UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) November 26, 1997
U.S. RESTAURANT PROPERTIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 1-13089 75-2687420
(STATE OF OTHER (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
JURISDICTION OF IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
5310 Harvest Hill Rd.
Suite 270, LB 168
Dallas, Texas 75230
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
972-387-1487
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
1
<PAGE>
U.S. RESTAURANT PROPERTIES, INC.
Explanatory Note............................................................ 3
Item 2. Acquisition or Disposition of Assets................................ 3
Item 7. Financial Statements, Pro Forma Information and Exhibits............ 5
Combined Statement of Revenues and Certain Expenses of Selected
Properties Sold to U.S. Restaurant Properties, Inc. (Perkin's
Acquisition) for the year ended June 30, 1997.................... 7
Statement of Revenue and Direct Operating Expenses Applicable to
the Acquisition of Eighteen Properties of Kettle Restaurant,
Inc. by U.S. Restaurant Properties, Inc. for the year ended
October 30, 1997................................................. 10
Statement of Revenues and Certain Expenses of the Property Sold
to U.S. Restaurant Properties, Inc. by L & H Donuts, Inc.
for the year ended December 31, 1996............................. 14
Combined Statement of Revenues and Certain Expenses of Selected
Properties Sold to U.S. Restaurant Properties, Inc. (Friesenhahn
Acquisition) for the year ended December 31, 1996................ 17
Financial information related to the acquisition of nine
restaurant properties by U.S. Restaurant Properties, Inc.
from Burger King Limited Partnership I........................... 20
Financial information related to the acquisition of 22
restaurant properties by U.S. Restaurant Properties, Inc.
from Burger King Limited Partnership III......................... 21
Pro forma Financial Information..................................... 22
Exhibit 23
(a) Consent of Deloitte & Touche LLP
(b) Consent of Montgomery, Jessup & Co., L.L.P.
2
<PAGE>
EXPLANATORY NOTE
U.S. Restaurant Properties, Inc., (the "Registrant") a fully integrated,
self-administered and self-managed real estate investment trust hereby amends
its Form 8-K dated November 26, 1997 as filed with the Securities and Exchange
Commission on December 9, 1997 as follows:
The Company hereby submits the financial statements required for the properties
acquired and included in this Form 8-K/A and pro forma information as shown on
item 7 and as further described in Item 2.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On November 17, 1997, the Registrant acquired four Perkins restaurant
properties located in Minnesota and Florida from Minneapolis Teachers'
Retirement Fund Association, Inc. and MRT Properties, Inc. The acquisition was
done pursuant to four purchase and sales agreements. The purchase price equaled
$2,974,450 in cash and other capitalized costs of approximately $48,000. The
selling entity was Minneapolis Teachers' Retirement Fund Association, Inc. a
Minnesota non-profit corporation and MRT Properties, Inc., a Minnesota
corporation. The acquisition was funded by the Registrant's bank line of credit.
On November 26, 1997, the Registrant acquired 18 restaurant properties located
in Texas, Oklahoma, Tennessee, New Mexico and Louisiana from Kettle Restaurants,
Inc. The acquisition was done pursuant to one purchase and sales agreement. The
purchase price equaled $6,000,000 in cash and other capitalized costs of
approximately $153,000. The selling entity was Kettle Restaurants, Inc., a Texas
corporation. The acquisition was funded by the Registrant's bank line of credit.
On December 4, 1997, The Registrant acquired one Dunkin Donut restaurant
property located in Florida from L & H Donuts, Inc. The acquisition was done
pursuant to one purchase and sale agreement. The purchase price equaled $593,500
in cash and other costs of approximately $6,000. The selling entity was L & H
Donuts, Inc, a Florida corporation. The acquisition was funded by the
Registrant's bank line of credit.
On December 10, 1997, the Registrant acquired two restaurant properties located
in Texas. The acquisition was done pursuant to two purchase and sale agreements.
The purchase price equaled $1,400,000 in cash and other costs of approximately
$13,000. The selling entities were Friesenhahn-Stehling, J.V. and
Friesenhahn-Brundage Joint Venture IV. The acquisition was funded by the
Registrant's bank line of credit.
On December 18, 1997, the Registrant acquired 31 Burger King restaurant
properties from Burger King Limited Partnership I and Burger King Limited
Partnership III. The acquisition was done pursuant to two purchase and sale
agreements. The properties were purchased from Burger King Limited Partnership
I, a New York limited liability partnership and Burger King Limited Partnership
III, a New York limited liability partnership. The purchase price equaled
$22,400,000 and other capitalized costs of approximately $286,000. The
acquisitions were funded by the Registrant's bank line of credit.
On various dates from October 15, 1997 through December 31, 1997, the Registrant
acquired five restaurant properties consisting of three Schlotzsky's, one
Fazoli's and one co-branded service center with a Jack-In-The-Box, convenience
store and gas station located in Illinois, Kentucky, South Carolina and Texas.
The properties were acquired pursuant to five separate purchase and sale
agreements from
3
<PAGE>
Schlotzsky's Real Estate, Inc., a Texas corporation, FZ Land, L.L.C., an
Illinois limited liability company and U.S. Restaurant Properties Development
L.P., a Texas limited partnership. U.S. Restaurant Properties Development L.P.
is a related party to which the Registrant has made available a revolving line
of credit, to be used solely for acquisition and development of restaurant
properties which will be purchased by the Registrant upon completion of
development. In addition, four buildings were acquired on undeveloped properties
purchased prior to October 15, 1997. These restaurant properties represent newly
developed properties and properties yet to be developed which do not have any
historical operations. The purchase price for these properties equaled
$7,615,000 and other capitalized costs of approximately $482,000. The
acquisitions were funded by the Registrant's bank line of credit.
In addition, to the above acquisitions, seven other properties (the "Other
Properties") were acquired during the period October 15, 1997 and December 31,
1997. These properties consist of three Taco Bell restaurant properties, one
Arby's restaurant property, one Burger King restaurant property, one Hardee's
restaurant property and one John Harvard's Brew House restaurant property
located in Texas, New Jersey, Florida, and Delaware. The properties were
purchased from Specialty Food Systems, Inc., a Louisiana corporation, Colby
Enterprises of Pemberton, Inc., a New Jersey corporation, N.C.J. Investment
Company, a Florida corporation and Liz Mar Development Company, a Delaware
corporation. These properties were purchased for an aggregate cash purchase
price of approximately $4,729,596 and were funded by the Registrant's bank line
of credit.
The transaction on November 26, 1997 in combination with previously reported
restaurant properties acquired between January 1, 1997 and October 15, 1997,
which are unaudited, and those acquired from the period October 15, 1997 and
November 26, 1997 (date of reportable event) are deemed significant in aggregate
to the Registrants total assets as previously reported on Form 10-K. The sellers
of all properties, except as noted above, are not affiliated with the
Registrant, any director or officer of the Registrant or any associate of any
such director or officer.
