Registrant, Net Lease Realty II, Inc. and the
Stockholders of CNL Realty Advisors, Inc.
10
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 16th day of
March, 1998.
COMMERCIAL NET LEASE REALTY, INC.
By: /s/ James M. Seneff, Jr.
---------------------------
JAMES M. SENEFF, JR.
Chairman of the Board of Directors
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.
Signature Title Date
--------- ----- -----
/s/ James M. Seneff, Jr. Chairman of the Board of March 16, 1998
- -------------------------- Directors Chief Executive
James M. Seneff, Jr. Officer (Principal
Executive Officer)
/s/ Robert A. Bourne Vice Chairman of the Board March 16, 1998
- ------------------------- of Directors
Robert A. Bourne
/s/ Edward Clark Director March 16, 1998
- --------------------------
Edward Clark
/s/ Willoughby T. Cox, Jr. Director March 16, 1998
- --------------------------
Willoughby T. Cox, Jr.
/s/ Clifford R. Hinkle Director March 16, 1998
- --------------------------
Clifford R. Hinkle
/s/ Ted B. Lanier Director March 16, 1998
- --------------------------
Ted B. Lanier
/s/ Gary M. Ralston President March 16, 1998
- --------------------------
Gary M. Ralston
/s/ Kevin B. Habicht Chief Financial Officer March 16, 1998
- -------------------------- (Principal Financial and
Kevin B. Habicht Accounting Officer),
Secretary & Treasurer
Report of Independent Auditors' on Supplementary Information
The Board of Directors
Commercial Net Lease Realty, Inc.:
Under date of January 16, 1998, we reported on the consolidated
balance sheets of Commercial Net Lease Realty, Inc. as of December
31, 1997 and 1996, and the related consolidated statements of
earnings, stockholders' equity and cash flows for each of the years
in the three-year period ended December 31, 1997, as contained in
the 1997 annual report to stockholders. These consolidated
financial statements and our report thereon are both included in
Item 14(a)1 of Form 10-K and incorporated by reference in the
annual report on Form 10-K for the year 1997. In connection with
our audit of the aforementioned consolidated financial statements,
we also audited the related consolidated financial statement
schedule at December 31, 1997. This consolidated financial
statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this
consolidated financial statement schedule based on our audits.
In our opinion, such consolidated financial statement schedule,
when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material
respects, the information set forth herein.
/s/ KPMG Peat Marwick LLP
Orlando, Florida
January 16, 1998
Initial Cost to Company
-------------------------------
Encumbrances Building and
(1) Land Improvements
- --------------------------- -------------------- ---------------- -----------------
Properties the Company
has Invested in Under
Under Operating Leases:
Academy:
Houston, TX - 1,074,232 -
Houston, TX - 699,165 -
N. Richland Hills, TX - 1,307,655 -
Houston, TX - 3,086,610 -
Houston, TX - 795,005 -
Baton Rouge, LA - 1,547,501 -
Babies "R" Us:
Arlington, TX - 830,689 2,611,867
Barnes & Noble:
Lakeland, FL - 1,070,902 1,516,983
Brandon, FL 1,574,542 (k) 1,476,407 1,527,150
Denver, CO - 3,244,785 2,722,087
Houston, TX - 3,307,562 2,396,024
Cary, NC - 2,778,458 2,650,008
Plantation, FL - 3,616,357 -
Lafayette, LA - 1,204,279 2,301,983
Oklahoma City, OK - 1,688,556 2,311,487
Daytona, FL - 2,587,451 2,052,643
Freehold, NJ - 2,917,219 2,260,663
Dayton, OH - 1,412,614 3,223,467
Redding, CA - 497,179 1,625,702
Best Buy:
Corpus Christi, TX 1,268,679 (j) 818,448 896,395
Brandon, FL - 2,985,156 2,772,137
Evanston, IL - 1,850,996 -
Cuyahoga Falls, OH - 3,708,980 2,359,377
Rockville, MD - 6,233,342 3,418,783
Fairfax, VA - 3,052,477 3,218,018
St. Petersburg, FL - 4,031,744 2,959,316
Blockbuster:
Dallas, TX - 346,548 1,963,773
Conyers, GA - 320,029 556,282
Borders Books & Music:
Wilmington, DE 4,766,983 (k) 3,030,769 6,061,538
Richmond, VA 2,504,467 (k) 2,177,310 2,599,587
Ft. Lauderdale, FL - 3,164,984 3,934,577
Bangor, ME - 1,546,915 2,486,761
Altamonte Spgs, FL - 1,947,198 -
Burger King:
Asheboro, NC - 420,508 815,190
Galliano, LA - 249,001 1,130,506
John's Island, SC - 385,517 698,309
Lake Charles, LA - 272,381 965,713
Lancaster, OH - 220,846 582,815
Natchez, MS - 206,717 653,530
Tappahannock, VA - 289,840 572,779
Warren, MI - 298,817 785,031
Manchester, NH - 619,037 428,757
Rochester, NH - 216,652 779,450
Columbus, OH - 357,114 407,093
Coon Rapids, MN - 322,658 544,936
Opeleousas, LA - 460,374 824,510
St. Paul, MN - 225,297 542,847
Checkers:
Orlando, FL - 256,568 -
CompUSA:
Mission Viejo, CA - 2,706,352 1,368,966
Computer City:
Miami, FL 2,401,168 (k) 2,713,192 1,866,676
Baton Rouge, LA - 609,069 913,603
Anchorage, AK - 928,321 1,662,584
Richmond, VA - 888,772 1,948,036
Dave's:
Maple Heights, OH - 1,034,758 2,874,414
Denny's:
Duncan, SC - 219,703 -
Greensboro, NC - 265,915 493,407
Greenville, SC - 344,817 400,895
Houston, TX - 289,036 572,985
Landrum, SC - 155,429 -
Mooresville, NC - 307,299 -
Santee, SC - 244,284 312,045
Topeka, KS - 414,686 -
Winter Springs, FL - 555,232 -
Dick's Clothing:
Taylor, MI - 1,920,032 3,526,868
White Marsh, MD - 2,680,532 3,916,889
Eckerd:
San Antonio, TX 642,231 (k) 440,985 -
Dallas, TX 618,752 (k) 541,493 -
Garland, TX 497,889 (k) 239,014 -
Arlington, TX 526,927 (k) 368,964 -
Millville, NJ 653,548 (k) 417,603 -
Atlanta, GA 584,047 (k) 445,593 -
Mantua, NJ 679,434 (k) 344,022 -
Amarillo, TX 604,575 (k) 329,231 -
Amarillo, TX 785,743 (k) 650,864 -
Glassboro, NJ 745,401 (k) 534,243 -
Kissimmee , FL 868,354 (k) 715,480 -
