<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
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OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE
EXCHANGE ACT
FOR THE TRANSITION PERIOD FROM to
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COMMISSION FILE NUMBER: 333-9371
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Captec Franchise Capital Partners L.P. IV
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(Exact name of registrant as specified in its charter)
Delaware 38-3304095
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(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
24 Frank Lloyd Wright Drive, Lobby L, 4th Floor
P.O. Box 544, Ann Arbor, Michigan 48106-0544
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(Address of principal executive offices)
(313) 994-5505
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(Issuer's telephone number)
Not Applicable
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(Former name, former address and former fiscal year, if changed since last
year)
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 for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
filing requirements for the past 90 days.
Yes X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court. Not Applicable.
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: Not Applicable
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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION Page
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<S> <C> <C>
Item 1. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Balance Sheet, June 30, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Statement of Operations for the three month period
ended June 30, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Statement of Operations for the six month period
ended June 30, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Statement of Changes in Partners' Capital for the three month period
ended June 30, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Statement of Cash Flows for the six month period
ended June 30, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
PART II OTHER INFORMATION
- ------------------------------
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . 17
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . 17
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . 17
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
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</TABLE>
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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
- ------ --------------------
The balance sheet of Captec Franchise Capital Partners L.P. IV (the
"Partnership") as of June 30, 1997 and the statements of operations and cash
flows for the period ending June 30, 1997 are unaudited and have not been
examined by independent public accountants. In the opinion of the Management,
these unaudited financial statements contain all adjustments necessary to
present fairly the financial position and results of operations and cash flows
of the Partnership for the periods then ended. All such adjustments are of a
normal and recurring nature.
These financial statements should be read in conjunction with the
audited financial statements and accompanying notes thereto included in the
Partnership's report on Form 10-K for the fiscal year ended December 31, 1996.
When used in this discussion, the words, "intends", "anticipates",
"expects", and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks and uncertainties
which could cause actual results to differ materially from those projected.
Such risks and uncertainties include the following: (i) a tenant may default
in making rent payments, (ii) a fire or other casualty may interrupt the cash
flow stream from a property, (iii) the properties may not be able to be leased
at the assumed rental rates, (iv) unexpected expenses may be incurred in the
ownership of the properties, and (v) properties may not be able to be sold at
the presently anticipated prices and times.
As a result of these and other factors, the Partnership may experience
material fluctuations in future operating results on a quarterly or annual
basis, which could materially and adversely affect its business, financial
condition and operating results. These forward-looking statements speak only
as of the date hereof. The Partnership undertakes no obligation to publicly
release the results of any revisions to these forward-looking statements which
may be made to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
1
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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
BALANCE SHEET
June 30, 1997
(Unaudited)
ASSETS
Cash $2,965,275
Investment in property under leases:
Operating leases, net 998,568
Direct financing leases, net 1,641,780
Accounts receivable 15,087
Unbilled rent 2,620
Due from related parties 12,844
----------
Total assets $5,636,174
==========
LIABILITIES & PARTNERS' CAPITAL
Liabilities:
Accounts payable $ 24,043
Due to related parties 131,425
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Total liabilities 155,468
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Partners' Capital:
Limited partners' capital accounts 5,479,501
General partners' capital accounts 1,205
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Total partners' capital 5,480,706
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Total liabilities & partners' capital $5,636,174
==========
The accompanying notes are an integral part of the financial statements.
2
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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
STATEMENT OF OPERATIONS
for the three month period ended June 30, 1997
(Unaudited)
Operating revenue:
Rental income $ 27,925
Finance income 38,908
----------
Total operating revenue 66,833
----------
Operating costs and expenses:
Depreciation 3,992
General and administrative 4,059
----------
Total operating costs and expenses 8,051
----------
Income from operations 58,782
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Other income (expense):
Interest income 21,473
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Total other income, net 21,473
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Net income 80,255
Net income allocable to general partners 802
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Net income allocable to limited partners $ 79,453
==========
Net income per limited partnership unit $ 18.62
==========
Weighted average number of limited partnership
units outstanding 4,268
==========
The accompanying notes are an integral part of the financial statements.