The purchase prices, which were negotiated with the sellers, were determined
through internal analysis by the Registrant of historical cash flows and fair
market values of the acquired properties.
4
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
a)(3)
Combined Statement of Revenues and Certain Expenses of Selected
Properties Sold to U.S. Restaurant Properties, Inc. (Perkin's
Acquisition) for the year ended June 30, 1997
Statement of Revenue and Direct Operating Expenses Applicable to
the Acquisition of Eighteen Properties of Kettle Restaurant,
Inc. by U.S. Restaurant Properties, Inc. for the year ended
October 30, 1997
Statement of Revenues and Certain Expenses of the Property sold
to U.S. Restaurant Properties, Inc. by L & H Donuts, Inc. for
the year ended December 31, 1996
Combined Statement of Revenues and Certain Expenses of Selected
Properties Sold to U.S. Restaurant Properties, Inc.
(Friesenhahn Acquisition) for the year ended December 31, 1996
Financial information related to the acquisition of nine restaurant
properties by U.S. Restaurant Properties, Inc. from Burger King
Limited Partnership I
Financial information related to the acquisition of 22 restaurant
properties by U.S. Restaurant Properties, Inc. from Burger King
Limited Partnership III
b) Pro forma Financial Information
c) Exhibits
23(a) Consent of Deloitte & Touche LLP
23(b) Consent of Montgomery, Jessup & Co., L.L.P.
5
<PAGE>
INDEPENDENT AUDITORS' REPORT
U.S. Restaurant Properties, Inc.
We have audited the accompanying combined statement of revenues and certain
expenses of Selected Properties Sold to U.S. Restaurant Properties, Inc.
(Perkin's Acquisition) for the year ended June 30, 1997. This financial
statement is the responsibility of the management of U.S. Restaurant Properties,
Inc. Our responsibility is to express an opinion on this statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the combined statement of revenues and certain expenses
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement. 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 audit provides a reasonable basis
for our opinion.
The accompanying combined statement of revenues and certain expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in the Form 8-K of U.S.
Restaurant Properties, Inc.. Material amounts, described in Note 1 to the
combined statement of revenues and certain expenses, that would not be
comparable to those resulting from the proposed future operations of the
properties sold to U.S. Restaurant Properties, Inc. are excluded and the
statement is not intended to be a complete presentation of the revenues and
expenses of these properties.
In our opinion, such combined statement of revenues and certain expenses
presents fairly, in all material respects, the combined revenues and certain
expenses, as defined above, of Selected Properties Sold to U.S. Restaurant
Properties, Inc. (Perkin's Acquisition) for the year ended June 30, 1997, in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Dallas, Texas
January 15, 1998
6
<PAGE>
<TABLE>
<CAPTION>
SELECTED PROPERTIES SOLD TO U.S. RESTAURANT PROPERTIES, INC. (PERKIN'S ACQUISITION)
COMBINED STATEMENT OF REVENUES AND CERTAIN EXPENSES
YEAR ENDED JUNE 30, 1997
<S> <C>
RENTAL INCOME
Minimum $ 226,481
Percentage 126,641
Cost Reimbursement revenue 8,137
--------------
TOTAL RENTAL INCOME 361,259
DIRECT EXPENSES-SALES TAX 8,137
--------------
NET RENTAL INCOME $ 353,122
==============
</TABLE>
See Accompanying Notes to the Combined Statement of Revenues
and Certain Expenses.
7
<PAGE>
NOTES TO THE SELECTED PROPERTIES SOLD TO U.S. RESTAURANT PROPERTIES, INC.
(PERKIN'S ACQUISITION) COMBINED STATEMENT OF REVENUES AND CERTAIN EXPENSES
1. Summary Of Significant Accounting Policies
Nature Of Operations
The accompanying combined statement of revenues and certain expenses
includes three properties acquired by U.S. Restaurant Properties, Inc. from
Minneapolis Teachers' Retirement Fund association, a Minnesota non-profit
corporation and MRT Properties, Inc., a Minnesota corporation. Collectively
the above entities are referred to as (the "Company"). The statement does
not include any revenues or expenses related to any other properties owned
or managed by the Company. The properties acquired are operated as Perkins
restaurants. In accordance with the Securities and Exchange Commission Rule
3-14, the statement does not include expenses not comparable to the
proposed future operations of the properties such as depreciation,
interest, or any other costs that are not directly associated with the
properties and accordingly, it is not intended to be a complete
presentation of revenues and expenses of the properties.
2. Use Of Estimates
The preparation of this combined statement of revenues and certain expenses
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of revenues and certain expenses during a reporting period. Actual
results could differ from those estimates.
3. Rental Income
The property leases are "triple net" leases which require the lessee to
pay all property taxes, assessments, insurance, maintenance costs and other
charges related to maintenance, repair and operation of the property. Cost
reimbursement revenue includes costs reimbursed by the tenant for sales
taxes on lease revenues. Certain information regarding each of the property
leases is set forth in the table below.
<TABLE>
<CAPTION>
MINIMUM
ANNUAL PERCENTAGE TERMINATION
LOCATION RENTAL RENTAL DATE
- ----------------------- -------------------------------------------- ---------------------- -----------------------
<S> <C> <C> <C>
Fort Myers, FL $110,211 Per year through 2/28/02 6% of sales in February 2002 with
excess of $1,571,733 two-five year renewal
options
Burnsville, MN 35,000 Per year through 3/31/99 5% of sales in March 1999 with
excess of $700,000 one-five year renewal
option
Albert Lea, MN 35,870 Per year through 1/18/01 5% of sales in January 2001 with
excess of $717,408 one-five year renewal
option
Crystal, MN 45,400 Per year through 11/08/00 5% of sales in November 2000 with
excess of $908,000 one-five year renewal
option
</TABLE>
The following is a schedule of minimum rental income on the non-cancelable
leases as of June 30, 1997:
1998 $ 226,481
1999 217,731
2000 191,481
2001 144,774
2002 73,474
Thereafter 0
-----------
$ 853,941
===========
8
<PAGE>
INDEPENDENT AUDITORS' REPORT
U.S. Restaurant Properties, Inc.
Dallas, Texas
We have audited the accompanying statement of revenues and direct operating
expenses applicable to the acquisition of eighteen properties of Kettle
Restaurants, Inc. by U.S. Restaurant Properties, Inc. for the year ended October
30, 1997. This financial statement is the responsibility of U.S. Restaurant
Properties, Inc. Our responsibility is to express an opinion on this statement
based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenues and direct operating expenses
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial presentation. We
believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenues and direct operating expenses was
prepared for the purpose of complying with rules and regulations of the
Securities and Exchange Commission and for the inclusion in the current report
on Form 8-K of U.S. Restaurant Properties, Inc. This statement is not intended
to be a complete presentation of revenues and expenses of the eighteen
properties of Kettle Restaurant, Inc. acquired by U.S. Restaurant Properties,
Inc.