Colleyville, TX 959,730 (k) 756,472 -
Tampa, FL - 604,682 -
Douglasville, GA - 413,439 995,209
Lafayette, LA - 967,528 -
Moore, OK - 414,738 -
Midwest City, OK - 1,080,637 1,103,351
Tallhassee, FL - 691,523 -
Irving, TX - 1,000,222 -
Snellville, GA - 486,272 1,320,087
Jasper, FL - 291,147 -
Williston, FL - 622,403 -
Pantego, TX - 1,016,062 1,448,911
Conyers, GA - 574,666 998,900
Norman, OK - 1,065,562 -
Chattanooga , TN - 474,267 -
Stone Mountain, GA - 638,643 1,111,064
Arlington, TX - 1,962,500 -
Leavenworth, KS - 650,170 -
Augusta, GA - 568,606 1,326,748
Riverdale, GA - 1,088,896 1,707,448
Morrow, GA - 550,457 1,248,422
Food 4 Less:
Lemon Grove, CA - 3,695,816 -
Golden Corral:
Woodstock, GA (e) - 200,680 328,450
Edenton, NC - 36,578 318,481
Rockledge, FL (e) - 120,593 340,889
Gilmer, TX (e) - 116,815 296,454
Bonham, TX (e) - 128,451 344,170
Center, TX (e) - 103,187 308,859
Leitchfield, KY (e) - 73,660 306,642
Marietta, GA (e) - 156,190 346,509
Silsbee, TX (e) - 132,802 302,052
Atlanta, TX (e) - 88,457 368,317
Vernon, TX (e) - 105,798 328,943
Abbeville, LA (e) - 98,577 362,416
Fredricksburg, TX - 169,984 321,189
Clanton, AL (e) - 113,017 296,921
Pleasanton, TX (e) - 139,694 316,070
Bowie, TX (e) - 57,824 311,544
Jacksonville, TX - 115,276 318,196
Lake Placid, FL (e) - 115,113 305,074
Ennis, TX - 153,701 366,639
Melbourne, FL (e) - 193,447 341,351
Franklin, LA (e) - 105,840 396,831
Franklin, VA - 100,808 424,164
Minden, LA (e) - 86,120 402,364
Durant, OK - 140,862 411,135
The Good Guys:
Foothill Ranch, CA - 1,456,113 2,505,022
Valencia,CA - 1,622,252 2,895,298
Riverside, CA - 1,722,736 2,761,220
Hardee's:
Chalkville, AL - 170,834 457,167
Columbia, TN - 226,300 -
Gulf Shores, AL - 348,281 595,164
Horn Lake, MS - 302,787 -
Johnson City, TN - 215,567 -
Mobile, AL - 336,696 -
Petal, MS - 277,104 415,193
Rock Hill, SC - 216,777 466,450
Tusculum, TN - 182,349 507,293
Warrior, AL - 177,659 -
West Point, MS - 173,386 -
Hi-Lo Automotive:
Mesquite, TX - 233,420 513,523
Arlington, TX - 295,331 571,609
Ft. Worth, TX - 197,037 512,296
Garland, TX - 239,570 512,023
Houston, TX - 261,318 531,968
Dallas, TX - 281,347 543,937
Bastrop, TX - 197,905 383,144
Eagle Pass, TX - 256,745 455,841
Lake Worth, TX - 252,141 539,510
McAllen, TX - 265,177 605,397
Nacogdoches, TX - 190,324 522,232
San Antonio, TX - 200,510 643,741
Temple, TX - 177,451 587,755
Universal City, TX - 247,264 570,677
HomePlace:
Altamonte Spgs, FL - 2,906,409 4,877,225
White Marsh, MD - 3,625,792 -
Ft. Myers, FL - 1,956,579 4,045,196
Bowie, MD - 1,965,508 -
International House of Pancakes:
Stafford, TX 500,126 (k) 382,084 -
Sunset Hills, MO 528,585 (k) 271,853 -
Las Vegas, NV 594,295 (k) 519,947 -
Ft. Worth, TX 552,880 (k) 430,896 -
Arlington, TX 530,916 (k) 404,512 -
Matthews, NC 543,010 (k) 380,043 -
Phoenix, AZ 546,664 (k) 483,374 -
Just for Feet:
Albuquerque, NM - 1,441,777 2,335,475
Kroger:
Columbus, OH - 780,838 520,559
Linens 'n Things:
Freehold, NJ 2,931,484 (j) 1,753,766 2,208,651
Luria's:
Coral Gables, FL - 1,782,346 -
South Miami, FL - 1,379,229 -
Tampa, FL - 2,127,503 1,521,730
Marshalls:
Freehold, NJ 3,431,576 (j) 2,052,946 2,585,432
Office Depot:
Arlington, TX 1,052,484 (k) 596,024 1,411,432
OfficeMax:
Corpus Christi, TX 1,439,600 (j) 893,270 978,344
Dallas, TX 1,482,890 (k) 1,118,500 1,709,891
Cincinnati, OH 1,110,461 (k) 543,489 1,574,551
Evanston, IL 1,900,778 (k) 1,867,831 1,757,618
Altamonte Spgs, FL - 1,689,793 3,050,160
Pompano Beach, FL - 2,266,908 1,904,803
Cutler Ridge, FL - 989,370 1,479,119
Sacramento, CA - 1,144,167 2,961,206
Salinas, CA - 1,353,217 1,829,325
Redding, CA - 667,174 2,181,563
Kelso, WA - 1,379,460 -
Oshman's Sporting Goods:
Dallas, TX - 1,311,440 -
Petco:
Grand Forks, ND - 306,629 909,671
Pier 1 Imports:
Dallas, TX - 189,010 1,071,054
Memphis, TN - 713,319 821,770
Sanford, FL - 737,901 -
Pizza Hut:
Orlando, FL - 220,632 258,483
Rally's:
Toledo, OH - 125,882 319,770
Robb & Stucky:
Ft. Myers, FL - 2,246,406 6,390,295
Roger & Marv's:
Kenosha, WI - 1,917,607 3,431,363
Ro-Jack's Food Store:
Warwick, RI - 1,699,330 -
Scotty's:
Orlando, FL - 1,157,268 2,077,131
Orlando, FL - 1,044,796 2,011,952
Sears Homelife:
Clearwater, FL 2,745,218 (j) 1,184,438 2,526,207
Orlando, FL 1,575,546 (k) 820,397 2,184,721
Pensacola, FL 1,820,864 633,125 1,595,405
Raleigh, NC 2,284,515 1,848,026 1,753,635
Tampa, FL 2,414,819 1,454,908 2,045,833
Shop & Save:
Homestead, PA - 1,139,419 -
Penn Hills, PA - 1,043,297 1,243,131
Sports Authority:
Memphis, TN - 2,459,381 -
SuperValu:
Huntington, WV - 1,254,238 760,602
Top's:
Lacey, WA - 2,777,449 7,082,150
Wacammaw:
Fairfax, VA - 2,156,801 -
Waremart:
Eureka, CA - 3,135,036 5,470,607
Wendy's Old Fashioned
Hamburger:
Fenton, MO - 307,068 496,410
Longwood, FL - 333,335 194,926
Unallocated costs
relating to construction
in progress
=============== ================ =================
48,669,181 201,028,076 209,113,098
=============== ================ =================
Properties the Company has
Invested in Under Direct
Financing Leases:
Academy:
Houston, TX - - 1,924,740
Houston, TX - - 1,867,519
N. Richland Hills, TX - - 2,253,408
Houston, TX - - 2,112,335
Houston, TX - - 1,910,697
Baton Rouge, LA - - 2,405,466
Barnes & Noble:
Plantation, FL - - 3,498,559
Best Buy:
Evanston, IL - - 3,400,057
Borders:
Altamonte Spgs, FL - - 3,267,579
Checkers:
Orlando, FL - - 286,910
Denny's:
Landrum, SC - - 374,684
Mooresville, NC - - 535,309
Duncan, SC - - 628,571
Akron, OH - 137,424 733,450
Topeka, KS - - 498,921
Winter Springs, FL - - 620,148
Eckerd:
San Antonio, TX - - 783,974
