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, 1996 ------------------------------------------ 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) 422-1574 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 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] The aggregate market value of voting stock held by non-affiliates of the registrant as of March 19, 1997, was $336,619,823. The number of shares of common stock outstanding as of March 19, 1997, was 23,393,672. 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, 1996 (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 1997 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, 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 upon lease expiration. 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, 1996, the Company borrowed $144,600,000 of amounts it has available under its credit facility and assumed mortgages totalling $6,864,000 to acquire 40 properties and nine buildings which were developed by the tenant on land parcels owned by the Company. As of December 31, 1996, the Company owned 195 properties (the "Properties") that are leased to major businesses, including Academy, Baby Superstore, Barnes & Noble, Best Buy, Blockbuster Music, Borders, Burger King, Checkers, 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, Pizza Hut, Scotty's, Sears, Sports Authority, Waccamaw and Wendy's. The occupancy rate of the Company's Property portfolio was 100 percent at December 31, 1996. All of 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 lease of each of the Company's Properties require payment of annual base rent plus, generally, either percentage rent based on the tenant's gross sales or contractual increases in annual rent. During 1996, one of the Company's lessees, Barnes & Noble Superstores, Inc., accounted for more than ten percent of the Company's total rental income. As of December 31, 1996, Barnes & Noble Superstores, Inc. was the lessee under leases relating to 11 Properties. It is anticipated that, based on the minimum rental payments required by the leases, Barnes & Noble Superstores, Inc. will continue to account for more than ten percent of the Company's total rental income in 1997. Any failure of this lessee could materially affect the Company's income. Investment in Subsidiaries In November 1995, the Company purchased 100% of the common stock of two newly-formed entities, Net Lease Realty I, Inc. and Net Lease Realty II, Inc., to facilitate the acquisition of certain properties. Each of the wholly-owned subsidiaries is a qualified real estate investment trust subsidiary as defined under Internal Revenue Code Section 856(i)(2). 1 Advisory Services The Company and CNL Realty Advisors, Inc. (the "Advisor") have entered into an advisory agreement (the "Advisory Agreement"), which provides for the Advisor to perform to receive an annual fee, payable monthly, equal to (i) seven percent of funds from operations, as defined in the Advisory Agreement, 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. Under the Advisory Agreement, the Advisor generally is 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 include 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 serves as the Company's consultant in connection with policy decisions to be made by the Board of Directors, manages the Company's Properties and renders other services as the Board of Directors deems appropriate. The Advisor is subject to the supervision of the Company's Board of Directors and has only such functions as are delegated to it. The Advisory Agreement was renewed January 1, 1997 and continues until January 1998, and thereafter may be extended annually upon mutual consent of a majority of the board of directors of the Advisor and a majority of the independent directors of the Company unless terminated at an earlier date upon 90 days' prior notice by either party. Historically, the Company has not had a large enough asset base to provide the economies of scale needed to support efficiently 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. However, management believes that the efficiencies currently experienced by employing a third-party advisor will diminish as the Company grows and expects that as the Company continues to grow it will be more cost effective to become self-administered. Management is currently considering whether it may be appropriate at this time to recommend to the Board of Directors that the Company become self-administered. Any recommendation would be evaluated by the Independent Directors, and any transaction by which the Company would become self-administered would be submitted to the stockholders for their approval. Competition The Company generally competes with other REITs, 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. The Company has no other employees. ITEM 2. PROPERTIES As of December 31, 1996, the Company owned 195 Properties located in 31 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. 