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Pursuant To Rule 424(b)(3)
Registration No. 333-09371
SUPPLEMENT NO. 8
DATED JULY 17, 1998
TO THE PROSPECTUS OF
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
DATED DECEMBER 23, 1996
This Supplement No. 8 is provided for the purpose of supplementing the
prospectus of Captec Franchise Capital Partners L.P. IV, a Delaware limited
partnership (the "Partnership"), dated December 23, 1996 (the "Prospectus").
This Supplement No. 8 expands upon, supplements, modifies and supersedes certain
information contained in the Prospectus and consolidates and/or supersedes
information in Supplement No. 7 dated June 5, 1998. This Supplement No. 8 must
be read in conjunction with the Prospectus. Unless otherwise defined,
capitalized terms used herein shall have the same meanings accorded such terms
in the Prospectus.
As of July 17, 1998, the Partnership had raised $27,127,969.91 through
the sale of 27,127.96991 Units. The following material sets forth certain
information regarding (i) the Partnership's purchase of Properties and Equipment
Packages, (ii) revisions to the Partnership Agreement in response to comments
made by certain securities administrators in states in which the Partnership
intends to sell Units, and (iii) events that happened after the date of the
Prospectus.
PROPERTY ACQUISITIONS
REAL ESTATE
<TABLE>
<CAPTION>
PURCHASE
DATE CONCEPT/LOCATION PRICE LESSEE
<S> <C> <C> <C>
3/10/97 Boston Market $ 964,000 Finest Foodservice L.L.C.
Rochester, Minnesota
7/25/97 Carino's Italian Kitchen $1,600,000 Kona Restaurant Group, Inc.
El Paso, Texas
7/25/97 Golden Corral Restaurant $ 550,000 Corral South Store 3, Inc.
Lakeland, Florida
8/8/97 Blockbuster Video $1,114,286 Blockbuster Videos, Inc.
Riverdale, Georgia
10/14/97 Hollywood Video $1,386,000 Hollywood Entertainment Corporation
Hamilton, Ohio
3/31/98 Arby's $ 780,000* Capital Foods, Inc.
Hilliard, Ohio
6/16/98 Steak & Ale $2,000,000 S&A Properties Corp.
Farmington Hills, Michigan
6/16/98 Steak & Ale $2,325,000 S&A Properties Corp.
Trevose, Pennsylvania
6/16/98 Bennigan's $1,550,000 S&A Properties Corp.
Norfolk, Virginia
</TABLE>
*The Partnership has purchased the land on which the Arby's restaurant is to be
constructed and agreed to pay for the construction of the building and other
improvements pursuant to a Disbursement Agreement. The Partnership is only
responsible for funding an aggregate of $780,000 for the acquisition of the land
and construction of the building and other improvements. As of July 17, 1998,
the Partnership has made disbursements totaling $390,354.
EQUIPMENT
<TABLE>
<CAPTION>
PURCHASE
DATE CONCEPT/LOCATION PRICE LESSEE
<S> <C> <C> <C>
3/31/97 Applebee's Neighborhood $ 402,000 J.M.C. Limited Partnership
Grill & Bar
Midvale, Utah
4/3/97 Black-Eyed Pea $ 350,000 DenAmerica Corporation
Plano, Texas
5/27/97 Shells Seafood Restaurant $ 118,658 Shells Seafood Restaurants, Inc.
Jacksonville, Florida
5/27/97 Shells Seafood Restaurant $ 93,460 Shells Seafood Restaurants, Inc.
Winter Haven, Florida
6/4/97 Golden Corral Restaurant $ 506,198 Corral South Store 4, Inc.
Temple Terrace, Florida
</TABLE>
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<TABLE>
<CAPTION>
PURCHASE
DATE CONCEPT/LOCATION PRICE LESSEE
<S> <C> <C> <C>
6/25/97 Arby's $ 159,471 Girardi-Riva Enterprises, Inc.
Pasco, Washington
7/9/97 Breckenridge Brewery & Pub $ 791,000 BBI Acquisition Co.
Breckenridge, Colorado
7/25/97 Burger King $ 282,327 Virginia QSC, L.L.C.
Colonial Heights, Virginia
10/15/97 KFC $ 231,021 Morgan's Restaurants of Pennsylvania,
Greensburg, Pennsylvania Inc.
3/31/98 Arby's $ 240,256 Girardi-Riva Enterprises, Inc.
Kennewick, Washington
3/31/98 KFC $ 278,753 J's Four, Inc.
13 locations in New York, New
Hampshire, and Massachusetts
3/31/98 Champps $ 853,551 Champps Americana, Inc.
Schaumberg, Illinois
6/15/98 Champps $1,038,012 Champps Americana, Inc.
Livonia, Michigan
</TABLE>
Boston Market Restaurant Lease (Rochester, Minnesota)
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 Partnership purchased the Minnesota
Property for a purchase price of $964,000.
Finest Foodservice and the Partnership have entered into a lease (the
"Finest Foodservice 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 term expires on April 1, 2012 with five renewal options of
five years each. Annual rental (the "Annual Rental") is payable according to the
following schedule:
<TABLE>
<CAPTION>
PERIOD ANNUAL RENTAL
<S> <C> <C>
Lease Years 1-5 $101,220
Lease Years 6-10 $111,342
Lease Years 11-15 $122,525
Lease Years 16-20 $134,777
Lease Years 21-25 $148,255
Lease Years 26-30 $163,081
Years 31-40 Fair market value determined for each subsequent five-
year period at the beginning of the 31st and 36th Lease
Years
</TABLE>
Beginning in the sixth lease year, and in addition to the Annual Rental provided
above, Finest Foodservice will pay percentage rent on an annual basis equal to
the difference between five percent of "gross sales" (as defined in the Finest
Foodservice Lease) during such lease year less the Annual Rental 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 has 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 years, an alternate purchase price equal to the total Annual Rental
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, an alternate
purchase price equal to the total Annual Rental for the third lease year divided
by 9.978%; (c) during the fourth lease year, an alternative purchase price equal
to the Annual Rental for the fourth lease year divided by 9.785%; and (d) during
the fifth lease year, an alternative purchase price equal to the Annual Rental
for the fifth lease year divided by 9.580%.
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The Option Holder has the option to purchase the Minnesota Property at
the following times and option prices:
PERIOD OPTION PRICE
Lease Years 6-8 Annual Rent payable for the Lease
Year subsequent to the Lease
Year in which the option is
exercised divided by ten percent
(10%)
Last ninety (90) days of Annual Rent payable for the 16th
the 15th Lease Year Lease Year divided by ten percent
(10%)
Last ninety (90) days of The lesser of (i) fair market
the 30th Lease Year value or (ii) the Annual Rent
payable for the 31st Lease
Year divided by ten percent (10%)
Last ninety (90) days of The lesser of (i) fair market
the 40th Lease Year value or (ii) one hundred ten
percent (110%) of the Annual Rent
payable for the 40th Lease Year
divided by ten percent (10%)
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.
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. As provided in the Partnership
Agreement, these fees are being paid for services rendered in connection with
the selection, evaluation and acquisition of the Minnesota Property. In
addition, 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
provides in the event that Finest Foodservice determines the Minnesota Property
is inadequate or unprofitable or is rendered unsuitable by condemnation or
casualty, Finest Foodservice, subject to the Partnership's approval, may
substitute another property of equal or greater current value having a Boston
Market restaurant located thereon. All obligations under the Finest Foodservice
Lease, including Annual Rental, 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) Finest Foodservice making
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
permit Finest Foodservice to remain in 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.
Carino's Italian Kitchen Lease (El Paso, Texas)
On July 25, 1997 the Partnership acquired the land and 6,257 square
foot building comprising a Carino's Italian Kitchen restaurant located at 675
Sunland Park Drive, El Paso, Texas (the "Carino's Property"). The Carino's
Property was constructed for its present use in 1995 and was fully operational
at the time of the purchase. The Carino's Property was purchased from and leased
back to Kona Restaurant Group, Inc., a Delaware corporation ("Kona Group"). Kona
Group operates casual dining restaurants under the primary trade names of
Carino's Italian Kitchen and Kona Ranch Steak House. The Partnership purchased a
fee simple interest in the Carino's Property for a purchase price of $1,600,000.
Kona Group and the Partnership have entered into a lease (the "Carino's
Lease"), which is an absolute net lease, whereby Kona Group is responsible for
all expenses related to the Carino's Property including real estate taxes,
insurance, maintenance and repair costs. The Carino's Lease term expires on July
31, 2014 with one renewal option of six years and one renewal option of seven
years. The initial annual rent is equal to eleven percent (11%)
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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 $1,600,000 the rent in
the first year of the Carino's Lease is $176,000 per year, or $14,667 per month.
The annual rent will increase by five percent (5%) on the August 1, 2000 and
every three years thereafter.
Kona Group has an option to purchase the Carino's Property during the
sixty-first (61st) full month of the Carino's Lease. In the event that Kona
Group elects to exercise the option to purchase in the sixty-first full month of
the Carino's Lease, the option price is $1,940,400.
The current annual rent per square foot for the Carino's Property is
$28.13 per square foot. The depreciable basis of the Carino's Property for
federal tax purposes is $500,000 and it will be depreciated using the straight
line method over 39 years, a rate of $12,821 per year.
An affiliate of the Managing General Partner has received an
Acquisition Fee from the Partnership in an amount equal to $64,000 and expects
to receive an additional fee of $16,000 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 Carino's Property, as provided for in the Partnership Agreement. In
addition, Kona Group has paid to the same affiliate a commitment fee equal to
$16,000 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 Carino's Lease contains material default provisions that include,
but are not limited to: (i) the vacating or abandonment of the Carino's Property
by Kona Group; (ii) the failure by Kona Group to make any payment due under the
Carino's Lease; (iii) the failure by Kona Group to observe or perform any of the
covenants, conditions, or provisions of the Carino's Lease; and (iv) the making
by Kona Group of any general arrangement or general assignment for the benefit
of creditors. In the event of a material default by Kona Group, the Carino's
Lease contains remedy provisions which are summarized as follows: (i) the
Partnership may terminate the Carino's Lease and take possession of the Carino's
Property, in which case the Partnership would be entitled to damages incurred by
reason of the material default; (ii) the Partnership may permit Kona Group to
remain in possession of the Carino's Property, in which case the Carino's Lease
would continue to be in effect; or (iii) the Partnership may pursue any other
legal remedy available.
Golden Corral Restaurant Lease (Lakeland, Florida)
On July 25, 1997, the Partnership acquired an undivided 34.375%
interest as a tenant in common with Captec Franchise Capital Partners L.P. III,
a Delaware limited partnership and affiliate of the Managing General Partner
("Captec III"), in the land and 8,825 square foot building located at 4532 South
Florida Avenue, Lakeland, Florida (the "Lakeland Property"). The Lakeland
Property was constructed for its present use in May of 1997 and leased to Corral
South Store 3, Inc., a Florida corporation ("Corral South 3"). Corral South 3
operates casual dining restaurants under the primary trade name of Golden Corral
Restaurants. Captec 3 purchased the Lakeland Property for a total purchase price
of $1,600,000 and sold the 34.375% interest to the Partnership for $550,000.
Corral South 3 and the Partnership have entered into a lease (the
"Corral South 3 Lease"), which is an absolute net lease, whereby Corral South 3
is responsible for all expenses related to the Lakeland Property including real
estate taxes, insurance, maintenance and repair costs. The Corral South 3 Lease
term commenced on June 1, 1997 and expires fifteen years thereafter. The Corral
South 3 Lease has two renewal options of five years each. The initial annual
rent is $174,400, or $14,533 per month, and increases by 8% on the five-year
anniversary of the Corral South 3 Lease and every five years thereafter
(including any renewal options). The Partnership's pro-rata share of the initial
annual rent will be $59,950 or $4,996 per month. The initial annual rent per
square foot on the Lakeland Property is $19.76. The depreciable basis of the
Lakeland Property for federal tax purposes is $1,080,000 and it will be
depreciated using the straight line method over 39 years, a rate of $27,692 per
year.
The obligations under the Corral South 3 Lease are guaranteed for the
benefit of the Partnership by David C. Brown, an individual. David C. Brown is
the sole stockholder of Corral South 3. Corral South 3 has an option to purchase
the Lakeland Property commencing on the sixty-first month of the Corral South 3
Lease. In the event that Corral South 3 elects to exercise the option to
purchase, the option price shall be $1,833,520.
An affiliate of the Managing General Partner has received an
acquisition fee from the Partnership in an amount equal to $22,000 and expects
to receive an additional fee of $5,500 from the Partnership after leveraging the
Lakeland 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 Lakeland Property, as provided for in the Partnership
Agreement. In addition, Corral South 3 has paid to the same affiliate a
commitment fee equal to $5,500, as provided for in the Partnership Agreement.
Corral South 3 has paid all of the expenses incident to the closing of the
transaction contemplated by this commitment including, without limitation, the
Partnership's attorney's fees, title insurance premiums, recording fees and
expenses and transfer taxes.
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The Corral South 3 Lease contains material default provisions that
include, but are not limited to: (i) the vacating or abandonment of the Lakeland
Property by Corral South 3; (ii) the failure by Corral South 3 to make any
payment due under the Corral South 3 Lease; (iii) the failure by Corral South 3
to observe or perform any of the covenants, conditions, or provisions of the
Corral South 3 Lease; and (iv) the making by Corral South 3 of any general
arrangement or general assignment for the benefit of creditors. In the event of
a material default by Corral South 3, the Corral South 3 Lease contains remedy
provisions which are summarized as follows: (i) the Partnership may terminate
the Corral South 3 Lease and take possession of the Lakeland Property, in which
case the Partnership would be entitled to damages incurred by reason of the
material default; (ii) the Partnership may permit Corral South 3 to remain in
possession of the Lakeland Property, in which case the Corral South 3 Lease
would continue to be in effect; or (iii) the Partnership may pursue any other
legal remedy available.