3
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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
STATEMENT OF OPERATIONS
for the six month period ended June 30, 1997
(Unaudited)
Operating revenue:
Rental income $ 34,026
Finance income 45,394
----------
Total operating revenue 79,420
----------
Operating costs and expenses:
Depreciation 3,992
General and administrative 6,876
----------
Total operating costs and expenses 10,868
----------
Income from operations 68,552
----------
Other income (expense):
Interest income 31,934
----------
Total other income, net 31,934
----------
Net income 100,486
Net income allocable to general partners 1,005
----------
Net income allocable to limited partners $ 99,481
==========
Net income per limited partnership unit $ 34.46
==========
Weighted average number of limited partnership
units outstanding 2,887
==========
The accompanying notes are an integral part of the financial statements.
4
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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
for the six month period ended June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Limited General Total
Partners' Partners' Partners'
Accounts Accounts Capital
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<S> <C> <C> <C>
Balance, January 1, 1997 $ 100 $ 200 $ 300
========== ========= ==========
Issuance of limited partnership units, net 5,409,820 5,409,820
Distributions - cash (29,900) 0 (29,900)
Net income 99,481 1,005 100,486
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Balance, June 30, 1997 $5,479,501 $ 1,205 $5,480,706
========== ========= ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
STATEMENT OF CASH FLOWS
for the six month period ended June 30, 1997
(Unaudited)
Cash flows from operating activities:
Net Income $ 100,486
Adjustments to net income:
Depreciation 3,992
Increase in unbilled rent (2,620)
(Increase) in receivables (14,748)
Increase in payables 24,004
-----------
Net cash provided by operating activities 111,114
-----------
Cash flows from investing activities:
Purchase of real estate for operating leases (1,002,560)
Purchase of equipment for financing leases (1,694,979)
Reduction of net investment in financing leases 53,199
-----------
Net cash used in investing activities (2,644,340)
-----------
Cash flows from financing activities:
Increase in due from related parties (12,844)
Increase in due to related parties 131,425
Issuance of limited partnership units 6,212,886
Offering costs (803,066)
Distributions to limited partners (29,900)
-----------
Net cash provided by financing activities 5,498,501
-----------
Net increase in cash 2,965,275
Cash, beginning of period 0
-----------
Cash, end of period $ 2,965,275
===========
The accompanying notes are an integral part of the financial statements.
6
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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
NOTES TO FINANCIAL STATEMENTS
1. THE PARTNERSHIP AND ITS SIGNIFICANT ACCOUNTING PRINCIPLES:
Captec Franchise Capital Partners L.P. IV (the "Partnership"), a Delaware
limited partnership, was formed on July 23, 1996 for the purpose of
acquiring income-producing commercial real properties and equipment
leased on a "triple net" or "double net" basis, primarily to operators of
national and regional franchised businesses, principally chain
restaurants, as well as national and regional retail chains. The general
partners of the Partnership are Captec Franchise Capital Corporation IV
(the "Corporation"), a wholly owned subsidiary of Captec Financial Group,
Inc. ("Captec"), and Patrick L. Beach, an individual, hereinafter
collectively referred to as the Sponsor. Patrick L. Beach is also the
Chairman of the Board of Directors, President and Chief Executive Officer
of the Corporation and Captec. The general partners have each
contributed $100 in cash to the Partnership as a capital contribution.
The Partnership commenced a public offering of limited partnership
interests ("Units") on December 23, 1996. A minimum of 2,000 Units and a
maximum of 30,000 Units, priced at $1,000 per Unit, were offered on a
"best efforts, part or none" basis. The Partnership broke impound on
March 5, 1997, at which time funds totaling $2,015,500 were released from
escrow and the Partnership immediately commenced operations. At June 30,
1997, the Partnership had accepted subscriptions for 6,155.699 Units, and
funds totaling $6,155,699.
