<PAGE>
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) June 24, 1998
U.S. RESTAURANT PROPERTIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 1-13089 75-2687420
(STATE OF OTHER JURISDICTION (COMMISSION FILE (I.R.S. EMPLOYER
OF INCORPORATION OR NUMBER) IDENTIFICATION NO.)
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>
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 June 24, 1998, as filed with the Securities and Exchange
Commission on July 7, 1998 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 in
Item 7 and as further described in Item 2.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On June 24, 1998, U.S. Restaurant Properties, Inc. (the "Registrant") acquired
two Burger King restaurants properties one located in Arizona and one in
California. The acquisition was done pursuant to one purchase and sale
agreement. The purchase price equaled $1,630,000 in cash and other capitalized
costs of approximately $22,000. The selling entity was Brulon Properties, a
Utah partnership. The acquisition was funded by the Registrant's bank line of
credit.
On June 22, 1998, the Registrant acquired one Village Inn restaurant property
located in Arizona. The acquisition was done pursuant to one purchase and sale
agreement. The purchase price equaled $335,000 in cash and other capitalized
costs of approximately $6,000. The selling entity was Frances M. Fisher an
individual. The acquisition was funded by the Registrant's bank line of credit.
On May 27, 1998, the Registrant acquired one Tony Roma's restaurant property
located in Texas. The acquisition was done pursuant to one purchase and sale
agreement. The purchase price equaled $796,000 in cash and other capitalized
costs of approximately $10,000. The selling entity was Austin Partners, a Texas
general partnership. The acquisition was funded by the Registrant's bank line
of credit.
On various dates between May 26, 1998 through June 10, 1998, the Registrant
acquired two Arby's and two Burger King restaurant properties located in Kansas,
Minnesota and North Carolina. These acquisitions were done pursuant to four
purchase and sale agreements. The purchase prices equaled $2,057,000 in cash
and other capitalized costs of approximately $73,000. The selling entities were
Minneapolis Teachers' Retirement Fund Association, a Minnesota non-profit
corporation and MRT Properties, Inc., a Minnesota corporation. The acquisitions
were funded by the Registrant's bank line of credit
On May 22, 1998, the Registrant acquired 11 restaurant properties consisting of
five Captain D's, two Shoney's, two Miami Subs, one Long John Silvers and one
Hooters restaurant located in Georgia, Louisiana, Oklahoma and Texas. The
acquisition was done pursuant to one purchase and sale agreement. The purchase
price equaled $5,087,512 in cash and other capitalized costs of approximately
$112,000. The selling entity was Shoney's, Inc., a Tennessee corporation. The
acquisition was funded by the Registrant's bank line of credit.
On April 8, 1998, the Registrant acquired two Ale House restaurant properties
located in Florida. The acquisition was done pursuant to one purchase and sale
agreement. These properties were purchased for an aggregate purchase price of
approximately $3,687,000. The selling entity was Jackson-Shaw Partners No. 51,
Ltd, a Texas limited partnership. The acquisition was funded by the
Registrant's bank line of credit.
On various dates from March 1, 1998 through June 30, 1998, the Registrant
acquired 26 properties consisting of four Schlotzsky's, one Arby's, one Burger
King, and 20 other regional brand restaurants and gas station properties located
in Arizona, California, Colorado, Delaware, Georgia, Michigan, New Hampshire,
Oregon, Pennsylvania, South Carolina and Texas. The properties were acquired
pursuant to 18 purchase and sale agreements. These properties were purchased
for an aggregate cash purchase price of approximately $21,514,000. These
restaurant and gas station properties represent newly developed properties and
properties yet to be developed, which do not have any historical operations.
These are not considered to be an acquisition of a business and consequently no
financial information is presented herein on these properties. The selling
entities were Dynamic Development Joint Venture, Schlotzsky's Real Estate, Inc.,
a Texas corporation, Caribou Coffee Company, Inc., a Minnesota corporation,
Texas Roadhouse of Grand Prairie LLC, a Kentucky limited liability company, John
Harvard's Brew House Pennsylvania, L.L.C., a Pennsylvania limited liability
company, Restaurant Properties L.L.C., a Kentucky limited liability company,
Evergreen State Limited Partnership No. 17, a Washington limited partnership,
Sybra,
2
<PAGE>
Inc. a Michigan corporation, Volume, Inc., a New Hampshire corporation, Medhi
Sater, an individual, Northwest Petroleum, Inc., a Texas Corporation 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. These acquisitions were funded
by the Registrant's bank line of credit.
In addition, to the above acquisitions, 11 other properties (the "Other
Properties") were acquired during the period March 1, 1998 and June 30, 1998.
These properties consist of four Arby's restaurant properties, one El Chico
restaurant and six other regional restaurant and gas station properties. The
properties were purchased from B.C. Oil Ventures, LLC, a California limited
liability company, Georgia Clubhouse, Inc., a Georgia corporation, Hal W. Smith,
an Individual, Buca (Wheeling), Inc., a Minnesota corporation, Sybra, Inc., a
Michigan corporation, Sybra of California, a California corporation, The Charles
Sewell Raper Trust Dated July 9, 1993, The Charles Shawn Raper Trust Dated July
9, 1993 and Robert L. Wiggins, Sr., an Individual. These properties were
purchased for an aggregate cash purchase price of approximately $11,347,000 and
were funded by the Registrant's bank line of credit.
The transaction on June 24, 1998, in combination with previously reported
restaurant properties acquired between January 1, 1998 and June 24, 1998 (date
of reportable event), which are unaudited, are deemed significant in aggregate
to the Registrants total assets as previously reported on Form 10-K. The
Sellers of all properties are not affiliated with the Registrant, any director
or officer of the Registrant or any associate of any such director or officer
except for U.S. Restaurant Properties Development, L.P. as indicated above.
