<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 MARCH 31, 1997
----------------------------
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
<PAGE> 2
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION Page
- ---------------------------------
<S> <C> <C>
Item 1. Financial Statements 1
Balance Sheet, March 31, 1997 2
Statement of Operations for the three month period
ended March 31, 1997 3
Statement of Changes in Partners' Capital for the three month period
ended March 31, 1997 4
Statement of Cash Flows for the three month period
ended March 31, 1997 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
PART II OTHER INFORMATION
- -----------------------------
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
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</TABLE>
i
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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 March 31, 1997 and the statements of operations and cash
flows for the period ending March 31, 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.
1
<PAGE> 4
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
BALANCE SHEET
March 31, 1997
(Unaudited)
ASSETS
<TABLE>
<S> <C>
Cash $ 898,655
Investment in property under leases:
Operating leases, net 1,002,560
Direct financing leases, net 408,840
Accounts receivable 4,804
Due from related parties 11,904
----------
Total assets $2,326,763
==========
LIABILITIES & PARTNERS' CAPITAL
Liabilities:
Accounts payable $ 12,983
Due to related parties 39,556
----------
Total liabilities 52,539
----------
Partners' Capital:
Limited partners' capital accounts 2,273,822
General partners' capital accounts 402
----------
Total partners' capital 2,274,224
----------
Total liabilities & partners' capital $2,326,763
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE> 5
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
STATEMENT OF OPERATIONS
for the three month period ended March 31, 1997
(Unaudited)
<TABLE>
<S> <C>
Operating revenue:
Rental income $ 6,486
Finance income 6,101
-------
Total operating revenue 12,587
-------
Operating costs and expenses:
General and administrative 2,817
-------
Total operating costs and expenses 2,817
-------
Income from operations 9,770
-------
Other income (expense):
Interest income 10,461
Other -
-------
Total other income, net 10,461
-------
Net income 20,231
Net income allocable to general partners 202
-------
Net income allocable to limited partners $20,029
=======
Net income per limited partnership unit $ 14.59
=======
Weighted average number of limited partnership
units outstanding 1,373
=======
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 6
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
for the three month period ended March 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Limited General Total
Partners' Partners' Partners'
Accounts Accounts Capital
-------- -------- ---------
<S> <C> <C> <C>
Balance, January 1, 1997 $ 100 $ 200 $ 300
Issuance of limited partnership
units, net 2,253,693 - 2,253,693
Distributions - cash - - -
Net income 20,029 202 20,231
---------- --------- ----------
Balance, March 31, 1997 $2,273,822 $ 402 $2,274,224
========== ========= ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 7
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
STATEMENT OF CASH FLOWS
for the three month period ended March 31, 1997
(Unaudited)
<TABLE>
<S> <C>
Cash flows from operating activities:
Net Income $ 20,231
Adjustments to net income:
Increase in receivables (4,465)
Increase in payables 12,944
-----------
Net cash provided by operating activities 28,710
-----------
Cash flows from investing activities:
Purchase of real estate for operating leases (1,002,560)
Purchase of equipment for financing leases (418,081)
Reduction of net investment in financing leases 9,241
-----------
Net cash used in investing activities (1,411,400)
-----------
Cash flows from financing activities:
Increase in due from related parties (11,904)
Increase in due to related parties 39,556
Issuance of limited partnership units 2,589,143
Offering costs (335,450)
-----------
Net cash provided by financing activities 2,281,345
-----------
Net increase in cash 898,655
Cash, beginning of period -
-----------
Cash, end of period $ 898,655
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 8
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 March 31, 1997, the
Partnership had accepted subscriptions for 2,590.172 Units, and funds
totaling $2,590,172.
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).
6
<PAGE> 9
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 March 31, 1996, there
is no comparable financial information for the three 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.
During the three month period ended March 31, 1997, the Partnership did not
make any distributions. The first cash distribution to the limited
partners took place on April 15, 1997 (see Note 6) and included interest
income earned during the escrow impound period, as well as cash flow from
operations for the partial three month period ended March 31, 1997. In the
future, it is expected that additional distributions of cash flow from
operations will be made quarterly in arrears.
7
<PAGE> 10
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 $129,509 during the three month period ended March 31, 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 $205,941 of selling
commissions paid or incurred during the three month period ended March 31,
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 $54,640 in acquisition
fees during the three month period ended March 31, 1997. Of these amounts,
$38,560 was capitalized into land and building subject to operating leases
and $16,080 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 three month period ended March 31, 1997.