Allocation of profits, losses and cash distributions from operations and
cash distributions from sale or refinancing are made pursuant to the
terms of the Partnership Agreement. Profits and losses from operations
are allocated among the limited partners based upon the number of Units
owned. In no event will the General Partners be allocated less than one
percent of profits and losses in any year.
Following is a summary of the Partnership's significant accounting
policies:
a. RENTAL INCOME FROM OPERATING LEASES: The Partnership's operating
leases have scheduled rent increases which occur at various dates
throughout the lease terms. The Partnership recognizes the total
rent, as stipulated by the lease agreement, as income on a
straight-line basis over the term of each lease. To the extent
rental income on the straight-line basis exceeds rents billable per
the lease agreement, an amount is recorded as unbilled rent.
b. LAND AND BUILDING SUBJECT TO OPERATING LEASES: Land and buildings
subject to operating leases are stated at cost less accumulated
depreciation. Buildings are depreciated on the straight-line method
over their estimated useful lives (40 years).
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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
NOTES TO FINANCIAL STATEMENTS
c. NET INVESTMENT IN FINANCING LEASES: Leases classified as financing
leases are stated as the sum of the minimum lease payments plus the
unguaranteed residual value accruing to the benefit of the lessor,
less unearned income. Unearned income is amortized to income over
the lease term so as to produce a constant periodic rate of return
on the net investment in the lease.
d. NET INCOME PER LIMITED PARTNERSHIP INTEREST: Net income per limited
partnership interest is calculated using the weighted average number
of limited partnership units outstanding during the period and the
limited partners' allocable share of the net income.
e. INCOME TAXES: No provision for income taxes is included in the
accompanying financial statements, as the Partnership's results of
operations are passed through to the partners for inclusion in their
respective income tax returns.
f. ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
g. NO COMPARABLE PRIOR PERIOD FINANCIAL INFORMATION: Since the
Partnership had not commenced operations as of June 30, 1996, there
is no comparable financial information for the three and six month
period then ended.
2. DISTRIBUTIONS:
Cash flows of the Partnership are allocated ninety-nine percent (99%) to
the limited partners and one percent (1%) to the Sponsor, except that the
Sponsor's share is subordinated to a ten percent (10%) preferred return
to the limited partners. Net sale or refinancing proceeds of the
Partnership will be allocated ninety percent (90%) to the limited
partners and ten percent (10%) to the Sponsor, except that the Sponsor's
share will be subordinated to a ten and one-half percent (10.5%)
preferred return plus return of the original contributions to the limited
partners.
The Partnership distributed approximately $30,000 during the three month
period ended June 30, 1997, representing cash flow from operations for
the quarter ended March 31, 1997.
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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
NOTES TO FINANCIAL STATEMENTS
3. RELATED PARTY TRANSACTIONS AND AGREEMENTS:
Organization and offering expenses, excluding selling commissions, are
paid initially by the Sponsors and/or their affiliates and were
reimbursed by the Partnership in an amount equal to up to three percent
(3%) of the gross proceeds of the offering (less any amounts paid
directly by the Partnership). In addition, the Sponsors and/or their
affiliates were paid a non-accountable expense allowance by the
Partnership in an amount equal to two percent (2%) of the gross proceeds
of the offering. The Sponsor was reimbursed $209,000 during the six month
period ended June 30, 1997. These costs were treated as capital issuance
costs and have been netted against the limited partners' capital
accounts.
The Partnership paid to Participating Dealers, including Affiliates of
the general partners, selling commissions in an amount equal to eight
percent (8%) of the purchase price of all Units placed by them directly.