The purchase prices, which were negotiated with the Sellers, were determined
through internal analysis by the Registrant of historical cash flows and/or fair
market values of the acquired Properties.
3
<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. by Brulon
Properties for the year ended December 31, 1997
Statement of Revenues and Certain Expenses of Property Sold to U.S.
Restaurant Properties, Inc. by Frances M. Fisher for the year ended
December 31, 1997
Statement of Revenues and Certain Expenses of Property Sold to U.S.
Restaurant Properties, Inc. by Austin Partners for the year ended
December 31, 1997
Combined Statement of Revenues of Selected Properties Sold to U.S.
Restaurant Properties, Inc. (Minneapolis Teachers' Retirement Fund
Association Acquisition) for the year ended June 30, 1997
Combined Statement of Revenues and Certain Expenses of Selected
Properties Sold to U.S. Restaurant Properties, Inc. by Shoney's,
Inc. for the year ended December 31, 1997
Combined Statement of Revenues and Certain Expenses of Selected
Properties Sold to U.S. Restaurant Properties, Inc. (Ale House
Acquisition) for the year ended December 31, 1997
b) Pro forma Financial Information
c) Exhibits
23 (1) Consent of Deloitte & Touche LLP
4
<PAGE>
INDEPENDENT AUDITORS' REPORT
U.S. Restaurant Properties, Inc.
We have audited the accompanying combined statement of revenues and certain
expenses of the Selected Properties Sold to U.S. Restaurant Properties, Inc. by
Brulon Properties for the year ended December 31, 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 of expenses, 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 combined 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. by Brulon Properties for the year ended December 31, 1997, in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Dallas, Texas
August 18, 1998
5
<PAGE>
SELECTED PROPERTIES SOLD TO U.S. RESTAURANT PROPERTIES, INC. BY BRULON
PROPERTIES
COMBINED STATEMENT OF REVENUES AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
RENTAL INCOME
Minimum $183,348
Percentage rent 7,233
Cost reimbursement 8,212
----------
TOTAL RENTAL INCOME 198,793
DIRECT EXPENSES
Property taxes 5,755
Lease revenue taxes 2,457
----------
TOTAL DIRECT EXPENSES 8,212
----------
NET RENTAL INCOME $190,581
----------
----------
</TABLE>
See Accompanying Notes to the Combined Statement of Revenues and Certain
Expenses.
6
<PAGE>
NOTES TO THE COMBINED STATEMENT OF REVENUES AND CERTAIN EXPENSES RELATING TO THE
SELECTED PROPERTIES SOLD TO U.S. RESTAURANT PROPERTIES, INC. BY BRULON
PROPERTIES
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
Brulon Properties, a Utah partnership (the "Partnership"). The statement
does not include any revenues or expenses related to any other properties
owned or managed by the Partnership. The properties acquired are operating
as Burger King restaurants. In accordance with the Securities and Exchange
Commission Rule 3-14, the combined 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 combined 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 combined 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 RENTALS DATE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Blythe, CA $106,143 Per year through 08/29/2001 The greater of annual base rent or August 2006
111,451 Per year through 08/29/2006 7.5% of sales between $0 - with one
$1,200,000 twenty year
or 7.0% of sales between $1,200,001- renewal
$1,450,000 or 6.5% of sales between option.
$1,450,001-$1,700,000 or 6.0% of
sales
over $1,700,000
Holbrook, AZ $ 72,036 Per year through 03/07/2001 8.5% of sales less minimum rent March 2021
75,636 Per year through 03/07/2006
79,416 Per year through 03/07/2011
83,388 Per year through 03/07/2016
87,564 Per year through 03/07/2021
</TABLE>
The following is a schedule of minimum rental income on the non-cancelable
leases as of December 31, 1997:
<TABLE>
<S> <C>
1998 $ 178,179
1999 178,179
2000 178,179
2001 182,949
2002 187,087
Thereafter 1,900,006
----------
$2,804,579
----------
----------
</TABLE>
4. Related Party Transactions
The lessee on the Holbrook, Arizona property was a related party to the
seller until September 1, 1997 when the operations and franchise agreement
at this property were sold to a third party.
7
<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 Frances M. Fisher for
the year ended December 31, 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 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 of expenses, 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 Frances M. Fisher
for the year ended December 31, 1997, in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Dallas, Texas
August 18, 1998
8
<PAGE>
PROPERTY SOLD TO U.S. RESTAURANT PROPERTIES, INC. BY FRANCES M. FISHER
STATEMENT OF REVENUES AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
RENTAL INCOME
Minimum $ 29,369
Percentage rent 30,506
Cost reimbursement 1,548
------------
TOTAL RENTAL INCOME 61,423
DIRECT EXPENSES - LEASE REVENUE TAXES 1,548
------------
NET RENTAL INCOME $ 59,875
------------
------------
</TABLE>
See Accompanying Notes to the Statement of Revenues and Certain Expenses.
9
<PAGE>
NOTES TO THE STATEMENT OF REVENUES AND CERTAIN EXPENSES RELATING TO THE PROPERTY
SOLD TO U.S. RESTAURANT PROPERTIES, INC. BY FRANCES M. FISHER
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 Frances M.
Fisher. The statement does not include any revenues or expenses related to
any other properties owned or managed by Frances M. Fisher. The property
acquired is operated as a Village Inn 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.
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" 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 revenue. Certain information regarding the property leases
set forth in the table below.