Dallas, TX - - 638,684
Garland, TX - - 710,634
Arlington, TX - - 636,070
Millville, NJ - - 828,942
Atlanta. GA - - 668,390
Mantua, NJ - - 951,795
Vineland, NJ 707,459 (k) 286,231 1,063,142
Amarillo, TX - - 849,071
Amarillo, TX - - 869,846
Amarillo, TX 513,506 (k) 158,851 855,348
Glassboro, NJ - - 887,497
Kissimmee , FL - - 933,852
Colleyville, TX - - 1,076,066
Alice,TX 521,052 (k) 189,187 804,963
Tampa, FL - - 1,090,532
Lafayette, LA - - 949,128
Moore, OK - - 879,296
Tallhassee, FL - - 1,274,147
East Point, GA - 336,610 1,173,529
Irving, TX - - 1,228,436
Ft. Worth, TX - 399,592 2,529,969
Williston, FL - - 355,757
Jasper, FL - - 347,474
Oklahoma City, OK - (m) 1,365,125
Oklahoma City, OK - (m) 1,419,093
Norman, OK - - 1,225,477
Chattanooga , TN - - 1,344,240
Food 4 Less:
Lemon Grove, CA - - 4,068,179
Food Lion:
Keystone Hts, FL 1,014,283 (k) 88,604 1,845,988
Chattanooga, TN 1,068,267 (k) 336,488 1,701,072
Lynchburg, VA 1,333,443 (j) 128,216 1,674,167
Martinsburg, WV 1,044,497 (k) 448,648 1,543,573
Good Guys:
Stockton, CA 1,864,093 (k) 580,609 2,974,868
Portland, OR - 817,574 2,630,652
Hardee's:
Mobile, AL - - 479,107
Warrior, AL - - 470,556
Horn Lake, MS - - 555,975
West Point, MS - - 517,424
Columbia, TN - - 584,927
Johnson City, TN - - 570,690
Iuka, MS - 130,258 505,363
Biscoe, NC - 60,301 479,984
Aynor, SC - 44,871 521,192
Hi-Lo Automotive:
Copperas Cove, TX - 116,637 476,331
Ft. Worth, TX - 92,779 607,971
Baton Rouge, LA - 89,954 508,146
Lake Jackson, TX - 120,313 609,300
Edinberg, TX - 97,056 418,926
Pantego, TX - 154,368 505,323
Ft. Worth, TX - 91,373 548,238
Pharr, TX - 94,576 472,880
Baton Rouge, LA - 122,349 527,930
Houston, TX - 37,508 596,069
HomePlace:
Arlington, TX - 752,840 4,045,374
Bowie, MD - - 4,262,338
International House of Pancakes:
Stafford, TX - - 571,832
Sunset Hills, MO - - 736,345
Las Vegas, NV - - 613,582
Ft. Worth, TX - - 623,641
Arlington, TX - - 608,132
Matthews, NC - - 655,668
Phoenix, AZ - - 559,307
Kash N' Karry:
Brandon, FL - 1,234,519 3,255,257
Levitz:
Tempe, AZ - 634,444 2,225,991
Luria's:
South Miami, FL - - 1,756,808
Coral Gables, FL - - 1,692,012
Oshman's Sporting Goods:
Dallas, TX - - 2,658,976
Ro-Jack's Food Store:
Warwick, RI - - 2,978,154
Shop & Save:
Homestead, PA - - 2,578,098
Wacammaw:
Fairfax, VA - - 3,356,493
=============== ================ ===============
8,066,600 7,782,180 113,631,669
=============== ================ ===============
COMMERCIAL NET LEASE REALTY, INC. AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
Costs Capitalized
Subsequent to Gross Amount at Which
Acquisition Carried at Close of Period (b)
--------------------------- -------------------------------------------------------
Improve- Carrying Building and
ments Costs Land Improvements Total
- ----------------------------------- -------------- ---------- ----------------- ----------------- ----------------
Properties the Company
has Invested in Under
Under Operating Leases:
Academy:
Houston, TX - - 1,074,232 (c) 1,074,232
Houston, TX - - 699,165 (c) 699,165
N. Richland Hills, TX - - 1,307,655 (c) 1,307,655
Houston, TX - - 2,098,895 (c) 2,098,895
Houston, TX - - 795,005 (c) 795,005
Baton Rouge, LA - - 1,547,501 (c) 1,547,501
Babies "R" Us:
Arlington, TX - - 830,689 2,611,867 3,442,556
Barnes & Noble:
Lakeland, FL - - 1,070,902 1,516,983 2,587,885
Brandon, FL - - 1,476,407 1,527,150 3,003,557
Denver, CO - - 3,244,785 2,722,087 5,966,872
Houston, TX - - 3,307,562 2,396,024 5,703,586
Cary, NC - - 2,778,458 2,650,008 5,428,466
Plantation, FL - - 3,616,357 (c) 3,616,357
Lafayette, LA - - 1,204,279 2,301,983 3,506,262
Oklahoma City, OK - - 1,688,556 2,311,487 4,000,043
Daytona, FL - - 2,587,451 2,052,643 4,640,094
Freehold, NJ - - 2,917,219 2,260,663 5,177,882
Dayton, OH - - 1,412,614 3,223,467 4,636,081
Redding, CA - - 497,179 1,625,702 2,122,881
Best Buy:
Corpus Christi, TX 12,222 - 818,448 908,617 1,727,065
Brandon, FL - - 2,985,156 2,772,137 5,757,293
Evanston, IL - - 1,850,996 (c) 1,850,996
Cuyahoga Falls, OH - - 3,708,980 2,359,377 6,068,357
Rockville, MD - - 6,233,342 3,418,783 9,652,125
Fairfax, VA - - 3,052,477 3,218,018 6,270,495
St. Petersburg, FL - - 4,031,744 2,959,316 6,991,060
Blockbuster:
Dallas, TX 39,243 - 346,548 2,003,016 2,349,564
Conyers, GA - - 320,029 556,282 876,311
Borders Books & Music:
Wilmington, DE - - 3,030,769 6,061,538 9,092,307
Richmond, VA - - 2,177,310 2,599,587 4,776,897
Ft. Lauderdale, FL - - 3,164,984 3,934,577 7,099,561
Bangor, ME - - 1,546,915 2,486,761 4,033,676
Altamonte Spgs, FL - - 1,947,198 (c) 1,947,198
Burger King:
Asheboro, NC - - 420,508 815,190 1,235,698
Galliano, LA - - 249,001 1,130,506 1,379,507
John's Island, SC - - 385,517 698,309 1,083,826
Lake Charles, LA - - 272,381 965,713 1,238,094
Lancaster, OH - - 220,846 582,815 803,661
Natchez, MS - - 206,717 653,530 860,247
Tappahannock, VA - - 289,840 572,779 862,619
Warren, MI - - 298,817 785,031 1,083,848
Manchester, NH - - 619,037 428,757 1,047,794
Rochester, NH - - 216,652 779,450 996,102
Columbus, OH - - 357,114 407,093 764,207
Coon Rapids, MN - - 322,658 544,936 867,594
Opeleousas, LA - - 460,374 824,510 1,284,884
St. Paul, MN - - 225,297 542,847 768,144
Checkers:
Orlando, FL - - 256,568 (c) 256,568
CompUSA:
Mission Viejo, CA - - 2,706,352 1,368,966 4,075,318
Computer City:
Miami, FL - - 2,713,192 1,866,676 4,579,868
Baton Rouge, LA - - 609,069 913,603 1,522,672
Anchorage, AK - - 928,321 1,662,584 2,590,905
Richmond, VA - - 888,772 1,948,036 2,836,808
Dave's:
Maple Heights, OH - - 1,034,758 2,874,414 3,909,172
Denny's:
Duncan, SC - - 219,703 (c) 219,703
Greensboro, NC - - 265,915 493,407 759,322
Greenville, SC - - 344,817 400,895 745,712
Houston, TX - - 289,036 572,985 862,021
Landrum, SC - - 155,429 (c) 155,429
Mooresville, NC - - 307,299 (c) 307,299
Santee, SC - - 244,284 312,045 556,329
Topeka, KS - - 414,686 (c) 414,686
Winter Springs, FL - - 555,232 (c) 555,232
Dick's Clothing:
Taylor, MI - - 1,920,032 3,526,868 5,446,900
White Marsh, MD - - 2,680,532 3,916,889 6,597,421
Eckerd:
San Antonio, TX - - 440,985 (c) 440,985
Dallas, TX - - 541,493 (c) 541,493
Garland, TX - - 239,014 (c) 239,014
Arlington, TX - - 368,964 (c) 368,964
Millville, NJ - - 417,603 (c) 417,603
Atlanta, GA - - 445,593 (c) 445,593
Mantua, NJ - - 344,022 (c) 344,022
Amarillo, TX - - 329,231 (c) 329,231
Amarillo, TX - - 650,864 (c) 650,864
Glassboro, NJ - - 534,243 (c) 534,243
Kissimmee , FL - - 715,480 (c) 715,480
Colleyville, TX - - 756,472 (c) 756,472
Tampa, FL - - 604,682 (c) 604,682
Douglasville, GA - - 413,439 995,209 1,408,648
Lafayette, LA - - 967,528 (c) 967,528
Moore, OK - - 414,738 (c) 414,738
Midwest City, OK - - 1,080,637 1,103,351 2,183,988
Tallhassee, FL - - 691,523 (c) 691,523
Irving, TX - - 1,000,222 (c) 1,000,222
Snellville, GA - - 486,272 1,320,087 1,806,359
Jasper, FL - - 291,147 (c) 291,147
Williston, FL - - 622,403 (c) 622,403
Pantego, TX - - 1,016,062 1,448,911 2,464,973
Conyers, GA - - 574,666 998,900 1,573,566
Norman, OK - - 1,065,562 (c) 1,065,562
Chattanooga , TN - - 474,267 (c) 474,267
Stone Mountain, GA - - 638,643 1,111,064 1,749,707
Arlington, TX 167,830 - 1,962,500 (g) 1,962,500
Leavenworth, KS 86,279 - 650,170 (g) 650,170
Augusta, GA - - 568,606 1,326,748 1,895,354
Riverdale, GA - - 1,088,896 1,707,448 2,796,344
Morrow, GA - - 550,457 1,248,422 1,798,879
Food 4 Less:
Lemon Grove, CA - - 3,695,816 (c) 3,695,816
Golden Corral:
Woodstock, GA (e) - - 200,680 328,450 529,130
Edenton, NC - - 36,578 318,481 355,059
Rockledge, FL (e) - - 120,593 340,889 461,482
Gilmer, TX (e) - - 116,815 296,454 413,269
Bonham, TX (e) - - 128,451 344,170 472,621
Center, TX (e) - - 103,187 308,859 412,046
Leitchfield, KY (e) - - 73,660 306,642 380,302
Marietta, GA (e) - - 156,190 346,509 502,699
Silsbee, TX (e) - - 132,802 302,052 434,854
Atlanta, TX (e) - - 88,457 368,317 456,774
Vernon, TX (e) - - 105,798 328,943 434,741
Abbeville, LA (e) - - 98,577 362,416 460,993
Fredricksburg, TX - - 169,984 321,189 491,173
Clanton, AL (e) - - 113,017 296,921 409,938
Pleasanton, TX (e) - - 139,694 316,070 455,764
Bowie, TX (e) - - 57,824 311,544 369,368
Jacksonville, TX - - 115,276 318,196 433,472
Lake Placid, FL (e) - - 115,113 305,074 420,187
Ennis, TX - - 153,701 366,639 520,340
Melbourne, FL (e) - - 193,447 341,351 534,798
Franklin, LA (e) - - 105,840 396,831 502,671
Franklin, VA - - 93,719 424,164 517,883
Minden, LA (e) - - 86,120 402,364 488,484
Durant, OK - - 140,862 411,135 551,997
The Good Guys:
Foothill Ranch, CA - - 1,456,113 2,505,022 3,961,135
Valencia,CA - - 1,622,252 2,895,298 4,517,550
Riverside, CA - - 1,722,736 2,761,220 4,483,956
Hardee's:
Chalkville, AL - - 170,834 457,167 628,001
Columbia, TN - - 226,300 (c) 226,300
Gulf Shores, AL - - 348,281 595,164 943,445
Horn Lake, MS - - 302,787 (c) 302,787
Johnson City, TN - - 215,567 (c) 215,567
Mobile, AL - - 336,696 (c) 336,696
Petal, MS - - 277,104 415,193 692,297
Rock Hill, SC - - 216,777 466,450 683,227
Tusculum, TN - - 182,349 507,293 689,642
Warrior, AL - - 177,659 (c) 177,659
West Point, MS - - 173,386 (c) 173,386
Hi-Lo Automotive:
Mesquite, TX - - 233,420 513,523 746,943
Arlington, TX - - 295,331 571,609 866,940
Ft. Worth, TX - - 197,037 512,296 709,333
Garland, TX - - 239,570 512,023 751,593
Houston, TX - - 261,318 531,968 793,286
Dallas, TX - - 281,347 543,937 825,284
Bastrop, TX - - 197,905 383,144 581,049
Eagle Pass, TX - - 256,745 455,841 712,586
Lake Worth, TX - - 252,141 539,510 791,651
McAllen, TX - - 265,177 605,397 870,574
Nacogdoches, TX - - 190,324 522,232 712,556
San Antonio, TX - - 200,510 643,741 844,251
Temple, TX - - 177,451 587,755 765,206
Universal City, TX - - 247,264 570,677 817,941
HomePlace:
Altamonte Spgs, FL - - 2,906,409 4,877,225 7,783,634
White Marsh, MD 2,401,918 - 3,625,792 (g) 3,625,792
Ft. Myers, FL - - 1,956,579 4,045,196 6,001,775
Bowie, MD - - 1,965,508 (c) 1,965,508
International House of Pancakes:
Stafford, TX - - 340,561 (c) 340,561
Sunset Hills, MO - - 271,853 (c) 271,853
Las Vegas, NV - - 519,947 (c) 519,947
Ft. Worth, TX - - 430,896 (c) 430,896
Arlington, TX - - 404,512 (c) 404,512
Matthews, NC - - 380,043 (c) 380,043
Phoenix, AZ - - 483,374 (c) 483,374
Just for Feet:
Albuquerque, NM - - 1,441,777 2,335,475 3,777,252
Kroger:
Columbus, OH - - 780,838 520,559 1,301,397
Linens 'n Things:
Freehold, NJ - - 1,753,766 2,208,651 3,962,417
Luria's:
Coral Gables, FL - - 1,782,346 (c) 1,782,346
South Miami, FL - - 1,379,229 (c) 1,379,229
Tampa, FL - - 2,127,503 1,521,730 3,649,233
Marshalls:
Freehold, NJ - - 2,052,946 2,585,432 4,638,378
Office Depot:
Arlington, TX - - 596,024 1,411,432 2,007,456
OfficeMax:
Corpus Christi, TX 76,664 - 893,270 1,055,008 1,948,278
Dallas, TX - - 1,118,500 1,709,891 2,828,391
Cincinnati, OH - - 543,489 1,574,551 2,118,040
Evanston, IL - - 1,867,831 1,757,618 3,625,449
Altamonte Spgs, FL - - 1,689,793 3,050,160 4,739,953
Pompano Beach, FL - - 2,266,908 1,904,803 4,171,711
Cutler Ridge, FL - - 989,370 1,479,119 2,468,489
Sacramento, CA - - 1,144,167 2,961,206 4,105,373
Salinas, CA - - 1,353,217 1,829,325 3,182,542
Redding, CA - - 667,174 2,181,563 2,848,737
Kelso, WA 1,079,000 - 1,379,460 (g) 1,379,460