8
<PAGE> 11
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 three month period ended March 31, 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 three month period ended March 31, 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 March 31, 1997 is comprised of
the following:
<TABLE>
<S> <C>
Land $ 363,882
Building and improvements 638,678
----------
1,002,560
Less accumulated depreciation -
----------
Total $1,002,560
==========
</TABLE>
The following is a schedule of future minimum lease payments to be received
on the operating leases as of March 31, 1997.
<TABLE>
<S> <C>
1997 $ 75,915
1998 101,220
1999 101,220
2000 101,220
2001 101,220
Thereafter 1,194,705
----------
Total $1,675,500
==========
</TABLE>
9
<PAGE> 12
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 March 31, 1997 is comprised of
the following:
<TABLE>
<S> <C>
Minimum lease payments to be received $ 560,719
Estimated residual value 32,160
---------
Gross investment in financing leases 592,879
Less unearned income (184,039)
---------
Net investment in financing leases $ 408,840
=========
</TABLE>
The following is a schedule of future minimum
lease payments to be received on the financing
leases as of March 31, 1997:
<TABLE>
<S> <C>
1997 $ 61,542
1998 82,056
1999 82,056
2000 82,056
2001 82,056
Thereafter 170,953
---------
Total $ 560,719
=========
</TABLE>
6. SUBSEQUENT EVENT:
Based upon the results of operations for the three month period ended
March 31, 1997, the Partnership had $29,900 to distribute, of which
$20,549 was distributed to its limited partners on April 15, 1997 and the
remaining $9,351 will be distributed to those limited partners who
elected to receive distributions on a monthly basis on May 15, 1997 and
June 15, 1997. Of the $29,900, approximately $6,634 represented interest
earned on the Partnership funds during the escrow period and $23,266
represented cash flow from operations during that period.
10
<PAGE> 13
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 March 31, 1997, the Partnership had accepted
subscriptions for 2,590.172 Units and funds totaling $2,590,172 from 209
limited partners. The Partnership had cash totaling $898,655 as of March 31,
1997, approximately $833,000 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
11
<PAGE> 14
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 three month period ending March 31, 1997, the Partnership
purchased one real estate property for $964,000 and one equipment package for
$402,000. On April 3, 1997, the Partnership purchased a second equipment
package for $350,000. The number of Properties and Equipment to be acquired
will depend upon the number of Units sold in the Offering.
Boston Market restaurant, Rochester, Minnesota (Property): 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 ("Finest
Foodservice"). Finest Foodservice operates casual dining restaurants under the
primary trade name of Boston Market. The headquarters office of Finest
Foodservice is 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 Finest Foodservice 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.
Finest Foodservice and the Partnership have entered into a lease which is
an absolute net lease whereby Finest Foodservice is responsible for all
expenses related to the Minnesota Property including real estate taxes,
insurance, maintenance and repair costs (the "Finest Foodservice Lease"). The
Finest Foodservice 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 Finest Foodservice 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,
Finest Foodservice shall pay Percentage Rent on an annual basis equal to the
difference between five percent of "gross sales" (as defined in the Finest
Foodservice 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
12
<PAGE> 15
divided by 9.462%; (b) during the third lease year in an amount equal to the
Annual Rent for Finest Foodservice 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 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 Finest Foodservice is adequate. The
current annual rent per square foot for the Minnesota Property is $33.35 per
square foot.
Finest Foodservice has paid to the same affiliate a closing fee equal to
$4,820 as provided for in the Partnership Agreement. Finest Foodservice 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 Finest Foodservice Lease contains a substitution option that in the
event that Finest Foodservice determines that the Minnesota Property is
inadequate or unprofitable or is rendered unsuitable by condemnation or
casualty, Finest Foodservice 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 Finest Foodservice 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 Finest Foodservice Lease contains material default provisions that
include, but are not limited to: (i) the vacating or abandonment of the
Minnesota Property by Finest Foodservice; (ii) the failure by Finest
Foodservice to make any payment due under the Finest Foodservice Lease; (iii)
the failure by Finest Foodservice to observe or perform any of the covenants,
conditions, or provisions of the Finest Foodservice Lease; and (iv) the making
by Finest Foodservice of any general arrangement or general assignment for the
benefit of creditors. In the event of a material default by Finest
Foodservice, the Finest Foodservice Lease contains remedy provisions which are
summarized as follows: (i) the Partnership may terminate the Finest Foodservice
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 Finest Foodservice's right to
possession of the Minnesota Property, in which case the Finest Foodservice
Lease would continue to be in effect; or (iii) the Partnership may pursue any
other legal remedy available.