<TABLE>
<CAPTION>
MINIMUM
ANNUAL PERCENTAGE TERMINATION
LOCATION RENTAL RENTAL DATE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tucson, AZ $ 29,369 Per year through 05/16/1998 6.0% of sales less minimum rent Lease expires 5/16/1998.
Beginning 5/17/1998, lessee
has the option to extend the
lease for 10 additional
periods of six months. Each
extension shall be deemed
exercised unless lessee gives
60 days notice not to renew.
The tenant has extended the
lease for the first renewal
period.
</TABLE>
The following is a schedule of minimum rental income on the non-cancelable
leases as of December 31, 1997:
<TABLE>
<S> <C>
1998 $11,013
-------
$11,013
-------
-------
</TABLE>
10
<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 Austin Partners for the
year ended December 31, 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 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 of expenses, 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 Austin Partners for
the year ended December 31, 1997, in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Dallas, Texas
August 3, 1998
11
<PAGE>
PROPERTY SOLD TO U.S. RESTAURANT PROPERTIES, INC. BY AUSTIN PARTNERS
STATEMENT OF REVENUES AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
RENTAL INCOME
Minimum $ 93,000
Percentage 7,786
Cost reimbursement 22,204
------------
TOTAL RENTAL INCOME 122,990
DIRECT EXPENSES - PROPERTY TAXES 22,204
------------
NET RENTAL INCOME $100,786
------------
------------
</TABLE>
See Accompanying Notes to the Statement of Revenues and Certain Expenses.
12
<PAGE>
NOTES TO THE STATEMENT OF REVENUES AND CERTAIN EXPENSES RELATING TO THE PROPERTY
SOLD TO U.S. RESTAURANT PROPERTIES, INC. BY AUSTIN PARTNERS
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 Austin Partners,
a Texas general partnership (the "Partnership"). The statement does not
include any revenues or expenses related to any other properties owned or
managed by the Partnership. The property acquired is operated as a Tony
Roma's 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 properties and accordingly, it is not intended to be a complete
presentation of revenues and expenses of the property.
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. Cost
reimbursement revenue includes costs reimbursed by the tenant for property
taxes. The lease specifies increases in lease payments. The recognition
of rental income has been straight-lined over the lease term in accordance
with generally accepted accounting principles. Certain information
regarding the property lease is set forth in the table below.
<TABLE>
<CAPTION>
MINIMUM
ANNUAL PERCENTAGE TERMINATION
LOCATION RENTAL RENTAL DATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
San Antonio, TX $ 84,000 Per year through 6/16/1999 6% of monthly sales in excess June 2004 with one five -year
102,000 Per year through 6/16/2004 of $116,666.97 until June 16, renewal option. In addition,
1999 and 6% of monthly sales the tenant has the right to
in excess of $141,666.67 from terminate if annual sales as
March 17, 1999 through June defined in the lease are less
16, 2004. than $1,700,000 during lease
years six through ten. If tenant
decides to terminate the tenant
is required to give a six month
notice and pay a termination fee
of $25,500.
</TABLE>
The following is a schedule of minimum rental income on the
lease as of December 31, 1997:
<TABLE>
<S> <C>
1998 $ 84,000
1999 93,000
2000 102,000
2001 102,000
2002 102,000
Thereafter 153,000
------------
$ 636,000
------------
</TABLE>
13
<PAGE>
INDEPENDENT AUDITORS' REPORT
U.S. Restaurant Properties, Inc.
We have audited the accompanying combined statement of revenues of Selected
Properties Sold to U.S. Restaurant Properties, Inc. (Minneapolis Teachers'
Retirement Fund Association 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
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 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 of expenses, described in Note 1 to the combined statement of
revenues, 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
combined revenues and expenses of these properties.
In our opinion, such combined statement of revenues presents fairly, in all
material respects, the combined revenues, as defined above, of Selected
Properties Sold to U.S. Restaurant Properties, Inc. (Minneapolis Teachers'
Retirement Fund Association Acquisition) for the year ended June 30, 1997, in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Dallas, Texas
August 6, 1998
14
<PAGE>
SELECTED PROPERTIES SOLD TO U.S. RESTAURANT PROPERTIES, INC.
(MINNEAPOLIS TEACHERS' RETIREMENT FUND ASSOCIATION ACQUISITION)
COMBINED STATEMENT OF REVENUES
YEAR ENDED JUNE 30, 1997
<TABLE>
<S> <C>
RENTAL INCOME
Minimum $ 205,429
Percentage 41,783
------------
TOTAL RENTAL INCOME $ 247,212
------------
------------
</TABLE>
See Accompanying Notes to the Combined Statement of Revenues.
15
<PAGE>
NOTES TO THE COMBINED STATEMENT OF REVENUES RELATING TO THE SELECTED PROPERTIES
SOLD TO U.S. RESTAURANT PROPERTIES, INC. (MINNEAPOLIS TEACHERS' RETIREMENT FUND
ASSOCIATION ACQUISITION)
1. Summary of Significant Accounting Policies
Nature of Operations
The accompanying combined statement of revenues includes four 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" or "MTRFA"). 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 Arby's
and Burger King 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 property 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. There are no
continuing operating expenses of the properties for 1997 which were
incurred by the lessor.
2. Use of Estimates
The preparation of this combined statement of revenues in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of combined
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 properties.
Certain information regarding the property leases is set forth in the table
below.