Blockbuster Video Lease (Riverdale, Georgia)
On August 8, 1997 the Partnership acquired the land and 6,500 square
foot building comprising a Blockbuster Video located at 8529 Georgia Highway 85,
Riverdale, Georgia (the "Blockbuster Property"). The Blockbuster Property was
constructed for its present use in 1995 and was fully operational at the time of
the purchase. The Blockbuster Property was purchased from Atlantis Properties,
L.L.C., a Georgia limited liability company ("Atlantis Properties"), for a
purchase price of $1,114,286.
The Partnership purchased the Blockbuster Property subject to a lease
dated April 4, 1997 (the "Blockbuster Lease") between Atlantis Properties and
Blockbuster Videos, Inc., a Texas corporation ("Blockbuster"), which is a net
lease, whereby Blockbuster is responsible for most expenses related to the
Blockbuster Property including real estate taxes, insurance, maintenance and
repair costs, except that the Partnership will be responsible for the repair and
maintenance of the structural systems including the roof, load-bearing walls and
floor slabs and exterior masonry walls and foundations. The Blockbuster Lease
term expires on June 30, 2007 with three renewal options of five years each.
Annual rental is payable according to the following schedule:
<TABLE>
<CAPTION>
PERIOD ANNUAL RENTAL
<S> <C>
Lease Years 1-5 $117,975
Lease Years 6-10 $132,145
Lease Years 11-15 $145,360
Lease Years 16-20 $159,900
Lease Years 21-25 $175,890
</TABLE>
The rent is payable in monthly installments on the first day of each month.
Thus, the monthly rent in the first five years of the Blockbuster Lease is
$9,831. Viacom International, Inc., a Delaware corporation, unconditionally and
irrevocably guaranteed the full and complete performance of the Blockbuster
Lease.
The current annual rent per square foot for the Blockbuster Property is
$18.15 per square foot. The depreciable basis of the Blockbuster Property for
federal tax purposes is $754,286 and it will be depreciated using the straight
line method over 39 years, a rate of $19,341 per year.
An affiliate of the Managing General Partner has received an
Acquisition Fee from the Partnership in an amount equal to $44,571 and expects
to receive an additional fee of $11,143 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 Blockbuster Property, as provided for in the Partnership Agreement. In
addition, Blockbuster has paid to the same affiliate a commitment fee equal to
$11,143 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 Blockbuster Lease contains material default provisions that
include, but are not limited to: (i) the failure by Blockbuster to make any
payment due under the Blockbuster Lease; (ii) the failure by Blockbuster to
observe or perform any of the covenants, conditions, or provisions of the
Blockbuster Lease; and (iii) the making by Blockbuster of any general
arrangement or general assignment for the benefit of creditors. In the event of
a material default by Blockbuster, the Blockbuster Lease contains remedy
provisions which are summarized as follows: (i) the Partnership may terminate
the Blockbuster Lease and take possession of the Blockbuster Property, in which
case the Partnership would be entitled to damages incurred by reason of the
material default; (ii) the Partnership may permit Blockbuster to remain in
possession of the Blockbuster Property, in which case the Blockbuster Lease
would continue to be in effect; or (iii) the Partnership may pursue any other
legal remedy available; provided, however, that the Partnership may not
accelerate rent and is required to mitigate damages.
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Hollywood Video Lease (Hamilton, Ohio)
On October 14, 1997, the Partnership acquired the land and 7,488 square
foot building comprising a Hollywood Video located at 1491 Main Street,
Hamilton, Ohio (the "Hollywood Video Property"). The Hollywood Video Property
was constructed for its present use in 1997 and was fully operational at the
time of the purchase. The Hollywood Video Property was purchased from Blue
Freedom Holdings, LLC, a Kentucky limited liability company, and leased to
Hollywood Entertainment Corporation, an Oregon corporation ("Hollywood
Entertainment"). The Partnership purchased a fee simple interest in the
Hollywood Video Property for a purchase price of $1,386,000
The Partnership purchased the property subject to a lease between Blue
Freedom Holdings, LLC and Hollywood Entertainment which commenced on July 24,
1997 (the "Hollywood Video Lease"). The Hollywood Video Lease is an absolute net
lease, whereby Hollywood Entertainment is responsible for all expenses related
to the Hollywood Video Property including real estate taxes, insurance,
maintenance and repair costs. The Hollywood Video Lease term expires on July 30,
2012 with three renewal options of five years each. The initial annual rent is
equal to eleven percent (11%) 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 $1,386,000 the rent in the first year of the Hollywood Video Lease is
$152,418 per year, or $12,701.50 per month. The annual rent shall be adjusted on
the first day of the sixty-first month and every sixty months thereafter by the
lesser of the Percentage CPI Increase, as defined in the Hollywood Video Lease,
or ten percent (10%).
The current annual rent per square foot for the Hollywood Video
Property is $20.35 per square foot. The depreciable basis of the Hollywood Video
Property for federal tax purposes is $811,000 and it will be depreciated using
the straight line method over 39 years, a rate of $20,795 per year.
An affiliate of the Managing General Partner has received an
Acquisition Fee from the Partnership in an amount equal to $55,440 and expects
to receive an additional fee of $13,860 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 Hollywood Video Property, as provided for in the Partnership Agreement.
In addition, Hollywood Entertainment has paid to the same affiliate a commitment
fee equal to $13,860 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 Hollywood Video Lease contains material default provisions that
include, but are not limited to: (i) the failure by Hollywood Entertainment to
make any payment due under the Hollywood Video Lease; (ii) the failure by
Hollywood Entertainment to observe or perform any of the covenants, conditions,
or provisions of the Hollywood Video Lease; and (iii) the making by Hollywood
Entertainment of any general arrangement or general assignment for the benefit
of creditors. In the event of a material default by Hollywood Entertainment, the
Hollywood Video Lease contains remedy provisions which are summarized as
follows: (i) the Partnership may terminate the Hollywood Video Lease and take
possession of the Hollywood Video Property, in which case the Partnership would
be entitled to damages incurred by reason of the material default; (ii) the
Partnership may permit Hollywood Entertainment to remain in possession of the
Hollywood Video Property, in which case the Hollywood Video Lease would continue
to be in effect; or (iii) the Partnership may pursue any other legal remedy
available.
Arby's Restaurant Lease (Hilliard, Ohio)
On March 31, 1998, the Partnership acquired, effective January 28,
1998, the land located at 4740 Cemetery Road, Hilliard, Ohio and all
improvements to be located thereon (the "Hilliard Property"). The Hilliard
Property was acquired from Captec Net Lease Realty, Inc. ("Net Lease"), an
affiliate of the General Partners, which purchased the Hilliard Property from,
and leased the property back to Capital Foods, Inc., an Ohio corporation
("Capital Foods"), by entering into a lease (the "Capital Foods Lease") with
Capital Foods. Capital Foods operates casual dining restaurants under the
primary trade name of Arby's. The Hilliard Property was purchased from Net Lease
for a purchase price of $780,000, the amount of funds spent by Net Lease for
such property. Net Lease also assigned to the Partnership a Disbursement
Agreement that provides that the Partnership must reimburse Capital Foods for
its construction costs in an amount equal to (i) the cost of the property plus
construction costs or (ii) $780,000, whichever is less. As of March 31, 1998,
the Partnership has made disbursements to Capital Foods totaling $390,354.
On March 31, 1998, Net Lease assigned to the Partnership the Capital
Foods Lease, which is an absolute net lease, whereby Capital Foods is
responsible for all expenses related to the Hilliard Property, including real
estate taxes, insurance, maintenance and repair costs. Under the Capital Foods
Lease, the interim term of the lease commenced on January 28,1998 and will
expire on the last day of the month in which the final disbursement is made, but
in no event beyond May 31, 1998 (the "Interim Term"). Capital Foods will pay
rent during the Interim Term equal to an annual rate of 12% multiplied by the
average daily balance of the cost of the land and total amount of the costs
advanced.
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The Capital Foods Lease base term will commence on the day following
the expiration of the Interim Term and will expire twenty years thereafter (the
"Base Term"). Capital Foods has the option to extend the Base Term for two
successive periods of five years each. The initial annual rent is equal to
11.25% of the purchase price. Thus, based on a purchase price of $780,000, the
rent in the first year of the Capital Foods Lease will be $87,750 per year, or
$7,312 per month. The annual rent will increase by 2.5% on the second
anniversary of the commencement of the Base Term and annually thereafter.
Capital Foods has an option to purchase the Hilliard Property during
the sixty-first full month of the Capital Foods Lease. In the event that Capital
Foods elects to exercise such option, the option price will be equal to the
annual rent during the sixth lease year divided by 10.25%.
As of March 31, 1998, the Partnership had paid an Acquisition Fee of
$15,614 to an affiliate of the Managing General Partner. In addition, based on
the maximum purchase price of $780,000, an affiliate of the Managing General
Partner will receive Acquisition Fees, totaling $15,586, from the Partnership as
the remaining $389,646 is disbursed, and expects to receive an additional fee of
$7,800 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 Hilliard Property, as
provided for in the Partnership Agreement. In addition, Capital Foods has paid
to the same affiliate a commitment fee equal to $15,600 as provided for in the
Partnership Agreement. Capital Foods 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 Capital Foods Lease contains material default provisions that
include, but are not limited to: (i) the vacating or abandonment of the Hilliard
Property by Capital Foods; (ii) the failure by Capital Foods to make any payment
due under the Capital Foods Lease; (iii) the failure by Capital Foods to observe
or perform any of the covenants, conditions, or provisions of the Capital Foods
Lease; and (iv) the making by Capital Foods of any general arrangement or
general assignment for the benefit of creditors. In the event of a material
default by Capital Foods, the Capital Foods Lease contains remedy provisions
which are summarized as follows: (i) the Partnership may terminate the Capital
Foods Lease and take possession of the Hilliard Property, in which case the
Partnership would be entitled to damages incurred by reason of the material
default; (ii) the Partnership may permit Capital Foods to remain in possession
of he Hilliard Property, in which case the Capital Foods Lease would continue to
be in effect; or (iii) the Partnership may pursue any other legal remedy
available.
Steak & Ale Restaurant Lease (Farmington Hills, Michigan)
On June 16, 1998, the Partnership acquired the land and 7,724 square
foot building compromising a Steak & Ale Restaurant located at 27590 Orchard
Lake Road, Farmington Hills, Michigan (the "Farmington Hills Steak & Ale
Property"). The Farmington Hills Steak & Ale Property was purchased from and
leased back to S&A Properties Corp. The Partnership purchased the Farmington
Hills Steak & Ale Property for $2,000,000.
S&A Properties Corp. and the Partnership have entered into a lease (the
"Farmington Hills Steak & Ale Lease"), which is an absolute net lease, whereby
S&A Properties Corp. is responsible for all expenses related to the Farmington
Hills Steak & Ale Property, including real estate taxes, insurance, maintenance
and repair costs. The Farmington Hills Steak & Ale Lease term expires June 15,
2018 with two renewal options of ten years. Annual rental is payable according
to the following schedule:
<TABLE>
<CAPTION>
PERIOD ANNUAL RENTAL
<S> <C>
Lease Years 1-3 $205,008
Lease Years 4-6 $217,308
Lease Years 7-9 $230,347
Lease Years 10-12 $244,168
Lease Years 13-15 $258,818
Lease Years 15-18 $274,347
Lease Years 19-20 $285,321
Lease Years 21-23 $302,440
Lease Years 24-25 $314,538
Lease Years 26-28 $333,410
Lease Years 29-30 $346,746
Lease Years 31-33 $367,551
Lease Years 34-35 $382,253
Lease Years 36-38 $405,188
Lease Years 39-40 $421,396
</TABLE>
S-7
<PAGE> 8
The rent is payable in monthly installments on the first day of each month.
Thus, the monthly rent in the first three years of the Farmington Hills Steak &
Ale Lease is $17,084. S&A Restaurant Corp., the parent corporation of the
tenant, and Steak and Ale of Michigan, Inc., the operating company affiliate of
the tenant that is operating the Steak and Ale Restaurant on the Farmington
Hills Steak & Ale Property, have each unconditionally and irrevocably guaranteed
the full and complete performance of the Farmington Hills Steak & Ale Lease.