In our opinion, the statement of revenues and direct operating expenses referred
to above presents fairly, in all material respects, the revenues and direct
operating expenses described in Note 1 of the eighteen properties of Kettle
Restaurants, Inc. acquired by U.S. Restaurant Properties, Inc. for the year
ended October 30, 1997, in conformity with generally accepted accounting
principles.
MONTGOMERY, JESSUP & CO., L.L.P.
January 20, 1998
Dallas, Texas
9
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES
APPLICABLE TO THE ACQUISITION OF
EIGHTEEN PROPERTIES OF KETTLE RESTAURANTS, INC.
BY U.S. RESTAURANT PROPERTIES, INC.
YEAR ENDED OCTOBER 30, 1997
<S> <C>
Revenues
Restaurant sales $ 5,700,663
Rental income 471,922
Cost reimbursement revenue 42,957
------------
Total revenues 6,215,542
Direct operating expenses:
Cost of sales 2,008,570
Wages and related expenses 2,352,941
Other direct expenses 1,401,841
Real estate taxes 99,313
------------
Total direct operating expenses 5,862,665
------------
Excess of revenues over direct operating expenses $ 352,877
============
</TABLE>
See accompanying notes to the Statement of Revenues and Direct
Operating Expenses
10
<PAGE>
NOTES TO STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES
APPLICABLE TO THE ACQUISITION OF
EIGHTEEN PROPERTIES OF KETTLE RESTAURANTS, INC.
BY U.S. RESTAURANT PROPERTIES, INC.
YEAR ENDED OCTOBER 30, 1997
1. Nature of business and basis of presentation:
Nature of business:
Kettle Restaurants, Inc. (the "Company") operates in the food service
business through Company operated and franchised restaurant outlets;
primarily in Texas, Oklahoma, Louisiana, Tennessee, and New Mexico. As
of November 1, 1996, the Company owned and operated fifteen of these
properties as Kettle Restaurants and leased the other three to Kettle
Restaurant franchisees. During the year, the Company entered into lease
and franchise agreements on the fifteen Company owned and operated
properties. Subsequent to October 30, 1997 the Company sold the
eighteen restaurant properties to U.S. Restaurant Properties, Inc.,
("USRP"). Refer to Note 4 regarding the terms of this sale.
Basis of presentation:
The accompanying statement of revenues and direct operating expenses
includes the operating results and rental income of eighteen Kettle
Restaurants, which were acquired by USRP on November 26, 1997. USRP did
not purchase the restaurant operations. This statement does not include
any revenues or expenses related to the remaining properties owned by
the Company. The statement does not include depreciation and
amortization, interest and income taxes, and accordingly is not
intended to be a complete presentation of revenues and expenses of the
restaurant's operations or the properties.
2. Summary of significant accounting policies:
Fiscal Year:
The Company's fiscal year is based on a 52-53 week reporting
period which ends each year on the Thursday nearest October 31.
Restaurant sales:
The sales are primarily cash sales and are recorded at the time of
retail sale.
Rental Income and the Cost Reimbursement Revenue:
The leases on these properties are "triple net" leases which require
the lessee to pay all property taxes, assessments, insurance,
maintenance costs and other charges related to maintenance, repair and
operation of the property. Cost reimbursement revenue includes costs
reimbursed by the tenant for property taxes. Refer to Note 3 regarding
schedule of minimum rental income.
11
<PAGE>
NOTES TO STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES
APPLICABLE TO THE ACQUISITION OF
EIGHTEEN PROPERTIES OF KETTLE RESTAURANTS, INC.
BY U.S. RESTAURANT PROPERTIES, INC.
YEAR ENDED OCTOBER 30, 1997
2. Summary of significant accounting policies (continued):
Other direct operating expenses:
Other direct operating expenses represent kitchen and restaurant
supplies, linens, uniforms, utilities, advertising, licenses and
other costs directly associated with the restaurant operations.
Management 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 revenues and direct
operating expenses during the reporting period. Actual results may, in
some instances, differ from previously estimated amounts.
3. Schedule of minimum rents:
At October 30, 1997, the Company leased to franchisees all eighteen
restaurant properties under operating leases that expire at various
dates through 2017. The terms of these leases range from 10 to 20
years. The following is a schedule of minimum rental income on the
non-cancelable leases as of October 30, 1997:
1998 $ 910,363
1999 910,545
2000 885,733
2001 836,109
2002 836,109
Thereafter 10,548,936
-------------
$ 14,927,795
=============
4. Subsequent event:
Sale of real estate:
On November 26, 1997, USRP acquired the 18 Kettle restaurant
properties for $6,000,000. In addition, under the terms of the sale
USRP will retain, throughout the term of the leases, the first $57,500
of each months aggregate rent payments received and remit to the
Company the aggregate rent payment amount in excess of $57,500.
12
<PAGE>
INDEPENDENT AUDITORS' REPORT
U.S. Restaurant Properties, Inc.
We have audited the accompanying statement of revenues and certain expenses of
the Property Sold to U.S. Restaurant Properties, Inc. by L & H Donuts, Inc. for
the year ended December 31, 1996. This financial statement is the responsibility
of the management of U.S. Restaurant Properties, Inc. Our responsibility is to
express an opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenues and certain expenses is free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. 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 audit provides a reasonable basis for our
opinion.
The accompanying statement of revenues and certain expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in the Form 8-K of U.S. Restaurant Properties,
Inc.. Material amounts, described in Note 1 to the statement of revenues and
certain expenses, that would not be comparable to those resulting from the
proposed future operations of the property sold to U.S. Restaurant Properties,
Inc. are excluded and the statement is not intended to be a complete
presentation of the revenues and expenses of this property.
In our opinion, such statement of revenues and certain expenses presents fairly,
in all material respects, the revenues and certain expenses, as defined above,
of the Property Sold to U.S. Restaurant Properties, Inc. by L & H Donuts, Inc.
for the year ended December 31, 1996, in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Dallas, Texas
January 8, 1998
13
<PAGE>
<TABLE>
<CAPTION>
PROPERTY SOLD TO U.S. RESTAURANT PROPERTIES, INC. BY L & H DONUTS, INC.
STATEMENT OF REVENUES AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 1996
<S> <C>
RENTAL INCOME
Minimum $ 67,511
Cost Reimbursement revenue and other 9,210
-----------
TOTAL RENTAL INCOME 76,721
DIRECT EXPENSES
Real estate taxes 6,167
Sales taxes 2,967
-----------
TOTAL DIRECT EXPENSES 9,134
-----------
NET RENTAL INCOME $ 67,587
===========
</TABLE>
See Accompanying Notes to Statement of Revenues and Certain Expenses.