<TABLE>
<CAPTION>
MINIMUM
ANNUAL PERCENTAGE TERMINATION
LOCATION RENTAL RENTAL DATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kansas City, KS $ 57,200 Per year through 4/30/2000 6% of sales in excess of $953,333 April 2000 with two-five
year renewal options
Topeka, KS 45,900 Per year through 10/2/2000 6.25% of sales in excess of $734,400 October 2000 with two-five
year renewal options
Wilmington, NC 46,620 Per year through 9/30/2000 6% of sales in excess of $650,000 September 2000 with two-
ten year renewal options
Burnsville, MN 59,952 Per year through 8/31/1999 7% of sales in excess of $588,000 October 2000 with two-five
41,160 Per year through 10/31/2000 year renewal options
</TABLE>
The following is a schedule of minimum rental income on the non-cancelable
leases as of June 30, 1997:
<TABLE>
<CAPTION>
<S> <C>
1998 $ 209,672
1999 209,672
2000 184,479
2001 36,850
2002 0
Thereafter 0
--------------
$ 640,673
--------------
--------------
</TABLE>
16
<PAGE>
INDEPENDENT AUDITORS' REPORT
U.S. Restaurant Properties, Inc.
We have audited the accompanying combined statement of revenues and certain
expenses of the Selected Properties Sold to U.S. Restaurant Properties, Inc. by
Shoney's, Inc. for the year ended December 31, 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 of expenses, 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 combined 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. by Shoney's, Inc. for the year ended December 31, 1997, in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Dallas, Texas
August 19, 1998
17
<PAGE>
SELECTED PROPERTIES SOLD TO U.S. RESTAURANT PROPERTIES, INC. BY SHONEY'S, INC.
COMBINED STATEMENT OF REVENUES AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
<S> <C>
RENTAL INCOME
Minimum $ 532,294
Percentage rent 14,841
Cost reimbursement 64,359
--------------
TOTAL RENTAL INCOME 611,494
DIRECT EXPENSES - PROPERTY TAXES 64,359
--------------
TOTAL DIRECT EXPENSES 64,359
--------------
NET RENTAL INCOME $ 547,135
--------------
--------------
</TABLE>
See Accompanying Notes to the Combined Statement of Revenues and Certain
Expenses.
18
<PAGE>
NOTES TO THE COMBINED STATEMENT OF REVENUES AND CERTAIN EXPENSES RELATING TO THE
SELECTED PROPERTIES SOLD TO U.S. RESTAURANT PROPERTIES, INC. BY SHONEY'S, INC.
1. Summary of Significant Accounting Policies
Nature of Operations
The accompanying combined statement of revenues and certain expenses
includes eleven properties acquired by U.S. Restaurant Properties, Inc.
from Shoney's, Inc., a Tennessee Corporation (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 Shoney's Restaurants, Captain D's Seafood Restaurants, Long
John Silvers Restaurants, Hooters Restaurant or Miami Subs Restaurants. In
accordance with the Securities and Exchange Commission Rule 3-14, the
combined 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 combined
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 combined 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 includes costs reimbursed by the
tenant for property 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>
Augusta, GA $ 85,000 Per year through 06/30/2013 6.5% of sales less minimum rent June 2013 with two-five
year renewal options
Augusta, GA 24,000 Per year through 08/09/2001 4.0 % of sales less minimum rent August 2001 with one-five
year renewal options
Lake Charles, LA 96,184 Per year through 12/31/2013 6.5 % of sales less minimum rent December 2013 with two-
five year renewal options
Oklahoma City, OK 75,000 Per year through 04/02/2000 none April 2005 with two-five
85,000 Per year through 04/02/2005 year renewal options
Cleburne, TX 38,453 Per year through 02/28/2003 None during original lease term and 6.0% of February 2003 with four-
sales less minimum rent during option years five year renewal options
Dallas, TX 27,858 Per year through 12/31/1997 None through December 31, 1997 and December 31, 2013 with
40,820 Per year through 12/31/2013 8.0 % of sales less minimum rent and real two-five year renewal
estate taxes through remaining lease term options
Duncanville, TX 21,769 Per year through 12/31/1997 None through December 31, 1997 and December 31, 2013 with
39,122 Per year through 12/31/2013 8.0 % of sales less minimum rent and real two-five year renewal
estate taxes through remaining lease term options
Fort Worth, TX 33,343 Per year through 12/31/1997 None through December 31, 1997 and December 31, 2013 with
49,934 Per year through 12/31/2013 8.0 % of sales less minimum rent and real two-five year renewal
estate taxes through remaining lease term options
Grand Prairie, TX 29,965 Per year through 12/31/1997 None through December 31, 1997 and December 31, 2013 with
56,825 Per year through 12/31/2013 8.0 % of sales less minimum rent and real two-five year renewal
estate taxes through remaining lease term options
</TABLE>
19
<PAGE>
NOTES TO THE COMBINED STATEMENT OF REVENUES AND CERTAIN EXPENSES RELATING TO THE
SELECTED PROPERTIES SOLD TO U.S. RESTAURANT PROPERTIES, INC. BY SHONEY'S INC.
(CONTINUED)
<TABLE>
<CAPTION>
MINIMUM
ANNUAL PERCENTAGE TERMINATION
LOCATION RENTAL RENTAL DATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Mesquite, TX $ 56,680 Per year through 03/31/2015 6.0 % of sales less minimum rent March 2015 with two-five year
renewal options
Richardson, TX 38,000 Per year through 04/30/2014 6.0 % of sales less minimum rent April 2014 with two-five year
renewal options
</TABLE>
The following is a schedule of minimum rental income on the non-cancelable
leases as of December 31, 1997:
<TABLE>
<CAPTION>
<S> <C>
1998 $ 602,018
1999 602,018
2000 609,518
2001 602,018
2002 588,018
Thereafter 5,351,389
--------------
$ 8,354,979
--------------
--------------
</TABLE>
4. Subsequent Events
On June 1, 1998, Long John Silver's, Inc., a lessee filed for bankruptcy
protection under chapter 11. In addition, on January 1, 1998, the master
lease covering the properties located in Dallas, Duncanville, Fort Worth
and Grand Prairie, Texas was amended through a sublease. The following is
the new sublease information for these properties.