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 2 commercial use which have been reviewed for traffic patterns and volume. Land costs range from approximately $36,500 to $4,600,000. Buildings. The buildings generally are rectangular and are constructed from various combinations of stucco, steel, wood, brick and tile. Building sizes range from approximately 1,000 to 60,000 square feet. Building costs range from approximately $195,000 to $6,062,000 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, 1996, the average remaining lease term was approximately 14 years. All of 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, 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 $910,000. 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 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, 1996, leases representing approximately 74 percent of annual base rent include contractual increases, leases representing approximately 33 percent of annual base rent include percentage rent provisions and leases representing approximately 19 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. The Company is not aware of any environmental liability with respect to any of its Properties that it believes would have a material adverse effect on the Company's assets or financial condition. The Company's principal executive offices are located at 400 E. South Street, Suite 500, Orlando, Florida 32801, where it occupies office space provided to it free of charge by CNL Realty Advisors, Inc., the Company's advisor. 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. 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. 3 PART II ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 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 21 of the Registrant's Annual Report to Shareholders for the year ended December 31, 1996; 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 one of the Registrant's Annual Report to Shareholders for the year ended December 31, 1996; 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 nine of the Registrant's Annual Report to Shareholders for the year ended December 31, 1996; 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 "Condensed Quarterly Financial Data" on page 21 of the Registrant's Annual Report to Shareholders for the year ended December 31, 1996; 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, 1996, are incorporated herein by reference. ITEM 9. DISAGREEMENTS OF ACCOUNTING AND FINANCIAL DISCLOSURE None. 4 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 responsive 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. 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 at December 31, 1996 and 1995 Consolidated Statements of Earnings for the years ended December 31, 1996, 1995 and 1994 Consolidated Statements of Stockholders' Equity for the years ended December 31, 1996, 1995 and 1994 Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994 5 Notes to Consolidated Financial Statements 2. Financial Statement Schedule Report of Independent Auditors' on Supplementary Information Schedule III - Real Estate and Accumulated Depreciation at December 31, 1996 Notes to Schedule III - Real Estate and Accumulated Depreciation at December 31, 1996 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 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). 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 Interest Rate Cap Agreement dated December 23, 1994, by and between the Registrant and First Union National Bank of Florida (filed as Exhibit 10.12 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994, and incorporated by reference). 10.5 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). 10.6 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). 10.7 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 6 Registrant's Current Report on Form 8-K dated January 18, 1996, and incorporated herein by reference). 10.8 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). 10.9 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). 10.10 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). 10.11 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). 13 Annual Report to Shareholders for the year ended December 31, 1996 (filed only to the extent material therefrom is specifically incorporated herein by reference). 23 Consent of Independent Accountants dated March 19, 1997. Filed herewith. (b) The Registrant filed no reports on Form 8-K during the period from October 1, 1996 through December 31, 1996. 7 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 19th day of March, 1997. 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 19, 1997 - ------------------------------ Directors and Chief James M. Seneff, Jr. Executive Officer (Prin- cipal Executive Officer) /s/ Robert A. Bourne Vice Chairman of the March 19, 1997 - ----------------------------- Board of Directors, Robert A. Bourne Secretary and Treasurer /s/ Edward Clark Director March 19, 1997 - ---------------------------- Edward Clark /s/ Willoughby T. Cox, Jr. Director March 19, 1997 - ---------------------------- Willoughby T. Cox, Jr. /s/ Clifford R. Hinkle Director March 19, 1997 - ---------------------------- Clifford R. Hinkle /s/ Ted B. Lanier Director March 19, 1997 - ---------------------------- Ted B. Lanier /s/ Gary M. Ralston President March 19, 1997 - ---------------------------- Gary M. Ralston /s/ Kevin B. Habicht Chief Financial Officer March 19, 1997 - --------------------------- (Principal Financial and Kevin B. Habicht Accounting Officer) Report of Independent Auditors' on Supplementary Information ------------------------------------------------------------- The Board of Directors Commercial Net Lease Realty, Inc.: Under date of January 20, 1997, except for Note 12 for which the date is February 13, 1997, we reported on the consolidated balance sheets of Commercial Net Lease Realty, Inc. as of December 31, 1996 and 1995, 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, 1996, as contained in Item 14(a)1 of Form 10-K and in the 1996 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 1996. In connection with our audit of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement schedule at December 31, 1996. 