An additional one percent (1%) of the purchase price was paid to
Participating Dealers on all Units placed by them until the minimum
number of Units were sold (2,015.5). The additional one percent (1%) was
paid out of the non-accountable expense allowance. There were $474,080
of selling commissions paid or incurred during the six month period ended
June 30, 1997. These costs were treated as capital issuance costs and
have been netted against the limited partners' capital accounts. The
Sponsor has also guaranteed payment of organization and offering expenses
which exceed 13%, including selling commissions, of the gross proceeds of
the offering.
An acquisition fee is charged, not to exceed the lesser of: (i) four
percent (4%) of gross proceeds plus an additional .0677% for each 1% of
indebtedness incurred in acquiring properties and/or equipment but in no
event will acquisition fees exceed five percent (5%) of the aggregate
purchase prices of properties and equipment; or (ii) compensation
customarily charged in arm's length transactions by others rendering
similar services. The Partnership paid the Sponsor $103,751 in
acquisition fees during the six month period ended June 30, 1997. This
amount was capitalized into net investment in financing leases.
The Partnership has entered into an asset management agreement with the
Sponsor and its affiliates, whereby the Sponsor provides various property
and equipment management services for the Partnership.
A subordinated asset management fee is charged, in an amount equal to one
percent (1%) of the gross rental revenues derived from the properties and
equipment. Payment of the asset management fee is subordinated to
receipt by the limited partners of annual distributions equal to a
cumulative, noncompounded return of ten percent (10%) per annum on their
adjusted invested capital. There were no subordinated asset management
fees paid to the General Partners during the six month period ended June
30, 1997.
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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
NOTES TO FINANCIAL STATEMENTS
3. RELATED PARTY TRANSACTIONS AND AGREEMENTS, CONTINUED:
An equipment liquidation fee limited to the lesser of three percent (3%)
of the sales price or customary fees for similar services will be paid in
conjunction with asset liquidation services. There were no equipment
liquidations during the six month period ended June 30, 1997.
The Partnership Agreement provides for the Sponsor to receive a real
estate liquidation fee limited to the lesser of three percent (3%) of the
gross sales price or fifty percent (50%) of the customary real estate
commissions in the event of a real estate liquidation. This fee is
payable only after the limited partners have received distributions equal
to a cumulative, noncompounded return of ten and one-half percent (10.5%)
per annum on their adjusted invested capital plus distributions of sale
or refinancing proceeds equal to 100% of their original contributions.
There were no real estate liquidations during the six month period ended
June 30, 1997.
The Partnership has agreed to indemnify the Sponsor and their affiliates
against certain costs paid in settlement of claims which might be
sustained by them in connection with the Partnership. Such
indemnification is limited to the assets of the Partnership and not the
limited partners.
4. LAND AND BUILDING SUBJECT TO OPERATING LEASES:
The net investment in operating leases as of June 30, 1997 is comprised
of the following:
Land $ 363,882
Building and improvements 638,678
---------------
1,002,560
Less accumulated depreciation (3,992)-
---------------
Total $ 998,568
===============
The following is a schedule of future minimum lease payments to be
received on the operating leases as of June 30, 1997.
1997 $ 50,610
1998 101,220
1999 101,220
2000 101,220
2001 101,220
Thereafter 1,194,705
---------------
Total $ 1,650,195
===============
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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
NOTES TO FINANCIAL STATEMENTS
5. NET INVESTMENT IN FINANCING LEASES:
The net investment in financing leases as of June 30, 1997 is comprised
of the following:
Minimum lease payments to be received $ 2,147,725
Estimated residual value 81,372
---------------
Gross investment in financing leases 2,229,097
Less unearned income (587,317)
---------------
Net investment in financing leases $ 1,641,780
===============
The following is a schedule of future minimum lease payments to be
received on the financing leases as of June 30, 1997:
1997 $ 189,735
1998 373,192
1999 373,192
2000 373,192
2001 373,192
Thereafter 465,222
---------------
Total $ 2,147,725
===============
6. SUBSEQUENT EVENT:
Based upon the results of operations for the six month period ended
June 30, 1997, the Partnership had $108,000 to distribute, of which
$78,587 was distributed to its limited partners on July 15, 1997 and
the remaining $29,413 will be distributed to those limited partners
who elected to receive distributions on a monthly basis on August 15,
1997 and September 15, 1997.
