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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 10, 1997
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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 333-9371 38-3304095
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(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
24 FRANK LLOYD WRIGHT DR. , P.O. BOX 544, ANN ARBOR, MI 48106
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(313) 994-5505 (800) 522-7832
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Not Applicable
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(Former name or former address, if changed since last report)
This document contains 4 pages. There are no exhibits attached hereto.
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Item 5. Other Events
Capitalized terms not otherwise defined herein shall have the same meaning
as in the prospectus of Captec Franchise Capital Partners L.P. IV (the
"Partnership") dated December 23, 1997, as supplemented to date (the
"Prospectus").
On March 10, 1997 the Partnership acquired the land and 3,035 square foot
building comprising a Boston Market restaurant located at 1201 S. Broadway,
Rochester, Minnesota (the "Minnesota Property"). The Minnesota Property was
constructed for its present use in November of 1995 and was fully operational
at the time of the purchase. The Minnesota Property was purchased from, and
leased back to Finest Foodservice L.L.C., a Delaware limited liability company
(the "Tenant"). The Tenant operates casual dining restaurants under the
primary trade name of Boston Market. The headquarters offices of the Tenant
are located at 8717 West 110th Street, Suite 600, Overland Park, Kansas. The
Partnership purchased a fee simple interest in the Minnesota Property for a
purchase price of $964,000 which was negotiated by an affiliate of the Managing
General Partner who considered factors such as the potential value of the site,
the financial condition and business and operating history of the Tenant and
demographic data for the area in which the Minnesota Property is located. The
purchase price for the Minnesota Property is supported by an independent MAI
appraisal. The Partnership purchased the Minnesota Property with cash from
offering proceeds. It is anticipated that the Minnesota Property will be
leveraged as provided for in the Prospectus, however, the Partnership presently
does not have a financing commitment.
The Tenant and the Partnership have entered into a lease (the "Lease"),
which is an absolute net lease, whereby the Tenant is responsible for all
expenses related to the Minnesota Property including real estate taxes,
insurance, maintenance and repair costs. The Lease term expires on April 1,
2012 with five renewal options of five years each. The initial annual rent is
equal to ten and one-half percent (10.5%) of the purchase price and will be
payable in monthly installments on the first day of each month. Thus, based on
the purchase price of $964,000 the rent in the first year of the Lease is
$101,220 per year, or $8,435 per month. The Annual Rent shall be increased
beginning on the sixth lease year to $111,342; beginning on the eleventh lease
year to $122,525 and at the end of every five years thereafter by ten percent
of the Annual Rent payable during the lease year immediately preceding.
Beginning in the sixth year, and in addition to the Annual Rent provided above,
the Tenant shall pay Percentage Rent on an annual basis equal to the difference
between five percent of "gross sales" (as defined in the lease) for such lease
year minus the Annual Rent payable for such lease year.
Boston Chicken, Inc., a Delaware corporation (the "Option Holder") has an
option to purchase and first right of refusal to purchase the Minnesota
Property. The Option Holder shall have the right to purchase the Minnesota
Property on the same terms and conditions as set forth in the offer or the
Option Holder may elect an alternate purchase price as follows: (a) during the
first and second lease year the purchase price shall be an amount equal to the
total rent payable for the lease year subsequent to the lease year in which the
option is exercised divided by 9.462%; (b) during the third lease year in an
amount equal to the Annual Rent for lease year 3 divided by 9.978%; (c)
during the fourth lease year in an amount equal to the Annual Rent for lease
year four divided by 9.785% and in lease year five in an amount equal to the
Annual Rent for lease year five divided by 9.580%.
Option Holder shall have the option to purchase the Minnesota Property any
time after the fifth year for the following option price: (a) if the Option
Holder exercises its option at purchase during the sixth through eighth lease
year, the option price shall be equal to the total rent payable for the lease
year subsequent to the lease year in which the option is exercised, divided by
ten percent.; (b) if the
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Option Holder exercises its option to purchase after the eighth lease year, the
option purchase price shall be the greater of the fair market value of the
Minnesota Property or an amount equal to the total rent payable for the lease
year subsequent to the lease year in which the option is exercised, divided by
ten percent.
An Affiliate of the Managing General Partner analyzed demographic,
geographic and market diversification data for the area in which the Minnesota
Property is located and reviewed the appraisal of the Minnesota Property and
the analysis regarding comparable properties contained therein. Based upon the
foregoing, the General Partners are unaware of any unfavorable competitive
conditions regarding the Minnesota Property. The General Partners believe that
the amount of insurance carried by the Tenant is adequate.
The current annual rent per square foot for the Minnesota Property is
$33.35 per square foot. The depreciable basis of the Minnesota Property for
federal tax purposes is $614,000 and it will be depreciated using the straight
line method over 39 years, a rate of $15,744 per year. The 1996 tax rate of
the township in which the Minnesota Property is located is $5.438 per $100 of
assessed value. The realty taxes for 1997 on the Minnesota Property are
$22,824.
An affiliate of the Managing General Partner has received an Acquisition
Fee from the Partnership in an amount equal to $38,560 and expects to receive
an additional fee of $9,640 from the Partnership after leveraging the Property,
as provided for in the Prospectus. These fees are being paid for services
rendered in connection with the selection, evaluation and acquisition of the
Minnesota Property, as provided for in the Partnership Agreement. In addition,
the Tenant has paid to the same affiliate a closing fee equal to $4,820 as
provided for in the Partnership Agreement. The Tenant also paid all of the
expenses incident to the closing of the transaction contemplated by this
commitment including, without limitation, title insurance premiums, recording
fees and expenses and transfer taxes.
The Lease contains a substitution option that in the event that the Tenant
determines that the Minnesota Property is inadequate or unprofitable or is
rendered unsuitable by condemnation or casualty, the Tenant may substitute
another property having a Boston Market restaurant located thereon, of equal or
greater current value. The substitute property shall be subject to the
approval of the Partnership. All obligations under the Lease including Annual
Rent, Percentage Rent and taxes attributable to rent and the Minnesota property
are unconditionally guaranteed by Boston Chicken, Inc., a Delaware corporation.
The Lease contains material default provisions that include, but are not
limited to: (i) the vacating or abandonment of the Minnesota Property by the
Tenant; (ii) the failure by the Tenant to make any payment due under the Lease;
(iii) the failure by the Tenant to observe or perform any of the covenants,
conditions, or provisions of the Lease; and (iv) the making by the Tenant of
any general arrangement or general assignment for the benefit of creditors. In
the event of a material default by the Tenant, the Lease contains remedy
provisions which are summarized as follows: (i) the Partnership may terminate
the Lease and take possession of the Minnesota Property, in which case the
Partnership would be entitled to damages incurred by reason of the material
default; (ii) the Partnership may maintain the Tenant's right to possession of
the Minnesota Property, in which case the Lease would continue to be in effect;
or (iii) the Partnership may pursue any other legal remedy available.
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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: /s/ W. Ross Martin
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W. Ross Martin
Chief Financial Officer and Sr. Vice
President, a duly authorized officer
Date: March 25, 1997
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