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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

		QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
		SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2000

OR

		TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
		SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission file number: 333-9371

CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)

38-3304095
(IRS Employer Identification Number)

24 Frank Lloyd Wright Drive, Lobby L, 4th Floor
P.O. Box 544, Ann Arbor, Michigan 48106-0544
(Address of principal executive offices, including zip code)

(734) 994-5505
(Issuer’s telephone number)

Not Applicable
(Former name, former address and former fiscal year, if changed since last year)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days. Yes No

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by court: Not applicable

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: Not applicable

CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV

Index to Form 10-Q

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Captec Franchise Capital Partners L.P. IV

Balance Sheet

      The accompanying notes are an integral part of the financial statements.

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Captec Franchise Capital Partners L.P. IV

Statement of Operations
(Unaudited)

The accompanying notes are an integral part of the financial statements.

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Captec Franchise Capital Partners L.P. IV

Statement of Changes in Partners’ Capital
for the nine months ended September 30, 2000
(Unaudited)

The accompanying notes are an integral part of the financial statements.

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Captec Franchise Capital Partners L.P. IV
Statement of Cash Flows
for the nine months ended September 30, 2000 and 1999
(Unaudited)

The accompanying notes are an integral part of the financial statements.

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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV

NOTES TO FINANCIAL STATEMENTS

1. THE PARTNERSHIP AND ITS SIGNIFICANT ACCOUNTING PRINCIPLES:

Captec Franchise Capital Partners L.P. IV (the “Partnership”), a Delaware limited partnership, was formed on July 23, 1996 for the purpose of acquiring income-producing commercial real properties and equipment leased on a “triple net” or “double net” basis, primarily to operators of national and regional chain and nationally franchised fast food and family style restaurants, as well as other national and regional retail chains. The general partners of the Partnership upon formation of the Partnership were 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. In August, 1998 the general partnership interest of the Partnership was acquired by Captec Net Lease Realty, Inc., an affiliate of Captec, for $2,912,000.

The Partnership commenced a public offering of limited partnership interest units on December 23, 1996. 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, and the Partnership immediately commenced operations. The Partnership completed the sale of all 30,000 units in 1998. During 1999 the Partnership repurchased a total of 117 units for $105,399, or 90% of the investor’s capital account. An additional 110 units were repurchased on April 1, 2000 for $99,282, or 100% of the investor’s original investment less 50% of cumulative dividends paid to date. The repurchase of the units was completed pursuant to the terms of the Repurchase Plan set forth in the Partnership’s Prospectus. At September 30, 2000, the Partnership had 29,773 units issued and outstanding.

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.

The balance sheet of the Partnership as of September 30, 2000 and the statements of operations and cash flows for the period ending September 30, 2000 and 1999 have not been audited. In the opinion of the Management, these unaudited financial statements contain all adjustments necessary to present fairly the financial position and results of operations and cash flows of the Partnership for the periods then ended. Results of operations for the interim periods are not necessarily indicative of results for the full year. These unaudited financial statements should be read in conjunction with the financial statements and notes thereto included in the Partnership’s annual report on Form 10-K for the year ended December 31, 1999 filed with the United States Securities and Exchange Commission on March 30, 2000.

2. LAND AND BUILDING SUBJECT TO OPERATING LEASES:

The net investment in operating leases as of September 30, 2000 is comprised of the following:

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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV

NOTES TO FINANCIAL STATEMENTS (continued)

3. NET INVESTMENT IN FINANCING LEASES:

The net investment in financing leases as of September 30, 2000 is comprised of the following:

4. NOTES PAYABLE:

In November, 1998, the Partnership entered into a $6.375 million term note, the proceeds of which were used to acquire additional properties. The note has a 10-year term, is collaterized by certain properties subject to operating leases, and bears an interest rate of 8.13% per annum.

In March, 1999, the Partnership entered into an additional $3.3 million term note. The note also has a 10-year term, is collaterized by certain properties subject to operating leases, and bears an interest rate of 8.5% per annum.

Debt issuance costs of approximately $595,500 in aggregate were incurred in connection with the issuance of the notes, and are being amortized using the straight-line method over the 10-year term.

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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV

PART I – FINANCIAL INFORMATION

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

When used in this discussion, the words, “intends”, “anticipates”, “expects”, and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties which could cause actual results to differ materially from those projected. Such risks and uncertainties include the following: (i) a tenant may default in making rent payments, (ii) a fire or other casualty may interrupt the cash flow stream from a property, (iii) the properties may not be able to be leased at the assumed rental rates, (iv) unexpected expenses may be incurred in the ownership of the properties, and (v) properties may not be able to be sold at the presently anticipated prices and times.