Oshman's Sporting Goods:
Dallas, TX - - 1,311,440 (c) 1,311,440
Petco:
Grand Forks, ND - - 306,629 909,671 1,216,300
Pier 1 Imports:
Dallas, TX 20,710 - 189,010 1,091,764 1,280,774
Memphis, TN - - 713,319 821,770 1,535,089
Sanford, FL - - 737,901 (f) 737,901
Pizza Hut:
Orlando, FL - - 220,632 258,483 479,115
Rally's:
Toledo, OH - - 125,882 319,770 445,652
Robb & Stucky:
Ft. Myers, FL - - 2,246,406 6,390,295 8,636,701
Roger & Marv's:
Kenosha, WI - - 1,917,607 3,431,363 5,348,970
Ro-Jack's Food Store:
Warwick, RI - - 1,699,330 (c) 1,699,330
Scotty's:
Orlando, FL - - 1,157,268 2,077,131 3,234,399
Orlando, FL - - 1,044,796 2,011,952 3,056,748
Sears Homelife:
Clearwater, FL 10,555 - 1,184,438 2,536,762 3,721,200
Orlando, FL - - 820,397 2,184,721 3,005,118
Pensacola, FL - - 633,125 1,595,405 2,228,530
Raleigh, NC - - 1,848,026 1,753,635 3,601,661
Tampa, FL - - 1,454,908 2,045,833 3,500,741
Shop & Save:
Homestead, PA - - 1,139,419 (c) 1,139,419
Penn Hills, PA - - 1,043,297 1,243,131 2,286,428
Sports Authority:
Memphis, TN 66,860 - 2,459,381 (g) 2,459,381
SuperValu:
Huntington, WV - - 1,254,238 760,602 2,014,840
Top's:
Lacey, WA - - 2,777,449 7,082,150 9,859,599
Wacammaw:
Fairfax, VA - - 2,156,801 (c) 2,156,801
Waremart:
Eureka, CA - - 3,135,036 5,470,607 8,605,643
Wendy's Old Fashioned
Hamburger:
Fenton, MO - - 307,068 496,410 803,478
Longwood, FL - - 333,335 194,926 528,261
Unallocated costs
relating to construction
in progress 208,295
============== ========== ================= ================= ================
4,169,576 - 199,991,749 209,272,492 409,264,241
============== ========== ================= ================= ================
Properties the Company has
Invested in Under Direct
Financing Leases:
Academy:
Houston, TX - - - (c) (c)
Houston, TX - - - (c) (c)
N. Richland Hills, TX - - - (c) (c)
Houston, TX - - - (c) (c)
Houston, TX - - - (c) (c)
Baton Rouge, LA - - - (c) (c)
Barnes & Noble:
Plantation, FL - - - (c) (c)
Best Buy:
Evanston, IL - - - (c) (c)
Borders:
Altamonte Spgs, FL - - - (c) (c)
Checkers:
Orlando, FL - - - (c) (c)
Denny's:
Landrum, SC - - - (c) (c)
Mooresville, NC - - - (c) (c)
Duncan, SC - - - (c) (c)
Akron, OH - - (d) (d) (d)
Topeka, KS - - - (c) (c)
Winter Springs, FL - - - (c) (c)
Eckerd:
San Antonio, TX - - - (c) (c)
Dallas, TX - - - (c) (c)
Garland, TX - - - (c) (c)
Arlington, TX - - - (c) (c)
Millville, NJ - - - (c) (c)
Atlanta. GA - - - (c) (c)
Mantua, NJ - - - (c) (c)
Vineland, NJ - - (d) (d) (d)
Amarillo, TX - - - (c) (c)
Amarillo, TX - - - (c) (c)
Amarillo, TX - - (d) (d) (d)
Glassboro, NJ - - - (c) (c)
Kissimmee , FL - - - (c) (c)
Colleyville, TX - - - (c) (c)
Alice,TX - - (d) (d) (d)
Tampa, FL - - - (c) (c)
Lafayette, LA - - - (c) (c)
Moore, OK - - - (c) (c)
Tallhassee, FL - - - (c) (c)
East Point, GA - - (d) (d) (d)
Irving, TX - - - (c) (c)
Ft. Worth, TX - - (d) (d) (d)
Williston, FL - - - (c) (c)
Jasper, FL - - - (c) (c)
Oklahoma City, OK - - (m) (c) (c)
Oklahoma City, OK - - (m) (c) (c)
Norman, OK - - - (c) (c)
Chattanooga , TN - - - (c) (c)
Food 4 Less:
Lemon Grove, CA - - - (c) (c)
Food Lion:
Keystone Hts, FL - - (d) (d) (d)
Chattanooga, TN - - (d) (d) (d)
Lynchburg, VA - - (d) (d) (d)
Martinsburg, WV - - (d) (d) (d)
Good Guys:
Stockton, CA - - (d) (d) (d)
Portland, OR - - (d) (d) (d)
Hardee's:
Mobile, AL - - - (c) (c)
Warrior, AL - - - (c) (c)
Horn Lake, MS - - - (c) (c)
West Point, MS - - - (c) (c)
Columbia, TN - - - (c) (c)
Johnson City, TN - - - (c) (c)
Iuka, MS - - (d) (d) (d)
Biscoe, NC - - (d) (d) (d)
Aynor, SC - - (d) (d) (d)
Hi-Lo Automotive:
Copperas Cove, TX - - (d) (d) (d)
Ft. Worth, TX - - (d) (d) (d)
Baton Rouge, LA - - (d) (d) (d)
Lake Jackson, TX - - (d) (d) (d)
Edinberg, TX - - (d) (d) (d)
Pantego, TX - - (d) (d) (d)
Ft. Worth, TX - - (d) (d) (d)
Pharr, TX - - (d) (d) (d)
Baton Rouge, LA - - (d) (d) (d)
Houston, TX - - (d) (d) (d)
HomePlace:
Arlington, TX - - (d) (d) (d)
Bowie, MD - - - (c) (c)
International House of Pancakes:
Stafford, TX - - - (c) (c)
Sunset Hills, MO - - - (c) (c)
Las Vegas, NV - - - (c) (c)
Ft. Worth, TX - - - (c) (c)
Arlington, TX - - - (c) (c)
Matthews, NC - - - (c) (c)
Phoenix, AZ - - - (c) (c)
Kash N' Karry:
Brandon, FL - - (d) (d) (d)
Levitz:
Tempe, AZ - - (d) (d) (d)
Luria's:
South Miami, FL - - - (c) (c)
Coral Gables, FL - - - (c) (c)
Oshman's Sporting Goods:
Dallas, TX - - - (c) (c)
Ro-Jack's Food Store:
Warwick, RI - - - (c) (c)
Shop & Save:
Homestead, PA - - - (c) (c)
Wacammaw:
Fairfax, VA - - - (c) (c)
============== ==========
- -
============== ==========
Life on Which
Depreciation in
Date Latest Income
Accumulated of Con- Date Statement is
Depreciation struction Acquired Computed
- ----------------------------------- --------------- ---------- ---------- -----------------
Properties the Company
has Invested in Under
Under Operating Leases:
Academy:
Houston, TX - 1994 05/95 (c)
Houston, TX - 1995 06/95 (c)
N. Richland Hills, TX - 1996 08/95 (h) (c)
Houston, TX - 1996 02/96 (h) (c)
Houston, TX - 1996 06/96 (h) (c)
Baton Rouge, LA - 1997 08/96 (h) (c)
Babies "R" Us:
Arlington, TX 98,489 1996 06/96 40 years
Barnes & Noble:
Lakeland, FL 112,733 1995 07/94 (h) 40 years
Brandon, FL 113,699 1995 08/94 (h) 40 years
Denver, CO 221,282 1994 09/94 40 years
Houston, TX 134,785 1995 10/94 (h) 40 years
Cary, NC 128,048 1996 05/95 (h) 40 years
Plantation, FL - 1996 05/95 (h) (c)
Lafayette, LA 97,834 1996 06/95 (h) 40 years
Oklahoma City, OK 114,021 1996 06/95 (h) 40 years
Daytona, FL 99,183 1996 09/95 (h) 40 years
Freehold, NJ 108,637 1995 01/96 40 years
Dayton, OH 50,367 1996 05/97 40 years
