UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the fiscal year ended December 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from to
--------- ------------
Commission File Number 0-15802
-------
QSR INCOME PROPERTIES, LTD.
---------------------------
(Exact name of registrant as specified in its charter)
California 95-4084042
- ------------------------------- -----------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
701 Western Avenue, Suite 200
Glendale, California 91201
- --------------------------------------- -----------------------------------
Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 244-8080
--------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
on which registered
NONE NONE
---- ----
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
-------------------------------------
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
--
DOCUMENTS INCORPORATED BY REFERENCE
NONE
----
<PAGE>
PART I
ITEM 1. Business.
---------
QSR Income Properties, Ltd. (the "Partnership") is a publicly held
limited partnership organized on November 1, 1985 under the California Revised
Limited Partnership Act. Commencing in June 1986, 100,000 units of limited
partnership interest (the "Units") were offered to the public in an interstate
offering. The offering was terminated on April 30, 1987 after the sale of 52,004
Units.
The Partnership was formed to invest in property for development and
operation of Rocky Rococo restaurants under an agreement with Rocky Rococo
Corporation ("Rocky Rococo"), an operator and franchiser of pizza restaurants.
The Partnership's original general partners were Madison Pizza Corporation, a
Delaware corporation ("Madison"), and B. Wayne Hughes ("Mr. Hughes"). Effective
December 1, 1989, Madison resigned as a general partner and Mr. Hughes succeeded
to Madison's general partner interest in a transaction approved by Limited
Partners holding a majority of the Units. Madison was subsequently dissolved on
December 28, 1989. Madison had been organized by Rocky Rococo and a group of
individuals, including Mr. Hughes, who had been previously engaged in real
estate development, management and syndication ventures not related to Rocky
Rococo (the "Organizing Shareholders"). Mr. Hughes and certain other Organizing
Shareholders disposed of their Madison and Rocky Rococo stock in 1989.
In 1988, Rocky Rococo and the Partnership discontinued operations in
various markets because the restaurants in those markets had not operated
profitably. All 23 of the Partnership's restaurants were closed because of
disappointing operating results between 1988 and 1990. As of December 31, 1996,
the Partnerships' facilities have been leased (or subleased) to unaffiliated
restaurant operators.
In 1996 the Partnership incurred $32,000 of holding expenses for a
closed restaurant. This facility was redeployed in December 1996.
Madison contributed a total of $912,000 ($561,000 in 1989 and $351,000
in 1988) to the Partnership in full satisfaction of its obligations under a
contribution agreement entered into in 1988. The funds contributed by Madison
were not accrued to the benefit of Madison and were used primarily for funding
ongoing fixed costs and restructuring transition expenditures. Accordingly, the
amount contributed was reflected in the attached financial statements as a
General Partner contribution with a subsequent "equity transfer" to the Limited
Partners.
Since Madison's resignation, the Partnership has been managed by Mr.
Hughes. Prior to the resignation of Madison as a general partner, the
Partnership was managed by the executive officers of Madison and by Mr. Hughes.
The limited partners of the Partnership have no right to participate in the
management or conduct of the Partnership's business and affairs.
Currently, there are four persons who render services on behalf of the
Partnership on a part-time basis. These persons include accounting,
administrative, clerical and real estate personnel. The persons rendering
services on a part-time basis also render services on behalf of one or more
corporations previously owned by Madison, other partnerships organized by
Madison and other affiliated corporations and partnerships of Mr. Hughes.
The term of the Partnership is until all properties have been sold
and, in any event, not later than December 31, 2040.
In November 1995, the general partner decided to place the facility
assets for sale and hired an investment banker to determine the valuation of the
assets and solicit offers. Based on offers to buy the assets received, the
general partner determined that the carrying value of the restaurant facilities
needed to be reduced to present the value of such assets at their net realizable
value. Consequently, the Partnership wrote-down the carrying value of its
restaurant facilities which resulted in a charge to income of $2,350,000 for the
year ended December 31, 1996.
1
<PAGE>
On September 16, 1996, the general partner entered into a purchase and
sale agreement with US Restaurants Properties Master LP, a Delaware limited
partnership and US Restaurant Properties Operating LP, a Delaware limited
partnership whereby the Partnership would sell its restaurant assets to USRP
Operating LP for $7,571,234 and certain of its notes receivable at a price which
provides USRP Operating LP with a 13.5% yield. USRP Operating LP will pay for
the purchase of the assets with limited partnership units of USRP Master LP.