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 20, 1997, except for Note 12 for which the date is February 13, 1997 <TABLE> COMMERCIAL NET LEASE REALTY, INC. SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION ------------------------------------------------------- December 31, 1996 <CAPTION> Costs Capitalized Initial Cost Subsequent To Company To Acquisition ------------------------ ------------------ Buildings Encum- and Improve- Carrying brances(l) Land Improvements ments Costs -------------- ----------- ------------ --------- -------- <S> <C> <C> <C> <C> <C> Properties the Company has Invested in Under Operating Leases: Academy: Houston, Texas $ - $ 1,074,232 $ - $ - $ - Houston, Texas - 699,165 - - - N. Richland Hills, Texas - 1,307,655 - - - Houston, Texas - 3,086,610 - - - Houston, Texas - 795,005 - - - San Antonio, Texas - 931,478 - - - Baton Rouge, Louisiana - 1,552,041 - - - Baby Superstore: Arlington, Texas - 830,689 2,611,867 - - Barnes & Noble: Lakeland, Florida - 1,070,902 1,516,983 - - Brandon, Florida 1,629,182(k) 1,476,407 1,527,150 - - Denver, Colorado - 3,244,785 2,722,087 - - Houston, Texas - 3,307,562 2,396,024 - - Plantation, Florida - 3,616,357 - - - Cary, North Carolina - 2,778,458 2,650,008 - - Lafayette, Louisiana - 1,204,279 2,301,983 - - Oklahoma City, Oklahoma - 1,688,556 2,311,487 - - Daytona, Florida - 2,587,451 2,052,643 - - Freehold, New Jersey - 2,917,219 2,260,663 - - Memphis, Tennessee - 1,785,157 - - - Best Buy: Corpus Christi, Texas 1,268,679(j) 818,448 896,395 12,222 - Blockbuster Music: Dallas, Texas - 346,548 1,963,773 39,243 - Borders: Wilmington, Delaware 4,932,406(k) 3,030,769 6,061,538 - - Richmond, Virginia 2,591,377(k) 2,177,310 2,599,587 - - Ft. Lauderdale, Florida - 3,164,984 3,934,577 - - Bangor, Maine - 1,546,915 2,486,761 - - Burger King: Asheboro, North Carolina - 420,508 815,190 - - Galliano, Louisiana - 249,001 1,130,506 - - John's Island, S. Carolina - 385,517 698,309 - - Lake Charles, Louisiana - 272,381 965,713 - - Lancaster, Ohio - 220,846 582,815 - - Natchez, Mississippi - 206,717 653,530 - - Tappahannock, Virginia - 289,840 572,779 - - Warren, Michigan - 298,817 785,031 - - Manchester, New Hampshire - 619,037 428,757 - - <CAPTION> Life on Which Gross Amount at Which Carried Depreciation at Close of Period (b) in Latest Buildings Date Income and Accumulated of Con- Date Statement is Land Improvements Total Depreciation struction Acquired Computed ----------- ------------- ------------ ------------ --------- -------- ------------ <C> <C> <C> <C> <C> <C> <C> $ 1,074,232 (c) $ 1,074,232 $ - 1994 05/95 (c) 699,165 (c) 699,165 - 1995 06/95 (c) 1,307,655 (c) 1,307,655 - 1996 08/95(h) (c) 3,086,610 (c) 3,086,610 - 1996 02/96(h) (c) 795,005 (c) 795,005 - 1996 06/96(h) (c) 931,478 (c) 931,478 - 1996 06/96 (c) 1,552,041 (f) 1,552,041 - (f) 08/96 (f) 830,689 2,611,867 3,442,556 33,192 1996 06/96 40 years 1,070,902 1,516,983 2,587,885 74,808 1995 07/94(h) 40 years 1,476,407 1,527,150 3,003,557 75,520 1995 08/94(h) 40 years 3,244,785 2,722,087 5,966,872 153,229 1994 09/94 40 years 3,307,562 2,396,024 5,703,586 74,884 1995 10/94(h) 40 years 3,616,357 (c) 3,616,357 - 1996 05/95(h) (c) 2,778,458 2,650,008 5,428,466 61,798 1996 05/95(h) 40 years 1,204,279 2,301,983 3,506,262 40,285 1996 06/95(h) 40 years 1,688,556 2,311,487 4,000,043 56,234 1996 06/95(h) 40 years 2,587,451 2,052,643 4,640,094 47,867 1996 09/95(h) 40 years 2,917,219 2,260,663 5,177,882 52,121 1995 01/96 40 years 1,785,157 (f) 1,785,157 - (f) 09/96 (f) 818,448 908,617 1,727,065 70,254 1967 11/93 40 years 346,548 2,003,016 2,349,564 136,345 1985 04/94 40 years 3,030,769 6,061,538 9,092,307 307,151 1994 12/94 40 years 2,177,310 2,599,587 4,776,897 101,456 1995 06/95 40 years 3,164,984 3,934,577 7,099,561 82,536 1995 02/96 40 years 1,546,915 2,486,761 4,033,676 32,811 1996 06/96 40 years 420,508 815,190 1,235,698 91,709 1986 07/92 40 years 249,001 1,130,506 1,379,507 127,182 1991 07/92 40 years 385,517 698,309 1,083,826 78,560 1988 07/92 40 years 272,381 965,713 1,238,094 108,643 1988 07/92 40 years 220,846 582,815 803,661 65,567 1987 07/92 40 years 206,717 653,530 860,247 73,522 1986 07/92 40 years 289,840 572,779 862,619 64,438 1987 07/92 40 years 298,817 785,031 1,083,848 88,316 1987 07/92 40 years 619,037 428,757 1,047,794 38,515 1980 05/93 40 years F-1 COMMERCIAL NET LEASE REALTY, INC. SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED ------------------------------------------------------------------- December 31, 1996 <CAPTION> Costs Capitalized Initial Cost Subsequent To Company To Acquisition ------------------------ ----------------- Buildings Encum- and Improve- Carrying brances (l) Land Improvements ments Costs ------------ ---------- ------------ -------- -------- <S> <C> <C> <C> <C> <C> Rochester, New Hampshire - 216,652 779,450 - - St. Paul, Minnesota - 225,297 542,847 - - Columbus, Ohio - 357,114 407,093 - - Opelousas, Louisiana - 460,374 824,510 - - Coon Rapids, Minnesota - 322,658 544,936 - - Checkers: Orlando, Florida - 256,568 - - - CompUSA: Mission Viejo, California - 2,706,352 1,368,966 - - Computer City: Miami, Florida 2,484,493(k) 2,713,192 1,866,676 - - Baton Rouge, Louisiana - 609,069 913,603 - - Anchorage, Alaska - 928,321 1,662,584 - - Richmond, Virginia - 888,772 1,948,036 - - Hartsdale, New York - 4,599,134 2,497,199 - - Denny's: Greenville, South Carolina - 344,817 400,895 - - Landrum, South Carolina - 155,429 - - - Mooresville, North Carolina - 307,299 - - - Greensboro, North Carolina - 265,915 493,407 - - Houston, Texas - 289,036 572,985 - - Santee, South Carolina - 244,284 312,045 - - Duncan, South Carolina - 219,703 - - - Topeka, Kansas - 414,686 - - - Winter Springs, Florida - 555,232 - - - Dick's Clothing: Taylor, Michigan - 1,920,032 3,526,868 - - White Marsh, Maryland - 2,680,532 3,916,889 - - Eckerd: San Antonio, Texas 664,517(k) 440,985 - - - Dallas, Texas 640,224(k) 541,493 - - - Garland, Texas 515,167(k) 239,014 - - - Arlington, Texas 545,212(k) 368,964 - - - Millville, New Jersey 676,227(k) 417,603 - - - Atlanta, Georgia 604,315(k) 445,593 - - - Mantua, New Jersey 703,012(k) 344,022 - - - Amarillo, Texas 813,010(k) 650,864 - - - Amarillo, Texas 625,555(k) 329,231 - - - Glassboro, New Jersey 771,267(k) 534,243 - - - Kissimmee, Florida 898,488(k) 715,480 - - - Colleyville, Texas 993,034(k) 756,472 - - - Tampa, Florida - 604,682 - - - Lafayette, Louisiana - 967,528 - - - Moore, Oklahoma - 414,738 - - - Douglasville, Georgia - 413,439 995,209 - - <CAPTION> Life on Which Gross Amount at Which Carried Depreciation at Close of Period (b) in Latest Buildings Date Income and Accumulated of Con- Date Statement is Land Improvements Total Depreciation struction Acquired Computed ---------- ------------- ------------ ------------ --------- -------- ------------ <C> <C> <C> <C> <C> <C> <C> 216,652 779,450 996,102 70,017 1987 05/93 40 years 225,297 542,847 768,144 47,536 1986 06/93 40 years 357,114 407,093 764,207 35,649 1982 06/93 40 years 460,374 824,510 1,284,884 72,201 1989 06/93 40 years 322,658 544,936 867,594 47,719 1990 06/93 40 years 256,568 (c) 256,568 - 1988 07/92 (c) 2,706,352 1,368,966 4,075,318 54,186 1994 02/94(h) 40 years 2,713,192 1,866,676 4,579,868 126,129 1994 04/94 40 years 609,069 913,603 1,522,672 22,901 1995 12/95 40 years 928,321 1,662,584 2,590,905 34,876 1995 02/96 40 years 888,772 1,948,036 2,836,808 28,671 1996 05/96 40 years 4,599,134 2,497,199 7,096,333 19,467 1996 08/96 40 years 344,817 400,895 745,712 36,012 1985 05/93 40 years 155,429 (c) 155,429 - 1992 05/93 (c) 307,299 (c) 307,299 - 1992 05/93 (c) 265,915 493,407 759,322 44,322 1992 05/93 40 years 289,036 572,985 862,021 51,471 1985 05/93 40 years 244,284 312,045 556,329 28,031 1992 05/93 40 years 219,703 (c) 219,703 - 1992 05/93 (c) 414,686 (c) 414,686 - 1989 06/93 (c) 555,232 (c) 555,232 - 1994 01/94 (c) 1,920,032 3,526,868 5,446,900 26,072 1996 08/96 40 years 2,680,532 3,916,889 6,597,421 28,956 1996 08/96 40 years 440,985 (c) 440,985 - 1993 12/93 (c) 541,493 (c) 541,493 - 1994 01/94 (c) 239,014 (c) 239,014 - 1994 02/94 (c) 368,964 (c) 368,964 - 1994 02/94 (c) 417,603 (c) 417,603 - 1994 03/94 (c) 445,593 (c) 445,593 - 1994 03/94 (c) 344,022 (c) 344,022 - 1994 06/94 (c) 650,864 (c) 650,864 - 1994 12/94 (c) 329,231 (c) 329,231 - 1994 12/94 (c) 534,243 (c) 534,243 - 1994 12/94 (c) 715,480 (c) 715,480 - 1995 04/95 (c) 756,472 (c) 756,472 - 1995 06/95 (c) 604,682 (c) 604,682 - 1995 12/95 (c) 967,528 (c) 967,528 - 1995 01/96 (c) 414,738 (c) 414,738 - 1995 01/96 (c) 413,439 995,209 1,408,648 22,945 1996 01/96 40 years F-2 COMMERCIAL NET LEASE REALTY, INC. SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED ------------------------------------------------------------------- December 31, 1996 <CAPTION> Costs Capitalized Initial Cost Subsequent To Company To Acquisition ------------------------ ----------------- Buildings Encum- and Improve- Carrying brances (l) Land Improvements ments Costs ------------ ---------- ------------ -------- -------- <S> <C> <C> <C> <C> <C> Midwest City, Oklahoma - 1,080,637 1,103,351 - - Tallahassee, Florida - 691,523 - - - Irving, Texas - 1,000,222 - - - Snellville, Georgia - 486,272 1,320,087 - - Food 4 Less: Lemon Grove, California - 3,695,816 - - - Golden Corral Family Steakhouse: Foley, Alabama - 101,286 283,991 - - Edenton, North Carolina - 36,578 318,481 - - Woodstock, Georgia - 200,680 328,450 - - Bonham, Texas - 128,451 344,170 - - Center, Texas (e) - 103,187 308,859 - - Gilmer, Texas (e) - 116,815 296,454 - - Leitchfield, Kentucky (e) - 73,660 306,642 - - Marietta, Georgia (g) - 156,190 346,509 - - Rockledge, Florida - 120,593 340,889 - - Silsbee, Texas (e) - 132,802 302,052 - - Atlanta, Texas (e) - 88,457 368,317 - - Vernon, Texas (e) - 105,798 328,943 - - Abbeville, Louisiana (e) - 98,577 362,416 - - Fredericksburg, Texas - 169,984 321,189 - - Bowie, Texas (e) - 