14
<PAGE>
NOTES TO THE PROPERTY SOLD TO U.S. RESTAURANT PROPERTIES, INC. BY L & H DONUTS,
INC. STATEMENT OF REVENUES AND CERTAIN EXPENSES
1. Summary Of Significant Accounting Policies
Nature Of Operations
The accompanying statement of revenues and certain expenses includes one
property acquired by U.S. Restaurant Properties, Inc. from L & H Donuts,
Inc., a Florida Corporation (the "Company"). The statement does not include
any revenues or expenses related to any other properties owned by the
Company. The property acquired is operated as a Dunkin Donut restaurant. In
accordance with the Securities and Exchange Commission Rule 3-14, the
statement does not include expenses not comparable to the proposed future
operations of the property such as depreciation, interest, or any other
costs that are not directly associated with the property and accordingly,
it is not intended to be a complete presentation of revenues and expenses
of the property.
During 1996, a tenant defaulted on its lease as a result of non-payment of
rent. In November 1996, a settlement with the tenant was reached and the
lease was assigned to a new tenant. Certain modifications to the lease were
made, including extension of the termination date and a decrease in rents
due in the first year of the lease with higher rents in the last four
years.
2. Use Of Estimates
The preparation of this statement of revenues and certain expenses in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of revenues and certain expenses during a reporting period. Actual
results could differ from those estimates.
3. Rental Income
The property lease is a "triple net" lease which requires the lessee to
pay all property taxes, assessments, insurance, maintenance costs and other
charges related to maintenance, repair and operation of the property.
Rental revenue is recorded on a straight-line basis over the life of the
lease. Rental revenue for January through August 1996 was recorded on a
cash basis due to the tenant default discussed above. The portion of the
settlement relating to back rent was also included in rent revenue in 1996.
Cost reimbursement revenue includes costs reimbursed by the tenant for
sales taxes on lease revenues collected and payment of property taxes.
Certain information regarding the amended lease, is set forth in the table
below.
<TABLE>
<CAPTION>
MINIMUM
ANNUAL PERCENTAGE TERMINATION
LOCATION RENTAL RENTAL DATE
- --------------------- ----------------------------------------- ------------------- ------------------------
<S> <C> <C> <C>
Melbourne, FL $60,000 Per year through 11/30/97 None September 2009
68,586 Per year through 9/30/00
78,874 Per year through 9/30/05
94,622 Per year through 9/30/09
</TABLE>
The following is a schedule of minimum rental income on the non-cancelable
lease as of December 31, 1996:
1997 $ 60,716
1998 68,586
1999 68,586
2000 71,158
2001 78,874
Thereafter 674,267
------------
$ 1,022,187
============
15
<PAGE>
INDEPENDENT AUDITORS' REPORT
U.S. Restaurant Properties, Inc.
We have audited the accompanying combined statement of revenues and certain
expenses of Selected Properties Sold to U.S. Restaurant Properties, Inc.
(Friesenhahn Acquisition) for the year ended December 31, 1996. This financial
statement is the responsibility of the management of U.S. Restaurant Properties,
Inc. Our responsibility is to express an opinion on this statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the combined statement of revenues and certain expenses
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement. 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 audit provides a reasonable basis
for our opinion.
The accompanying combined statement of revenues and certain expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in the Form 8-K of U.S.
Restaurant Properties, Inc.. Material amounts, described in Note 1 to the
combined statement of revenues and certain expenses, that would not be
comparable to those resulting from the proposed future operations of the
properties sold to U.S. Restaurant Properties, Inc. are excluded and the
statement is not intended to be a complete presentation of the revenues and
expenses of these properties.
In our opinion, such combined statement of revenues and certain expenses
presents fairly, in all material respects, the combined revenues and certain
expenses, as defined above, of the Selected Properties Sold to U.S. Restaurant
Properties, Inc. (Friesenhahn Acquisition) for the year ended December 31, 1996,
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Dallas, Texas
January 13, 1998
16
<PAGE>
<TABLE>
<CAPTION>
SELECTED PROPERTIES SOLD TO U.S. RESTAURANT PROPERTIES, INC. (FRIESENHAHN ACQUISITION)
COMBINED STATEMENT OF REVENUES AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 1996
<S> <C>
RENTAL INCOME
Minimum $ 173,290
Percentage 6,515
Cost reimbursement revenue 29,483
------------
TOTAL RENTAL INCOME 209,288
DIRECT EXPENSE
Real estate taxes 25,579
Insurance 3,904
------------
TOTAL DIRECT EXPENSE 29,483
------------
NET RENTAL INCOME $ 179,805
============
</TABLE>
See Accompanying Notes to the Combined Statement of Revenues
and Certain Expenses.
17
<PAGE>
NOTES TO THE SELECTED PROPERTIES SOLD TO U.S. RESTAURANT PROPERTIES, INC.
(FRIESENHAHN ACQUISITION) COMBINED STATEMENT OF REVENUES AND CERTAIN EXPENSES
1. Summary Of Significant Accounting Policies
Nature Of Operations
The accompanying combined statement of revenues and certain expenses
includes two properties acquired by U.S. Restaurant Properties, Inc. from
Friesenhahn-Brundage Joint Venture IV and Friesenhahn-Stehling, J.V.
collectively referred to as ( the "Company"). The statement does not
include any revenues or expenses related to any other properties owned or
managed by the Company. One property acquired is operated as a Hooters
restaurant. The other property was operated as a Taco Cabana but is
currently vacant. The tenant continues to pay rents under the lease on a
monthly basis. In accordance with the Securities and Exchange Commission
Rule 3-14, the statement does not include expenses not comparable to the
proposed future operations of the properties such as depreciation,
interest, or any other costs that are not directly associated with the
properties and accordingly, it is not intended to be a complete
presentation of revenues and expenses of the properties.
2. Use Of Estimates
The preparation of this combined statement of revenues and certain expenses
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of revenues and certain expenses during a reporting period. Actual
results could differ from those estimates.
3. Rental Income
The leases on these properties are "triple net" leases which require the
lessee to pay all property taxes, assessments, insurance, maintenance costs
and other charges related to maintenance, repair and operation of the
properties. Cost reimbursement revenue represents amounts reimbursed by the
tenants to the Company for real estate taxes and insurance. Certain
information regarding each of the property leases is set forth in the table
below.
<TABLE>
<CAPTION>
MINIMUM
ANNUAL PERCENTAGE TERMINATION
LOCATION RENTAL RENTALS DATE
- ----------------------- -------------------------------------------- ---------------------- ---------------------
<C> <C> <C> <C>
5630 Wurzbach Rd. $104,028 Per year through 2/28/99 with 6% of sales (in February 2008 with
San Antonio, TX increases every three years excess of minimum two five-year
equal to the lesser of $8,000 rent) renewal options
plus the product of the current
Consumer Price Index (CPI) over
CPI at March 1993 times base rent
of $8,000 or 1.09 times the rent
of the prior period
8527 Wurzbach Rd 71,520 Per year through 2/28/99 with 5% of sales (in February 2003 with
San Antonio, TX increases every three years excess of minimum two five-year
equal to the lesser of $5,500 rent) renewal options
plus the product of the current
CPI over CPI at March 1993
times the base rent of $5,500
or 1.09 times the rent of the
prior period
</TABLE>
18
<PAGE>
NOTES TO THE SELECTED PROPERTIES SOLD TO U.S. RESTAURANT PROPERTIES, INC.