<TABLE>
<CAPTION>
MINIMUM
ANNUAL PERCENTAGE TERMINATION
LOCATION RENTAL RENTAL DATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dallas, TX $ 29,028 Per year through 12/31/2007 5.0% of sales less minimum rent and real December 2013 with two-five
31,931 Per year through 12/31/2013 estate taxes year renewal options.
Duncanville, TX 19,235 Per year through 12/31/2007 5.0% of sales less minimum rent and real December 2013 with two-five
21,159 Per year through 12/31/2013 estate taxes year renewal options.
Fort Worth, TX 31,920 Per year through 12/31/2007 5.0% of sales less minimum rent and real December 2013 with two-five
35,112 Per year through 12/31/2013 estate taxes year renewal option
Grand Prairie, TX 28,656 Per year through 12/31/2007 5.0% of sales less minimum rent and real December 2013 with two-five
31,522 Per year through 12/31/2013 estate taxes year renewal options.
</TABLE>
20
<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. (Ale
House Acquisition) for the year ended December 31, 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 of expenses, 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 combined 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. (Ale House Acquisition) for the year ended December 31, 1997,
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Dallas, Texas
June 9, 1998
21
<PAGE>
SELECTED PROPERTIES SOLD TO U.S. RESTAURANT PROPERTIES, INC. (ALE HOUSE
ACQUISITION)
COMBINED STATEMENT OF REVENUES AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
RENTAL INCOME
Minimum $ 372,000
Percentage 61,694
Cost reimbursement 22,320
-----------
TOTAL RENTAL INCOME 456,014
DIRECT EXPENSES - LEASE RENT TAXES 22,320
-----------
TOTAL DIRECT EXPENSES 22,320
-----------
NET RENTAL INCOME $ 433,694
-----------
-----------
</TABLE>
See Accompanying Notes to the Combined Statement of Revenues and Certain
Expenses.
22
<PAGE>
NOTES TO THE COMBINED STATEMENT OF REVENUES AND CERTAIN EXPENSES RELATING TO THE
SELECTED PROPERTIES SOLD TO U.S. RESTAURANT PROPERTIES, INC. (ALE HOUSE
ACQUISITION)
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
Jackson-Shaw Partners, No. 51, Ltd., a Texas limited partnership (the
"Partnership"). The statement does not include any revenues or expenses
related to any other properties owned or managed by the Partnership. The
properties acquired are operated as Ale House and Raw Bar restaurants. In
accordance with the Securities and Exchange Commission Rule 3-14, the
combined 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 combined
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 combined 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 properties.
Cost reimbursement revenue includes costs reimbursed by the tenant for
sales taxes on lease revenue. All lease rents and cost reimbursements were
received from a related party. Certain information regarding the property
leases is set forth in the table below.
<TABLE>
<CAPTION>
MINIMUM
ANNUAL PERCENTAGE TERMINATION
LOCATION RENTAL RENTAL DATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Davie, FL $ 180,000 Per year through 1/31/2001 with annual 5.5% of sales less January 2006 with three-five
increases in rent beginning on the first minimum rent year renewal options
day of lease year six by the Consumer
Price Index
Pembrook Pines, FL 192,000 Per year through 1/6/2001with annual 5.5% of sales less January 2006 with three-five
increases in rent beginning on the first minimum rent year renewal options
day of lease year six by the Consumer
Price Index
</TABLE>
The following is a schedule of minimum rental income on the non-cancelable
leases as of December 31, 1997:
<TABLE>
<S> <C>
1998 $ 372,000
1999 372,000
2000 372,000
2001 372,000
2002 372,000
Thereafter 1,147,000
--------------
$ 3,007,000
--------------
--------------
</TABLE>
23
<PAGE>
PRO FORMA FINANCIAL INFORMATION
This Form 8-K/A does not include an unaudited Pro Forma Consolidated
Balance Sheet of U.S. Restaurant Properties, Inc. (the "Company") as of June 30,
1998 since all acquisitions within this Form 8-K/A are already included in the
Company's consolidated balance sheet included in the Company's Form 10-Q filed
with the Securities and Exchange Commission on August 14, 1998.
The unaudited Pro Forma Condensed Consolidated Statement of Income for the
year ended December 31, 1997 is presented as if the following had occurred as of
January 1, 1997: (a) the acquisition of 277 properties for $182,396,000
including the market value of 680,695 shares of the Company's Common Stock
issued in connection with acquisitions and the sale of eight properties for
$5,822,000 on various dates between January 1, 1997 and December 31, 1997; (b)
the acquisition of 93 properties for $82,534,000 acquired between January 1,
1998 and June 30, 1998 including the acquisition of 31 newly constructed and
undeveloped properties; (c) the sale of two properties for $1,313,000 between
January 1, 1998 and June 30, 1998; (d) the issuance of $111,000,000 of 7.15%
fixed rate debt; (e) the issuance of 1,434,831 shares in five separate
transactions to individual investors with net proceeds of $25,000,000; (f) the
additional borrowings of $37,514,000 required to purchase the properties
acquired; (g) the preferred stock dividends required and the reduction of
interest expense as a result of the preferred stock offering in November 1997
based on the offering proceeds to reduce the total debt outstanding by
$87,622,000; and (h) the three-for-two stock split on October 30, 1997.