57,824 311,544 - - Clanton, Alabama (e) - 113,017 296,921 - - Jacksonville, Texas - 115,276 318,196 - - Lake Placid, Florida (e) - 115,113 305,074 - - Pleasanton, Texas (e) - 139,694 316,070 - - Ennis, Texas - 153,701 366,639 - - Franklin, Louisiana (e) - 105,840 396,831 - - Melbourne, Florida (e) - 193,447 341,351 - - Franklin, Virginia - 100,808 424,164 - - Minden, Louisiana (e) - 86,120 402,364 - - Durant, Oklahoma - 140,862 411,135 - - Good Guys: Foothill Ranch, California - 1,456,113 2,505,022 - - Hardee's: Chalkville, Alabama - 170,834 457,167 - - Gulf Shores, Alabama - 348,281 595,164 - - Mobile, Alabama - 336,696 - - - Warrior, Alabama - 177,659 - - - Horn Lake, Mississippi - 302,787 - - - Petal, Mississippi - 277,104 415,193 - - West Point, Mississippi - 173,386 - - - Rock Hill, South Carolina - 216,777 466,450 - - Columbia, Tennessee - 226,300 - - - Johnson City, Tennessee - 215,567 - - - Tusculum, Tennessee - 182,349 507,293 - - <CAPTION> Life on Which Gross Amount at Which Carried Depreciation at Close of Period (b) in Latest Buildings Date Income and Accumulated of Con- Date Statement is Land Improvements Total Depreciation struction Acquired Computed ---------- ------------ ---------- ------------ --------- -------- ------------ <C> <C> <C> <C> <C> <C> <C> 1,080,637 1,103,351 2,183,988 22,764 1996 03/96 40 years 691,523 (c) 691,523 - 1996 06/96 (c) 1,000,222 (c) 1,000,222 - 1996 12/96 (c) 486,272 1,320,087 1,806,359 177 1996 12/96 40 years 3,695,816 (c) 3,695,816 - 1996 07/95(h) (c) 101,286 283,991 385,277 105,105 1984 10/84 35 years 36,578 318,481 355,059 115,975 1984 11/84 35 years 200,680 328,450 529,130 119,556 1984 11/84 35 years 128,451 344,170 472,621 124,245 1984 12/84 35 years 103,187 308,859 412,046 111,509 1984 12/84 35 years 116,815 296,454 413,269 107,030 1984 12/84 35 years 73,660 306,642 380,302 110,699 1984 12/84 35 years 156,190 346,509 502,699 125,091 1984 12/84 35 years 120,593 340,889 461,482 123,060 1984 12/84 35 years 132,802 302,052 434,854 109,056 1984 12/84 35 years 88,457 368,317 456,774 132,594 1985 01/85 35 years 105,798 328,943 434,741 115,130 1985 03/85 35 years 98,577 362,416 460,993 126,846 1985 04/85 35 years 169,984 321,189 491,173 112,416 1985 04/85 35 years 57,824 311,544 369,368 109,040 1985 05/85 35 years 113,017 296,921 409,938 103,922 1985 05/85 35 years 115,276 318,196 433,472 111,368 1985 05/85 35 years 115,113 305,074 420,187 106,776 1985 05/85 35 years 139,694 316,070 455,764 110,625 1985 05/85 35 years 153,701 366,639 520,340 124,657 1985 07/85 35 years 105,840 396,831 502,671 134,922 1985 07/85 35 years 193,447 341,351 534,798 116,059 1985 07/85 35 years 93,719 424,164 517,883 104,173 1987 02/87 40 years 86,120 402,364 488,484 78,794 1989 03/89 40 years 140,862 411,135 551,997 76,295 1989 08/89 40 years 1,456,113 2,505,022 3,961,135 337 1995 12/96 40 years 170,834 457,167 628,001 36,292 1992 10/93 40 years 348,281 595,164 943,445 47,246 1993 10/93 40 years 336,696 (c) 336,696 - 1993 10/93 (c) 177,659 (c) 177,659 - 1992 10/93 (c) 302,787 (c) 302,787 - 1993 10/93 (c) 277,104 415,193 692,297 32,959 1993 10/93 40 years 173,386 (c) 173,386 - 1993 10/93 (c) 216,777 466,450 683,227 37,028 1993 10/93 40 years 226,300 (c) 226,300 - 1993 10/93 (c) 215,567 (c) 215,567 - 1993 10/93 (c) 182,349 507,293 689,642 40,271 1993 10/93 40 years F-3 COMMERCIAL NET LEASE REALTY, INC. SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED ------------------------------------------------------------------- December 31, 1996 <CAPTION> Costs Capitalized Initial Cost Subsequent To Company To Acquisition ------------------------ ----------------- Buildings Encum- and Improve- Carrying brances (l) Land Improvements ments Costs ------------ ---------- ------------ -------- -------- <S> <C> <C> <C> <C> <C> Hi-Lo Automotive: Mesquite, Texas - 233,420 513,523 - - Fort Worth, Texas - 197,037 512,296 - - Houston, Texas - 261,318 531,968 - - Arlington, Texas - 295,331 571,609 - - Garland, Texas - 239,570 512,023 - - Dallas, Texas - 281,347 543,937 - - McAllen, Texas - 265,177 605,397 - - Temple, Texas - 177,451 587,755 - - San Antonio, Texas - 200,510 643,741 - - Universal City, Texas - 247,264 570,677 - - Bastrop, Texas - 197,905 383,144 - - Lake Worth, Texas - 252,141 539,510 - - Nacogdoches, Texas - 190,324 522,232 - - Eagle Pass, Texas - 256,745 455,841 - - International House of Pancakes: Stafford, Texas 517,481(k) 382,084 - - - Sunset Hills, Missouri 546,928(k) 271,853 - - - Las Vegas, Nevada 614,918(k) 519,947 - - - Fort Worth, Texas 572,066(k) 430,896 - - - Arlington, Texas 549,340(k) 404,512 - - - Matthews, North Carolina 561,854(k) 380,043 - - - Phoenix, Arizona 565,635(k) 483,374 - - - Kash N Karry: Brandon, Florida - 1,234,480 - - - Linens 'n Things: Freehold, New Jersey 2,931,484(j) 1,753,766 2,208,651 - - Luria's: South Miami, Florida - 1,379,229 - - - Tampa, Florida - 2,127,503 1,521,730 - - Coral Gables, Florida - 1,782,346 - - - Marshalls: Freehold, New Jersey 3,431,576(j) 2,052,946 2,585,432 - - Office Depot: Arlington, Texas 1,089,007(k) 596,024 1,411,432 - - OfficeMax: Corpus Christi, Texas 1,439,600(j) 893,270 978,344 76,664 - Dallas, Texas 1,534,349(k) 1,118,500 1,709,891 - - Cincinnati, Ohio 1,148,996(k) 543,489 1,574,551 - - Evanston, Illinois 1,966,738(k) 