(FRIESENHAHN ACQUISITION) COMBINED STATEMENT OF REVENUES AND CERTAIN EXPENSES
3. Rental Income (continued)
The following is a schedule of minimum rental income on the non-cancelable
leases as of December 31,1996:
1997 $ 175,548
1998 175,548
1999 175,548
2000 175,548
2001 175,548
Thereafter 724,946
-------------
$ 1,602,686
=============
19
<PAGE>
Financial information related to the acquisition of nine restaurant properties
by U. S. .Restaurant Properties, Inc. from Burger King Limited Partnership I.
Burger King Limited Partnership I is a publicly owned New York limited
partnership ("BK I"). With respect to BK I, as reported by its management, net
income totaled $1,026,350 for the year ended December 31, 1996 and net income of
$328,996 for the six months ended June 30, 1997. BK I reported total assets of
$3,052,291 and partners' equity of $2,190,018 as of December 31, 1996 and total
assets of $2,410,788 and partners' equity of 2,213,108 as of June 30, 1997.
Persons interested in receiving copies of BK I's publicly issued financial
statements for the year ended December 31, 1996 and for the six months ended
June 30, 1997 can do so by contacting Burger King Limited Partnership I at: 3
World Financial Center, 29th Floor, New York, N.Y. 10285 or by accessing the
Securities and Exchange Commission's EDGAR archives through their Web site
located at http://www.sec.gov.
20
<PAGE>
Financial information related to the acquisition of 22 restaurant properties by
U. S. Restaurant Properties, Inc. from Burger King Limited Partnership III.
Burger King Limited Partnership III is a publicly owned New York limited
partnership ("BK III"). As of December 31, 1996, BK III owned 23 properties and
of those properties, 22 were acquired by U. S. Restaurant Properties, Inc. With
respect to BK III, as reported by its management, net income totaled $1,787,581
for the year ended December 31, 1996 and net income of $1,387,703 for the six
months ended June 30, 1997. BK III reported total assets of $6,292,587 and
partners' equity of $5,329,214 as of December 31, 1996 and total assets of
$6,364,402 and partners' equity of $5,063,538 as of June 30, 1997. Persons
interested in receiving copies of BK III's publicly issued financial statements
for the year ended December 31, 1996 and for the six months ended June 30, 1997
can do so by contacting Burger King Limited Partnership III at: 3 World
Financial Center, 29th Floor, New York, NY 10285 or by accessing the Securities
and Exchange Commission's EDGAR archives through their web site located at:
http://www.sec.gov.
21
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following September 30, 1997 unaudited Pro Forma Consolidated
Balance Sheet of U.S. Restaurant Properties, Inc. (the "Company") consists of
the Company's September 30, 1997 historical balance sheet adjusted on a pro
forma basis to reflect as of September 30, 1997: (a) the acquisition of 67
operating properties for $43,733,000, (b) the acquisition of seven newly
constructed and five undeveloped properties for $8,097,000, (c) the sale of four
properties for $2,605,000, (d) the additional borrowings required to purchase
the properties acquired, (e) the conversion of the managing general partnership
to a real estate investment trust on October 15, 1997 and the reduction of total
debt outstanding of $87,810,000 from the preferred stock offering in November
1997. The unaudited Pro Forma Consolidated Balance Sheet is not necessarily
indicative of what the actual financial position of the Company would have been
at September 30, 1997 had all of these transactions occurred as of such date and
it does not purport to represent the future financial position of the Company.
The unaudited Pro Forma Condensed Consolidated Statement of Income for
the year ended December 31, 1996 is presented as if the following had occurred
as of January 1, 1996: (a) the operations relating to the period between January
1, 1996 and the date of the acquisition for the 1996 acquisitions, comprised of
184 properties acquired on various dates from January 1, 1996 through December
31, 1996, for $105,336,000 including the fair value of 577,254 units issued in
connection with the acquisitions, (b) the acquisition of 209 properties for
$137,108,000 including the value of 680,695 units issued in connection with the
acquisitions and the sale of four properties for $3,217,000 on various dates
between January 1, 1997 and October 15, 1997, (c) the acquisition of 62
operating properties for $38,605,000 acquired between October 15, 1997 and
December 31, 1997, (d) the acquisition of seven newly constructed and five
undeveloped properties for $8,097,000, between October 15 and December 31, 1997,
(e) the sale of four properties for $2,605,000 between October 15 and December
31, 1997, (f) the issuance of 2,700,000 units in June 1996 with net proceeds of
$40,203,000, (g) the issuance of 1,434,831 units in five separate transactions
to individual investors with net proceeds of $25,000,000, (h) the additional
borrowings of $118,149,000 required to purchase the properties acquired, (i) the
conversion of the managing general partnership to a real estate investment trust
on October 15, 1997, (j) the preferred stock dividends required and the
reduction of interest expense as a result of the offering based on the offering
proceeds to reduce the total debt outstanding by $87,810,000, and (k) the
three-for-two stock split on October 30, 1997. The unaudited Pro Forma Condensed
Consolidated Statement of Income is not necessarily indicative of what the
actual results of operations of the Partnership would have been assuming the
transactions described above had been completed as of January 1, 1996, nor do
they purport to represent the results of operations for future periods.
The unaudited Pro Forma Condensed Consolidated Statement of Income for
the nine months ended September 30, 1997 is presented as if the following had
occurred as of January 1, 1997: (a) the acquisition of 209 properties for
$137,108,000 including the value of 680,695 units issued in connection with
acquisitions and the sale of four properties for $3,217,000 on various dates
between January 1, 1997 and October 15, 1997, (b) the acquisition of 62
operating properties for $38,605,000 acquired between October 15, 1997 and
December 31, 1997, (c) the acquisition of seven newly constructed and five
undeveloped properties for $8,097,000, between October 15 and December 31, 1997,
(d) the sale of four properties for $2,605,000 between October 15, and December
31, 1997, (e) the issuance of 1,434,831 units in five separate transactions to
individual investors with net proceeds of $25,000,000, (f) the additional
borrowings of $52,350,000 required to purchase the properties acquired, (g) the
conversion of the managing general partnership to a real estate investment trust
on October 15, 1997, (h) the preferred stock dividends required and the
reduction of interest expense as a result of the offering based on the
22
<PAGE>
offering proceeds to reduce the total debt outstanding by $87,810,000, and (i)
the three-for-two stock split on October 30, 1997. The unaudited Pro Forma
Condensed Consolidated Statement of Income is not necessarily indicative of what
the actual results of operations of the Partnership would have been assuming the
transactions described above had been completed as of January 1, 1997, nor do
they purport to represent the results of operations for future periods.