USRP Master LP is a New York Stock Exchange traded master limited partnership
traded under the symbol "USV".
The transaction which is subject to certain contingencies, including
approval by the limited partners of the Partnership is expected to close in the
first half of 1997. The transaction is expected to be tax-free for most limited
partners. After the sale of the Partnership assets, the Partnership expects to
liquidate, distributing to the Unitholders the limited partnership interests in
USRP Master LP and any cash reserves.
ITEM 2. Properties.
-----------
The Partnership had developed and operated 23 restaurant properties
through June 1988.
The Partnership transferred or otherwise terminated its ownership or
leasehold interests in seven of its 23 properties. Of the 16 closed properties
that continued to be owned or leased by the Partnership, all have been leased or
subleased to unaffiliated operators. The following table sets forth information
as of December 31, 1996, concerning the 16 restaurant properties (each having
from 2,800 to 3,450 square feet of restaurant space) that continue to be owned
or leased by the Partnership:
<TABLE>
<CAPTION>
Size of
Parcel Date of Date Date Lease
Location (Sq. Ft.) Purchase Leased Expires
- ------------------------ ----------- ---------------- --------------- ---------------
INDIANA
<S> <C> <C> <C> <C>
3846 Lafayette
Indianapolis, IN 29,000 March 12, 1987 July 1989 July 2004
7863 U.S. 31 S.
Greenwood, IN 37,400 March 12, 1987 November 1990 November 2005
9755 E. Washington St.
Indianapolis, IN 45,000 July 13, 1987 February 1989 February 2004
315 College Mall Rd.
Bloomington, IN 43,500 Land Lease October 1989 October 2004
909 W. McGalliard
Muncie, IN 23,800 October 1, 1987 September 1989 June 2007
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Size of
Parcel Date of Date Date Lease
Location (Sq. Ft.) Purchase Leased Expires
- ------------------------ ----------- ---------------- --------------- ---------------
COLORADO
<S> <C> <C> <C> <C>
9200 Arapahoe Rd.
Green Village, CO 36,100 June 23, 1986 September 1990 September 2010
MINNESOTA
5101 W. 98th St.
Bloomington, MN 43,600 Land Lease September 1989 September 2003
2880 Coon Rapids Blvd.
Coon Rapids, MN 60,000 May 15, 1987 December 1996 December 1999
2130 & Cliff Rd.
Eagan, MN 59,800 May 1, 1987 August 1989 May 2003
MISSOURI
100 Old Sugar Creek Rd.
Fenton, MO 32,500 September 16, 1987 June 1989 June 2001
8071 Manchester Rd.
Brentwood, MO 31,200 Land Lease September 1991 September 1999
ILLINOIS
1617 N. Belt West
Bellville, IL 49,800 November 7, 1986 December 1989 December 2001
500 S. Illinois St.
Bellville, IL 28,000 July 8, 1987 May 1991 April 2011
235 S. Bolingbrook Dr.
Bolingbrook, IL 23,800 January 21, 1988 September 1989 September 2003
6820 E Northwest Hwy.
Crystal Lake, IL 62,000 December 14, 1987 October 1989 March 1999
WISCONSIN
7411 122nd Ave.
Bristol (Kenosha), WI 43,700 December 30, 1986 April 1993 December 2003
</TABLE>
3
<PAGE>
Set forth below are summaries of the 16 facilities currently leased to
unaffiliated operators.
The restaurant located at 3846 Lafayette in Indianapolis, Indiana,
which is owned by the Partnership, has been leased on a triple net basis to a
Midwest pizza chain at a rate of $74,000 per year. The lease also includes a
percentage rent feature with respect to incremental sales above specified
levels. The lease has a term of 15 years, with two five-year renewal options.
The restaurant located at 7863 U.S. 31 South in Greenwood, Indiana,
which is owned by the Partnership, has been leased to a restaurant chain for
$85,000 per year. This lease provides for a 15% increase in rent every five
years with two five-year renewal options.
The restaurant located at 9755 East Washington in Indianapolis,
Indiana, which is owned by the Partnership, has been leased to a restaurant
chain, at a rate of $74,000 per year. This lease, which became effective in
February 1989, provides for a 16% base rent increase every five years with two
five-year renewal options.