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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
PART I - FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
LIQUIDITY AND CAPITAL COMMITMENTS:
- ---------------------------------
The Partnership commenced the offering (the "Offering") of up to
30,000 limited partnership units ("Units") registered under the Securities Act
of 1933, as amended, by means of a Registration Statement which was declared
effective by the Securities and Exchange Commission on December 23, 1996. The
Offering will terminate when the maximum number of Units are sold (30,000) or
December 23, 1998, whichever occurs first.
The Partnership accepted subscriptions for the minimum number of Units
on March 5, 1997, broke escrow and immediately commenced operations. As a
result, on that date the Partnership received funds totaling $2,015,500 from
the sale of 2,015.5 Units. As of June 30, 1997, the Partnership had accepted
subscriptions for 6,155.699 Units and funds totaling $6,155,688 from 441
limited partners. The Partnership had cash totaling $2,965,275 as of June 30,
1997, approximately $2,656,342 of which is available for investment.
The Partnership intends to utilize the proceeds of the offering to
acquire income-producing commercial Properties and Equipment leased primarily
to operators of national chain and nationally franchised fast-food, family
style and dinner house restaurants as well as other franchised or chain
businesses or Retail Concerns, pursuant to Triple Net Leases or Double Net
Leases. The Partnership expects to use not less than 75%, but not more than
90%, of the Net Offering Proceeds to acquire Properties and up to 25%, but not
less than 10%, to acquire Equipment. The Property leases are expected to
provide for a base minimum annual rent, with provisions for fixed increases on
specific dates or indexation of rent to indices such as the Consumer Price
Index and/or percentage rents. Equipment will be leased only pursuant to Full
Payout Leases.
Net Offering Proceeds, together with leverage of up to 35% of the sum
of gross proceeds and the aggregate amount of Partnership indebtedness secured
by Partnership assets (approximately 40% of the aggregate purchase prices of
Partnership assets) when incurred, will provide additional funds to be used by
the Partnership to purchase Properties and Equipment.
Once substantially all of the Partnership's funds have been applied as
intended, the Partnership expects to require limited amounts of liquid assets
since the form of lease which it intends to use for its Properties and
Equipment will require lessees to pay all taxes and assessments, maintenance
and repairs items (except, with respect to Double Net Properties, costs
associated with the maintenance and repair of the exterior walls and roof of
the Property) and insurance premiums, including casualty insurance. The
general partners expect that the cash flow to be generated by the Partnership's
Properties and Equipment will be adequate to pay operating expenses and provide
distributions to Limited Partners.
The General Partners are not aware of any material trends, favorable
or unfavorable, in either capital resources or the outlook for long-term cash
generation, nor do they expect any
12
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material changes in the availability and relative cost of such capital
resources, other than as referred to herein and in the Partnership's Prospectus.
Acquisitions
- ------------
During the six month period ending June 30, 1997, the Partnership
purchased six equipment packages for a total of $1,227,787 and one real estate
property for $964,000. The number of Properties and Equipment to be acquired
will depend upon the number of Units sold in the Offering.
Black-Eyed Pea, Plano, Texas (Equipment) : On April 3, 1997, the
Partnership acquired restaurant equipment (the "Black-Eyed Pea Equipment") to be
used in the operation of a Black-Eyed Pea restaurant, located at 1905 Preston
Road, Plano, Texas for $350,000. The Black-Eyed Pea Equipment was acquired from
DenAmerica Corp., which purchased the Black-Eyed Pea Equipment from various
vendors for a total cost of $350,000. The Partnership leased the Black-Eyed Pea
Equipment to DenAmerica Corporation, a Georgia corporation, dba Black-Eyed Pea
("DenAmerica"). The headquarters offices of DenAmerica are located at 7373 N.