The tenant has a first right of refusal to acquire the Farmington Hills
Steak & Ale Property during the term of the Farmington Hills Steak & Ale Lease,
including any renewals or extensions. The tenant also has the option to purchase
the Farmington Hills Steak & Ale Property at the following times and option
prices:
PERIOD OPTION PRICE
July, 2003 (i) $2,400,000 less (ii) any
insurance or condemnation proceeds
received by the Partnership and not
used for reconstruction of the
property (the "Retained Proceeds")
less (iii) the product of (A) the
Retained Proceeds, (B) 20%, and (C)
a fraction in which the numerator is
the number of years which have
elapsed from the date of the
Partnership's receipt of the
Retained Proceeds to the date of the
closing of the tenant's purchase of
the property, and the denominator is
the number of years which have
elapsed from June 16, 1998 to the
closing of the tenant's purchase of
the property
July, 2008 (i) $2,400,000 less (ii) any
insurance or condemnation proceeds
received by the Partnership and not
used for reconstruction of the
property (the "Retained Proceeds")
less (iii) the product of (A) the
Retained Proceeds, (B) 20%, and (C)
a fraction in which the numerator is
the number of years which have
elapsed from the date of the
Partnership's receipt of the
Retained Proceeds to the date of the
closing of the tenant's purchase of
the property, and the denominator is
the number of years which have
elapsed from June 16, 1998 to the
closing of the tenant's purchase of
the property
July, 2013 (i) $2,300,000 less (ii) any
insurance or condemnation proceeds
received by the Partnership and not
used for reconstruction of the
property (the "Retained Proceeds")
less (iii) the product of (A) the
Retained Proceeds, (B) 15%, and (C)
a fraction in which the numerator is
the number of years which have
elapsed from the date of the
Partnership's receipt of the
Retained Proceeds to the date of the
closing of the tenant's purchase of
the property, and the denominator is
the number of years which have
elapsed from June 16, 1998 to the
closing of the tenant's purchase of
the property
March 1, 2017 through (i) $2,200,000 less (ii) any
February 28, 2018 insurance or condemnation proceeds
received by the Partnership and not
used for reconstruction of the
property (the "Retained Proceeds")
less (iii) the product of (A) the
Retained Proceeds, (B) 10%, and (C)
a fraction in which the numerator is
the number of years which have
elapsed from the date of the
Partnership's receipt of the
Retained Proceeds to the date of the
closing of the tenant's purchase of
the property, and the denominator is
the number of years which have
elapsed from June 16, 1998 to the
closing of the tenant's purchase of
the property
S-8
<PAGE> 9
PERIOD OPTION PRICE
February, 2028 (i) $2,400,000 less (ii) any
insurance or condemnation proceeds
received by the Partnership and not
used for reconstruction of the
property (the "Retained Proceeds")
less (iii) the product of (A) the
Retained Proceeds, (B) 20%, and (C)
a fraction in which the numerator is
the number of years which have
elapsed from the date of the
Partnership's receipt of the
Retained Proceeds to the date of the
closing of the tenant's purchase of
the property, and the denominator is
the number of years which have
elapsed from June 16, 1998 to the
closing of the tenant's purchase of
the property
February, 2038 (i) $2,600,000 less (ii) any
insurance or condemnation proceeds
received by the Partnership and not
used for reconstruction of the
property (the "Retained Proceeds")
less (iii) the product of (A) the
Retained Proceeds, (B) 30%, and (C)
a fraction in which the numerator is
the number of years which have
elapsed from the date of the
Partnership's receipt of the
Retained Proceeds to the date of the
closing of the tenant's purchase of
the property, and the denominator is
the number of years which have
elapsed from June 16, 1998 to the
closing of the tenant's purchase of
the property
In the event the tenant fails to exercise its option to purchase the property
(i) from March 1, 2017 through February 28, 2018 and fails to extend the lease
for the first renewal term, (ii) during February, 2028 and fails to extend the
lease for the second renewal term, or (iii) during February, 2038, the
Partnership has the right to require the tenant to purchase the property at the
Option Price set forth above.
An affiliate of the Managing General Partner has received an
Acquisition Fee from the Partnership in an amount equal to $80,000, and expects
to receive an additional fee of $20,000 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 Property as provided for in the Partnership Agreement. In addition, S&A
Properties Corp. has paid to the same affiliate a commitment fee equal to
$10,000 as provided for in the Partnership Agreement. S&A Properties Corp. 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 Farmington Hills Steak & Ale Restaurant Lease contains material
default provisions that include, but are not limited to: (i) the failure by S&A
Properties Corp. to make any payment due under the Farmington Hills Steak & Ale
Lease within ten days after notice from the Partnership; (ii) the failure by S&A
Properties Corp. to observe or perform any of the covenants, conditions or
provisions of the Farmington Hills Steak & Ale Lease within thirty days after
notice from the Partnership; (iii) a default of the tenant under any other lease
with the Partnership that is not cured within thirty days after notice from the
Partnership; and (iv) the making by S&A Properties Corp. of any general
arrangement or general assignment for the benefit of creditors. In the event of
a material default by S&A Properties Corp., the Farmington Hills Steak & Ale
Lease contains remedy provisions which are summarized as follows: (i) the
Partnership may terminate the Farmington Hills Steak & Ale Lease and take
possession of the Property, in which case the Partnership would be entitled to
damages incurred by reason of the material default; (ii) the Partnership may
permit S&A Properties Corp. to remain in possession of the Property, in which
case the Farmington Hills Steak & Ale Lease would continue to be in effect; or
(iii) the Partnership may pursue any other legal remedy available.
Steak & Ale Restaurant Lease (Trevose, Pennsylvania)
On June 16, 1998, the Partnership acquired the land and 7,239 square
foot building compromising a Steak & Ale Restaurant located at 2224 U.S. 1
Roosevelt Boulevard, Trevose, Pennsylvania (the "Trevose Steak & Ale Property").
The Trevose Steak & Ale Property was purchased from and leased back to S&A
Properties Corp. The Partnership purchased the Trevose Steak & Ale Property for
$2,325,000.
S-9
<PAGE> 10
S&A Properties Corp. and the Partnership have entered into a lease (the
"Trevose Steak & Ale Lease"), which is an absolute net lease, whereby S&A
Properties Corp. is responsible for all expenses related to the Trevose Steak &
Ale Property, including real estate taxes, insurance, maintenance and repair
costs. The Trevose Steak & Ale Lease term expires June 15, 2018 with two renewal
options of ten years. Annual rental is payable according to the following
schedule:
<TABLE>
<CAPTION>
PERIOD ANNUAL RENTAL
<S> <C>
Lease Years 1-3 $238,320
Lease Years 4-6 $252,619
Lease Years 7-9 $267,776
Lease Years 10-12 $283,843
Lease Years 13-15 $300,874
Lease Years 15-18 $318,926
Lease Years 19-20 $331,683
Lease Years 21-23 $351,584
Lease Years 24-25 $365,647
Lease Years 26-28 $387,586
Lease Years 29-30 $403,090
Lease Years 31-33 $427,275
Lease Years 34-35 $444,366
Lease Years 36-38 $471,028
Lease Years 39-40 $489,869
</TABLE>
The rent is payable in monthly installments on the first day of each month.
Thus, the monthly rent in the first three years of the Trevose Steak & Ale Lease
is $19,860. S&A Restaurant Corp., the parent corporation of the tenant, and
Steak and Ale of Pennsylvania, Inc., the operating company affiliate of the
tenant that is operating the Steak and Ale Restaurant on the Trevose Steak & Ale
Property, have each unconditionally and irrevocably guaranteed the full and
complete performance of the Trevose Steak & Ale Lease.
The tenant has a first right of refusal to acquire the Trevose Steak &
Ale Property during the term of the Trevose Steak & Ale Lease, including any
renewals or extensions. The tenant also has the option to purchase the Trevose
Steak & Ale Property at the following times and option prices:
PERIOD OPTION PRICE
July, 2003 (i) $2,790,000 less (ii) any
insurance or condemnation proceeds
received by the Partnership and not
used for reconstruction of the
property (the "Retained Proceeds")
less (iii) the product of (A) the
Retained Proceeds, (B) 20%, and (C)
a fraction in which the numerator is
the number of years which have
elapsed from the date of the
Partnership's receipt of the
Retained Proceeds to the date of the
closing of the tenant's purchase of
the property, and the denominator is
the number of years which have
elapsed from June 16, 1998 to the
closing of the tenant's purchase of
the property
July, 2008 (i) $2,790,000 less (ii) any
insurance or condemnation proceeds
received by the Partnership and not
used for reconstruction of the
property (the "Retained Proceeds")
less (iii) the product of (A) the
Retained Proceeds, (B) 20%, and (C)
a fraction in which the numerator is
the number of years which have
elapsed from the date of the
Partnership's receipt of the
Retained Proceeds to the date of the
closing of the tenant's purchase of
the property, and the denominator is
the number of years which have
elapsed from June 16, 1998 to the
closing of the tenant's purchase of
the property
S-10
<PAGE> 11
July, 2013 (i) $2,673,750 less (ii) any
insurance or condemnation proceeds
received by the Partnership and not
used for reconstruction of the
property (the "Retained Proceeds")
less (iii) the product of (A) the
Retained Proceeds, (B) 15%, and (C)
a fraction in which the numerator is
the number of years which have
elapsed from the date of the
Partnership's receipt of the
Retained Proceeds to the date of the
closing of the tenant's purchase of
the property, and the denominator is
the number of years which have
elapsed from June 16, 1998 to the
closing of the tenant's purchase of
the property
March 1, 2017 through (i) $2,557,500 less (ii) any
February 28, 2018 insurance or condemnation proceeds
received by the Partnership and not
used for reconstruction of the
property (the "Retained Proceeds")
less (iii) the product of (A) the
Retained Proceeds, (B) 10%, and (C)
a fraction in which the numerator is
the number of years which have
elapsed from the date of the
Partnership's receipt of the
Retained Proceeds to the date of the
closing of the tenant's purchase of
the property, and the denominator is
the number of years which have
elapsed from June 16, 1998 to the
closing of the tenant's purchase of
the property
February, 2028 (i) $2,790,000 less (ii) any
insurance or condemnation proceeds
received by the Partnership and not
used for reconstruction of the
property (the "Retained Proceeds")
less (iii) the product of (A) the
Retained Proceeds, (B) 20%, and (C)
a fraction in which the numerator is
the number of years which have
elapsed from the date of the
Partnership's receipt of the
Retained Proceeds to the date of the
closing of the tenant's purchase of
the property, and the denominator is
the number of years which have
elapsed from June 16, 1998 to the
closing of the tenant's purchase of
the property
February, 2038 (i) $3,022,500 less (ii) any
insurance or condemnation proceeds
received by the Partnership and not
used for reconstruction of the
property (the "Retained Proceeds")
less (iii) the product of (A) the
Retained Proceeds, (B) 30%, and (C)
a fraction in which the numerator is
the number of years which have
elapsed from the date of the
Partnership's receipt of the
Retained Proceeds to the date of the
closing of the tenant's purchase of
the property, and the denominator is
the number of years which have
elapsed from June 16, 1998 to the
closing of the tenant's purchase of
the property
In the event the tenant fails to exercise its option to purchase the property
(i) from March 1, 2017 through February 28, 2018 and fails to extend the lease
for the first renewal term, (ii) during February, 2028 and fails to extend the
lease for the second renewal term, or (iii) during February, 2038, the
Partnership has the right to require the tenant to purchase the property at the
Option Price set forth above.
An affiliate of the Managing General Partner has received an
Acquisition Fee from the Partnership in an amount equal to $93,000, and expects
to receive an additional fee of $23,250 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 Property as provided for in the Partnership Agreement. In addition, S&A
Properties Corp. has paid to the same affiliate a commitment fee equal to
$11,625 as provided for in the Partnership Agreement. S&A Properties Corp. 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 Trevose Steak & Ale Restaurant Lease contains material default
provisions that include, but are not limited to: (i) the failure by S&A
Properties Corp. to make any payment due under the Trevose Steak & Ale Lease
S-11
<PAGE> 12
within ten days after notice from the Partnership; (ii) the failure by S&A
Properties Corp. to observe or perform any of the covenants, conditions or
provisions of the Trevose Steak & Ale Lease within thirty days after notice from
the Partnership; (iii) a default of the tenant under any other lease with the
Partnership that is not cured within thirty days after notice from the
Partnership; and (iv) the making by S&A Properties Corp. of any general
arrangement or general assignment for the benefit of creditors. In the event of
a material default by S&A Properties Corp., the Trevose Steak & Ale Lease
contains remedy provisions which are summarized as follows: (i) the Partnership
may terminate the Trevose Steak & Ale Lease and take possession of the Property,
in which case the Partnership would be entitled to damages incurred by reason of
the material default; (ii) the Partnership may permit S&A Properties Corp. to
remain in possession of the Property, in which case the Trevose Steak & Ale
Lease would continue to be in effect; or (iii) the Partnership may pursue any
other legal remedy available.
Bennigan's Restaurant Lease (Norfolk, Virginia)
On June 16, 1998, the Partnership acquired the land and 6,798 square
foot building compromising a Bennigan's Restaurant located at 5741 E. Virginia
Beach, Norfolk, Virginia (the "Bennigan's Property"). The Bennigan's Property
was purchased from and leased back to S&A Properties Corp. The Partnership
purchased the Bennigan's Property for $1,550,000.
S&A Properties Corp. and the Partnership have entered into a lease (the
"Bennigan's Lease"), which is an absolute net lease, whereby S&A Properties
Corp. is responsible for all expenses related to the Bennigan's Property,
including real estate taxes, insurance, maintenance and repair costs. The
Bennigan's Lease term expires June 15, 2018 with two renewal options of ten
years. Annual rental is payable according to the following schedule:
<TABLE>
<CAPTION>
PERIOD ANNUAL RENTAL
<S> <C>
Lease Years 1-3 $158,880
Lease Years 4-6 $168,413
Lease Years 7-9 $178,518
Lease Years 10-12 $189,229
Lease Years 13-15 $200,582
Lease Years 15-18 $212,617
Lease Years 19-20 $221,122
Lease Years 21-23 $234,389
Lease Years 24-25 $243,765
Lease Years 26-28 $258,391
Lease Years 29-30 $268,726
Lease Years 31-33 $284,850
Lease Years 34-35 $296,244
Lease Years 36-38 $314,019
Lease Years 39-40 $326,579
</TABLE>
The rent is payable in monthly installments on the first day of each month.
Thus, the monthly rent in the first three years of the Bennigan's Lease is
$13,240. S&A Restaurant Corp., the parent corporation of the tenant, and Steak
and Ale of Virginia, Inc., the operating company affiliate of the tenant that is
operating the Bennigan's Restaurant on the Bennigan's Property, have each
unconditionally and irrevocably guaranteed the full and complete performance of
the Bennigan's Lease.