1,867,831 1,757,618 - - Altamonte Springs, Florida - 1,650,419 2,979,087 - - Pompano Beach, Florida - 2,266,908 1,904,803 - - Cutler Ridge, Florida - 989,370 1,479,119 - - Sacramento, California - 1,129,077 2,922,150 - - <CAPTION> Life on Which Gross Amount at Which Carried Depreciation at Close of Period (b) in Latest Buildings Date Income and Accumulated of Con- Date Statement is Land Improvements Total Depreciation struction Acquired Computed ---------- ------------- ----------- ------------ --------- -------- ------------ <C> <C> <C> <C> <C> <C> <C> 233,420 513,523 746,943 28,299 1994 10/94 40 years 197,037 512,296 709,333 26,713 1993 11/94 40 years 261,318 531,968 793,286 27,744 1994 11/94 40 years 295,331 571,609 866,940 29,808 1993 11/94 40 years 239,570 512,023 751,593 26,698 1993 11/94 40 years 281,347 543,937 825,284 27,343 1994 12/94 40 years 265,177 605,397 870,574 19,087 1995 09/95 40 years 177,451 587,755 765,206 18,531 1989 09/95 40 years 200,510 643,741 844,251 20,296 1994 09/95 40 years 247,264 570,677 817,941 17,992 1995 09/95 40 years 197,905 383,144 581,049 12,080 1994 09/95 40 years 252,141 539,510 791,651 17,010 1995 09/95 40 years 190,324 522,232 712,556 16,465 1995 09/95 40 years 256,745 455,841 712,586 14,372 1994 09/95 40 years 382,084 (c) 382,084 - 1992 10/93 (c) 271,853 (c) 271,853 - 1993 10/93 (c) 519,947 (c) 519,947 - 1993 12/93 (c) 430,896 (c) 430,896 - 1993 12/93 (c) 404,512 (c) 404,512 - 1993 12/93 (c) 380,043 (c) 380,043 - 1993 12/93 (c) 483,374 (c) 483,374 - 1993 12/93 (c) 1,234,480 (f) 1,234,480 - (f) 10/96 (f) 1,753,766 2,208,651 3,962,417 129,283 1994 08/94 40 years 1,379,229 (c) 1,379,229 - 1988 06/96 (c) 2,127,503 1,521,730 3,649,233 19,339 1994 06/96 40 years 1,782,346 (c) 1,782,346 - 1994 06/96 (c) 2,052,946 2,585,432 4,638,378 151,338 1994 08/94 40 years 596,024 1,411,432 2,007,456 102,836 1991 01/94 40 years 893,270 1,055,008 1,948,278 81,889 1967 11/93 40 years 1,118,500 1,709,891 2,828,391 128,359 1993 12/93 40 years 543,489 1,574,551 2,118,040 97,735 1994 07/94 40 years 1,867,831 1,757,618 3,625,449 68,596 1995 06/95 40 years 1,650,419 2,979,087 4,629,506 68,685 1995 01/96 40 years 2,266,908 1,904,803 4,171,711 43,104 1972 02/96 40 years 989,370 1,479,119 2,468,489 18,797 1995 06/96 40 years 1,129,077 2,922,150 4,051,227 196 1996 12/96 40 years F-4 COMMERCIAL NET LEASE REALTY, INC. SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED ------------------------------------------------------------------- December 31, 1996 <CAPTION> Costs Capitalized Initial Cost Subsequent To Company To Acquisition ------------------------ ----------------- Buildings Encum- and Improve- Carrying brances (l) Land Improvements ments Costs ------------ ---------- ------------ -------- ------- <S> <C> <C> <C> <C> <C> Oshman's Sporting Goods: Dallas, Texas - 1,311,440 - - - Pier 1 Imports: Dallas, Texas - 189,010 1,071,054 20,710 - Memphis, Tennessee - 716,332 - - - Pizza Hut: Orlando, Florida - 220,632 258,483 - - Rally's: Toledo, Ohio - 125,882 319,770 - - Scotty's: Orlando, Florida - 1,044,796 2,011,952 - - Orlando, Florida - 1,157,268 2,077,131 - - Sears Homelife Centers: Orlando, Florida 1,630,220(k) 820,397 2,184,721 - - Clearwater, Florida 2,745,218(j) 1,184,438 2,526,207 10,555 - Tampa, Florida 2,511,525 1,454,908 2,045,833 - - Pensacola, Florida 1,885,394 633,125 1,595,405 - - Raleigh, North Carolina 2,357,255 1,848,026 1,753,635 - - Sports Authority: Sarasota, Florida - 1,403,494 1,963,006 - - Waccamaw: Fairfax, Virginia - 2,156,801 - - - Sarasota, Florida - 2,207,244 3,087,176 - - Wendy's Old Fashioned Hamburger: Fenton, Missouri - 307,068 496,410 - - Longwood, Florida - 333,335 194,926 - - ----------- ------------ ------------ -------- ------- $49,955,749 $138,527,151 $138,429,902 $159,394 $ - =========== ============ ============ ======== ======= Properties the Company has Invested in Under Direct Financing Leases: Academy: Houston, Texas - $ - $ 1,924,740 $ - $ - Houston, Texas - - 1,867,519 - - N. Richland Hills, Texas - - 2,253,408 - - Houston, Texas - - 2,112,335 - - Houston, Texas - - 1,910,697 - - San Antonio, Texas - - 1,963,109 - - Barnes & Noble: Plantation, Florida - - 3,498,559 - - <CAPTION> Life on Which Gross Amount at Which Carried Depreciation at Close of Period (b) in Latest Buildings Date Income and Accumulated of Con- Date Statement is Land Improvements Total Depreciation struction Acquired Computed ---------- ------------ ---------- ------------- --------- -------- ------------ <C> <C> <S> <S> <S> <S> <S> 1,311,440 (c) 1,311,440 - 1994 03/94 (c) 189,010 1,091,764 1,280,774 74,324 1980 04/94 40 years 716,332 (f) 716,332 - (f) 09/96 (f) 220,632 258,483 479,115 42,194 1974 08/93 20.9 years 125,882 319,770 445,652 37,095 1989 07/92 38.8 years 1,044,796 2,011,952 3,056,748 78,296 1995 06/95 40 years 1,157,268 2,077,131 3,234,399 79,168 1995 06/95 40 years 820,397 2,184,721 3,005,118 196,400 1992 05/93 40 years 1,184,438 2,536,762 3,721,200 227,358 1992 05/93 40 years 1,454,908 2,045,833 3,500,741 26,141 1992 06/96 40 years 633,125 1,595,405 2,228,530 20,386 1994 06/96 40 years 1,848,026 1,753,635 3,601,661 22,408 1995 06/96 40 years 1,403,494 1,963,006 3,366,500 132 1988 12/96 40 years 2,156,801 (c) 2,156,801 - 1995 12/95 (c) 2,207,244 3,087,176 5,294,420 