23
<PAGE>
U.S. RESTAURANT PROPERTIES, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
September 30, 1997
(Unaudited)
(Dollars In thousands)
<TABLE>
<CAPTION>
REIT
Conversion
Operating Newly and
Property Constructed Offering
Historical Acquisition (a) Acquisitions (b) Sales (c) Adjustments (d) Pro Forma
----------- ------------ ------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Cash and equivalents......... $ 1,666 $ - $ - $ - $ 1 $ 1,667
Receivables, net............. 2,682 159 (227) (40) 2,574
Deferred rent receivable..... 1,556 1,556
Purchase deposits and
escrows.................... 2,234 (318) (732) 1,184
Prepaid expenses............. 1,146 1,146
Notes receivable............. 2,153 972 3,125
Notes receivable - related
parties.................... 5,425 (2,061) 3,364
Mortgage loan receivable..... 5,986 5,986
Net investment in direct
financing leases........... 14,902 (567) 14,335
Land......................... 92,179 14,082 3,263 (1,050) 108,474
Buildings and leasehold
improvements, net.......... 168,542 29,651 4,834 (38) 202,989
Machinery and equipment, net. 3,471 3,471
Intangibles, net............. 11,866 (261) 11,605
----------- ------------ ------------- ---------- ------------ ------------
$ 313,808 $ 43,574 $ 5,077 $ (984) $ 1 $ 361,476
=========== ============ ============= ========== ============ ============
Accounts payable............. $ 4,628 $ 91 $ 25 $ - $ - $ 4,744
Deferred rent payable........ 113 113
Deferred gain on sale of
property................... 803 257 1,060
Lines of credit.............. 129,573 43,483 5,052 (1,218) (87,810) 89,080
Notes payable................ 40,000 40,000
Capitalized lease
obligations................ 222 (23) 199
General Partner's capital.... 1,055 (1,055) 0
Limited Partner's capital.... 137,414 (137,414) 0
Stockholders' Equity......... 0 226,280 226,280
----------- ------------ ------------- ---------- ------------ ------------
$ 313,808 $ 43,574 $ 5,077 $ (984) $ 1 $ 361,476
=========== ============ ============= ========== ============ ============
</TABLE>
See Notes to Pro Forma Consolidated Balance Sheet.
24
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(a) Reflects pro forma adjustments for acquisitions completed since September
30, 1997 which consist of the purchase of 67 operating properties and the
borrowings required to complete the purchase of these properties as
follows:
<TABLE>
<CAPTION>
Number of
Properties Operating
------------- ----------------
<S> <C> <C>
BK III 22 $ 16,212
BK I 9 6,474
Kettle Acquisition 18 6,153
Perkins Acquisition 4 3,023
Harrigans Acquisition 3 3,899
Taco Bell 3 878
Friesenhahn Acquisition 2 1,413
Dunkin Donut 1 600
Superpumper 1 1,229
Other Properties 4 3,852
----- ----------------
67 43,733
=====
Add percent rent receivable 159
Less September 30, 1997 purchase deposits
relating to acquisitions (318)
Less tenant security deposit and escrow
received (91)
----------------
Increase in line of credit and notes payable $ 43,483
================
Costs of the acquisitions are allocated
as follows:
Land $ 14,082
Buildings and leasehold improvements 29,651
================
$ 43,733
================
</TABLE>
The respective purchase price for the properties has been allocated between land
and buildings and leasehold improvements, on a preliminary basis. Final
determination of the proper allocation between these accounts will be made prior
to finalizing the financial statements for the year ended December 31, 1997.
Management does not expect material adjustments to occur.
25
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET (CONTINUED)
(b) Reflects pro forma adjustments for acquisitions completed since September
30, 1997 which consist of the purchase of seven newly constructed and five
undeveloped properties and the borrowings required to complete the purchase
of these properties as follows:
<TABLE>
<CAPTION>
Number of Newly
Properties Constructed
------------- ----------------
<S> <C> <C>
Schlotzsky's 10 $ 4,648
Other 2 3,449
---- ----------------
12 8,097
====
Less September 30, 1997 purchase deposits
relating to acquisitions (732)
Less reduction in accrued interest receivable (227)
Less reduction in notes receivable - related
party (2,061)
Less tenant security deposit and escrow
received (25)
----------------
Increase in line of credit and notes payable $ 5,052
================
Costs of the acquisitions are allocated
as follows:
Land $ 3,263
Buildings and leasehold improvements 4,834
----------------
$ 8,097
================
</TABLE>
The respective purchase price for the properties has been allocated between land
and buildings and leasehold improvements, on a preliminary basis. Final
determination of the proper allocation between these accounts will be made prior
to finalizing the financial statements for the year ended December 31, 1997.
Management does not expect material adjustments to occur.
(c) Reflects pro forma adjustments for restaurant properties sold since
September 30, 1997 which consist of the sale of four operating properties
and the reduction in borrowings as a result of the sale of these properties
as follows:
<TABLE>
<CAPTION>
Number of
Properties Sales
------------- ----------------
<S> <C> <C>
Burger King 4 $ (1,088)
Add note receivable on sale 972
Add decrease in capital lease obligation 23
Less decrease in accounts receivable (40)
Less direct financing lease portion of sale (567)
Less intangibles (261)
Less deferred gain on sale (257)
----------------
Decrease in line of credit $ (1,218)
================
Costs of the sales are allocated
as follows:
Land $(1,050)
Buildings and leasehold improvements (38)
----------------
$ (1,088)
================
</TABLE>
d) Reflects pro forma adjustments for the conversion to a real estate
investment trust and the issuance of preferred stock. See supplemental
prospectus filed on November 12, 1997.