Proceeds from the property sales and stock issuances were used to finance the
property acquisitions. The unaudited Pro Forma Condensed Consolidated Statement
of Income is not necessarily indicative of what the actual results of operations
of the Company 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.
The unaudited Pro Forma Condensed Consolidated Statement of Income for the
six months ended June 30, 1998 is presented as if the following had occurred as
of January 1, 1998: (a) the acquisition of 93 properties for $82,534,000
acquired between January 1, 1998 and June 30, 1998 including the acquisition of
31 newly constructed and undeveloped properties, (b) the sale of two properties
for $1,313,000 between January 1, 1998 and June 30, 1998 and (c) the issuance of
$111,000,000 of 7.15% fixed rate debt and related financing transactions. The
unaudited Pro Forma Condensed Consolidated Statement of Income is not
necessarily indicative of what the actual results of operations of the Company
would have been assuming the transactions described above had been completed as
of January 1, 1998, nor do they purport to represent the results of operations
for future periods.
Base rents are recorded in the attached pro forma statements of income on a
straight-line basis from the date of acquisition to the termination of the lease
which may differ from historical straight-line rents due to the different lease
periods. Percentage rents are excluded from the following pro forma financial
statements since the required information for all properties and for all periods
is not available.
24
<PAGE>
U.S. RESTAURANT PROPERTIES, INC.
PRO FORMA INCOME CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE/UNIT DATA)
<TABLE>
<CAPTION>
1997
Acquisitions Preferred Jan - Feb
ACTUAL and Stock 1998
12/31/97 Sales (a) Offering Acquisitions
-------- --------- -------- ------------
<S> <C> <C> <C> <C>
Total Revenues $ 35,584 $ 12,180 $ -- $ 4,647 (c)
Expenses
Ground Lease expense 2,488 514 -- --
Depreciation and amortization 9,415 3,590 -- 1,177 (m)
General and administrative 3,590 609 -- --
Interest expense 10,011 5,930 (6,572) (b) --
--------- -------- --------- --------
Total expenses 25,504 10,643 (6,572) 1,177
--------- -------- --------- --------
Income before gain on sale of property, minority
interest and unusual items 10,080 1,537 (6,572) 3,470
--------- -------- --------- --------
Minority interest in income (202) -- -- --
Gain on sale of property 869 -- -- --
Termination of management
contract (19,220) -- -- --
REIT conversion costs (920) -- -- --
--------- -------- --------- --------
Net income (loss) (9,393) $ 1,537 $ (6,572) $ 3,470
-------- --------- --------
-------- --------- --------
Preferred stock dividend (868) (6,234) (b)
---------
Net loss allocable to
Common Stock/unitholders $ (10,261)
---------
---------
Avg. no. of shares/units o/s
Basic 11,693
---------
---------
Diluted 11,693
---------
---------
Net loss per share/unit
Basic $ (0.88)
---------
---------
Diluted $ (0.88)
---------
---------
<CAPTION>
Frances
1998 Brulon M. Austin
Sales Properties Fisher Partners
----- ---------- ------ --------
<S> <C> <C> <C> <C>
Total Revenues $ (112) (d) $ 190 (e) $ 29 (f) $ 99 (g)
Expenses
Ground Lease expense -- -- -- --
Depreciation and amortization (15) (m) 62 (m) 9 (m) 30 (m)
General and administrative -- -- -- --
Interest expense -- -- -- --
------ ------ ----- -----
Total expenses (15) 62 9 30
------ ------ ----- -----
Income before gain on sale of property, minority
interest and unusual items (97) 128 20 69
------ ------ ----- -----
Minority interest in income -- -- -- --
Gain on sale of property -- -- -- --
Termination of management
contract -- -- -- --
REIT conversion costs -- -- -- --
------ ------ ----- -----
Net income (loss) $ (97) $ 128 $ 20 $ 69
------ ------ ----- -----
------ ------ ----- -----
</TABLE>
SEE NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF INCOME
continued on next page
25
<PAGE>
U.S. RESTAURANT PROPERTIES, INC.
PRO FORMA INCOME CONDENSED CONSOLIDATED STATEMENT OF INCOME (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE/UNIT DATA)
<TABLE>
<CAPTION>
Newly
Minneapolis Constructed Other Pro Forma PRO FORMA
Teachers' Shoney's Ale House Properties Properties Adjustment 12/31/97
-------- -------- --------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Total Revenues $ 201 (h) $ 536 (i) $ 372 (j) $ 1,146 (k) $ 1,369 (l) $ -- $ 56,241
Expenses
Ground Lease expense -- -- -- -- -- -- 3,002
Depreciation and
amortization 80 (m) 195 (m) 133 (m) 285 (m) 418 (m) -- 15,379
General and administrative -- -- -- -- -- -- 4,199
Interest expense -- -- -- -- -- 5,287 (n) 14,656
-------- -------- -------- -------- -------- -------- ---------
Total expenses 80 195 133 285 418 5,287 37,236
-------- -------- -------- -------- -------- -------- ---------
Income before gain on sale
of property, minority
interest and unusual items 121 341 239 861 951 (5,287) 19,005
-------- -------- -------- -------- -------- -------- ---------
Minority interest in income -- -- -- -- -- (185) (o) (387)
Gain on sale of property -- -- -- -- -- -- 869
Termination of management --
contract -- -- -- -- -- (19,220)
REIT conversion costs -- -- -- -- -- -- (920)
-------- -------- -------- -------- -------- -------- ---------
Net income (loss) $ 121 $ 341 $ 239 $ 861 $ 951 $ (5,472) (653)
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Preferred stock dividend (7,102)
---------
Net loss allocable to
Common Stock/unitholders $ (7,755)
---------
Avg. no. of shares/units o/s
Basic 12,631
---------
---------
Diluted 12,631
---------
---------
Net loss per share/unit
Basic $ (0.61)
---------
---------
Diluted $ (0.61)
---------
---------
</TABLE>
26
<PAGE>
NOTES TO PRO FORMA CONDENSED 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 277 properties acquired on various
dates from January 1, 1997 through December 31, 1997 and the sale of eight
properties on various dates from January 1, 1997 through December 31, 1997.