The tenant has a first right of refusal to acquire the Bennigan's
Property during the term of the Bennigan's Lease, including any renewals or
extensions. The tenant also has the option to purchase the Bennigan's Property
at the following times and option prices:
PERIOD OPTION PRICE
July, 2003 (i) $1,860,000 less (ii) any
insurance or condemnation proceeds
received by the Partnership and not
used for reconstruction of the
property (the "Retained Proceeds")
less (iii) the product of (A) the
Retained Proceeds, (B) 20%, and (C)
a fraction in which the numerator is
the number of years which have
elapsed from the date of the
Partnership's receipt of the
Retained Proceeds to the date of the
closing of the tenant's purchase of
the property, and the denominator is
the number of years which have
elapsed from June 16, 1998 to the
closing of the tenant's purchase of
the property
S-12
<PAGE> 13
July, 2008 (i) $1,860,000 less (ii) any
insurance or condemnation proceeds
received by the Partnership and not
used for reconstruction of the
property (the "Retained Proceeds")
less (iii) the product of (A) the
Retained Proceeds, (B) 20%, and (C)
a fraction in which the numerator is
the number of years which have
elapsed from the date of the
Partnership's receipt of the
Retained Proceeds to the date of the
closing of the tenant's purchase of
the property, and the denominator is
the number of years which have
elapsed from June 16, 1998 to the
closing of the tenant's purchase of
the property
July, 2013 (i) $1,782,500 less (ii) any
insurance or condemnation proceeds
received by the Partnership and not
used for reconstruction of the
property (the "Retained Proceeds")
less (iii) the product of (A) the
Retained Proceeds, (B) 15%, and (C)
a fraction in which the numerator is
the number of years which have
elapsed from the date of the
Partnership's receipt of the
Retained Proceeds to the date of the
closing of the tenant's purchase of
the property, and the denominator is
the number of years which have
elapsed from June 16, 1998 to the
closing of the tenant's purchase of
the property
March 1, 2017 through (i) $1,705,000 less (ii) any
February 28, 2018 insurance or condemnation proceeds
received by the Partnership and not
used for reconstruction of the
property (the "Retained Proceeds")
less (iii) the product of (A) the
Retained Proceeds, (B) 10%, and (C)
a fraction in which the numerator is
the number of years which have
elapsed from the date of the
Partnership's receipt of the
Retained Proceeds to the date of the
closing of the tenant's purchase of
the property, and the denominator is
the number of years which have
elapsed from June 16, 1998 to the
closing of the tenant's purchase of
the property
February, 2028 (i) $1,860,000 less (ii) any
insurance or condemnation proceeds
received by the Partnership and not
used for reconstruction of the
property (the "Retained Proceeds")
less (iii) the product of (A) the
Retained Proceeds, (B) 20%, and (C)
a fraction in which the numerator is
the number of years which have
elapsed from the date of the
Partnership's receipt of the
Retained Proceeds to the date of the
closing of the tenant's purchase of
the property, and the denominator is
the number of years which have
elapsed from June 16, 1998 to the
closing of the tenant's purchase of
the property
February, 2038 (i) $2,015,000 less (ii) any
insurance or condemnation proceeds
received by the Partnership and not
used for reconstruction of the
property (the "Retained Proceeds")
less (iii) the product of (A) the
Retained Proceeds, (B) 30%, and (C)
a fraction in which the numerator is
the number of years which have
elapsed from the date of the
Partnership's receipt of the
Retained Proceeds to the date of the
closing of the tenant's purchase of
the property, and the denominator is
the number of years which have
elapsed from June 16, 1998 to the
closing of the tenant's purchase of
the property
In the event the tenant fails to exercise its option to purchase the property
(i) from March 1, 2017 through February 28, 2018 and fails to extend the lease
for the first renewal term, (ii) during February, 2028 and fails to extend the
lease for the second renewal term, or (iii) during February, 2038, the
Partnership has the right to require the tenant to purchase the property at the
Option Price set forth above.
S-13
<PAGE> 14
An affiliate of the Managing General Partner has received an
Acquisition Fee from the Partnership in an amount equal to $62,000, and expects
to receive an additional fee of $15,500 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 Property as provided for in the Partnership Agreement. In addition, S&A
Properties Corp. has paid to the same affiliate a commitment fee equal to $7,750
as provided for in the Partnership Agreement. S&A Properties Corp. 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 Bennigan's Lease contains material default provisions that include,
but are not limited to: (i) the failure by S&A Properties Corp. to make any
payment due under the Bennigan's Lease within ten days after notice from the
Partnership; (ii) the failure by S&A Properties Corp. to observe or perform any
of the covenants, conditions or provisions of the Bennigan's Lease within thirty
days after notice from the Partnership; (iii) a default of the tenant under any
other lease with the Partnership that is not cured within thirty days after
notice from the Partnership; and (iv) the making by S&A Properties Corp. of any
general arrangement or general assignment for the benefit of creditors. In the
event of a material default by S&A Properties Corp., the Bennigan's Lease
contains remedy provisions which are summarized as follows: (i) the Partnership
may terminate the Bennigan's Lease and take possession of the Property, in which
case the Partnership would be entitled to damages incurred by reason of the
material default; (ii) the Partnership may permit S&A Properties Corp. to remain
in possession of the Property, in which case the Bennigan's Lease would continue
to be in effect; or (iii) the Partnership may pursue any other legal remedy
available.
Applebee's Neighborhood Grill & Bar Equipment Lease (Midvale, Utah)
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 $402,000.00. The Applebee's Equipment was acquired from
Captec Financial Group, Inc. ("Captec"), an affiliate of the General Partners,
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 Applebees ( "JMC"), by entering into a lease dated March 1,
1997 (the "JMC Lease") with JMC on the Partnership's standard form of equipment
lease. The terms of the Partnership's standard form of equipment lease provide
that the tenant is responsible for all expenses related to the equipment,
including taxes, insurance, maintenance and repair costs. JMC owns and operates
the Applebee's Neighborhood Grill & Bar restaurant under a franchise agreement.
On March 31, 1997, Captec assigned the JMC Lease to the Partnership,
effective as of February 20, 1997. 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 JMC 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 Equipment for the lesser of fair market value or Forty Thousand Two
Hundred Dollars ($40,200).
JMC paid the first and last month's rent of $13,676 and interim rent in
the amount of $2,051 to the Partnership. An affiliate of the Managing General
Partner received an Acquisition Fee from the Partnership in an amount equal to
$16,080, and expects to receive an additional fee of $4,020 from the Partnership
after leveraging the Applebee's Equipment, as provided for in the Partnership
Agreement. In addition, JMC paid a commitment fee equal to $4,020 to the same
affiliate as provided for in the Partnership Agreement.
Black-Eyed Pea Equipment Lease (Plano, Texas)
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 d/b/a Black-Eyed Pea ("DenAmerica"), by entering into a
lease dated as of April 15, 1997 (the "DenAmerica Lease") with DenAmerica on the
Partnership's standard form of equipment lease. DenAmerica operates and
franchises restaurants under the primary trade names of Denny's and Black-Eyed
Pea.
The 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 its
fair market value at the date of the exercise of the option.
S-14
<PAGE> 15
The Partnership consented to a sublease between DenAmerica and Texas
BEP., LP., a Texas limited partnership, on the same terms and conditions as the
DenAmerica Lease. DenAmerica remains the obligor under the DenAmerica Lease.
DenAmerica paid the first and last month's rent of $11,732 and interim
rent in the amount of $2,346 to the Partnership. An affiliate of the Managing
General Partner received an Acquisition Fee from the Partnership in an amount
equal to $14,000 and expects to receive an additional fee of $3,500 from the
Partnership after leveraging the Black-Eyed Pea Equipment, as provided for in
the Partnership Agreement. In addition, DenAmerica paid a commitment fee equal
to $3,500 to the same affiliate as provided for in the Partnership Agreement.
Jacksonville Shells Seafood Equipment Lease (Jacksonville, Florida)
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"). Shells Seafood owns and operates Shells Seafood
Restaurants.
The Partnership and Shells Seafood entered into the Partnership's
standard form of equipment lease commencing on June 1, 1997 (the "Jacksonville
Shells Seafood Lease"). 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 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 $11,866.
Shells Seafood paid the first and last month's rent of $5,297 and
interim rent in the amount of $441 to the Partnership. An affiliate of the
Managing General Partner received an Acquisition Fee from the Partnership in an
amount equal to $4,746, and expects to receive an additional fee of $1,187 from
the Partnership after leveraging the Jacksonville Shells Equipment, as provided
for in the Partnership Agreement. In addition, Shells Seafood paid a commitment
fee equal to $1,187 to the same affiliate as provided for in the Partnership
Agreement.
Winter Haven Shells Seafood Equipment Lease (Winter Haven, Florida)
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.
The Partnership and Shells Seafood entered into the Partnership's
standard form of equipment lease commencing on June 1, 1997 (the "Winter Haven
Shells Seafood Lease"). 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 $9,346.
Shells Seafood paid the first and last month's rent of $4,172 and
interim rent in the amount of $348 to the Partnership. An affiliate of the
Managing General Partner received an Acquisition Fee from the Partnership in an
amount equal to $3,738, and expect to receive an additional fee of $935 from the
Partnership after leveraging the Winter Haven Shells Equipment, as provided for
in the Partnership Agreement. In addition, Shells Seafood paid a commitment fee
equal to $935 to the same affiliate as provided for in the Partnership
Agreement.
Golden Corral Equipment Lease (Temple Terrace, Florida)
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"). 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 (the "Corral South
4 Lease"). The lease term is 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.
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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. An
affiliate of the Managing General Partner received an Acquisition Fee from the
Partnership in an amount equal to $20,248, and expects to receive an additional
fee of $5,062 from the Partnership after leveraging the Golden Corral Equipment,
as provided for in the Partnership Agreement. 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 Equipment Lease (Pasco, Washington)
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 to Girardi-Riva
Enterprises, Inc., an Arizona corporation dba Arby's Restaurant
("Girardi-Riva"). 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 (the "Girardi-Riva Lease") commencing July 1,
1997. 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 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. An affiliate of the Managing
General Partner received an acquisition fee from the Partnership in an amount
equal to $6,379, and expects to receive an additional fee of $1,595 from the
Partnership after leveraging the Arby's Equipment, as provided for in the
Partnership Agreement. In addition, Girardi-Riva paid a commitment fee equal to
$1,595 to the same affiliate as provided for in the Partnership Agreement.
Breckenridge Brewery & Pub Equipment Lease (Breckenridge, Colorado)
On July 9, 1997, the Partnership purchased restaurant equipment to be
used in the operation of an Breckenridge Brewery & Pub, located at 600 South
Main, Breckenridge, Colorado (the "Breckenridge Equipment") for $791,000. The
Breckenridge Equipment was acquired from, and leased back to BBI Acquisition
Co., a Colorado corporation dba Breckenridge Brewery & Pub ("BBI").
The Partnership and BBI entered into the Partnership's standard form of
equipment lease ("BBI Lease") commencing August 1, 1997. The lease term is 84
months and the minimum annual rent is $163,262 payable in monthly installments
of $13,605.20 on the 1st day of each month. The annual rent remains fixed for
the entire BBI Lease term. All obligations under the BBI Lease are
unconditionally guaranteed by Breckenridge Holding Company, a Colorado
corporation. At the end of the BBI Lease term, upon at least 90 days prior
irrevocable notice to the Partnership, BBI may purchase all of the Breckenridge
Equipment for $1.00.
BBI paid the first and last month's rent of $27,210 and interim rent in
the amount of $10,094 to the Partnership. An affiliate of the Managing General
Partner received an acquisition fee from the Partnership in an amount equal to
$31,640, and expects to receive an additional fee of $7,910 from the Partnership
after leveraging the Breckenridge Equipment, as provided for in the Partnership
Agreement. In addition, BBI paid a commitment fee equal to $7,910 to the same
affiliate as provided for in the Partnership Agreement.
Burger King Equipment Lease (Colonial Heights, Virginia)
On July 25,1997, the Partnership made an initial disbursement of
$30,600 for restaurant equipment to be used in the operation of a Burger King
restaurant, located at 401 Southpark Blvd., Colonial Heights, Virginia ("Burger
King Equipment"). The final disbursement was made on November 1, 1997. The
Burger King Equipment was acquired from various vendors for a total cost of
$282,327 and leased to Virginia QSC, LLC, a Delaware limited liability company
dba Burger King ("Virginia QSC"). Virginia QSC owns and operates the Burger King
restaurant under a franchise agreement.
The Partnership and Virginia QSC have entered into a Progress Payment
Agreement dated July 15, 1997, ("Agreement") whereby the Partnership shall
provide disbursements of down payments and interim payments to pay approved
costs associated with the purchase of the Burger King Equipment. Under the terms
of the Agreement, all of the Burger King Equipment will be delivered and
installed and all disbursements made on or before October 31, 1997. Virginia QSC
paid to the Partnership a daily progress rental payment for each day that any
down payment and/or interim payment remained outstanding. The daily progress
payment was equal to .00031944 times the total amount outstanding and was paid
from July 25, 1997 to October 22, 1997. All of the Burger King Equipment was
delivered, installed, and accepted by Virginia QSC on October 22, 1997.
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<PAGE> 17
The Partnership and Virginia QSC entered into the Partnership's
standard form of equipment lease (the "Virginia QSC Lease") dated July 15, 1997
and amended October 22, 1997 and November 1, 1997. The base lease term is 84
months and will commence on the first or fifteenth of the month following the
final funding under the Agreement. Under the terms of the Virginia QSC Lease,
the minimum annual rent is $58,340 and is payable in monthly installments of
$4,862. The annual rent remains fixed for the entire Virginia QSC Lease term.
All obligations under the Virginia QSC Lease are jointly and severally
unconditionally guaranteed by the following individuals: Justin Hathaway, Steven
Porath and Alan Buford, each of whom is a member of Virginia QSC. At the end of
the Virginia QSC Lease term, upon at least 90 days prior irrevocable notice to
the Partnership, Virginia QSC may purchase all of the Burger King Equipment for
$1.00.
Virginia QSC paid the first and last month's rent of $9,723 and interim
rent of $1,094 to the Partnership at final funding. An affiliate of the Managing
General Partner received an acquisition fee from the Partnership in an amount
equal to $11,293, and expects to receive an additional fee of $2,823 from the
Partnership after leveraging the Burger King Equipment, as provided for in the
Partnership Agreement. Virginia QSC paid a commitment fee equal to $3,100 to the
same affiliate, as provided for in the Partnership Agreement.
KFC Equipment Lease (Greensburg, Pennsylvania)
On October 15,1997, the Partnership acquired restaurant equipment to be
used in the operation of a KFC restaurant, located at 975 E. Pittsburg Street,
Greensburg, Pennsylvania (the "KFC Equipment"). The KFC Equipment was acquired
from various vendors for a total cost of $231,021 and leased to Morgan's
Restaurants of Pennsylvania, Inc., a Pennsylvania corporation dba KFC Restaurant
("Morgan's"). Morgan's owns and operates the KFC restaurant under a franchise
agreement.