26
<PAGE>
U.S. RESTAURANT PROPERTIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
For the Year Ended December 31, 1996
(Unaudited)
(In thousands, except per unit data)
<TABLE>
<CAPTION>
REIT
1997 Conversion
Acquisitions and
1996 and Offering Dunkin
Historical Acquisitions Sales Adjustments Sales Perkins Kettle Donut
---------- ------------ ------------ ----------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TOTAL REVENUES $ 18,324 $ 7,365 (a) $ 16,962 (b) $ - $ (243) (e) $ 353 (f) $ 690 (g) $ 82 (h)
EXPENSES
Rent 2,080 232 (a) 271 (c) - (32) (e) - - -
Depreciation and
amortization 3,978 1,855 5,137 (91) (d) (10) (n) 79 (n) 215 (n) 13 (n)
Taxes, general and
administrative 2,461 684 1,402 (2,477) (d) - - - -
Interest expense,
net 2,364 3,038 7,161 (6,322) (d) - - - -
---------- ------------ ------------ ----------- ------- ------- ------- ------
TOTAL EXPENSES 10,883 5,809 13,971 (8,890) (42) 79 215 13
Gain on sale
of equipment 32 - - - - - - -
---------- ------------ ------------ ----------- ------- ------- ------- ------
NET INCOME $ 7,473 $ 1,556 $ 2,991 $ 8,890 $ (201) $ 274 $ 475 $ 69
========== ============ ============ =========== ======= ======= ======= ======
Preferred stock
dividends $ - $ (7,102) (d)
----------
Net income
allocable to
unitholders/
common
shareholders $ 7,325
==========
Average number of
outstanding units 9,161 1,014 1,275
==========
NET INCOME PER
UNIT/SHARE $ 0.80
==========
</TABLE>
See Notes to Pro Forma Consolidated Statement of Income
continued on next page
27
<PAGE>
U.S. RESTAURANT PROPERTIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (continued)
For the Year Ended December 31, 1996
(Unaudited)
(In thousands, except per unit data)
<TABLE>
<CAPTION>
Friesenhahn Newly Constructed Other Pro Forma
Acquisition BK I BK III Properties Properties Adjustment Pro Forma
----------- -------- ---------- ----------------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
TOTAL REVENUES $ 183 (i) $ 906 (j) $ 1,998 (k) $ 1,033 (l) $ 589 (m) $ - $ 48,242
EXPENSES
Rent - 134 (j) 279 (k) - - - 2,964
Depreciation and
amortization 41 (n) 236 (n) 574 (n) 241 (n) 136 (n) - 12,404
Taxes, general and
administrative - - - - - - 2,070
Interest expense,
net - - - - - 3,197 (o) 9,438
----------- -------- ---------- ----------------- ----------- ---------- -----------
TOTAL EXPENSES 41 370 853 241 136 3,197 26,876
Gain on sale of
equipment - - - - - - 32
----------- -------- ---------- ----------------- ----------- ---------- -----------
NET INCOME $ 142 $ 536 $ 1,145 $ 792 $ 453 $ (3,197) $ 21,398
=========== ======== ========== ================= =========== ==========
Preferred stock
dividends (7,102)
-----------
Net income
allocable to
unitholders/
common
shareholders 14,296
===========
Average number of
outstanding units 13,955
===========
NET INCOME PER
UNIT/SHARE $ 1.02
===========
</TABLE>
See Notes to Pro Forma Consolidated Statement of Income.
28
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(a) Reflects pro forma adjustments to operations relating to the period
between January 1, 1996 and the date of acquisition for the 1996
acquisitions, comprised of 184 properties acquired on various dates
from January 1, 1996 through December 31, 1996.
(b) Reflects pro forma adjustment for the completed 1997 acquisitions and
sales comprising of 209 properties acquired and four properties sold on
various dates from January 1, 1997 through October 15, 1997.
(c) Represents actual rent expense on 209 properties acquired from January
1, 1997 through October 15, 1997.
(d) Reflects pro forma adjustment for the conversion to a real estate
investment trust and the issuance of preferred stock. See
supplemental prospectus filed on November 12, 1997.
(e) Reflects pro forma adjustment to operations based on historical
financial information on four properties sold.
(f) Reflects pro forma adjustment to operations relating to base and
percentage rent based on historical financial information for the
Perkin's Acquisition comprised of four properties acquired on
November 17, 1997. See combined statement of revenues and certain
expenses included herein.
(g) Reflects pro forma adjustment to operations relating to base rent
based on historical information for the Kettle acquisition
comprised of 18 properties acquired on November 26, 1997. See
statement of revenues and direct operating expenses included herein.
(h) Reflects pro forma adjustment to operations relating to base rent
based on historical financial information for L&H Donuts, Inc.
acquisition comprised of one property acquired on December 4, 1997.
See statement of revenues and certain expenses included herein.
(i) Reflects pro forma adjustment to operations relating to base and
percentage rent based on historical financial information for
the Friesenhahn Acquisition comprised of two properties acquired
on December 10, 1997. See combined statement of revenues and certain
expenses included herein.
(j) Reflects pro forma adjustment to operations relating to base and
percentage rent based on historical financial information for
the BK I acquisition comprised of nine properties acquired on
December 18, 1997.
(k) Reflects pro forma adjustment to operations relating to base and
percentage rent based on historical financial information for the
BK III acquisition comprised of 22 properties acquired on
December 18, 1997.
(l) Reflects pro forma adjustment to operations based on executed
lease information for the newly constructed and undeveloped
acquisitions comprised of seven properties acquired on various
dates from October 15, 1997 through December 31, 1997.
(m) Reflects pro forma adjustment to operations relating to base rent
based on newly executed lease and historical financial information
for seven other properties acquired on various dates from October 15,
1997 through December 31, 1997.
(n) Reflects pro forma increase in depreciation expense related to the
purchase price of the respective properties or decrease in
depreciation expense due to the sale of the respective properties.
Depreciation is computed using the straight-line method over the
estimated useful lives of building, leasehold improvements,
machinery and equipment which range from 10 to 20 years.
29
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(o) Reflects the pro forma adjustment to interest expense as a result
of the purchase of the respective properties. Pro forma interest
expense is based on the increase in debt outstanding and
borrowings for payment of distributions on units issued on a
pro forma basis using interest rates based on the Company's credit
arrangements which are as follows:
<TABLE>
<CAPTION>
Principal Interest Rate
<S> <C> <C>
Series A Senior Secured Guaranteed Notes $12,500,000 8.06%
Series B Senior Secured Guaranteed Notes 27,500,000 8.30%
Line of credit 62,874,000 7.20%
Line of credit 26,200,000 8.03%
</TABLE>
30
<PAGE>
U.S. RESTAURANT PROPERTIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
For the nine months ended September 30, 1997
(Unaudited)
(In thousands, except per unit data)
<TABLE>
<CAPTION>
REIT
1997 Conversion
Acquisitions and
and Offering Dunkin
Historical Sales Adjustments Sales Perkins Kettle Donut
---------- ------------- ------------ -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
TOTAL REVENUES $ 24,596 $ 7,245 (a) $ - $ (173) (d) $ 265 (e) $ 518 (f) $ 61 (g)
EXPENSES
Rent 1,873 136 (b) - (22) (d) - - -
Depreciation and
amortization 5,984 2,121 (68) (c) (6) (m) 59 (m) 161 (m) 10 (m)
Taxes, general and
administrative 3,078 609 (1,858) (c) - - - -
Interest expense 6,661 3,540 (4,939) (c) - - - -
---------- ------------- ------------- -------- ------- ------- -------
TOTAL EXPENSES 17,596 6,406 (6,865) (28) 59 161 10
---------- ------------- ------------- -------- ------- ------- -------
Income before
unusual items 7,000 839 6,865 (145) 206 357 51
Gain on sale of
property 450 - - - - - -
REIT conversion
costs (819) - 819 - - - -
---------- ------------- ------------- -------- ------- ------- -------
NET INCOME $ 6,631 $ 839 $ 7,684 $ (145) $ 206 $ 357 $ 51
========== ============= ============= ======== ======= ======= =======
Preferred stock
dividends - (5,326) (c)
----------
Net income
allocable to
unitholders/
common
shareholders $ 6,499
==========
Average number of
outstanding units 11,611 1,014 1,275
==========
NET INCOME PER
UNIT/SHARE $ 0.56
==========
</TABLE>
See Notes to Pro Forma Consolidated Statement of Income.