Scottsdale Rd., Suite D120, Scottsdale, Arizona. DenAmerica operates and
franchises restaurants under the primary trade names of Denny's and Black-Eyed
Pea.
The Partnership and DenAmerica have entered into the Partnership's
standard form of equipment lease ( the "DenAmerica Lease") dated April 15,
1997. Under the terms of the DenAmerica Lease, DenAmerica is responsible for
all expenses related to the Black-Eyed Pea Equipment including taxes,
insurance, maintenance and repair costs. The DenAmerica Lease term is 84
months and the minimum annual rent is $70,392 payable in monthly installments
of $5,866 on the 15th day of each month. The annual rent remains fixed for the
entire DenAmerica Lease term.
At the end of the DenAmerica Lease term, upon at least 90 days prior
irrevocable notice to the Partnership, DenAmerica may purchase all of the
Black-Eyed Equipment for the fair market value at the date of the exercise of
the option.
The Partnership consented to a sublease between DenAmerica, and Texas
BEP., L.P., a Texas limited partnership, on the same terms and conditions as
the DenAmerica Lease. DenAmerica remains the obligor under the DenAmerica
Lease.
At closing, DenAmerica paid the first and last month's rent of $11,732
and interim rent in the amount of $2,346 to the Partnership. DenAmerica paid a
commitment fee equal to $3,500 to the same affiliate as provided for in the
Partnership Agreement.
Shells Seafood, Jacksonvillle, Florida (Equipment) : On May 27,1997,
the Partnership acquired restaurant equipment to be used in the operation of a
Shells Seafood Restaurant, located at 9965 San Jose Blvd., Jacksonville, Florida
(the "Jacksonville Shells Equipment"). The Jacksonville Shells Equipment was
purchased from various vendors for a total cost of $118,658.30 and leased to
Shells Seafood Restaurants, Inc., a Delaware corporation ("Shells Seafood").
The headquarter offices of Shells Seafood are located at 16316 N. Dale Mabry
Highway, Suite 100, Tampa, Florida.
The Partnership and Shells Seafood Restaurant, Inc. entered into the
Partnership's standard form of equipment lease commencing on June 1, 1997
("Jacksonville Shells Seafood Lease"). Under the terms of the Jacksonville
Shells Seafood Lease, Shells Seafood is
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<PAGE> 16
responsible for all expenses related to the Jacksonville Shells Equipment
including taxes, insurance, maintenance and repair costs. The lease term is 60
months and the minimum annual rent is $31,781 payable in monthly installments
of $2,648 on the 1st day of each month. The annual rent remains fixed for the
entire Jacksonville Shells Seafood Lease term.
At the end of the Jacksonville Shells Seafood Lease term, upon at
least 90 days prior irrevocable notice to the Partnership, Shells Seafood may
purchase all of the Jacksonville Shells Equipment for the fair market value or
$11,866, whichever is less.
Shells Seafood paid the first and last month's rent of $5,297 and
interim rent in the amount of $441 to the Partnership. In addition, Shells
Seafood paid a commitment fee equal to $1,187 to the same affiliate as provided
for in the Partnership Agreement.
Shells Seafood, Winter Haven, Florida (Equipment): On May 27,1997,
the Partnership acquired restaurant equipment to be used in the operation of a
Shells Seafood Restaurant, located at 1551 3rd Street, SW, Winter Haven,
Florida (the "Winter Haven Shells Equipment"). The Winter Haven Shells
Equipment was purchased from various vendors for a total cost of $93,460 and
leased to Shells Seafood Restaurants, Inc., a Delaware corporation ("Shells
Seafood"). The headquarter offices of Shells Seafood are located at 16316 N.
Dale Mabry Highway, Suite 100, Tampa, Florida. Shells Seafood owns and
operates the Shells Seafood Restaurant.