The Partnership and Morgan's entered into the Partnership's standard
form of equipment lease (the "Morgan's Lease") commencing on October 15, 1997.
The lease term is 84 months and the minimum annual rent is $45,188 payable in
monthly installments of $3,766 on the 15th day of each month. The annual rent
remains fixed for the entire Morgan's Lease term. All obligations under the
Morgan's Lease are unconditionally guaranteed by Morgan's Foods, Inc., an Ohio
corporation and parent company of Morgan's. At the end of the Morgan's Lease
term, upon at least 90 days prior irrevocable notice to the Partnership,
Morgan's may purchase all of the KFC Equipment for $1.00.
Morgan's paid the first and last month's rent of $7,531 to the
Partnership. An affiliate of the Managing General Partner received an
acquisition fee from the Partnership in an amount equal to $9,241 and expects to
receive an additional fee of $2,310 from the Partnership after leveraging the
KFC Equipment, as provided for in the Partnership Agreement. In addition,
Morgan's paid a commitment fee equal to $2,310 to the same affiliate as provided
for in the Partnership Agreement.
Arby's Equipment Lease (Kennewick, Washington)
On March 31, 1998, the Partnership acquired for $240,256, effective
January 26, 1998, restaurant equipment to be used in the operation of an Arby's
restaurant, located at 7500 W. Canal Drive, Kennewick, Washington (the
"Kennewick Equipment"). The Kennewick Equipment was acquired from Captec, which
purchased the Kennewick Equipment from various vendors for a total cost of
$240,256 and leased it to Girardi-Riva Enterprises, Inc., an Arizona corporation
dba Arby's Restaurant ("Girardi-Riva"), by entering into a lease commencing
February 1, 1998 with Girardi-Riva on the Partnership's standard form of
equipment lease (the "Kennewick Girardi-Riva Lease"). Girardi-Riva owns and
operates the Arby's restaurant under a franchise agreement.
On March 31, 1998, Captec assigned the Kennewick Girardi-Riva Lease to
the Partnership, effective as of January 26, 1998. The lease term is 84 months
and the minimum annual rent is $49,300 payable in monthly installments of $4,108
on the 1st day of each month. The annual rent remains fixed for the entire
Kennewick Girardi-Riva Lease term. All obligations under the Kennewick
Girardi-Riva Lease are jointly and severally unconditionally guaranteed by
Richard Riva, Sharri Riva, Thomas Girardi and Kathy Girardi.
At the end of the Kennewick Girardi-Riva Lease term, upon at least 45
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 month's rent of
$4,108 and interim rent in the amount of $822 to the Partnership. An affiliate
of the Managing General Partner received an acquisition fee from the Partnership
in an amount equal to $9,610, and expects to receive an additional fee of $2,403
from the Partnership after leveraging the Arby's Equipment, as provided for in
the Partnership Agreement. In addition, Girardi-Riva paid a commitment fee equal
to $2,500 to the same affiliate as provided for in the Partnership Agreement.
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KFC Equipment Lease (13 locations in New York, New Hampshire, and Massachusetts)
On March 31, 1998, the Partnership acquired for $278,753, effective
January 5, 1998, point of sale equipment (the "POS Equipment") to be used in the
operation of 13 KFC restaurants, located at the following locations:
600 Columbia Turnpike 274 Delaware Ave.
E. Greenbush, New York Albany, New York
1235 Central Street 109 State Street
Albany, New York Schenectedy, New York
5 Kunker Ave. 10 Crystal Ave.
Latham, New York Derry, New Hampshire
1712 State Street 4 Sandy Road
Schenectedy, New York Ayer, Massachusetts
65 Congress Street 481 South Broadway
Troy, New York Salem, New Hampshire
1573 Western Ave. 447 Main Street
Albany, New York Yarmouth, Massachusetts
112 Broadway
Albany, New York
The POS Equipment was acquired from Captec, which purchased the Kennewick
Equipment from various vendors for a total cost of $278,753 and leased it to J's
Four, Inc., a Massachusetts corporation dba KFC ("J's Four"), by entering into a
lease commencing February 1, 1998 with J's Four on the Partnership's standard
form of equipment lease (the "J's Four Lease"). J's Four owns and operates the
KFC restaurants under a franchise agreement.
On March 31, 1998, Captec assigned the J's Four Lease to the
Partnership, effective as of January 5, 1998. The lease term is 60 months and
the minimum annual rent is $70,580 payable in monthly installments of $5,882 on
the 1st day of each month. The annual rent remains fixed for the entire J's Four
Lease term.
At the end of the J's Four Lease term, upon at least 45 days prior
irrevocable notice to the Partnership, J's Four may purchase all of the KFC
Equipment for $1.00. J's Four paid the first month's rent of $5,882 and interim
rent in the amount of $441 to the Partnership. An affiliate of the Managing
General Partner received an acquisition fee from the Partnership in an amount
equal to $11,150, and expects to receive an additional fee of $2,788 from the
Partnership after leveraging the KFC Equipment, as provided for in the
Partnership Agreement. In addition, J's Four paid a commitment fee equal to
$2,788 to the same affiliate as provided for in the Partnership Agreement.
Champps Equipment Lease (Schaumberg, Illinois)
On March 31, 1998, the Partnership acquired for $853,551 restaurant
equipment to be used in the operation of an Champps restaurant, located at 955
Golf Road, Schaumberg, Illinois (the "Schaumberg Champps Equipment"). The
Schaumberg Champps Equipment was acquired from Captec, which purchased the
Schaumberg Champps Equipment from various vendors for a total cost of $853,551
and leased it to Champps Americana, Inc., a Minnesota corporation dba Champps
("Champps Americana"), by entering into a lease commencing April 1, 1998 with
Champps Americana on the Partnership's standard form of equipment lease (the
"Schaumberg Champps Americana Lease"). Champps Americana owns and operates the
Champps restaurant under a franchise agreement.
On March 31, 1998, Captec assigned the Schaumberg Champps Americana
Lease to the Partnership. The lease term is 60 months and the minimum annual
rent is $211,817 payable in monthly installments of $17,651 on the 1st day of
each month. The annual rent remains fixed for the entire Schaumberg Champps
Americana Lease term. All obligations under the Schaumberg Champps Americana
Lease are jointly and severally unconditionally guaranteed by Unique Casual
Restaurants, Inc., a Delaware corporation, and Champps Entertainment, Inc., a
Minnesota corporation.
At the end of the Schaumberg Champps Americana Lease term, upon at
least 45 days prior irrevocable notice to the Partnership, Champps Americana may
purchase the Schaumberg Champps Equipment for $85,355 or the fair market value,
whichever is less. At closing, Champps Americana paid the first and last month's
rent of $34,142. An affiliate of the Managing General Partner received an
acquisition fee from the Partnership in an amount equal to $34,142, and expects
to receive an additional fee of $8,536 from the Partnership after leveraging the
Schaumberg Champps Equipment, as provided for in the Partnership Agreement. In
addition, Champps
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Americana paid a commitment fee equal to $8,535 to the same affiliate as
provided for in the Partnership Agreement.
Champps Equipment Lease (Livonia, Michigan)
On June 15, 1998, the Partnership acquired restaurant equipment to be
used in the operation of a Champps Restaurant, located at 19470 Haggerty Road,
Livonia, Michigan (the "Livonia Champps Equipment"), for $1,038,012. The Livonia
Champps Equipment was purchased from Captec, an affiliate of the General
Partners, which purchased the equipment from various vendors for $1,038,012 and
leased it to Champps Americana by entering into a lease (the "Livonia Champps
Americana Lease") commencing July 1, 1998 with Champps Americana on the
Partnership's standard form of equipment lease. Champps Americana owns and
operates the Champps restaurant under a franchise agreement.
On June 15, 1998, Captec assigned the Livonia Champps Americana Lease
to the Partnership. The lease term is 60 months and the minimum annual rent is
$273,048 payable in monthly installments of $22,754 on the first day of each
month. The annual rent remains fixed for the entire Livonia Champps Americana
Lease term. All obligations under the Livonia Champps Americana Lease are
jointly and severally unconditionally guaranteed by Unique Casual Restaurants,
Inc., a Minnesota corporation.
At the end of the Livonia Champps Americana Lease term, upon at least
45 days prior irrevocable notice to the Partnership, Champps Americana may
purchase the Livonia Champps Equipment for the lesser of (i) $100,000 or (ii)
its fair market value. At closing, Champps Americana paid the first and last
month's rent of $45,508. An affiliate of the Managing General Partner received
an acquisition fee from the Partnership in an amount equal to $41,521, and
expects to receive an additional fee of $10,380 from the Partnership after
leveraging the Livonia Champps Equipment, as provided for in the Partnership
Agreement. In addition, Champps Americana paid a commitment fee equal to $10,380
to the same affiliate as provided for in the Partnership Agreement.
Property and Equipment Acquisitions-General
With respect to each of the Properties, an affiliate of the Managing
General Partner (i) 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 Property is located, (ii) analyzed
demographic, geographic and market diversification data for the area in which
each Property is located and reviewed an independent MAI appraisal of each
Property and the analysis regarding comparable properties contained therein, and
(iii) negotiated the purchase price.
The Partnership purchased each Property and Equipment package with cash
from Offering proceeds. It is anticipated that each such Property and Equipment
package will be leveraged as provided for in the Prospectus. However, the
Partnership presently does not have a financing commitment. With respect to each
of the Properties and the Equipment packages, the General Partners believe that
the amount of insurance carried by each tenant is adequate.
Secured Loan to G.C. of Charlottesville, Inc.
On April 30, 1998, the Partnership acquired a $398,924 secured
promissory note (the "Secured Note") from G.C. of Charlottesville, Inc. The
Secured Note is secured by a security interest in restaurant equipment to be
used in the operation of a Golden Corral Restaurant located at 1185 Seminole
Trail, Charlottesville, Virginia (the "Charlottesville Golden Corral
Equipment"). The Charlottesville Golden Corral Equipment was purchased from
various vendors for a total cost of $398,924. G.C. of Charlottesville, Inc. owns
and operates the Golden Corral Restaurant under a franchise agreement.
The Secured Note bears interest at 9.1% and is payable in 84 monthly
installments of $6,439 payable on the 1st day of each month commencing on June
1, 1998. Prepayment of the Secured Note is prohibited until April 24, 2000.
Thereafter, the borrower may prepay the entire balance of the Secured Note,
subject to the payment of a yield maintenance premium to reimburse the
Partnership for the difference between the 9.1% interest rate in the Secured
Note and the yield on a United States Treasury obligation of a constant maturity
rate maturing closest in time but prior to the maturity date of the Secured
Note.
An affiliate of the Managing General Partner received an Acquisition
Fee from the Partnership in an amount equal to $15,957. In addition, Corral
South 4 paid a commitment fee equal to $4,000 to the same affiliate as provided
for in the Partnership Agreement.
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<PAGE> 20
RISK FACTORS
The following paragraph is added to the end of the section of the
Prospectus entitled "Risk Factors Litigation against General Partner and
Possible Adverse Effect on Net Worth":
On January 31, 1997, the Court's decision was reversed on
appeal by the Michigan Court of Appeals. The plaintiffs appealed the
Court of Appeals decision to the Michigan Supreme Court, which denied
such appeal.
PRIOR OFFERINGS
The following text has been added to the first paragraph of this
Section of the Prospectus:
On January 29, 1997, effective as of January 1, 1997, Captec L.P. II
sold all of its equipment packages and real estate properties to an
Affiliate of the Managing General Partner for $2,760,000 in a
transaction that was consented to by a majority in interest of the
limited partners. Simultaneously with such sale, Captec L.P. II paid
all of its expenses and distributed its remaining $2,000,569 to its
limited partners.
PLAN OF DISTRIBUTION
The subsections of this section of the Prospectus titled "General",
"Compensation", and "Indemnification" are amended, effective as of the date of
this Prospectus Supplement, to read in their entirety as follows:
GENERAL
The Offering is being made on a "best efforts, part or none" basis
through broker-dealers who are members of the National Association of Securities
Dealers, Inc. (the "Participating Dealers") and Captec Securities Corporation,
which will act as Dealer-Manager. The individual General Partner and the
corporate General Partner are each an Affiliate of the Dealer-Manager. The
Offering is conditioned upon sale of the Minimum Number of Units prior to the
close of business one year after the effective date of this Prospectus (the
"Termination Date"). Since the Minimum Number of Units was sold on March 5,
1997, prior to the Termination Date, the General Partners may extend the
Offering to a date not later than the earlier to occur: (i) sale of all Units
offered hereby; or (ii) two years after the effective date of this Prospectus
(the "Extended Termination Date"). After the Minimum Number of Units was sold,
the Partnership has and will schedule interim closings at which subscribers will
be admitted as Limited Partners on at least a monthly basis.
The Offering is made pursuant to agreements among the General Partners,
the Partnership, the Dealer-Manager and the Participating Dealers pursuant to
which the Participating Dealers are acting as agents of the Partnership for the
purpose of offering and selling Units. The Units are being offered on a "best
efforts, part or none" basis, which means that Participating Dealers are not
obligated to purchase any Units but are required only to use their best efforts
to sell Units to investors.
COMPENSATION
Subject to the provisions for reduced selling commissions, the
Partnership will pay selling commissions equal to 8.0% of Gross Proceeds to the
Dealer-Manager for Units sold by it. The Dealer-Manager may reallow fees of up
to 8% to the Participating Dealers with respect to Units sold by them. The
General Partners also paid an additional selling commission equal to 1% of Gross
Proceeds to Participating Dealers from Units sold until the Minimum Number of
Units was sold. The Dealer-Manager may also receive up to 0.5% of Gross Proceeds
as reimbursement for bona fide due diligence expenses. The Dealer-Manager may
reallow to any Participating Dealer or its registered representatives all or any
portion of this fee based upon the bona fide due diligence expenses incurred.