207 1988 12/96 40 years 307,068 496,410 803,478 67,778 1985 07/92 33 years 333,335 194,926 528,261 27,959 1982 07/92 31.4 years - ------------ ------------ ------------ ---------- $138,520,062 $138,589,296 $277,109,358 $8,078,562 ============ ============ ============ ========== - (c) (c) (c) 1994 05/95 (c) - (c) (c) (c) 1995 06/95 (c) - (c) (c) (c) 1996 08/95(h) (c) - (c) (c) (c) 1996 02/96(h) (c) - (c) (c) (c) 1996 06/96(h) (c) - (c) (c) (c) 1996 06/96 (c) - (c) (c) (c) 1996 05/95(h) F-5 COMMERCIAL NET LEASE REALTY, INC. SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED ------------------------------------------------------------------- December 31, 1996 <CAPTION> Costs Capitalized Initial Cost Subsequent To Company To Acquisition ------------------------ ----------------- Buildings Encum- and Improve- Carrying brances (l) Land Improvements ments Costs ------------ ---------- ------------ -------- -------- <S> <C> <C> <C> <C> <C> Checkers: Orlando, Florida - - 286,910 - - Denny's: Landrum, South Carolina - - 374,684 - - Mooresville,North Carolina - - 535,309 - - Akron, Ohio - 137,424 733,450 - - Duncan, South Carolina - - 628,571 - - Topeka, Kansas - - 498,921 - - Winter Springs, Florida - - 620,148 - - Eckerd: San Antonio, Texas - - 783,974 - - Dallas, Texas - - 638,684 - - Garland, Texas - - 710,634 - - Arlington, Texas - - 636,070 - - Millville, New Jersey - - 828,942 - - Atlanta, Georgia - - 668,390 - - Mantua, New Jersey - - 951,795 - - Vineland, New Jersey 732,010(k) 286,231 1,063,142 - - Amarillo, Texas - - 869,846 - - Amarillo, Texas 531,326(k) 158,851 855,348 - - Amarillo, Texas - - 849,071 - - Glassboro, New Jersey - - 887,497 - - Kissimmee, Florida - - 933,852 - - Alice, Texas 539,133(k) 189,187 804,963 - - Colleyville, Texas - - 1,076,066 - - Tampa, Florida - - 1,090,532 - - Lafayette, Louisiana - - 949,128 - - Moore, Oklahoma - - 879,296 - - Tallahassee, Florida - - 1,274,147 - - East Point, Georgia - 336,610 1,173,529 - - Irving, Texas - - 1,228,436 - - Ft. Worth, Texas - 399,592 2,529,969 - - Food 4 Less Lemon Grove, California - - 4,068,179 - - Food Lion: Keystone Heights, Florida 1,049,480(k) 88,604 1,845,988 - - Chattanooga, Tennessee 1,105,338(k) 336,488 1,701,072 - - Lynchburg, Virginia 1,333,443(j) 128,216 1,674,167 - - Martinsburg, West Virginia 1,080,743(k) 448,648 1,543,573 - - Good Guys: Stockton, California 1,928,780(k) 580,609 2,974,868 - - Portland, Oregon - 817,574 2,630,652 - - Hardee's: Mobile, Alabama - - 479,107 - - Warrior, Alabama - - 470,556 - - Horn Lake, Mississippi - - 555,975 - - <CAPTION> Life on Which Gross Amount at Which Carried Depreciation at Close of Period (b) in Latest Buildings Date Income and Accumulated of Con- Date Statement is Land Improvements Total Depreciation struction Acquired Computed ---------- ------------- ------------ ------------- --------- -------- ------------ <C> <C> <C> <C> <C> <C> <C> - (c) (c) (c) 1988 07/92 (c) - (c) (c) (c) 1992 05/93 (c) - (c) (c) (c) 1992 05/93 (c) (d) (d) (d) (d) 1992 05/93 (d) - (c) (c) (c) 1992 05/93 (c) - (c) (c) (c) 1989 06/93 (c) - (c) (c) (c) 1994 01/94 (c) - (c) (c) (c) 1993 12/93 (c) - (c) (c) (c) 1994 01/94 (c) - (c) (c) (c) 1994 02/94 (c) - (c) (c) (c) 1994 02/94 (c) - (c) (c) (c) 1994 03/94 (c) - (c) (c) (c) 1994 03/94 (c) - (c) (c) (c) 1994 06/94 (c) (d) (d) (d) (d) 1994 11/94 (d) - (c) (c) (c) 1994 12/94 (c) (d) (d) (d) (d) 1994 12/94 (d) - (c) (c) (c) 1994 12/94 (c) - (c) (c) (c) 1994 12/94 (c) - (c) (c) (c) 1995 04/95 (c) (d) (d) (d) (d) 1995 06/95 (d) - (c) (c) (c) 1995 06/95 (c) - (c) (c) (c) 1995 12/95 (c) - (c) (c) (c) 1995 01/96 (c) - (c) (c) (c) 1995 01/96 (c) - (c) (c) (c) 1996 06/96 (c) (d) (d) (d) (d) 1996 12/96 (d) - (c) (c) (c) 1996 12/96 (c) (d) (d) (d) (d) 1996 12/96 (d) - (c) (c) (c) 1996 07/95(h) (c) (d) (d) (d) (d) 1993 05/93 (d) (d) (d) (d) (d) 1993 10/93 (d) (d) (d) (d) (d) 1994 01/94 (d) (d) (d) (d) (d) 1994 08/94 (d) (d) (d) (d) (d) 1991 07/94 (d) (d) (d) (d) (d) 1996 05/96 (d) - (c) (c) (c) 1993 10/93 (c) - (c) (c) (c) 1992 10/93 (c) - (c) (c) (c) 1993 10/93 (c) F-6 COMMERCIAL NET LEASE REALTY, INC. SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED ------------------------------------------------------------------- December 31, 1996 <CAPTION> Costs Capitalized Initial Cost Subsequent To Company To Acquisition ------------------------ ----------------- Buildings Encum- and Improve- Carrying brances (l) Land Improvements ments Costs ----------- ---------- ------------ -------- -------- <S> <C> <C> <C> <C> <C> Iuka, Mississippi - 130,258 505,363 - - West Point, Mississippi - - 517,424 - - Biscoe, North Carolina - 60,301 479,984 - - Aynor, South Carolina - 44,871 521,192 - - Columbia, Tennessee - - 584,927 - - Johnson City, Tennessee - - 570,690 - - Hi-Lo Automotive: Edinberg, Texas - 97,056 418,926 - - Copperas Cove, Texas - 116,637 476,331 - - Baton Rouge, Louisiana - 89,954 508,146 - - Lake Jackson, Texas - 120,313 609,300 - - Fort Worth, Texas - 92,779 607,971 - - Pantego, Texas - 154,368 505,323 - - Fort Worth, Texas - 91,373 548,238 - - Pharr, Texas - 94,576 472,880 - - Baton Rouge, Louisiana - 122,349 527,930 - - Houston, Texas - 37,508 596,069 - - Homeplace: Arlington, Texas - 752,840 4,045,374 - - International House of Pancakes: Stafford, Texas - - 