The Partnership and Shells Seafood Restaurant, Inc. entered into the
Partnership's standard form of equipment lease commencing on June 1, 1997
("Winter Haven Shells Seafood Lease"). Under the terms of the Winter Haven
Shells Seafood Lease, Shells Seafood is responsible for all expenses related to
the Winter Haven Shells Equipment including taxes, insurance, maintenance and
repair costs. The lease term is 60 months and the minimum annual rent is
$25,032 payable in monthly installments of $2,086 on the 1st day of each month.
The annual rent remains fixed for the entire Winter Haven Shells Lease term.
At the end of the Winter Haven Shells Seafood Lease term, upon at
least 90 days prior irrevocable notice to the Partnership, Shells Seafood may
purchase all of the Winter Haven Shells Equipment for the fair market value or
$9,346, whichever is less.
Shells Seafood paid the first and last month's rent of $4,172 and
interim rent in the amount of $348 to the Partnership. In addition, Shells
Seafood paid a commitment fee equal to $935 to the same affiliate as provided
for in the Partnership Agreement.
Golden Corral, Temple Terrace, Florida (Equipment) : On June 4,1997,
the Partnership acquired restaurant equipment to be used in the operation of a
Golden Corral Restaurant located at 11801 56th Street North, Temple Terrace,
Florida (the "Golden Corral Equipment"). The Golden Corral Equipment was
purchased from various vendors for a total cost of $506,198 and leased to Corral
South Store 4, Inc. a Florida corporation dba Golden Corral Restaurant ("Corral
South 4"). The headquarter offices of Corral South 4 are located at 2665 S. Oak
Ridge Court, Fort Myers, Florida. Corral South 4 owns and operates the Golden
Corral Restaurant under a franchise agreement
The Partnership and Corral South 4 entered into the Partnership's
standard form of equipment lease commencing on June 15, 1997 ("Corral South 4
Lease"). Under the terms of the Corral South 4 Lease, Corral South 4 is
responsible for all expenses related to the Golden Corral Equipment including
taxes, insurance, maintenance and repair costs. The lease term is
14
<PAGE> 17
60 months and the annual rent is $131,207 payable in monthly installments of
$10,934 on the 15th day of each month. The annual rent remains fixed for the
entire Golden Corral Lease term. All obligations under the Corral South 4
Lease are guaranteed by David C. Brown, an individual.
At the end of the Corral South 4 Lease term, upon at least 90 days
prior irrevocable notice to the Partnership, Corral South 4 may purchase all of
the Golden Corral Equipment for $1.00.
At closing Corral South 4 paid the first and last month's rent of
$21,868 and interim rent in the amount of $4,374 to the Partnership. In
addition, Corral South 4 paid a commitment fee equal to $5,500 to the same
affiliate as provided for in the Partnership Agreement
Arby's, Pasco, Washington (Equipment): On June 25,1997, the
Partnership acquired restaurant equipment to be used in the operation of an
Arby's restaurant, located at 2411 West Court, Pasco, Washington (the "Arby's
Equipment"). The Arby's Equipment was acquired from various vendors for a
total cost of $159,470.62 and leased it to Girardi-Riva Enterprises, Inc., an
Arizona corporation, dba Arby's Restaurant ("Girardi-Riva"). The headquarter
offices of Girardi-Riva are located at 8075 East Morgan Trail, Suite 4,
Scottsdale, Arizona. Girardi-Riva owns and operates the Arby's restaurant
under a franchise agreement.
The Partnership and Girardi-Riva entered into the Partnership's
standard form of equipment lease ("Girardi-Riva Lease") commencing July 1,
1997. Under the terms of the Girardi-Riva Lease, Girardi-Riva is responsible
for all expenses related to the Arby's Equipment including taxes, insurance,
maintenance and repair costs. The lease term is 84 months and the minimum
annual rent is $32,724 payable in monthly installments of $2,727 on the 1st day
of each month. The annual rent remains fixed for the entire Girardi-Riva Lease
term. All obligations under the Girardi-Riva Lease are jointly and severally
unconditionally guaranteed by the following individuals: Richard Riva, Sharri
Riva, Thomas Girardi and Kathy Girardi.