13
<PAGE> 16
Applebee's Neighborhood Grill & Bar restaurant, Midvale, Utah (Equipment):
On March 31,1997, the Partnership acquired, effective as of February 20, 1997,
restaurant equipment (the "Applebee's Equipment") to be used in the operation
of an Applebee's Neighborhood Grill & Bar, located at 7045 South 1300 East,
Midvale, Utah for $402,000. The Applebee's Equipment was acquired from Captec
Financial Group, Inc. ("Captec") which purchased the Applebee's Equipment from
various vendors for a total cost of $402,000 and leased it to J.M.C. Limited
Partnership, a Utah limited partnership, DBA Applebee's ("JMC"). The
headquarters offices of JMC are located at 19 E. 200 South, Suit 1000, Salt
lake City, Utah. JMC owns and operates the Applebee's Neighborhood Grill & Bar
restaurant under a franchise agreement. The purchase was made in cash from
proceeds of the Partnership; however, it is anticipated that the Applebee's
Equipment will subsequently be leveraged as provided for in the Prospectus.
The Partnership presently does not have a financing commitment.
On March 31, 1997, the Partnership took assignment from Captec, effective
as of February 20, 1997, of the Partnership's standard form of equipment lease
("JMC Lease") dated March 1, 1997. Under the terms of the JMC Lease, JMC is
responsible for all expenses related to the Applebee's Equipment including
taxes, insurance, maintenance and repair costs. The lease term is 84 months
and the minimum annual rent is $82,056 payable in monthly installments of
$6,838 on the 1st day of each month. The annual rent remains fixed for the
entire Lease term. The JMC Lease is guaranteed by the following: John B.
Prince, an individual; and William Tell, Inc., a Utah corporation.
At the end of the JMC Lease term, upon at least 90 days prior irrevocable
notice to the Partnership, JMC may purchase all of the Applebee's Equipment for
the fair market value or $40,200, whichever is less. The General Partners
believe that the amount of insurance carried by JMC is adequate. At closing,
JMC paid the first and last month's rent to the Partnership totaling $13,676
and interim rent of $2,051. JMC paid a commitment fee equal to $4,020 to the
an affiliate as provided for in the Partnership Agreement.
Black-Eyed Pea restaurant, 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 purchase was made in cash from proceeds of the
Partnership, however, it is anticipated that the Black-Eyed Pea Equipment will
subsequently be leveraged as provided for in the Prospectus. The Partnership
presently does not have a financing commitment.
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.
14
<PAGE> 17
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 General Partners believe that the amount of insurance carried
by DenAmerica is adequate.
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.
RESULTS OF OPERATIONS:
For the three month period ended March 31, 1997 the Partnership earned
revenues totaling approximately $23,000. Revenues for the period were
comprised of approximately $6,500 rental income from operating leases, $6,000
of financing income from financing leases and $10,500 of interest income. For
the three month period ended March 31, 1997, the Partnership incurred expenses
totaling approximately $3,000 comprised of general and administrative expenses.
For the three month period ended March 31,1997, the Partnership earned net
income of approximately $20,000.
No comparative information is available for the three month period ended
March 31, 1996, since the Partnership did not commence operations until the
first quarter of 1997.
During the three month period ended March 31, 1997, the Partnership did
not make any distributions. Based upon the results of operations for the three
month period ended March 31, 1997, the Partnership had $29,900 to distribute,
of which $20,549 was distributed to its limited partners on April 15, 1997 and
the remaining $9,351 will be distributed to those limited partners who elected
to receive distributions on a monthly basis on May 15, 1997 and June 15, 1997.
Of the $29,900, approximately $6,634 represents interest earned on the
Partnership funds during the escrow period and $23,266 represents cash flow
from operations during that period.
15
<PAGE> 18
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 March 10, 1997, filed March 25, 1997. Subsequent
reports on Form 8-K/A No. 1 dated March 10, 1997, filed May 7, 1997
and Form 8-K dated March 31, 1997, filed May 7, 1997.
16
<PAGE> 19
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: May 15, 1997
17
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 898,655
<SECURITIES> 0
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<PP&E> 1,411,400
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0
0
<COMMON> 0
<OTHER-SE> 2,274,224
<TOTAL-LIABILITY-AND-EQUITY> 2,326,763
<SALES> 12,587
<TOTAL-REVENUES> 23,048
<CGS> 0
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