The General Partners will receive a Non-Accountable Expense Allowance in an
amount equal to 2% of Gross Proceeds to cover certain expenses relating to the
offer and sale of Units (including the additional 1% selling commission payable
until the Minimum Number of Units is sold). In no event will sales commissions,
the Non-Accountable Expense Allowance, Organization and Offering Expenses,
wholesaling salaries and expenses and expenses of sales seminars, exceed in the
aggregate, 13% of Gross Proceeds.
The General Partners, their Affiliates and Participating Dealers may
purchase up to 10% of the Units, net of any selling commissions but otherwise on
the same terms as purchasers who are not Affiliates. Purchase of Units by the
General Partners and their Affiliates will not be counted for purposes of
reaching the Minimum Number of Units. Any purchases by the General Partners will
be for investment purposes only and not with a view toward resale. Investors
will not have a right to withdraw and receive a return of their contributions.
Neither the General Partners nor any of their Affiliates will directly or
indirectly pay or award any compensation to a third party engaged as an
investment adviser as inducement to advise favorably toward investment in the
Partnership. In
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<PAGE> 21
addition, the selling commissions to the Dealer-Manager and Participating
Dealers will be reduced on sales of 501 or more Units in accordance with the
following Schedule:
<TABLE>
<CAPTION>
Dollar Amount Purchased Investor's
---------------------- ----------
Purchase Price Selling Commission Per Unit
-------------- ---------------------------
Per Unit Percent Dollar Amount
-------- ------- -------------
<S> <C> <C> <C>
$1,000 - $500,000 $1,000 8.0% $80.00
$501,000 - $750,000 $980 6.0% $60.00
$751,000 - $1,000,000 $970 5.0% $50.00
$1,001,000 - $1,500,000 $960 4.0% $40.00
$1,501,000 - $2,000,000 $950 3.0% $30.00
$2,001,000 and above $940 2.0% $20.00
</TABLE>
The purchaser of such Units will be credited with such reduced
commission and the net proceeds to the Partnership will not be affected by the
discount. Subscriptions may be combined for purposes of determining the volume
discounts applicable to subscriptions from a purchaser.
Investors who, in connection with their purchase of Units, have engaged
the services of a registered investment advisor with whom the Investor has
agreed to pay a fee for investment advisory services in lieu of normal
commissions based on the volume of securities sold may agree with the
Dealer-Manager and the Participating Dealer selling such Units to reduce the
amount of selling commissions payable with respect to such sale to zero. The
proceeds to the Partnership will not be affected by eliminating the commissions
payable in connection with sales to Investors purchasing through such investment
advisors. All such sales must be made through registered broker-dealers.
INDEMNIFICATION
The Partnership, General Partners, and Dealer-Manager have agreed to
indemnify the Participating Dealers and the Participating Dealers have agreed to
indemnify the General Partners, Dealer-Manager, and the Partnership against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Act"). In the opinion of the Securities and Exchange Commission,
indemnification for liabilities under the Act is against public policy and
therefore unenforceable. The Participating Dealers may be deemed to be
underwriters as that term is defined in the Act.
AMENDMENT TO THE AGREEMENT OF LIMITED
PARTNERSHIP OF CAPTEC FRANCHISE
CAPITAL PARTNERS IV
Sections 9, 12, 14, and 15 of the Partnership's Agreement of Limited
Partnership included as Exhibit B to the Prospectus (the "Partnership
Agreement"), have been corrected and amended, consistent with the disclosures in
the Prospectus as set forth below:
9. COMPENSATION TO THE GENERAL PARTNERS AND THEIR AFFILIATES
The second sentence of Section 9.7 of the Partnership Agreement has
been amended so as to read in its entirety as follows:
Such fees shall accrue and be subordinated to receipt by the Limited
Partners of aggregate Distributions equal to a 10.5% per annum
cumulative, non-compounded return on their Adjusted Investment plus
aggregate distributions of Net Sale or Refinancing Proceeds equal to
100% of their Original Contributions.
12. TRANSFERABILITY OF UNITS
Section 12.1.4 of the Partnership Agreement has been amended so as to
read in its entirety as follows:
12.1.4 if the Managing General Partner determines in its sole
discretion that such assignment would prevent the Partnership from
being able to satisfy either the 2% or 5% "safe harbors" contained in
Service Advance Notice 88-75 or in corresponding regulations or the
Partnership has received an opinion of counsel or a favorable service
ruling that such transfer would result in the Partnership being
classified as a "publicly-traded partnership" for federal income tax
purposes.
S-21
<PAGE> 22
14. RIGHTS, AUTHORITY, POWERS, RESPONSIBILITIES AND DUTIES OF THE MANAGING
GENERAL PARTNER
The first sentence of Section 14.4.5 has been amended so as to permit
the Partnership to only enter into co-tenancy arrangements, joint ventures or
general partnerships with non-affiliates that own one or more Assets, and
Section 14.4.5 now reads in its entirety as follows:
cause the Partnership to invest in any Asset with unaffiliated parties
that own one or more Assets through co-tenancy arrangements, joint
ventures or general partnerships except on substantially the same terms
and conditions (although not necessarily the same percentage interest)
as such unaffiliated parties; provided, however, that no such
investment shall be entered into by the Partnership (i) if it involves
the payment of duplicative property management or other fees which
would have the effect of circumventing any of the restrictions on and
prohibited transactions involving conflicts of interest contained in
this Partnership Agreement, and (ii) unless the Partnership acquires a
controlling interest in such joint venture or partnership.
15. RIGHTS AND POWERS OF THE LIMITED PARTNERS
The last sentence of Section 15.3 has been revised so as to remove the
General Partners' right to vote the Units of those Limited Partners that do not
submit a vote within a certain time period, and Section 15.3 reads in its
entirety as follows:
15.3 Consent Without a Meeting. The Managing General Partner may and,
upon receipt of a request in writing signed by ten percent (10%) or
more in interest of the Limited Partners, the Managing General Partner
shall, submit any matter upon which the Limited Partners are entitled
to act, to the Limited Partners for a vote by written consent without a
meeting. For purposes of obtaining a written vote under this
Partnership Agreement, the Managing General Partner may require a
written response within a specified time, but not less than fifteen
(15) days and no more than sixty (60) days from receipt of said
request.
PROPOSED ASSIGNMENT OF GENERAL PARTNERSHIP INTERESTS
In a recently filed registration statement with the Commission for its
initial public offering, Captec Net Lease Realty, Inc., an Affiliate of the
General Partners, stated that it will become the sole general partner of the
Partnership by acquiring the general partnership interests in the Partnership
held by the General Partners. However, the transfer of such general partnership
interests is subject to the approval of the Limited Partners by Majority Vote,
and the Limited Partners will receive notice of and an opportunity to approve
any transfer of the general partnership interests.
FINANCIAL STATEMENTS
The financial statements of the Partnership and Managing Partner set
forth on pages F-1 to F-7 of the Prospectus are replaced in their entirety by
the financial statements on the following pages.
S-22
<PAGE> 23
INDEX TO FINANCIAL STATEMENTS
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV PAGE
REPORT OF INDEPENDENT ACCOUNTANTS.....................................F-1
FINANCIAL STATEMENTS:
Balance Sheet ................................................F-2
Statement of Operations.......................................F-3
Statement of Changes in Partners' Capital.....................F-4
Statement of Cash Flows.......................................F-5
Notes to Financial Statements.................................F-6
CAPTEC FRANCHISE CAPITAL CORPORATION IV PAGE
REPORT OF INDEPENDENT ACCOUNTANTS....................................F-11
FINANCIAL STATEMENTS:
Balance Sheet ...............................................F-12
Statement of Operations......................................F-13
Statement of Changes in Stockholders' Equity.................F-14
Statement of Cash Flows......................................F-15
Notes to Financial Statements................................F-16
F-i
<PAGE> 24
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Captec Franchise Capital Corporation IV
Managing General Partner of
Captec Franchise Capital Partners L.P. IV:
We have audited the accompanying balance sheet of Captec Franchise Capital
Partners L.P. IV as of December 31, 1997 and 1996 and the related statements of
operations, changes in partners' capital, and cash flows for the years then
ended. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
financial statement amounts and disclosures. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Captec Franchise Capital
Partners L.P. IV as of December 31, 1997 and 1996, and the results of its
operations, changes in partners' capital and its cash flows for the years then
ended, in conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand
Detroit, Michigan
March 14, 1998
F-1
<PAGE> 25
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
BALANCE SHEET
December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 5,008,194 $ -
Investment in property under leases:
Operating leases, net 5,805,870 -
Financing leases, net 2,838,663 -
Prepaid expenses - 339
Accounts receivable 3,487 -
Unbilled rent 25,983 -
Due from related parties 49,381 -
----------- ----------
Total asset $13,731,578 $ 339
=========== ==========
LIABILITIES & PARTNERS' CAPITAL
Liabilities:
Accounts payable $ 49,375 $ -
Due to related parties 129,683 -
Overdraft - 39
----------- ----------
Total liabilities 179,058 39
----------- ----------
Partners' Capital:
Limited partners' capital accounts 13,547,060 100
General partners' capital accounts 5,460 200
----------- ----------
Total partners' capital 13,552,520 300
----------- ----------
Total liabilities & partners' capital $13,731,578 $ 339
=========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-2
<PAGE> 26
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
STATEMENT OF OPERATIONS
for the years ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Operating revenue:
Rental income $295,367 $ -
Finance income 201,314 -
-------- --------
Total operating revenue 496,681 -
-------- --------
Operating costs and expenses:
Depreciation 32,988 -
General and administrative 31,296 -
-------- --------
Total operating costs and expenses 64,284 -
-------- --------
Income from operations 432,397 -
-------- --------
Other income:
Interest income 92,048 -
Other 1,598 -
-------- --------
Total other income 93,646 -
-------- --------
Net income 526,043 -
Net income allocable to general partners 5,260 -
-------- --------
Net income allocable to limited partners $520,783 $ -
======== ========
Net income per limited partnership unit $ 74.10 $ -
======== ========
Weighted average number of limited partnership
units outstanding 7,028 -
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE> 27
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
for the years ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
Limited Limited General Total
Partners' Partners' Partners' Partners'
Units Accounts Accounts Capital
<S> <C> <C> <C> <C>
Balance July 30, 1996 - $ 100 $ 200 $ 300
Net income - - - -
------- ----------- ----------- ------------
Balance, December 31, 1996 - 100 200 300
Issuance of 15,392 limited partnership
units, net 15,392 13,385,077 13,385,077
Distributions - ($23.32 per unit) - (358,900) - (358,900)
Net income - 520,783 5,260 526,043
-------- ------------ ----------- ------------
Balance, December 31, 1997 15,392 $ 13,547,060 $ 5,460 $ 13,552,520
======== ============ =========== ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE> 28
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
STATEMENT OF CASH FLOWS
for the year ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 526,043 $ -
Adjustments to net income:
Depreciation 32,987 -
Decrease (increase) in prepaids 339 (339)
Increase in unbilled rent (25,983) -
Increase in accounts receivable (3,487) -
Increase in accounts payable 49,336 39
------------ ------------
Net cash provided by operating activities 579,235 (300)
------------ ------------
Cash flows from investing activities:
Purchase of real estate for operating leases (5,838,857) -
Purchase of equipment for financing leases (3,051,499) -
Reduction of net investment in financing leases 212,836 -
------------ ------------
Net cash used in investing activities (8,677,520) -
------------ ------------
Cash flows from financing activities:
(Increase) in due from related parties (49,381) -
Increase in due to related parties 129,683 -
Issuance of limited partnership units 15,380,902 -
Offering costs (1,995,825) -
Distributions to limited partners (358,900) -
------------ ------------
Net cash provided by financing activities 13,106,479 -
------------ ------------
Net (decrease) increase in cash and cash equivalents 5,008,194 (300)
Cash and cash equivalents, beginning of period - 300
------------ ------------
Cash and cash equivalents, end of period $ 5,008,194 $ -
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE> 29
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 organized 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 chain franchised fast food and family
style restaurants, as well as other 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 31, 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 December
31, 1997, the Partnership had accepted subscriptions for 15,392 Units,
and funds totaling $15,380,902.
The initial Limited Partner of the Partnership was Patrick L. Beach.
As of December 31, 1996, Mr. Beach had contributed $100 to the capital of
the Partnership and had received 0.1 Unit. During 1997, upon admission to
the Partnership of other Limited Partners, the initial Limited Partner
may withdraw from the Partnership, and his 0.1 Unit shall be redeemed for
$100.
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. CASH EQUIVALENTS: The Partnership considers all highly liquid
investments purchased with an original maturity of three months or less to be
cash equivalents.
F-6
<PAGE> 30
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
NOTES TO FINANCIAL STATEMENTS
1. THE PARTNERSHIP AND ITS SIGNIFICANT ACCOUNTING PRINCIPLES, CONTINUED:
b. 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.
c. 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).
d. 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.
e. 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.
f. 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.
g. 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.
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%) per annum
cumulative, non-compounded 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%) per annum cumulative, non-compounded return
on their Adjusted Investment plus return of the original contributions to
the limited partners.
Distributions of cash flow from operations are paid quarterly in
arrears.
3. RELATED PARTY TRANSACTIONS AND AGREEMENTS:
Organization and offering expenses, excluding selling commissions,
are paid initially by the General Partners and/or their affiliates and
are 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 Sponsor and/or its
affiliates are 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 and/or its affiliates were reimbursed
$710,310 during the twelve month period ended December 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 $1,223,946
of selling commissions paid or incurred during the twelve month period
ended December 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.
F-7
<PAGE> 31
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 $341,936 in
acquisition fees during the twelve month period ended December 31, 1997,
and expects to pay an additional $68,351 once the Partnership has
obtained the maximum leverage. Of this amount $117,365 was capitalized
into net investment in financing leases and $224,571 was capitalized into
land and building subject to operating 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, non-compounded return of ten percent (10%) per annum on their
Adjusted Investment. There was $6,297 paid or incurred to the General
Partners during the twelve month period ended December 31, 1997.