Redding, CA 22,015 1997 06/97 40 years
Best Buy:
Corpus Christi, TX 92,987 1967 11/93 40 years
Brandon, FL 60,640 1996 02/97 40 years
Evanston, IL - 1994 02/97 (c)
Cuyahoga Falls, OH 31,950 1970 06/97 40 years
Rockville, MD 39,174 1995 07/97 40 years
Fairfax, VA 30,169 1995 08/97 40 years
St. Petersburg, FL 21,578 1997 09/97 40 years
Blockbuster:
Dallas, TX 186,430 1985 04/94 40 years
Conyers, GA 7,533 1997 06/97 40 years
Borders Books & Music:
Wilmington, DE 458,689 1994 12/94 40 years
Richmond, VA 166,446 1995 06/95 40 years
Ft. Lauderdale, FL 180,900 1995 02/96 40 years
Bangor, ME 94,980 1996 06/96 40 years
Altamonte Spgs, FL - 1997 09/97 (c)
Burger King:
Asheboro, NC 112,089 1986 07/92 40 years
Galliano, LA 155,445 1991 07/92 40 years
John's Island, SC 96,017 1988 07/92 40 years
Lake Charles, LA 132,786 1988 07/92 40 years
Lancaster, OH 80,137 1987 07/92 40 years
Natchez, MS 89,860 1986 07/92 40 years
Tappahannock, VA 78,757 1987 07/92 40 years
Warren, MI 107,942 1987 07/92 40 years
Manchester, NH 49,234 1980 05/93 40 years
Rochester, NH 89,503 1987 05/93 40 years
Columbus, OH 45,826 1982 06/93 40 years
Coon Rapids, MN 61,343 1990 06/93 40 years
Opeleousas, LA 92,814 1989 06/93 40 years
St. Paul, MN 61,107 1986 06/93 40 years
Checkers:
Orlando, FL - 1988 07/92 (c)
CompUSA:
Mission Viejo, CA 88,410 1994 02/94 (h) 40 years
Computer City:
Miami, FL 172,795 1994 04/94 40 years
Baton Rouge, LA 45,741 1995 12/95 40 years
Anchorage, AK 76,441 1995 02/96 40 years
Richmond, VA 77,372 1996 05/96 40 years
Dave's:
Maple Heights, OH 62,878 1985 02/97 40 years
Denny's:
Duncan, SC - 1992 05/93 (c)
Greensboro, NC 56,657 1992 05/93 40 years
Greenville, SC 46,034 1985 05/93 40 years
Houston, TX 65,795 1985 05/93 40 years
Landrum, SC - 1992 05/93 (c)
Mooresville, NC - 1992 05/93 (c)
Santee, SC 35,832 1992 05/93 40 years
Topeka, KS - 1989 06/93 (c)
Winter Springs, FL - 1994 01/94 (c)
Dick's Clothing:
Taylor, MI 114,244 1996 08/96 40 years
White Marsh, MD 126,878 1996 08/96 40 years
Eckerd:
San Antonio, TX - 1993 12/93 (c)
Dallas, TX - 1994 01/94 (c)
Garland, TX - 1994 02/94 (c)
Arlington, TX - 1994 02/94 (c)
Millville, NJ - 1994 03/94 (c)
Atlanta, GA - 1994 03/94 (c)
Mantua, NJ - 1994 06/94 (c)
Amarillo, TX - 1994 12/94 (c)
Amarillo, TX - 1994 12/94 (c)
Glassboro, NJ - 1994 12/94 (c)
Kissimmee , FL - 1995 04/95 (c)
Colleyville, TX - 1995 06/95 (c)
Tampa, FL - 1995 12/95 (c)
Douglasville, GA 47,825 1996 01/96 40 years
Lafayette, LA - 1995 01/96 (c)
Moore, OK - 1995 01/96 (c)
Midwest City, OK 50,348 1996 03/96 40 years
Tallhassee, FL - 1996 06/96 (c)
Irving, TX - 1996 12/96 (c)
Snellville, GA 33,180 1996 12/96 40 years
Jasper, FL - 1994 01/97 (c)
Williston, FL - 1995 01/97 (c)
Pantego, TX 19,621 1997 06/97 40 years
Conyers, GA 13,527 1997 06/97 40 years
Norman, OK - 1997 06/97 (c)
Chattanooga , TN - 1997 09/97 (c)
Stone Mountain, GA 8,102 1997 09/97 40 years
Arlington, TX - (g) 11/97 (g)
Leavenworth, KS - (g) 11/97 (g)
Augusta, GA 1,382 1997 12/97 40 years
Riverdale, GA 1,779 1997 12/97 40 years
Morrow, GA 1,300 1997 12/97 40 years
Food 4 Less:
Lemon Grove, CA - 1996 07/95 (h) (c)
Golden Corral:
Woodstock, GA (e) 128,940 1984 11/84 35 years
Edenton, NC 125,075 1984 11/84 35 years
Rockledge, FL (e) 132,800 1984 12/84 35 years
Gilmer, TX (e) 115,501 1984 12/84 35 years
Bonham, TX (e) 134,079 1984 12/84 35 years
Center, TX (e) 120,334 1984 12/84 35 years
Leitchfield, KY (e) 119,460 1984 12/84 35 years
Marietta, GA (e) 134,992 1984 12/84 35 years
Silsbee, TX (e) 117,686 1984 12/84 35 years
Atlanta, TX (e) 143,117 1985 01/85 35 years
Vernon, TX (e) 124,528 1985 03/85 35 years
Abbeville, LA (e) 137,200 1985 04/85 35 years
Fredricksburg, TX 121,593 1985 04/85 35 years
Clanton, AL (e) 112,406 1985 05/85 35 years
Pleasanton, TX (e) 119,655 1985 05/85 35 years
Bowie, TX (e) 117,942 1985 05/85 35 years
Jacksonville, TX 120,460 1985 05/85 35 years
Lake Placid, FL (e) 115,492 1985 05/85 35 years
Ennis, TX 135,132 1985 07/85 35 years
Melbourne, FL (e) 125,812 1985 07/85 35 years
Franklin, LA (e) 146,260 1985 07/85 35 years
Franklin, VA 114,777 1987 02/87 40 years
Minden, LA (e) 88,853 1989 03/89 40 years
Durant, OK 86,573 1989 08/89 40 years
The Good Guys:
Foothill Ranch, CA 62,962 1995 12/96 40 years
Valencia,CA 63,335 1995 02/97 40 years
Riverside, CA 43,144 1995 05/97 40 years
Hardee's:
Chalkville, AL 47,721 1992 10/93 40 years
Columbia, TN - 1993 10/93 (c)
Gulf Shores, AL 62,125 1993 10/93 40 years
Horn Lake, MS - 1993 10/93 (c)
Johnson City, TN - 1993 10/93 (c)
Mobile, AL - 1993 10/93 (c)
Petal, MS 43,339 1993 10/93 40 years
Rock Hill, SC 48,690 1993 10/93 40 years
Tusculum, TN 52,953 1993 10/93 40 years
Warrior, AL - 1992 10/93 (c)
West Point, MS - 1993 10/93 (c)
Hi-Lo Automotive:
Mesquite, TX 41,137 1994 10/94 40 years
Arlington, TX 44,099 1993 11/94 40 years
Ft. Worth, TX 39,521 1993 11/94 40 years
Garland, TX 39,498 1993 11/94 40 years
Houston, TX 41,043 1994 11/94 40 years
Dallas, TX 40,941 1994 12/94 40 years
Bastrop, TX 21,658 1994 09/95 40 years
Eagle Pass, TX 25,768 1994 09/95 40 years
Lake Worth, TX 30,497 1995 09/95 40 years
McAllen, TX 34,222 1995 09/95 40 years
Nacogdoches, TX 29,521 1995 09/95 40 years
San Antonio, TX 36,389 1994 09/95 40 years
Temple, TX 33,224 1989 09/95 40 years
Universal City, TX 32,259 1995 09/95 40 years
HomePlace:
Altamonte Spgs, FL 35,563 1997 09/97 40 years
White Marsh, MD - (g) 10/97 (g)
Ft. Myers, FL 4,214 1997 12/97 40 years
Bowie, MD - 1997 12/97 (c)
International House of Pancakes:
Stafford, TX - 1992 10/93 (c)
Sunset Hills, MO - 1993 10/93 (c)