(b) Reflects pro forma adjustment for the issuance of preferred stock.
Proceeds of which were used to finance the acquisitions.
(c) Reflects pro forma adjustment to operations relating to base and percentage
rent for the 1998 acquisitions comprised of 35 properties acquired on
various dates from January 1, 1998 through February 28, 1998.
(d) Reflects pro forma adjustment to operations for historical financial
results for two properties sold.
(e) Reflects pro forma adjustment to operations relating to base rent based on
historical financial information for the Brulon Properties acquisition
comprised of two properties acquired on June 24, 1998. See combined
statement of revenues and certain expenses included herein.
(f) Reflects pro forma adjustment to operations relating to base rent based on
historical financial information for the Frances M. Fisher acquisition
comprised of one property acquired on June 22, 1998. See statement of
revenues and certain expenses included herein.
(g) Reflects pro forma adjustment to operations relating to base rent based on
historical financial information for the Austin Partners acquisition
comprised of one property acquired on May 27, 1998. See statement of
revenues and certain expenses included herein.
(h) Reflects pro forma adjustment to operations relating to base rent based on
historical financial information for the Minneapolis Teachers' Retirement
Association Acquisition comprised of four properties acquired on various
dated between May 26, 1998 and June 10, 1998. See combined statement of
revenues included herein.
(i) Reflects pro forma adjustment to operations relating to base rent based on
historical financial information for the Shoney's acquisition comprised of
11 properties acquired on May 22, 1998. See combined statement of revenues
and certain expenses included herein.
(j) Reflects pro forma adjustment to operations relating to base rent based on
historical financial information for the Ale House Acquisition comprised of
two properties acquired on April 8, 1998. See combined statement of
revenues and certain expenses included herein.
(k) Reflects pro forma adjustment to operations based on executed lease
information for the newly constructed and undeveloped acquisitions
comprised of 26 properties acquired on various dates from March 1, 1998
through June 30, 1998. These are not considered to be an acquisition of a
business and consequently no financial information is presented herein on
these properties. Leases on these properties may have been entered into
subsequent to their development or redevelopment and the properties revenue
therefrom is included in the pro forma statement of income.
(l) Reflects pro forma adjustment to operations relating to base rent based on
newly executed lease and historical financial information for 11 other
properties acquired on various dates from March 1, 1998 through June 30,
1998.
(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.
27
<PAGE>
NOTE TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (CONTINUED)
(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%
Fixed Rate Debt 111,000,000 7.15%
Line of credit 67,000,000 7.50%
</TABLE>
(o) Reflects pro forma allocation of operating income to minority interest.
28
<PAGE>
U.S. RESTAURANT PROPERTIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ACTUAL Jan-Feb 1998 1998 Brulon Frances M. Austin
6/30/98 Acquisitions Sales Properties Fisher Partners
------- ------------ ----- ---------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Total Revenues $ 27,416 $ 272 (a) $ (58) (b) $ 92 (c) $ 14 (d) $ 40 (e)
Expenses
Ground Lease expense 1,468 -- -- -- -- --
Depreciation and amortization 7,060 108 (k) (6) (k) 30 (k) 4 (k) 12 (k)
General and administrative 2,198 -- -- -- -- --
Interest expense 7,132 -- -- -- -- --
---------- -------- ------- ------- ------- ------
Total expenses 17,858 108 (6) 30 4 12
---------- -------- ------- ------- ------- ------
Income before gain on sale of
property, minority interest,
unusual item, extraordinary item
and other 9,558 164 (52) 62 10 28
---------- -------- ------- ------- ------- ------
Gain on sale of property 457 -- -- -- -- --
Equity in net income (loss) -- --
of affiliates (56) -- -- --
Minority interest in operating
Partnership net income (503) -- -- -- -- --
Loss on early extinguishment -- -- -- --
of debt (190) --
---------- -------- ------- ------- ------- ------
Net income 9,266 $ 164 $ (52) $ 62 $ 10 $ 28
-------- ------- ------- ------- ------
-------- ------- ------- ------- ------
Preferred stock dividend (3,551)
----------
Net income allocable to
Common Stockholders $ 5,715
----------
----------
Avg. no. of shares o/s
Basic 12,938
----------
----------
Diluted 13,124
----------
----------
Net income per share
Basic $ 0.44
----------
----------
Diluted $ 0.44
----------
----------
</TABLE>
SEE NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF INCOME
continued on next page
29
<PAGE>
U.S. RESTAURANT PROPERTIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (CONTINUED)
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Newly
Minneapolis Constructed Other Pro Forma PRO FORMA
Teachers' Shoney's Ale House Properties Properties Adjustment 6/30/98
-------- -------- --------- ---------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Total Revenues $ 84 (f) $ 212 (g) $ 101 (h) $ 416 (i) $ 355 (j) $ -- $ 28,944
Expenses
Ground Lease expense -- -- -- -- -- -- 1,468
Depreciation and amortization 34 (k) 77 (k) 36 (k) 104 (k) 122 (k) -- 7,581
General and administrative -- -- -- -- -- -- 2,198
Interest expense -- -- -- -- -- 805 (l) 7,937
------ ------- -------- ------- -------- ------- ----------
Total expenses 34 77 36 104 122 805 19,184
------ ------- -------- ------- -------- ------- ----------
Income before gain on sale of
property, minority interest,
unusual item, extraordinary
item and other 50 135 65 312 233 (805) 9,760
------ ------- -------- ------- -------- ------- ----------
Gain on sale of property -- -- -- -- -- -- 457
Equity in net income (loss) of
affiliates -- -- -- -- -- -- (56)
Minority interest in operating
Partnership net income -- -- -- -- -- (16) (m) (519)
Loss on extinguishment of debt -- -- -- -- -- -- (190)
------ ------- -------- ------- -------- ------- ----------
Net income $ 50 $ 135 $ 65 $ 312 $ 233 $ (821) 9,452
------ ------- -------- ------- -------- -------
------ ------- -------- ------- -------- -------
Preferred stock dividend (3,551)
----------
Net income allocable to
Common Stockholders $ 5,901
----------
----------
Avg. no. of shares o/s
Basic 12,947
----------
----------
Diluted 13,178
----------
----------
Net income per share
Basic $ 0.46
----------
----------
Diluted $ 0.45
----------
----------
</TABLE>
SEE NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF INCOME
30
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(a) Reflects pro forma adjustment to operations relating to the period between
January 1, 1998 and the date of acquisition for base rent for 1998
acquisitions comprised of 35 properties acquired on various dates from
January 1, 1998 through February 28, 1998.