The restaurant located at 315 College Mall Road in Bloomington,
Indiana, which is located on land leased by the Partnership, has been subleased
to a Supermarket chain at a rate of $80,000 ($46,000 net to the Partnership) per
year. This lease provides for a 12% increase in base rent every four years with
two five-year renewal options.
The restaurant in Muncie, Indiana, which is owned by the Partnership,
was leased to a restaurant chain at a rate of $58,000 per year. The lease became
effective in September 1989 and provides for a 10% increase in base rent every
five years with four five-year renewal options. The lease also includes a
percentage rent feature with respect to incremental sales above specified
levels. The restaurant located at 9200 Arapahoe Road in Green Village, Colorado,
which is owned by the Partnership, has been leased to a restaurant chain for
$83,000 per year. This lease provides for a 15% increase in rent every five
years with one eight-year renewal option.
The restaurant located in Bloomington, Minnesota, which located on
land leased by the Partnership, has been subleased to a restaurant chain for a
gross rental of $82,000 ($47,000 net to the Partnership) per year. The
Partnership, in its capacity as lessee, is currently paying $35,000 to the
ground lessor. The sublease allows the Partnership to sell its leasehold
interest at any time, although the sub-tenant has been granted a right of first
refusal for any sale transaction. The terms of the sublease provide for a 9%
increase in base rent every three years with two five-year renewal options. The
lease also includes a percentage rent feature with respect to incremental sales
above specified levels.
The restaurant located at 2130 and Cliff Road in Eagan, Minnesota,
which is owned by the Partnership, has also been leased to a restaurant chain,
at a rate of $78,000 per year. This lease provides for a 9% increase in base
rent every three years with two five-year renewal options. The lease also
includes a percentage rent feature with respect to incremental sales above
specified levels.
The restaurant located at 100 Old Sugar Creek Road in Fenton,
Missouri, which is owned by the Partnership, has been leased to a restaurant
chain at a rate of $75,000 per year. This lease provides for a 15% increase in
base rent every five years with three five-year renewal options.
The restaurant located at 1617 N. Belt West in Bellville, Illinois,
which is owned by the Partnership, has been leased to a restaurant chain at a
rate of $66,000 per year. The lease expires in December 1996 and provides for
three five-year renewal options.
The restaurant located at 235 S. Bolingbrook Drive in Bolingbrook,
Illinois, which is owned by the Partnership, has been leased to a restaurant
chain, at a rate of $71,000 per year. This lease provides for a 9% increase in
base rent every three years with two five-year renewal options. The lease also
includes a percentage rent feature with respect to incremental sales above
specified levels.
4
<PAGE>
The restaurant located at 6820 E. Northwest Highway in Crystal Lake,
Illinois, which is owned by the Partnership, was leased to a restaurant chain
for $77,000 per year. This lease provides for a 12% increase in rent every four
years with two five-year renewal options. The lease also includes a percentage
rent feature with respect to incremental sales above specified levels.
The restaurant located at 500 S. Illinois Street in Belville,
Illinois, which is owned by the Partnership, has been leased to a restaurant
chain, at a rate of $68,000 per year. This lease provides for a 15% increase in
base rent every five years with two five year renewal options.
The restaurant located at 8071 Manchester Road in Brentwood, Missouri,
which is located on land leased by the Partnership, has been subleased to a
restaurant chain at a rate of $48,000 ($6,000 net to the Partnership) per year.
The lease expires in September 1996 and provides for two three-year and one two
year renewal options. The lessee has exercised one of their three-year options
extending the lease term to September 1999.
The restaurant located at 7411 122nd Avenue in Kenosha, Wisconsin,
which is owned by the Partnership, has been leased to a restaurant chain for
$36,000 per year. The lease provides for a 10% increase in base rent every four
years with one five-year renewal option.
The restaurant located at 2880 Coon Rapids in Coon Rapids, Minnesota,
which is owned by the Partnership, has been leased to a restaurant chain for
$29,450 per year. The lessee has an option to purchase the property. The
exercise price is $300,000 for the first year of the lease term and increases to
$325,000 in the second year and $350,000 in the third year. The lease expires
December 1999.
ITEM 3. Legal Proceedings.
-----------------
No material legal proceedings are pending against the Partnership.
ITEM 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
No matters were submitted to a vote of security holders during the
fourth quarter of 1996.
PART II
ITEM 5. Market for the Partnership's Common Equity and Related Stockholder
Matters.
------------------------------------------------------------------
No public trading market exists for the units of limited partnership
interest.