Las Vegas, NV - 1993 12/93 (c)
Ft. Worth, TX - 1993 12/93 (c)
Arlington, TX - 1993 12/93 (c)
Matthews, NC - 1993 12/93 (c)
Phoenix, AZ - 1993 12/93 (c)
Just for Feet:
Albuquerque, NM 31,626 1997 06/97 40 years
Kroger:
Columbus, OH 11,387 1982 02/97 40 years
Linens 'n Things:
Freehold, NJ 184,500 1994 08/94 40 years
Luria's:
Coral Gables, FL - 1994 06/96 (c)
South Miami, FL - 1988 06/96 (c)
Tampa, FL 57,382 1994 06/96 40 years
Marshalls:
Freehold, NJ 215,974 1994 08/94 40 years
Office Depot:
Arlington, TX 138,122 1991 01/94 40 years
OfficeMax:
Corpus Christi, TX 108,276 1967 11/93 40 years
Dallas, TX 171,106 1993 12/93 40 years
Cincinnati, OH 137,099 1994 07/94 40 years
Evanston, IL 112,536 1995 06/95 40 years
Altamonte Spgs, FL 143,236 1995 01/96 40 years
Pompano Beach, FL 90,724 1972 02/96 40 years
Cutler Ridge, FL 55,775 1995 06/96 40 years
Sacramento, CA 74,203 1996 12/96 40 years
Salinas, CA 40,016 1995 02/97 40 years
Redding, CA 29,542 1997 06/97 40 years
Kelso, WA - (g) 09/97 (g)
Oshman's Sporting Goods:
Dallas, TX - 1994 03/94 (c)
Petco:
Grand Forks, ND 972 1996 12/97 40 years
Pier 1 Imports:
Dallas, TX 101,631 1980 04/94 40 years
Memphis, TN 11,128 1997 09/96 (h) 40 years
Sanford, FL - (f) 06/97 (f)
Pizza Hut:
Orlando, FL 54,552 1974 08/93 20.9 years
Rally's:
Toledo, OH 45,347 1989 07/92 38.8 years
Robb & Stucky:
Ft. Myers, FL 6,657 1997 12/97 40 years
Roger & Marv's:
Kenosha, WI 70,372 1992 02/97 40 years
Ro-Jack's Food Store:
Warwick, RI - 1992 02/97 (c)
Scotty's:
Orlando, FL 131,096 1995 06/95 40 years
Orlando, FL 128,595 1995 06/95 40 years
Sears Homelife:
Clearwater, FL 290,797 1992 05/93 40 years
Orlando, FL 251,018 1992 05/93 40 years
Pensacola, FL 60,271 1994 06/96 40 years
Raleigh, NC 66,248 1995 06/96 40 years
Tampa, FL 77,287 1992 06/96 40 years
Shop & Save:
Homestead, PA - 1994 02/97 (c)
Penn Hills, PA 27,194 1991 02/97 40 years
Sports Authority:
Memphis, TN - (g) 12/97 (g)
SuperValu:
Huntington, WV 16,638 1971 02/97 40 years
Top's:
Lacey, WA 154,922 1992 02/97 40 years
Wacammaw:
Fairfax, VA - 1995 12/95 (c)
Waremart:
Eureka, CA 119,670 1965 02/97 40 years
Wendy's Old Fashioned
Hamburger:
Fenton, MO 82,859 1985 07/92 33 years
Longwood, FL 34,179 1982 07/92 31.4 years
Unallocated costs
relating to construction
in progress
===============
12,296,997
===============
Properties the Company has
Invested in Under Direct
Financing Leases:
Academy:
Houston, TX (c) 1994 05/95 (c)
Houston, TX (c) 1995 06/95 (c)
N. Richland Hills, TX (c) 1996 08/95 (h) (c)
Houston, TX (c) 1996 02/96 (h) (c)
Houston, TX (c) 1996 06/96 (h) (c)
Baton Rouge, LA (c) 1997 08/96 (h) (c)
Barnes & Noble:
Plantation, FL (c) 1996 05/95 (h) (c)
Best Buy:
Evanston, IL (c) 1994 02/97 (c)
Borders:
Altamonte Spgs, FL (c) 1997 09/97 (c)
Checkers:
Orlando, FL (c) 1988 07/92 (c)
Denny's:
Landrum, SC (c) 1992 05/93 (c)
Mooresville, NC (c) 1992 05/93 (c)
Duncan, SC (c) 1992 05/93 (c)
Akron, OH (d) 1992 05/93 (d)
Topeka, KS (c) 1989 06/93 (c)
Winter Springs, FL (c) 1994 01/94 (c)
Eckerd:
San Antonio, TX (c) 1993 12/93 (c)
Dallas, TX (c) 1994 01/94 (c)
Garland, TX (c) 1994 02/94 (c)
Arlington, TX (c) 1994 02/94 (c)
Millville, NJ (c) 1994 03/94 (c)
Atlanta. GA (c) 1994 03/94 (c)
Mantua, NJ (c) 1994 06/94 (c)
Vineland, NJ (d) 1994 11/94 (d)
Amarillo, TX (c) 1994 12/94 (c)
Amarillo, TX (c) 1994 12/94 (c)
Amarillo, TX (d) 1994 12/94 (d)
Glassboro, NJ (c) 1994 12/94 (c)
Kissimmee , FL (c) 1995 04/95 (c)
Colleyville, TX (c) 1995 06/95 (c)
Alice,TX (d) 1995 06/95 (d)
Tampa, FL (c) 1995 12/95 (c)
Lafayette, LA (c) 1995 01/96 (c)
Moore, OK (c) 1995 01/96 (c)
Tallhassee, FL (c) 1996 06/96 (c)
East Point, GA (d) 1996 12/96 (d)
Irving, TX (c) 1996 12/96 (c)
Ft. Worth, TX (d) 1996 12/96 (d)
Williston, FL (c) 1995 01/97 (c)
Jasper, FL (c) 1994 01/97 (c)
Oklahoma City, OK (c) 1997 06/97 (c)
Oklahoma City, OK (c) 1997 06/97 (c)
Norman, OK (c) 1997 06/97 (c)
Chattanooga , TN (c) 1997 09/97 (c)
Food 4 Less:
Lemon Grove, CA (c) 1996 07/95 (h) (c)
Food Lion:
Keystone Hts, FL (d) 1993 05/93 (d)
Chattanooga, TN (d) 1993 10/93 (d)
Lynchburg, VA (d) 1994 01/94 (d)
Martinsburg, WV (d) 1994 08/94 (d)
Good Guys:
Stockton, CA (d) 1991 07/94 (d)
Portland, OR (d) 1996 05/96 (d)
Hardee's:
Mobile, AL (c) 1993 10/93 (c)
Warrior, AL (c) 1992 10/93 (c)
Horn Lake, MS (c) 1993 10/93 (c)
West Point, MS (c) 1993 10/93 (c)
Columbia, TN (c) 1993 10/93 (c)
Johnson City, TN (c) 1993 10/93 (c)
Iuka, MS (d) 1993 10/93 (d)
Biscoe, NC (d) 1993 10/93 (d)
Aynor, SC (d) 1993 10/93 (d)
Hi-Lo Automotive:
Copperas Cove, TX (d) 1994 10/94 (d)
Ft. Worth, TX (d) 1993 10/94 (d)
Baton Rouge, LA (d) 1994 10/94 (d)
Lake Jackson, TX (d) 1994 10/94 (d)
Edinberg, TX (d) 1993 10/94 (d)
Pantego, TX (d) 1993 10/94 (d)
Ft. Worth, TX (d) 1993 11/94 (d)
Pharr, TX (d) 1993 11/94 (d)
Baton Rouge, LA (d) 1994 12/94 (d)
Houston, TX (d) 1982 09/95 (d)
HomePlace:
Arlington, TX (d) 1996 06/96 (d)
Bowie, MD (c) 1997 12/97 (c)
International House of Pancakes:
Stafford, TX (c) 1992 10/93 (c)
Sunset Hills, MO (c) 1993 10/93 (c)
Las Vegas, NV (c) 1993 12/93 (c)
Ft. Worth, TX (c) 1993 12/93 (c)
Arlington, TX (c) 1993 12/93 (c)
Matthews, NC (c) 1993 12/93 (c)
Phoenix, AZ (c) 1993 12/93 (c)
Kash N' Karry:
Brandon, FL (d) 1997 10/96 (h) (d)
Levitz:
Tempe, AZ (d) 1994 01/95 (d)
Luria's:
South Miami, FL (c) 1988 06/96 (c)
Coral Gables, FL (c) 1994 06/96 (c)
Oshman's Sporting Goods:
Dallas, TX (c) 1994 03/94 (c)
Ro-Jack's Food Store:
Warwick, RI (c) 1992 02/97 (c)
Shop & Save:
Homestead, PA (c) 1994 02/97 (c)
Wacammaw:
Fairfax, VA (c) 1995 12/95 (c)
COMMERCIAL NET LEASE REALTY, INC.