As a result of these and other factors, the Partnership may experience material fluctuations in future operating results on a quarterly or annual basis, which could materially and adversely affect its business, financial condition and operating results. These forward-looking statements speak only as of the date hereof. The Partnership undertakes no obligation to publicly release the results of any revisions to these forward-looking statements which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

RESULTS OF OPERATIONS

Three Months Ended September 30, 2000. During the three months ended September 30, 2000 total operating revenue decreased 5.8% to approximately $869,000 as compared to approximately $922,000 for the three months ended September 30, 1999. Rental revenue from operating leases for the three months ended September 30, 2000 increased 1% to approximately $724,000 as compared to approximately $720,000 for the three months ended September 30, 1999. Earned income from financing leases for the three months ended September 30, 2000 decreased 28.2% to approximately $145,000 as compared to approximately $202,000 for the three months ended September 30, 1999 due to the sale of one equipment lease and the amortization of principal balances.

Operating expenses were approximately $334,000 for the three months ended September 30, 2000 as compared to approximately $329,000 for the three months ended September 30, 1999. Total operating expenses for the three months ended September 30, 2000 is comprised of approximately $94,000 of depreciation expense, approximately $26,000 of general and administrative expenses, and approximately $214,000 of interest expense. The increase in operating expenses for the three months ended September 30, 2000 as compared to the three months ended September 30, 1999 is primarily due to a full period of depreciation for properties leased in preceding periods.

Other income for the three months ended September 30, 2000 decreased to $0 as compared to approximately $3,000 for the three months ended September 30, 1999.

As a result of the foregoing, the Partnership’s net income decreased 10.3% to $535,000 for the three months ended September 30, 2000 as compared to $596,000 for the three months ended September 30, 1999.

Nine Months Ended September 30, 2000. During the nine months ended September 30, 2000 total operating revenue increased 1.7% to $2.63 million as compared to $2.58 million for the nine months ended September 30, 1999. Rental revenue from operating leases for the nine months ended September 30, 2000 increased 10.5% to $2.2 million as compared to $2.0 million for the nine months ended September 30, 1999 primarily from the benefit of a full period of rental revenue from properties acquired and leased in preceding periods. Earned income from financing leases for the nine months ended September 30, 2000 decreased 26.4% to approximately $452,000 as compared to approximately $614,000 for the nine months

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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV

PART I – FINANCIAL INFORMATION

ended September 30, 1999 due to the sale of one equipment lease and the amortization of principal balances.

Operating expenses were approximately $996,000 for the nine months ended September 30, 2000 as compared to approximately $899,000 for the nine months ended September 30, 1999. Total operating expenses for the nine months ended September 30, 2000 is comprised of approximately $283,000 of depreciation expense, approximately $71,000 of general and administrative expenses, and approximately $642,000 of interest expense. The increase in operating expenses for the nine months ended September 30, 2000 as compared to the nine months ended September 30, 1999 is due to additional interest expense related to the note payable issued in March 1999, and increased depreciation expense for new property acquisitions, offset by cost savings achieved in general and administrative expenses.

Other income for the nine months ended September 30, 2000 increased to approximately $43,000 as compared to approximately $29,000 for the nine months ended September 30, 1999 as a result of a gain on the sale of one equipment lease.

As a result of the foregoing, the Partnership’s net income decreased 2.3% to $1.67 million for the nine months ended September 30, 2000 as compared to $1.71 million for the nine months ended September 30, 1999.

Distributions. The Partnership announced third quarter distributions of $900,000, of which $784,166 was distributed to its Limited Partners on October 15, 2000 and the remaining $115,834 will be distributed to those limited partners who elected to receive distributions on a monthly basis.

LIQUIDITY AND CAPITAL COMMITMENTS

The Partnership commenced the offering of up to 30,000 limited partnership units registered under the Securities Act of 1933, as amended, by means of a Registration Statement which was declared effective by the Securities and Exchange Commission on December 23, 1996. The Offering reached final funding in December, 1998 with subscriptions for the entire offering of 30,000 units. Net proceeds after offering expenses were approximately $26.1 million.

In December, 1998 the Partnership entered into a $6.375 million term note. The Partnership entered into an additional $3.276 million term note in June, 1999. Proceeds from the notes were used to acquire additional properties. The notes have a 10-year term, are collaterized by certain properties subject to operating leases, and bear interest at rates ranging from 8.13 to 8.5% per annum. Debt issuance costs of approximately $595,500 in aggregate incurred in connection with the issuance of the notes are being amortized into interest expense over the life of the notes using the straight-line method.

At September 30, 2000 the Partnership had a portfolio of 20 properties located in 10 states, with a cost of $26.8 million, and 23 equipment leases with an original investment of $7.7 million. As of September 30, 2000 the Partnership’s investments were allocated approximately 78% to properties and 22% to equipment.

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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV

PART I – FINANCIAL INFORMATION

The Partnership expects to require limited amounts of liquid assets since the properties and equipment leases require the lessees to pay all taxes and assessments, maintenance and repair items (except, with respect to double net properties, costs associated with maintenance and repair of the exterior walls and roof of the property) and insurance premiums, including casualty insurance. The general partners expect that the cash flow to be generated by the Partnership’s properties and equipment will be adequate to pay operating expenses and provide distributions to Limited Partners.

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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV

PART II – OTHER INFORMATION

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PART II – OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) The following exhibits are included herein or incorporated by reference:

(b) Reports on Form 8-K:

There were no reports filed on Form 8-K for the quarter ended September 30, 2000.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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Exhibit Index