Exclusive of the general partner's interest in the Partnership, as of
December 31, 1996, there were approximately 3,026 record holders of Units.
Distributions to the general partner and to the Partnership's Limited
Partners are made quarterly based on "Cash Available for Distribution". Cash
Available for Distribution is generally the sum of (i) cash funds from
operations of the Partnership, without deductions for depreciation, but after
deducting for capital improvements, plus (ii) net proceeds from any sale or
financing of the Partnership's properties, less adequate cash reserves for other
obligations of the Partnership for which there is no other provision.
5
<PAGE>
The aggregate amount of distributions paid to the limited and general
partners in each year since inception of the Partnership were as follows:
Limited General
Partners Partner Total
------------ ---------- ------------
1986 $ 32,000 $ 3,000 $ 35,000
1987 451,000 43,000 494,000
1988 390,000 16,000 406,000
1989 520,000 5,000 525,000
1990 520,000 5,000 525,000
1991 1,495,000 147,000 1,642,000
1992 520,000 51,000 571,000
1993 520,000 51,000 571,000
1994 1,834,000 179,000 2,013,000
1995 676,000 66,000 742,000
1996 676,000 66,000 742,000
------------ ---------- ------------
Total $7,634,000 $632,000 $8,266,000
========== ======== ==========
During February 1997, the Partnership made a one-time distribution of
cash reserves. Each limited partner received $26.00 per unit in the
distribution.
Because of the Partnership's disappointing operating results, the
General Partners waived their incentive distributions associated with the
Partnership's distributions to Limited Partners from the second quarter of 1988
through fourth quarter 1990.
The general partner has an 8% interest in cash distributions
attributable to operations (exclusive of distributions attributable to sale and
financing proceeds) until the limited partners recover all of their investment,
regardless of source. Thereafter, the general partner has a 25% interest in all
cash distributions (including sale and financing proceeds). At December 31, 1996
cumulative distributions to limited partners were $7,634,000; accordingly
$18,368,000 of additional distributions are required to be made to the limited
partners for the limited partners to recover their capital contributions.
6
<PAGE>
ITEM 6. Selected financial data.
-----------------------
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------------------------------------------
1996 1995 1994 1993 1992
-------- ------- ------- ------- -----
(In thousands, except per unit amounts)
Operating data
<S> <C> <C> <C> <C> <C>
Lease income $1,095 $1,062 $1,023 $949 $1,034
Interest income 105 88 110 60 79
Write-down of restaurant facilities (2,350) (400) - - -
Loss on sale of real estate facility - (406) - - -
Net (loss) income (1,484) (3) (180) 618 373 463
Limited partners' share (1,528) (237) 453 324 412
General partner's share 44 57 165 49 51
Limited partners' per unit data (1):
Net (loss) income $ (29.38) (3) $ (4.55) $ 8.71 $ 6.23 $ 7.92
Cash distributions 13.00 13.00 35.25 (2) 10.00 10.00
Balance Sheet
- -------------
Assets $9,400 $11,617 $13,971 $13,971 $14,083
Partners' equity 9,243 11,469 13,786 13,786 13,984
</TABLE>
(1) Per unit data is based on 52,004 limited partnership units outstanding
during the years ended December 31, 1996, 1995, 1994, 1993 and 1992.
(2) Includes a special distribution per unit of $25.25 in 1994 to
distribute excess cash reserves.
(3) Based upon offers to purchase the Partnership's properties received in
1996, the general partner determined that the carrying value of the
Partnership's real estate assets should be decreased by $2,350,000 to
value such real estate assets at their net realizable value. The
result of offsetting this revaluation provision against the $866,000
of net income from operations before such revaluation provision for
the year of 1996 is a net loss from operations for such period of
$1,484,000. A net loss of $1,528,000 has been allocated to the limited
partners, resulting in a loss allocation of $29.38 per unit.
7
<PAGE>
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
---------------------------------------------------------------
The Partnership's activity began in June 1986 with the offering of up
to 100,000 units of limited partnership interest to the public in an interstate
offering of which 52,004 units were sold.
In 1988, the Partnership commenced a program to terminate activities
associated with operating its properties as Rocky Rococo restaurants and dispose
of its leasehold interests and redeploy its property interests by seeking well
known, unaffiliated third party lessees to lease its properties.