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
(a) Transactions in real estate and accumulated depreciation during 1997, 1996 and 1995, are summarized as follows:
1997 1996 1995
----------- ----------- -----------
Land and Buildings:
Balance at the Beginning of Period 277,109,358 161,454,129 109,852,431
Acquisitions 156,011,944 116,563,622 51,601,698
Sale of land and buildings (19,846,879) (908,393) -
----------- ----------- -----------
Balance at the Close of Period 413,274,423 277,109,358 161,454,129
=========== =========== ===========
Accumulated Depreciation:
Balance at the Beginning of Period 8,078,562 5,497,390 3,761,369
Sale of land and buildings (258,942) (222,940) -
Depreciation expense 4,477,377 2,804,112 1,736,021
----------- ------------ ----------
Balance at the Close of Period 12,296,997 8,078,562 5,497,390
============ ============ ===========
(b) As of December 31, 1997, all of the leases are treated as operating leases
for federal income tax purposes. As of December 31, 1997, the aggregate
cost of the properties owned by the Company and its subsidaries for federal
income tax purposes was $534,688,369.
(c) For financial reporting purposes, the portion of the lease relating to the
building has been recorded as a direct financing lease; therefore,
depreciation is not applicable.
(d) For financial reporting purposes, the lease for the land and building has
been recorded as a direct financing lease; therefore, depreciation is not
applicable.
(e) The tenant of this property, Golden Corral Corporation, has subleased this
property. Golden Corral Corporation continues to be responsible for
complying with all the terms of the lease agreement and is continuing to
pay rent on this property to the Company.
(f) The Company owns only land for this property. Pursuant to the lease
agreement, the Company is to purchase the building once construction is
complete.
(g) The Company owns only land for this property. The building is under
construction; therefore, no depreciation was taken.
(h) Date acquired represents acquisition date of land. Pursuant to the lease
agreement, the Company purchased the buildings from the tenants upon
completion of construction, generally within 12 months from the acquisition
of the land.
(i) During the years ended December 31, 1997, 1996 and 1995, the Company (i)
incurred acquisition fees and expense reimbursement fees totalling
$2,552,205, $2,278,306 and $937,363, respectively, paid to CNL Realty
Advsisors, Inc. and (ii) acquired land and buildings purchased from
affiliates of CNL Realty Advisors, Inc. for an aggregate cost of
$39,322,795, $37,712,514, and $17,968,518, respectively. Such amounts are
included in land and buildings on operating leases and net investments in
direct financing leases.
(j) Property is encumbered as a part of the Company's $13,150,000 long term,
fixed rate mortgage and security agreement.
(k) Property is encumbered as a part of the Company's $39,450,000 long term,
fixed rate mortgage and security agreement.
(l) Encumbered properties for which the portion of the lease relating to the
land is accounted for as an operating lease and the portion of the lease
relating to the building is accounted for as a direct financing lease, the
total amount of the encumberance is listed with the land portion of the
property.
(m) The Company owns only the building for this property. The land is subject
to a ground lease between the Company and an unrelated third party.
EXHIBITS
EXHIBIT INDEX
Exhibit Number Page
-------------- ----
3.1 Articles of Incorporation of the Registrant (filed as
Exhibit 3.3(i) to the Registrant's Registration Statement
No. 1-11290 on Form 8-B, and incorporated herein by
reference).
3.2 Bylaws of the Registrant, (filed as Exhibit 3(ii) to
Amendment No. 2 to the Registrant's Registration No. 33-
83110 on Form S-3, and incorporated herein by reference).
3.3 Articles of Amendment to the Articles of Incorporation of
the Registrant (filed as Exhibit 3.3 to the Registrant's
Form 10-Q for the quarter ended June 30, 1996, and
incorporated herein by reference).
3.4 Articles of Amendment to the Articles of Incorporation of
the Registrant (filed as Exhibit 3.4 to the Registrant's
Current Report on Form 8-K dated February 18, 1998, and
filed with the Securities and Exchange Commission on
February 19, 1998, and incorporated herein by reference).
4 Specimen Certificate of Common Stock, par value $.01 per
share, of the Registrant (filed as Exhibit 3.4 to the
Registrant's Registration Statement No. 1-11290 on Form 8-B
and incorporated herein by reference).
10.1 Letter Agreement dated July 10, 1992, amending Stock
Purchase Agreement dated January 23, 1992 (filed as Exhibit
10.34 to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1992, and incorporated herein by
reference).
10.2 Advisory Agreement between Registrant and CNL Realty
Advisors, Inc. effective as of April 1, 1993 and renewed
January 1, 1997 (filed as Exhibit 10.04 to Amendment No. 1
to the Registrant's Registration Statement No. 33-61214 on
Form S-2, and incorporated herein by reference).
10.3 1992 Commercial Net Lease Realty, Inc. Stock Option Plan
(filed as Exhibit No. 10(x) to the Registrant's Registration
Statement No. 33-83110 on Form S-3, and incorporated herein
by reference).
10.4 Second Amended and Restated Line of Credit and Security
Agreement, dated December 7, 1995, among Registrant, certain
lenders listed therein and First Union National Bank of
Florida, as the Agent, relating to a $100,000,000 loan
(filed as Exhibit 10.14 to the Registrant's Current Report
on Form 8-K dated January 18, 1996, and incorporated herein
by reference).
10.5 Secured Promissory Note, dated December 14, 1995, among
Registrant and Principal Mutual Life Insurance Company
relating to a $13,150,000 loan (filed as Exhibit 10.15 to
the Registrant's Current Report on Form 8-K dated January
18, 1996, and incorporated herein by reference).
10.6 Mortgage and Security Agreement, dated December 14, 1995,
among Registrant and Principal Mutual Life Insurance Company
relating to a $13,150,000 loan (filed as Exhibit 10.16 to
the Registrant's Current Report on Form 8-K dated January
18, 1996, and incorporated herein by reference).
10.7 Loan Agreement, dated January 19, 1996, among Registrant and
Principal Mutual Life Insurance Company relating to a
$39,450,000 loan (filed as Exhibit 10.12 to the Registrant's
Annual Report on Form 10-K for the year ended December 31,
1995, and incorporated herein by reference).
10.8 Secured Promissory Note, dated January 19, 1996, among
Registrant and Principal Mutual Life Insurance Company
relating to a $39,450,000 loan (filed as Exhibit 10.13 to
the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1995, and incorporated herein by
reference).
10.9 Third Amended and Restated Line of Credit and Security
Agreement, dated September 3, 1996, by and among Registrant,
certain lenders and First Union National Bank of Florida, as
the Agent, relating to a $150,000,000 loan (filed as Exhibit
10.11 to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1996, and incorporated
herein by reference).
10.10 Second Renewal and Modification Promissory Note, dated
September 3, 1996, by and among Registrant and First Union
National Bank of Florida, as the Agent, relating to
$150,000,000 loan (filed as Exhibit 10.12 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996, and incorporated herein by
reference).
10.11 Agreement and Plan of Merger dated May 15, 1997, by and
among Commercial Net Lease Realty, Inc. and Net Lease Realty
II, Inc. and CNL Realty Advisors, Inc. and the Stockholders
of CNL Realty Advisors, Inc. (filed as Exhibit 10.1 to the
Registrant's Current Report on Form 8-K dated May 16, 1997,
and incorporated herein by reference).
10.12 Fourth Amended and Restated Line of Credit and Security
Agreement, dated August 6, 1997, by and among Registrant,
certain lenders and First Union National Bank, as the Agent,
relating to a $200,000,000 loan (filed as Exhibit 10 to the
Registrant's Current Report on Form 8-K dated September 12,
1997, and incorporated herein by reference).
13 Annual Report to Shareholders for the year ended December
31, 1997 (previously filed).
23 Consent of Independent Accountants dated March 16, 1998
(previously filed).
(b) The Registrant filed one report on Form 8-K on December 19,
1997, for the purpose of incorporating certain items by
reference into its registration statement on Form S-3 dated
December 19, 1997, and one report on form 8-K on December
22, 1997, reporting the approval by the stockholders of the
Registrant of the Agreement and Plan of Merger by and among
the Registrant, Net Lease Realty II, Inc. and the
Stockholders of CNL Realty Advisors, Inc.