F-8
<PAGE> 32
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 twelve month period ended December 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, non-compounded return of ten and one-half percent
(10.5%) per annum, cumulative non-compounded preferred return on their
Adjusted Investment capital plus distributions of sale or refinancing
proceeds equal to 100% of their original contributions. There were no
real estate liquidations during the twelve month period ended December
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 December 31, 1997 is
comprised of the following:
<TABLE>
<CAPTION>
<S> <C>
Land $ 2,676,582
Building and improvements 3,162,276
-------------
5,838,858
Less accumulated depreciation (32,988)
-------------
Total $ 5,805,870
=============
</TABLE>
The following is a schedule of future minimum lease payments to be
received on the operating leases as of December 31, 1997.
<TABLE>
<CAPTION>
<S> <C>
1998 $ 607,570
1999 607,570
2000 611,235
2001 616,366
2002 632,662
Thereafter 6,180,051
-------------
Total $ 9,255,454
=============
</TABLE>
F-9
<PAGE> 33
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 December 31, 1997 is
comprised of the following:
<TABLE>
<CAPTION>
<S> <C>
Minimum lease payments to be received $ 3,714,592
Estimated residual value 81,372
------------
Gross investment in financing leases 3,795,964
Less unearned income (957,301)
Net investment in financing leases $ 2,838,663
============
</TABLE>
The following is a schedule of future minimum lease payments to be
received on the financing leases as of December 31, 1997:
<TABLE>
<CAPTION>
<S> <C>
1998 $ 640,331
1999 639,982
2000 639,982
2001 639,982
2002 514,635
Thereafter 639,680
------------
Total $ 3,714,592
============
</TABLE>
6. SUBSEQUENT EVENT:
Based upon the results of operations for the three month period ended
December 31, 1997, the Partnership will distribute $350,000, of which
$284,706 was distributed to its limited partners on January 15, 1998 and
the remaining $65,294 will be distributed to those limited partners who
elected to receive distributions on a monthly basis on February 13, 1998
and March 13, 1998.
F-10
<PAGE> 34
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Captec Franchise Capital Corporation IV:
We have audited the accompanying balance sheet of Captec Franchise Capital
Corporation IV as of December 31, 1997 and 1996, and the related statements of
operations, changes in stockholders' equity, and cash flows for the years then
ended. These financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free from
material misstatement. An audit includes examining, on a test basis, evidence
supporting financial statement amounts and disclosures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Captec Franchise Capital
Corporation IV as of December 31, 1997 and 1996, and the results of its
operations, changes in stockholders' equity and its cash flows for the years
then ended, in conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand
Detroit, Michigan
March 14, 1998
F-11
<PAGE> 35
CAPTEC FRANCHISE CAPITAL CORPORATION IV
BALANCE SHEET
December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
ASSETS
<S> <C> <C>
Cash $ 1,748 $ 1,407
Investment in partnership 2,730 100
Reimbursable organizational & offering expenses, net 15,594 29,048
Receivable from affiliate 19,766 1,697
Other assets 15,005 16,038
------- -------
Total assets $54,843 $48,290
======= =======
LIABILITIES & STOCKHOLDERS' EQUITY
Total liabilities:
Accounts payable $51,213 $37,022
Payable to affiliates - 10,268
Income tax payable 894 -
------- -------
Total liabilities 52,107 47,290
------- -------
Stockholders' equity:
Common stock, no par value; 60,000 shares authorized,
1,000 shares issued and outstanding - -
Paid-in capital 1,000 1,000
Retained earnings 1,736 -
------- -------
Total stockholders' equity 2,736 1,000
------- -------
Total liabilities & stockholders' equity $54,843 $48,290
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-12
<PAGE> 36
CAPTEC FRANCHISE CAPITAL CORPORATION IV
STATEMENT OF OPERATIONS
for the years ended December 31, 1997 and 1996
<TABLE>
<S> <C> <C>
Investment income from partnership $2,630 $ -
------ ----------
Net income before taxes 2,630 -
Income tax provision 894 -
------ ----------
Net income $1,736 $ -
------ ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-13
<PAGE> 37
CAPTEC FRANCHISE CAPITAL CORPORATION IV
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
for the years ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
<S> <C> <C> <C> <C>
Balance, January 1, 1996 $ - $ 1,000 $ - $ 1,000
Net Income - - - -
----------- ----------- ----------- ----------
Balance, December 31, 1996 - 1,000 - 1,000
Net income - - 1,736 1,736
----------- ----------- ----------- ----------
Balance, December 31, 1997 $ - $ 1,000 $ 1,736 $ 2,736
=========== =========== =========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-14
<PAGE> 38
CAPTEC FRANCHISE CAPITAL CORPORATION IV
STATEMENT OF CASH FLOWS
for the years ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,736 $ -
Adjustments to net income:
Undistributed income from partnership (2,630) (100)
Increase in income tax payable 894 -
Decrease (increase) in other assets 1,033 (16,038)
Increase in accounts payable 14,191 37,022
-------- --------
Net cash provided by operating activities 15,224 20,884
-------- --------
Cash flows from financing activities:
Issuance of common stock - 1,000
Decrease in reimbursable offering expense and payable to affiliate, net (14,883) (20,477)
-------- --------
Net cash provided by financing activities (14,883) (19,477)
-------- --------
Net increase (decrease) in cash 341 1,407
Cash, beginning of year 1,407 -
-------- --------
Cash, end of period $ 1,748 $ 1,407
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-15
<PAGE> 39
CAPTEC FRANCHISE CAPITAL CORPORATION IV
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION:
Captec Franchise Capital Corporation IV (the "Corporation") is a
Michigan corporation organized on July 22, 1996. The Corporation was
formed for the purpose of serving as the managing general partner of
Captec Franchise Capital Partners L.P. IV (the "Partnership"), a Delaware
limited partnership.
The Corporation is a wholly owned subsidiary of Captec Financial
Group, Inc. ("Captec"). Captec has paid $1,000 in cash to the Corporation
for the purchase of 1,000 shares of common stock of the Corporation. As a
general partner of the Partnership, the Corporation has contributed $100
to the capital of the Partnership. Patrick L. Beach is also a general
partner of the Partnership and is the Chairman of the Board of Directors,
President and Chief Executive Officer of the Corporation and Captec. Each
general partner has a 0.5 percent share in the Partnership's net income
or loss.
The Partnership undertook a public offering of limited partnership
interests ("Units") in 1997. A minimum of 2,000 Units and a maximum of
30,000 Units, priced at $1,000 per Unit, will be offered on a "best
efforts, part or none" basis. As of December 31, 1997, the Partnership
had accepted subscriptions for 15,380.902 Units and funds totaling
$15,380,902.
Affiliates of the Corporation are expected to provide various
services to the Partnership and will be paid certain fees for such
services as specified in the Partnership Agreement.
Following is a summary of the Corporation's significant accounting
principles:
a. INCOME TAXES: The Corporation reports its income for federal
income tax purposes in the consolidated tax return of Captec.
Income taxes are allocated by Captec to the Corporation on the
separate return basis. The Corporation's income tax expense
reflected in the statement of operations and that computed by
applying the statutory federal income tax rate are approximately
equal. Deferred income taxes, for financial reporting purposes,
are not material.
b. 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.
c. RECLASSIFICATIONS: Certain 1996 financial statement amounts have
been reclassified to conform to the 1997 presentation.
2. OPERATIONS:
The Corporation's only source of revenue in 1997 and 1996 was from
its investment in the Partnership. See the accompanying financial
statements of the Partnership.
3. RELATED PARTY TRANSACTIONS:
Organization and offering expenses related to the offering of Units
are prepaid by the Corporation and 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). The
Corporation is also reimbursed by the Partnership for a non-accountable
expense allowance in an amount equal to two percent (2%) of the gross
proceeds of the offering. During 1997 the Corporation was reimbursed
indirectly through payments made in the amount of $500,699 by LP IV to
Captec on behalf of the Corporation.
The Corporation receives advances from Captec in order to have
sufficient funds for the prepayment of organization and offering and
non-accountable expenses made on behalf of the Partnership. As the
Corporation receives reimbursements of such prepaid expenses, the
advances to Captec are repaid.
F-16
<PAGE> 40
PRIOR PERFORMANCE TABLES
The Prior Performance Tables set forth in Exhibit A of the Prospectus
are replaced in their entirety by the prior performance tables on the following
pages.
S-15
<PAGE> 41
EXHIBIT A
PRIOR PERFORMANCE TABLES
The information in this Exhibit A contains certain relevant summary
information concerning prior partnerships sponsored by the General Partners and
their Affiliates which have investment objectives similar to the Partnership
(the "Prior Partnerships").
Upon request to the General Partners, the General Partners will
provide, without charge, a copy of the most recent Annual Report on Form 10-K
filed with the Securities and Exchange Commission for Captec Franchise Capital
Partners L.P. II, and Captec Franchise Capital Partners L.P. III, as well as a
copy, for a reasonable fee, of the exhibits filed with such reports.
The investment objectives of the Prior Partnerships, which are
substantially the same as those of the Partnership, generally include
preservation and protection of capital, the generation of increased income and
protection against inflation, capital appreciation, and deferral of taxation of
a portion of cash distributions.
INVESTORS SHOULD NOT CONSTRUE INCLUSION OF THE FOLLOWING TABLES AS
IMPLYING THAT THE PARTNERSHIP WILL HAVE RESULTS COMPARABLE TO THOSE REFLECTED IN
SUCH TABLES. DISTRIBUTABLE CASH FLOW, FEDERAL INCOME TAX DEDUCTIONS, OR OTHER
FACTORS COULD BE SUBSTANTIALLY DIFFERENT. INVESTORS SHOULD NOTE THAT, BY
ACQUIRING UNITS IN THE PARTNERSHIP, THEY WILL NOT BE ACQUIRING ANY INTEREST IN
ANY PRIOR PARTNERSHIPS.
DESCRIPTION OF TABLES
The following Tables are included herein:
Table I - Experience in Raising and Investing Funds
Table II - Compensation to Sponsor
Table III - Operating Results of Prior Programs
Table IV - Results of Completed Programs
Table V - Sales or Disposals of Properties
Unless otherwise indicated in the Tables, all information contained in
the Tables is as of September 30, 1997. The following is a brief description of
the Tables:
Table I - Experience in Raising and Investing Funds
Table I presents information on a percentage basis showing the
experience of the General Partners and their Affiliates in raising and investing
funds for the Prior Partnerships whose offerings closed in the most recent three
years.
The Table sets forth information on the offering expenses incurred and
amounts available for investment expressed as a percentage of total dollars
raised. The Table also shows the percentage of property acquisition cost
leveraged, the date the offering commenced, and the time required to raise funds
for investment.
Table II - Compensation to Sponsor
Table II provides information, on a total dollar basis, regarding
amounts and types of compensation paid to the general partners of the Prior
Partnerships whose offerings closed in the most recent three years.
Table III - Operating Results of Prior Programs
Table III presents a summary of operating results for the period from
inception through September 30, 1997, of the Prior Partnerships whose offerings
closed in the most recent five years.
The Table includes a summary of income or loss of the Prior
Partnerships presented on the basis of generally accepted accounting principles.
The Table also shows cash generated from operations, which represents the cash
generated from operations of the properties of the Prior Partnerships, as
distinguished from cash generated from other sources (special items). The
section of the Table entitled "Special Items": provides information relating
A-1
<PAGE> 42
to cash generated from or used by items which are not directly related to the
operations other properties of the Prior Partnerships, but rather are related to
items of a partnership nature. These items include proceeds from capital
contributions of limited partners, proceeds of mortgage loans, and disbursements
made from these sources of funds, such as acquisition of the properties and
other costs which are related more to the formation of the partnership than to
the actual operations of the properties.
The Table also presents information pertaining to investment income,
returns of capital, cash distributions from operations, sales and refinancing
proceeds expressed in total dollar amounts as well as distributions and tax
results on a per $1,000 investment basis.
Table IV - Results of Completed Programs
Table IV presents a summary of results of completed programs for the
period from inception through September 30, 1997, of the Prior Partnerships
whose offerings closed in the most recent five years.
The Table presents information on the basis of generally accepted
accounting principles and of cash. These items include investment income,
returns of capital, cash distributions from operations, sales and refinancing
proceeds expressed as distributions and tax results on a per $1,000 investment
basis.
Table V - Sales or Disposals of Properties
Table V presents information regarding sales or disposals of property
of the Prior Partnerships in the most recent three years.
A-2
<PAGE> 43
TABLE I
EXPERIENCE IN RAISING AND INVESTING FUNDS
<TABLE>
<CAPTION>
CAPTEC FRANCHISE
CAPITAL PARTNERS
L.P. III (A)(B)
----------------
<S> <C>
Dollar amount offered ................................ $ 20,000,000
Dollar amount raised (100%) .......................... $ 20,000,000
Less offering expenses:
Selling commissions .............................. 8.0%
Organizational expenses .......................... 3.0%
Other (no-accountable allowance) ................. 2.0%
Reserves ............................................. 0.0%
Percent available for investment ..................... 87.0%
Acquisition Costs:
Cash down payment ................................ 83.5%
Acquisition fees ................................. 3.4%
Acquisition expenses ............................. 0.0%
Total acquisition costs .............................. 86.9%
Percent leverage ..................................... 0.0%
Date offering began .................................. August 12, 1994
Length of offering (months) .......................... 24
Months to invest 90% of amount available
for investment ................................... 2
</TABLE>
- -------------------------------
(a) Captec Franchise Capital Partners L.P. III ("Captec L.P. III") is a
public program with investment objectives similar to those of the
Partnership.
(b) Information in the Table is presented as of September 30, 1997. Captec
L.P. III closed its offering on August 12, 1996 having raised
$20,000,000 from 1,391 investors. As of September 30, 1997, Captec L.P.
III had acquired the land and building of eleven properties for a
purchase price of $13,687,361 and nine equipment packages for
$3,001,879. In addition, this table reflects the reinvestment of sale
proceeds of an equipment package which was purchased for $228,055 in
1995 and subsequently sold for $199,399 in August 1997.