As of December 31, 1988, the Partnership had acquired or entered into
leases for 23 properties, all of which had been fully improved. The total cost
of developing the Partnership's 23 restaurant facilities was $18,231,000, which
was funded entirely through offering proceeds.
During 1988 through 1990, the Partnership's 23 restaurants were closed
because they were not operating profitably. (See Item 1 above for additional
information regarding the closing of the Partnership's restaurants.)
As of December 31, 1996, The remaining 16 facilities have been
redeployed by leasing the facilities to third party tenants.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995:
The Partnership's net income decreased $1,304,000 from a loss of
$180,000 in 1995 to a loss of $1,484,000 in 1996. The decrease is primarily
attributable to a write-down of $2,350,000 to record the carrying value of the
Partnership's facilities at their net realizable value (see below). Excluding
the write-down of restaurant facilities in 1996 and 1995, and the loss on sale
of a real estate facility in 1995, the Partnership's net income increased
$240,000 in 1996 over 1995. The increase was due to increase in lease income and
interest income combined with a decrease in depreciation expense.
Lease income increased $33,000 or 3% from $1,062,000 in 1995 to
$1,095,000 in 1996 due to scheduled escalations in lease income. Included in
lease income in 1996 and 1995 is approximately $17,000 and $26,000,
respectively, of additional lease income under a percentage of rent feature with
respect to incremental sales above specified levels.
Interest income increased $17,000 from $88,000 in 1995 to $105,000 in
1996 due to an increase in invested cash balances in 1996 compared to 1995.
Depreciation expense decreased $190,000 in 1996 compared to 1995 as
the result of the Partnership's properties being carried at net realizable value
and the discontinuation of provisions for depreciation subsequent to the first
quarter of 1996.
Idle facility cost decreased $14,000 from 1995 to 1996 due to cost
incurred on one closed facility in 1996 compared to two closed facilities in
1995. At December 31, 1996 all facilities have been redeployed.
8
<PAGE>
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994:
The Partnership's net income decreased $798,000 from $618,000 in 1994
to a loss of $180,000 in 1995. The decrease is attributable to a $406,000 loss
on the sale of the Partnership's Iliff, Colorado property in November 1995, and
a write-down of a restaurant facility as discussed below.
Lease income increased $39,000 or 4% from $1,023,000 in 1994 to
$1,062,000 in 1995 due to scheduled escalations in lease income. Included in
lease income in 1995 and 1994 is approximately $26,000 and $25,000,
respectively, of additional lease income under a percentage of rent feature with
respect to incremental sales above specified levels.
Interest income decreased $22,000 from $110,000 in 1994 to $88,000 in
1995 due to a decrease in invested cash balances in 1995 compared to 1994. The
decrease in invested cash balances is due to a special distribution in December
1994 of $1,422,000.
During 1995, the Partnership wrote-down the carrying value of the Coon
Rapids, Minnesota restaurant facility to its estimated net realizable value. The
restaurant facility is closed and has not yet been redeployed. The write-down
resulted in a charge to income of $400,000 for the year ended December 31, 1995.
Idle facility cost increased $10,000 from 1994 to 1995 on its closed
facilities (one of the two closed facilities was sold in November 1995).
LIQUIDITY AND CAPITAL RESOURCES:
For the year ended December 31, 1996, the Partnership's leasing
activities generated cash flow of $922,000. Cash flow from the Partnership's
leasing activities have been sufficient to meet all current obligations of the
Partnership.
Management expects to continue to fund capital expenditures and
quarterly distributions to partners from operating cash flow.
In connection with the leases signed, the Partnership sold the
equipment and furnishings of each facility to the lessee. In connection with
these sales, the Partnership received promissory notes that are fully amortized
over nine years, accrue interest at 8.5%, and require annual aggregate principal
installments of approximately $40,000. These notes mature in 1998 through 2000.
PROPOSED SALE OF ASSETS
In November 1995, the general partner decided to place the facility
assets for sale and hired an investment banker to determine the valuation of the
assets and solicit offers. Based on offers to buy the assets received, the
general partner determined that the carrying value of the assets needed to be
reduced by $2,350,000 to present the value of such assets at their net
realizable value. Such valuation assumes costs to be incurred in the ordinary
course of sale.
On September 16, 1996, the general partner entered into a purchase and
sale agreement with US Restaurants Properties Master LP, a Delaware limited
partnership and US Restaurants Properties Operating LP, a Delaware limited
partnership whereby the Partnership would sell its restaurant assets to USRP
Operating LP for $7,571,234 and certain of its notes receivable at a price which
provides USRP Operating LP with a 13.5% yield. USRP Operating LP will pay for
the purchase of the assets with limited partnership units of USRP Master LP.