At the end of the Girardi-Riva Lease term, upon at least 90 days prior
irrevocable notice to the Partnership, Girardi-Riva may purchase all of the
Arby's Equipment for $1.00.
Girardi-Riva paid the first and last month's rent of $5,454 and
interim rent in the amount of $545 to the Partnership. In addition,
Girardi-Riva paid a commitment fee equal to $1,595 to the same affiliate as
provided for in the Partnership Agreement.
The purchase of the five equipment packages was made in cash from
proceeds of the Partnership; however, it is anticipated that it will
subsequently be leveraged as provided for in the Prospectus. The Partnership
presently does not have a financing commitment. The General Partners believe
that the amount of insurance carried by the lessees is adequate.
RESULTS OF OPERATIONS:
- ---------------------
For the three and six month periods ended June 30, 1997 the
Partnership earned revenues totaling approximately $88,000 and
$111,000,respectively.The increase in revenues is $28,000 rental income,
$39,000 financial income and $21,000 interest income. For the three and six
month periods ended June 30, 1997, the Partnership incurred expenses totaling
approximately $8,000 and $11,000 respectively, comprised of general and
administrative expenses and depreciation(due to the growth in depreciable
assets). For the three and six
15
<PAGE> 18
month periods ended June 30, 1997, the Partnership earned net income of
approximately $80,000 and $100,486 respectively. The increase in revenues,
expenses and net income is due to progress in selling Units and investing the
proceeds therefrom in income producing, net leased, real estate properties and
equipment.
No comparative information is available for the three and six month
periods ended June 30, 1996, since the Partnership did not commence operations
until the first quarter of 1997.
The Partnership distributed approximately $29,000 during the three
month period ended June 30, 1997, representing cash flow from operations for
the quarter ended March 31, 1997. Based upon the results of operations for the
three month period ended June 30, 1997, the Partnership had $108,000, which
will be distributed during the following quarter.
16
<PAGE> 19
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are included herein or incorporated by
reference:
Number Exhibit
------ -------
4 Agreement of Limited Partnership of Registrant.
(Incorporated by reference from Exhibit B of the
final Prospectus dated December 23, 1996, as
supplemented and filed with the Securities and
Exchange Commission, S. E. C. File No. 333-9371)
27 Financial Data Schedule
(b) Reports on Form 8-K.
Form 8-K dated May 27, 1997, filed June 17, 1997. Subsequent
reports on Form 8-K July 9, 1997; filed July 22, 1997.
17
<PAGE> 20
SIGNATURES
Pursuant to the requirements 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.
By: Captec Franchise Capital Corporation IV
Managing General Partner of Captec
Franchise Capital Partners L.P. IV
By: /w/ W. Ross Martin
---------------------------------------
W. Ross Martin
Chief Financial Officer and Vice
President, a duly authorized officer
Date: August 14, 1997
18
<PAGE> 21
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
---------- -----------
27 FINANCIAL DATA SCHEDULE
19
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,965,275
<SECURITIES> 0
<RECEIVABLES> 30,551
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,995,826
<PP&E> 2,644,340
<DEPRECIATION> (3,992)
<TOTAL-ASSETS> 5,636,174
<CURRENT-LIABILITIES> 155,468
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 5,480,706
<TOTAL-LIABILITY-AND-EQUITY> 5,636,174
<SALES> 79,420
<TOTAL-REVENUES> 111,354
<CGS> 0
<TOTAL-COSTS> 10,868
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 100,486
<INCOME-TAX> 0
<INCOME-CONTINUING> 100,486
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 100,486
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