A-3
<PAGE> 44
TABLE II
COMPENSATION TO SPONSOR
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. III (a)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Date offering commenced .......................... August 12, 1994
Dollar amount raised ............................ $ 20,000,000
Amount paid to sponsor from proceeds of offering:
Offering expenses ........................... $ 2,600,000
Acquisition fees:
- Real estate commissions .................. -
- Advisory fees ............................ -
- Other $ 667,471
Other ....................................... -
1995 1996 1997 (b)
Dollar amount of cash generated from operations
before deducting payments to sponsor ........ $ 346,827 $1,436,358 $1,467,498
Amount paid to sponsor from operations:
Property management fees .................... - $ 19,038 $ 16,797
Partnership management fees ................. - - -
Reimbursements .............................. - - -
Leasing commissions ......................... - - -
Other ....................................... - - -
Dollar amount of property sales and refinancing
before deducting payments to sponsor:
- Cash ..................................... - - -
- Notes .................................... - - -
Amount paid to sponsor from property sales
and refinancing:
Real estate commissions ..................... - - -
</TABLE>
- ---------------------------
(a) Captec Franchise Capital Partners L.P. III ("Captec L.P. III") is a
public program with investment objectives similar to those of the
Partnership.
(b) Information in the Table is presented as of September 30, 1997.
A-4
<PAGE> 45
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. II
<TABLE>
<CAPTION>
1994 1995 1996 1997 (b)
---- ---- ---- --------
<S> <C> <C> <C> <C>
Gross revenues ...................................... $ 169,837 $ 349,675 $ 514,963 $ 44
Profit on sale of properties ........................ - - 3,652 216,756
Interest income ..................................... 30,325 - - -
Less:
Operating expenses .............................. (6,443) (9,568) (84,138) -
Interest expense ................................ (14,309) (83,553) (79,309) -
Depreciation .................................... (15,377) (28,462) (28,473) -
----------- --------- --------- -----------
Net income - GAAP basis ............................. $ 164,033 $ 228,092 $ 326,695 $ 216,800
=========== ========= ========= ===========
Taxable Income
- - from operations ................................. $ 126,606 $ 111,079 $ 279,893 $ 305,398
- - from gain on sale ............................... - - -
Cash generated from operations ...................... $ 179,410 $ 256,554 $ 355,168 $ 44
Cash generated from sales ........................... - - 7,400 2,010,151
Cash generated from refinancing ..................... - - - -
----------- --------- --------- -----------
Cash generated from operations, sales
and refinancing ................................. $ 179,410 $ 256,554 $ 362,568 $ 2,010,195
Less: cash distributions to investors: (a)
- - from operating cash flow ........................ (136,988) (177,618) (149,076) (44)
- - from sales and refinancing ...................... - - (7,400) (2,000,526)
- - from other: reduction of net investment
in financing leases ............................. (6,957) (69,282) (137,024) -
Cash generated (deficiency) after cash
distributions ................................... 35,465 9,654 69,068 9,625
----------- -------- --------- -----------
Special items (not including sales and refinancing):
- - Partners' capital contributions, net of
offering costs .................................. 1,688,135 - - -
- - Proceeds from borrowings ........................ 831,000 - - -
- - Purchase of real estate for operating lease ..... (2,271,562) 326,760 - 2,335,000
- - Purchase of equipment for financing leases ...... (149,139) (425,284) - 425,000
- - Reduction of net investment in financing
leases .......................................... 6,957 69,282 137,024 -
- - Principal payments of debt obligations .......... (6,133) (39,099) (43,343) (749,849)
- - Increase in other assets ........................ (69,886) (7,837) (255,110) 7,834
- - Increase (decrease) in other liabilities ........ 22,187 36,753 (9,625) (30,053)
----------- --------- --------- -----------
Cash generated (deficiency) after cash
distributions and special items ................. $ 87,024 $ (29,771) $(101,986) $ 1,997,557
=========== ========= ========= ===========
Tax and Distribution Data per $1,000 Invested:
Federal Income Tax Results:
Ordinary income (loss)
- from operations .............................. $ 67 $ 57 $ 144 $ 157
- from recapture ............................... - - - -
Capital gain (loss) ............................. - - - -
Cash Distributions to Investors: (a)
Source (on GAAP basis):
- Investment income ............................ $ 77 $ 127 $ 151 $ 31
- Return of capital ............................ - - - $ 1,000
Source (on cash basis):
- Sales ........................................ - - $ 4 $ 1,031
- Refinancing .................................. - - - -
- Operations ................................... $ 73 $ 91 $ 77 $ 0
- Other: reduction of investment in financing
leases ....................................... $ 4 $ 36 $ 70 -
Amount (in percentage terms) remaining invested
in program properties at the end of the last
year reported in the Table ...................... 100% 100% 94% 0%
</TABLE>
A-5
<PAGE> 46
TABLE III (CONTINUED)
OPERATING RESULTS OF PRIOR PROGRAMS
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. III
<TABLE>
<CAPTION>
1995 1996 1997 (b)
---- ---- --------
<S> <C> <C> <C>
Gross revenues $ 359,018 $ 1,336,908 $ 1,492,975
Profit on sale of properties - - -
Interest income 10,928 154,575 50,302
Less:
Operating expenses (23,119) (55,125) (75,779)
Interest expense - - -
Depreciation (33,978) (114,272) (154,960)
----------- ------------ -----------
Net income - GAAP basis $ 312,849 $ 1,322,086 $ 1,312,538
=========== =========== ===========
Taxable Income
- - from operations $ 63,498 $ 731,132 N/A (c)
- - from gain on sale - - N/A (c)
Cash generated from operations $ 346,827 $ 1,436,358 $ 1,467,498
Cash generated from sales - - -
Cash generated from refinancing - - -
----------- ------------ -----------
Cash generated from operations, sales
and refinancing $ 346,827 $ 1,436,358 $ 1,467,498
Less: cash distributions to investors: (a)
- - from operating cash flow (289,426) (1,141,826)
- - from sales and refinancing - - -
- - from other: reduction of net investment
in financing leases (121,674) (331,707) (498,171)
----------- ------------ -----------
Cash generated (deficiency) after cash
distributions (64,273) (177,902) (172,499)
Special items (not including sales and refinancing):
- - Partners' capital contributions, net of
offering costs 6,437,467 10,957,187 -
- - Proceeds from borrowings - - -
- - Purchase of real estate for operating lease (3,403,260) (9,537,532) (1,293,965)
- - Purchase of equipment for financing leases (2,001,275) 6,543
- - Contrustion loan draws - (939,778) 939,778
- - Reduction of net investment in financing
leases 121,674 331,707 498,171
- - Principal payments of debt obligations - - -
- - Increase in other assets (53,560) (179,661) (117,247)
- - Increase (decrease) in other liabilities 55,034 67,413 (46,774)
----------- ------------ -----------
Cash generated (deficiency) after cash
distributions and special items $ 1,091,807 $ (836,422) $ (185,993)
=========== ============ ===========
Tax and Distribution Data per $1,000 Invested:
Federal Income Tax Results:
Ordinary income (loss)
- from operations $ 16 $ 47 N/A (c)
- from recapture - - -
Capital gain (loss) - - N/A (c)
Cash Distributions to Investors: (a)
Source (on GAAP basis):
- Investment income $ 81 $ 85 $ 66
- Return of capital $ 26 $ 19 $ 16
Source (on cash basis):
- Sales - - -
- Refinancing - - -
- Operations $ 75 $ 82 $ 57
- Other: reduction of investment in financing
leases $ 32 $ 21 $ 25
Amount (in percentage terms) remaining invested
in program properties at the end of the last
year reported in the Table 100% 100% 100%
</TABLE>
A-6
<PAGE> 47
TABLE III (CONTINUED)
OPERATING RESULTS OF PRIOR PROGRAMS
FOOTNOTES
(a) Cash distributions are paid quarterly, 15 days after the end of the
quarter. Distributions indicated above correspond to the reporting
period, but the last of the quarterly distributions included in the
total were actually paid in the following period.
(b) Results for the nine month period ended September 30, 1997.
(c) Not available because taxable income is not computed for interim
periods.
A-7
<PAGE> 48
TABLE IV
RESULTS OF COMPLETED PROGRAMS
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. II
<TABLE>
<CAPTION>
<S> <C>
Dollar Amount Raised............................... $ 1,940,500
Number of Properties Purchased..................... 2
Number of Equipment Leases Purchased............... 4
Date of Closing of Offering........................ May 6, 1994
Date of First Sale of Property/Equipment Lease..... August 13, 1996
Date of Final Sale of Property/Equipment Lease..... January 1, 1997
Tax and Distribution Data Per $1,000
Investment Through............................. March 31, 1997
Federal Income Tax Results:
Ordinary income (loss)
- from operations............................. $ 425
- from recapture.............................. -
Capital Gain (loss) -
Deferred Gain
Capital..................................... -
Ordinary.................................... -
Cash Distributions to Investors
Source (on GAAP basis)
- Investment income........................... $ 386
- Return of capital........................... $ 1,000
Source (on cash basis)
- Sales....................................... $ 1,035
- Refinancing................................. -
- Operations.................................. $ 241
- Reduction of Net Investment in Financing Leases $ 110
Receivable on Net Purchase Money Financing -
</TABLE>
A-8
<PAGE> 49
TABLE V. SALES OR DISPOSALS OF PROPERTIES
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. II
<TABLE>
<CAPTION>
SELLING PRICE, NET OF
CLOSING COSTS AND GAAP ADJUSTMENTS
--------------------------------------------------------------- ------
PURCHASE
CASH MONEY
RECEIVED NET MORTGAGE
DATE ACQUIRED DATE OF CLOSING MORTGAGE TAKEN BACK BY ORIGINAL
PROPERTY OF SALE COSTS BALANCE AT TIME PROGRAM MORTGAGE
OF SALE TOTAL FINANCING
<S> <C> <C> <C> <C> <C> <C> <C>
Taco Cabana Restaurant
3575 W. Tropicana
Las Vegas, NV 5/25/94 1/1/97 (2) $ 1,755,000 $ 547,390 -- $1,207,610 $ 606,630
Kenny Rogers
Roasters
13606 Bruce B. 10/7/94 1/1/97 (2) 580,000 202,460 -- 377,540 224,370
Downs
Tampa, FL
Checkers Drive-In
1939 Oscela Pkwy 9/7/94 1/1/97 (2) 132,000 -- -- $ 132,000 --
Kissimmee, FL
Popeyes Restaurant
11211 Abercorn St.
Savannah, GA 2/8/95 8/13/96 7,400 -- -- $ 7,400 --
Schlotzsky's Deli
2835 N. Memorial Pkwy
Huntsville, AL 2/13/95 1/1/97 (2) 88,000 -- -- $ 88,000 --
Italian Oven
Cedar Knoll Galleria
Ashland, KY 2/21/95 1/1/97 (2) 205,000 -- -- $ 205,000 --
TOTAL LEVERAGE $ 749,850 $ 831,000
ON PORTFOLIO
</TABLE>
<TABLE>
<CAPTION>
COST OF PROPERTIES INCLUDING
CLOSING AND SOFT COSTS
------------------------------------------
TOTAL ACQUISITION EXCESS
COST, CAPITAL (DEFICIENCY)
IMPROVEMENT, OPERATING CASH
CLOSING AND RECEIPTS OVER
SOFT COSTS 4 TOTAL CASH EXPENDITURES
<S> <C> <C> <C>
Taco Cabana Restaurant
3575 W. Tropicana Purchase:
Las Vegas, NV 1,350,000 $1,417,500 $ 432,000
Acq. Fees:
67,500
Kenny Rogers
Roasters Purchase:
13606 Bruce B. 502,202(1) $ 527,312 $ 117,869
Downs Acq. Fees:
Tampa, FL 25,110
Checkers Drive-In Purchase:
1939 Oscela Pkwy 142,000 $ 149,100 $ 94,614
Kissimmee, FL Acq. Fees: 7,100
Popeyes Restaurant
11211 Abercorn St. Purchase: 74,000
Savannah, GA Acq. Fees: 3,700 $ 77,700 $ 32,197
Schlotzsky's Deli
2835 N. Memorial Pkwy Purchase:
Huntsville, AL 103,968 Acq. $ 109,166 $ 57,141
Fees: 5,198
Italian Oven
Cedar Knoll Galleria Purchase:
Ashland, KY 227,063 $ 238,416 $ 120,638
Acq. Fees:
11,353
</TABLE>
(1) Property purchased through a joint venture. Total purchase price of the
property was $800,000
(2) The properties were sold to an affiliated party
(3) The taxable gain will be treated as ordinary income.
(4) Amounts shown do not include pro rata share of original offering costs.
A-9
<PAGE> 50
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. III
- ------------------------------------------
<TABLE>
<CAPTION>
SELLING PRICE, NET OF
CLOSING COSTS AND GAAP ADJUSTMENTS
-------------------------------------------------------
PURCHASE
CASH MONEY
RECEIVED MORTGAGE MORTGAGE
DATE DATE NET OF BALANCE TAKEN BACK
ACQUIRED OF CLOSING AT TIME OF BY PROGRAM
PROPERTY SALE COSTS SALE TOTAL (3)
<S> <C> <C> <C> <C> <C> <C>
Arby's
912 Maye Blvd.
Greenville, NC 2/29/95 8/4/97 $199,399 -- -- $199,399
</TABLE>
<TABLE>
<CAPTION>
COST OF PROPERTIES INCLUDING
CLOSING AND SOFT COSTS
---------------------------------------------------------------
TOTAL
ACQUISITION
COST, CAPITAL EXCESS (DEFICIENCY)
ORIGINAL IMPROVEMENT, OPERATING CASH
MORTGAGE CLOSING AND RECEIPTS OVER
PROPERTY FINANCING SOFT COSTS (4) TOTAL CASH EXPENDITURES
<S> <C> <C> <C> <C>
Arby's
912 Maye Blvd. Purchase:
Greenville, NC -- 228,055 $237,177 $107,277
Acq. Fees: 9,122
</TABLE>
A-10