(b) Reflects pro forma adjustment to operations for historical financial
results for two properties sold.
(c) Reflects pro forma adjustment to operations relating to base rent based on
historical financial information for the Brulon Properties acquisition
comprised of two properties acquired on June 24, 1998. See combined
statement of revenues and certain expenses included herein.
(d) Reflects pro forma adjustment to operations relating to base rent based on
historical financial information for the Frances M. Fisher acquisition
comprised of one property acquired on June 22, 1998. See statement of
revenues and certain expenses included herein.
(e) Reflects pro forma adjustment to operations relating to base rent based on
historical financial information for the Austin Partners acquisition
comprised of one property acquired on May 27, 1998. See statement of
revenues and certain expenses included herein.
(f) Reflects pro forma adjustment to operations relating to base rent based on
historical financial information for the Minneapolis Teachers' Retirement
Association Acquisition comprised of four properties acquired on various
dated between May 26, 1998 and June 10, 1998. See combined statement of
revenues included herein.
(g) Reflects pro forma adjustment to operations relating to base rent based on
historical financial information for the Shoney's acquisition comprised of
11 properties acquired on May 22, 1998. See combined statement of revenues
and certain expenses included herein.
(h) Reflects pro forma adjustment to operations relating to base rent based on
historical financial information for the Ale House Acquisition comprised of
two properties acquired on April 8, 1998. See combined statement of
revenues and certain expenses included herein.
(i) Reflects pro forma adjustment to operations based on executed lease
information for the newly constructed and undeveloped acquisitions
comprised of 26 properties acquired on various dates from March 1, 1998
through June 30, 1998. These are not considered to be an acquisition of a
business and consequently no financial information is presented herein on
these properties. Leases on these properties may have been entered into
subsequent to their development or redevelopment and the properties revenue
therefrom is included in the pro forma statement of income.
(j) Reflects pro forma adjustment to operations relating to base rent based on
newly executed lease and historical financial information for 11 other
properties acquired on various dates from March 1, 1998 through June 30,
1998.Reflects pro forma adjustment for the issuance of preferred stock,
proceeds of which were used to finance the acquisitions.
(k) 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.
31
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF INCOME (CONTINUED)
(l) 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%
Fixed Rate Debt 111,000,000 7.15%
Line of credit 67,000,000 6.74%
</TABLE>
(m) Reflects pro forma allocation of operating income to minority interest.
32
<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: August 21, 1998 U.S. RESTAURANT PROPERTIES, INC
By: /s/ Robert J. Stetson
---------------------------------
Robert J. Stetson
President, Chief Executive Officer
By: /s/ Michael D. Warren
---------------------------------
Michael D. Warren
Director of Finance
33
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statement on
Form S-3 (Registration No. 333-34263) of U.S. Restaurant Properties, Inc. of our
report dated June 9, 1998 with respect to the combined statement of revenues and
certain expenses of Selected Properties Sold to U.S. Restaurant Properties, Inc.
(Ale House Acquisition) for the year ended December 31, 1997, our report dated
August 3, 1998 with respect to the statement of revenues and certain expenses of
the Property Sold to U.S. Restaurant Properties, Inc. by Austin Partners for the
year ended December 31, 1997, our report dated August 6, 1998 with respect to
the combined statement of revenues of Selected Properties Sold to U.S.
Restaurant Properties, Inc. (Minneapolis Teachers' Retirement Fund Association
Acquisition) for the year ended June 30, 1997, our report dated August 18, 1998
with respect to the statement of revenues and certain expenses of the Property
Sold to U.S. Restaurant Properties, Inc. by Frances M. Fisher for the year ended
December 31, 1997, our report dated August 18, 1998 with respect to the combined
statement of revenues and certain expenses of the Selected Properties Sold to
U.S. Restaurant Properties, Inc. by Brulon Properties for the year ended
December 31, 1997 and our report dated August 19, 1998 with respect to the
combined statement of revenues and certain expenses of the Selected Properties
Sold to U.S. Restaurant Properties, Inc. by Shoney's, Inc. for the year ended
December 31, 1997, appearing in this Current Report on Form 8-K of U.S.
Restaurant Properties, Inc.
DELOITTE & TOUCHE LLP
Dallas, Texas
August 21, 1998