continued on next page
31
<PAGE>
U.S. RESTAURANT PROPERTIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (continued)
For the nine months ended September 30, 1997
(Unaudited)
(In thousands, except per unit data)
<TABLE>
<CAPTION>
Friesenhahn Newly Constructed Other Pro Forma
Acquisition BK I BK III Properties Properties Adjustment Pro Forma
----------- -------- ---------- ----------------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
TOTAL REVENUES $ 137 (h) $ 680 (i) $ 1,498 (j) $ 776 (k) $ 441 (l) $ - $ 36,044
EXPENSES
Rent - 101 (i) 209 (j) - - - 2,297
Depreciation and
amortization 31 (m) 177 (m) 431 (m) 181 (m) 102 (m) - 9,183
Taxes, general and
administrative - - - - - - 1,829
Interest expense - - - - - 1,727 (n) 6,989
----------- -------- ---------- ----------------- ----------- ---------- -----------
TOTAL EXPENSES 31 278 640 181 102 1,727 20,298
----------- -------- ---------- ----------------- ----------- ---------- -----------
Income before
unusual items 106 402 858 595 339 (1,727) 15,746
Gain on sale of
property - - - - - - 450
REIT conversion
costs - - - - - - -
----------- -------- ---------- ----------------- ----------- ---------- -----------
NET INCOME $ 106 $ 402 $ 858 $ 595 $ 339 $ (1,727) $ 16,196
=========== ======== ========== ================= =========== ===========
Preferred stock
dividends (5,326)
-----------
Net income
allocable to
unitholders/
common
shareholders $ 10,870
===========
Average number of
outstanding units 14,006
===========
NET INCOME PER
UNIT/SHARE $ 0.78
===========
</TABLE>
See Notes to Pro Forma Consolidated Statement of Income.
32
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(a) Reflects pro forma adjustment to operations relating to the period
between January 1, 1997 and the date of acquisition for base and
percentage rent for the 1997 acquisitions comprised of 209 properties
acquired on various dates from January 1, 1997 through October 15, 1997.
(b) Represents actual rent expense on 209 properties acquired from
January 1, 1997 through October 15, 1997.
(c) Reflects pro forma adjustment for the conversion to a real estate
investment trust and the issuance of preferred stock. See supplemental
prospectus filed on November 12, 1997.
(d) Reflects pro forma adjustment to operations based on historical
financial information on four properties sold.
(e) Reflects pro forma adjustment to operations relating to base and
percentage rent based on historical financial information for the
Perkin's Acquisition comprised of four properties acquired on
November 17, 1997. See combined statement of revenues and certain
expenses included herein.
(f) Reflects pro forma adjustment to operations relating to base rent
based on historical information for the Kettle acquisition
comprised of 18 properties acquired on November 26, 1997. See
statement of revenues and direct operating expenses included herein.
(g) Reflects pro forma adjustment to operations relating to base rent
based on historical financial information for L&H Donuts, Inc.
acquisition comprised of one property acquired on December 4, 1997.
See statement of revenues and certain expenses included herein.
(h) Reflects pro forma adjustment to operations relating to base and
percentage rent based on historical financial information for
the Friesenhahn Acquisition comprised of two properties acquired
on December 10, 1997. See combined statement of revenues and certain
expenses included herein.
(i) Reflects pro forma adjustment to operations relating to base and
percentage rent based on historical financial information for
the BK I acquisition comprised of nine properties acquired on
December 18, 1997.
(j) Reflects pro forma adjustment to operations relating to base and
percentage rent based on historical financial information for the
BK III acquisition comprised of 22 properties acquired on
December 18, 1997.
(k) Reflects pro forma adjustment to operations based on executed lease
information for the newly constructed and undeveloped acquisitions
comprised of seven properties acquired on various dates from
October 15, 1997 through December 31, 1997.
(l) Reflects pro forma adjustment to operations relating to base rent
based on newly executed lease and historical financial information
for seven other properties acquired on various dates from
October 15, 1997 through December 31, 1997.
(m) Reflects pro forma increase in depreciation expense related to the
purchase price of the respective properties or decrease in
depreciation expense due to the sale of the respective properties.
Depreciation is computed using the straight-line method over the
estimated useful lives of building, leasehold improvements,
machinery and equipment which range from 10 to 20 years.
33
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(n) Reflects the pro forma adjustment to interest expense as a result
of the purchase of the respective properties. Pro forma interest
expense is based on the increase in debt outstanding and
borrowings for payment of distributions on units issued on a
pro forma basis using interest rates based on the Company's credit
arrangements which are as follows:
<TABLE>
<CAPTION>
Principal Interest Rate
<S> <C> <C>
Series A Senior Secured Guaranteed Notes $12,500,000 8.06%
Series B Senior Secured Guaranteed Notes 27,500,000 8.30%
Line of credit 62,874,000 7.50%
Line of credit 26,200,000 8.03%
</TABLE>
34
<PAGE>
SIGNATURE
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.
Date: January 23, 1998 U.S. RESTAURANT PROPERTIES, INC.
By: /s/ Robert J. Stetson
-----------------------------------
Robert J. Stetson
President, Chief Executive Officer
35
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-34263 of U.S. Restaurant Properties, Inc. on Form S-3 of our report dated
January 15, 1998 with respect to the combined statement of revenues and certain
expenses of Selected Properties Sold to U.S. Restaurant Properties, Inc.
(Perkin's Acquisition) for the year ended June 30, 1997, our report dated
January 8, 1998 with respect to the statement of revenues and certain expenses
of the Property Sold to U.S. Restaurant Properties, Inc. by L & H Donuts, Inc.
for the year ended December 31, 1996, our report dated January 13, 1998 with
respect to the combined statement of revenues and certain expenses of Selected
Properties Sold to U.S. Restaurant Properties Inc. (Friesenhahn Acquisition) for
the year ended December 31, 1996, appearing in the Current Report on Form 8-K/A
dated January 23, 1998 of U.S. Restaurant Properties, Inc.
DELOITTE & TOUCHE LLP
Dallas, Texas
January 23, 1998
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-34263 of the U.S. Restaurant Properties, Inc. on Form S-3 of our report
dated January 20, 1998 with respect to the Statement of Revenues and Direct
Operating Expenses Applicable to the Acquisition of Eighteen Properties of
Kettle Restaurants, Inc. by U.S. Restaurant Properties, Inc. for the year ended
October 30, 1997, appearing in the Current Report on Form 8-K/A dated January
23, 1998 of U.S. Restaurant Properties, Inc.
MONTGOMERY, JESSUP & CO., L.L.P.
Dallas, Texas
January 23, 1998