571,832 - - Sunset Hills, Missouri - - 736,345 - - Las Vegas, Nevada - - 613,582 - - Fort Worth, Texas - - 623,641 - - Arlington, Texas - - 608,132 - - Matthews, North Carolina - - 655,668 - - Phoenix, Arizona - - 559,307 - - Levitz: Tempe, Arizona - 634,444 2,225,991 - - Luria's: South Miami, Florida - - 1,756,808 - - Coral Gables, Florida - - 1,692,012 - - Oshman's Sporting Goods: Dallas, Texas - - 2,658,976 - - Waccamaw: Fairfax, Virginia - - 3,356,493 - - ------------ ----------- ----------- -------- ------- $ 8,300,253 $ 6,547,661 $87,390,663 $ - $ - ============ =========== =========== ======== ======= <CAPTION> Life on Which Gross Amount at Which Carried Depreciation at Close of Period (b) in Latest Buildings Date Income and Accumulated of Con- Date Statement is Land Improvements Total Depreciation struction Acquired Computed ---------- ------------- ------------ ------------ --------- -------- ------------ <C> <C> <C> <C> <C> <C> <C> (d) (d) (d) (d) 1993 10/93 (d) - (c) (c) (c) 1993 10/93 (c) (d) (d) (d) (d) 1993 10/93 (d) (d) (d) (d) (d) 1993 10/93 (d) - (c) (c) (c) 1993 10/93 (c) - (c) (c) (c) 1993 10/93 (c) (d) (d) (d) (d) 1993 10/94 (d) (d) (d) (d) (d) 1994 10/94 (d) (d) (d) (d) (d) 1994 10/94 (d) (d) (d) (d) (d) 1994 10/94 (d) (d) (d) (d) (d) 1993 10/94 (d) (d) (d) (d) (d) 1993 10/94 (d) (d) (d) (d) (d) 1993 11/94 (d) (d) (d) (d) (d) 1993 11/94 (d) (d) (d) (d) (d) 1994 12/94 (d) (d) (d) (d) (d) 1982 09/95 (d) (d) (d) (d) (d) 1996 06/96 (d) - (c) (c) (c) 1992 10/93 (c) - (c) (c) (c) 1993 10/93 (c) - (c) (c) (c) 1993 12/93 (c) - (c) (c) (c) 1993 12/93 (c) - (c) (c) (c) 1993 12/93 (c) - (c) (c) (c) 1993 12/93 (c) - (c) (c) (c) 1993 12/93 (c) (d) (d) (d) (d) 1994 01/95 (d) - (c) (c) (c) 1988 06/96 (c) - (c) (c) (c) 1994 06/96 (c) - (c) (c) (c) 1994 03/94 (c) - (c) (c) (c) 1995 12/95 (c) F-7 </TABLE> COMMERCIAL NET LEASE REALTY, INC. NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION ---------------------------------------------------------------- December 31, 1996 (a) Transactions in real estate and accumulated depreciation during 1996, 1995 and 1994, are summarized as follows: Accumulated Cost Depreciation ------------ ------------ Land and Buildings: Balance, December 31, 1993 $ 54,633,354 $2,684,776 Acquisitions 55,219,077 - Depreciation expense - 1,076,593 ------------ ---------- Balance, December 31, 1994 109,852,431 3,761,369 Acquisitions 51,601,698 - Depreciation expense - 1,736,021 ------------ ---------- Balance, December 31, 1995 161,454,129 5,497,390 Acquisitions 116,563,622 - Sale of land and buildings (908,393) (222,940) Depreciation expense - 2,804,112 ------------ ---------- Balance, December 31, 1996 $277,109,358 $8,078,562 ============ ========== (b) As of December 31, 1996, all of the leases are treated as operating leases for federal income tax purposes. As of December 31, 1996 and 1995, the aggregate cost of the Properties owned by the Company and its subsidiaries for federal income tax purposes was $371,047,781 and $219,057,229, respectively. (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 to a separate operator. 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 will purchase the building once construction is complete. (g) The tenant of this Property, Golden Corral Corporation, has subleased this Property to an operator of a Ragazzi's restaurant. Golden Corral Corporation continues to be responsible for complying with all of the terms of the lease agreement and is continuing to pay rent on this Property to the Company. (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. F-8 COMMERCIAL NET LEASE REALTY, INC. NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED ---------------------------------------------------------------------------- December 31, 1996 (i) During the years ended December 31, 1996, 1995 and 1994, the Company (i) incurred acquisition fees and expense reimbursement fees totalling $2,278,306, $937,363 and $1,436,073, respectively, paid to CNL Realty Advisors, Inc. and (ii) acquired land and buildings purchased from affiliates of CNL Realty Advisors, Inc. for an aggregate cost of $37,712,514, $17,968,518 and $7,261,454, 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 encumbrance is listed with the land portion of the property. F-9 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). 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 Interest Rate Cap Agreement dated December 23, 1994, by and between the Registrant and First Union National Bank of Florida (filed as Exhibit 10.12 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994, and incorporated by reference). 10.5 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). 10.6 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). 10.7 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). i 10.8 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). 10.9 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). 10.10 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). 10.11 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). 13 Annual Report to Shareholders for the year ended December 31, 1996 (filed only to the extent material therefrom is specifically incorporated herein by reference). 23 Consent of Independent Accountants dated March 19, 1997. Filed herewith. ii