USRP Master LP is a New York Stock Exchange traded master limited partnership
traded under the symbol "USV".
The transaction which is subject to certain contingencies, including
approval by the limited partners of the Partnership is expected to close in the
9
<PAGE>
first half of 1997. The transaction is expected to be tax-free for most limited
partners. After the sale of the Partnership's assets, the Partnership expects to
liquidate, distributing to the Unitholders the limited partnership interests in
USRP Master LP and any cash reserves.
ITEM 8. Financial Statements and Supplementary Data.
-------------------------------------------
The Partnership's financial statements are included elsewhere herein.
Reference is made to the Index to Financial Statements in Item 14(a).
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
---------------------------------------------------------------
None.
PART III
ITEM 10. Directors and Executive Officers of the Partnership.
---------------------------------------------------
The Partnership has no directors or executive officers.
The Partnership's general partner is Mr. B. Wayne Hughes, age 63. Mr.
Hughes manages and makes investment decisions for the Partnership. Mr. Hughes
has been a director of Public Storage, Inc. ("PSI"), a real estate investment
trust ("REIT"), since its organization in 1980 and was President and Co-Chief
Executive Officer from 1980 until November 1991 when he became Chairman of the
Board and sole Chief Executive Officer. Since 1990, Mr. Hughes has been Chairman
of the Board and Chief Executive Officer Public Storage Properties XI, Inc.,
Public Storage Properties XIV, Inc., Public Storage Properties XV, Inc., Public
Storage Properties XVI, Inc., Public Storage Properties XVII, Inc., Public
Storage Properties XVIII, Inc., Public Storage Properties XIX, Inc., Public
Storage Properties XX, Inc., (collectively, the Public Storage Properties
REITs"), REITs organized by affiliates of PSI. Mr. Hughes has been active in the
real estate investment field during the past 26 years.
Pursuant to Articles XVI, XVII and XXI of the Partnership's Amended
Certificate and Agreement of Limited Partnership, the general partner continues
to serve until (i) death, insanity, insolvency, bankruptcy or dissolution, (ii)
withdrawal with the consent of any other general partner and a majority vote of
the limited partners, or (iii) removal by a majority vote of the limited
partners.
There have been no events under any bankruptcy act, no criminal
proceedings, and no judgments or injunctions material to the evaluation of the
ability of the general partner during the past five years.
ITEM 11. Executive Compensation.
-----------------------
The Partnership has no subsidiaries, directors or officers. See Item
13 for a description of certain transactions between the Partnership and its
general partner and affiliates.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management.
---------------------------------------------------------------
(a) As of the date hereof, no person is known by the Partnership to
own beneficially more than 5% of the units of limited partnership
interest.
(b) The Partnership has no officers and directors.
Mr. Hughes and Madison, the two original general partners, initially
contributed $262,000 to the capital of the Partnership. As a result Mr. Hughes,
who succeeded to Madison's general partner interest in December 1989, will
participate in the distributions to all of the Partnership's partners and in the
Partnership's profits and losses in the same proportion that such capital
contribution bears to the total capital contributions. Mr. Hughes and Madison
also contributed $912,000 to be used primarily to fund the Partnership's capital
and liquidity needs during the restructuring period. (See Item 1 for additional
information regarding this contribution.) Because the Limited Partners received
the benefit of Madison's contribution, the amount contributed is reflected in
the financial statements attached to this report as a General Partner
contribution with a subsequent "equity transfer" to the Limited Partners.
10
<PAGE>
(c) Except as set forth below, the Partnership knows of no contractual
arrangements, the operation of the terms of which may at a subsequent date
result in a change in control of the Partnership. Articles XVI, XVII and Section
21.1 of the Partnership's Amended Certificate and Agreement of Limited
Partnership, provide, in substance, that the Limited Partners shall have the
right, by majority vote, to remove a general partner and that a general partner
may designate a successor with the consent of any other general partner and a
majority of the limited partners.
ITEM 13. Certain Relationships and Related Transactions.
-----------------------------------------------
The Limited Partnership Agreement provides that the general partner
will be entitled to cash incentive distributions in an amount equal to (i) 8% of
cash flow from operations until the distributions to all partners from all
sources equal their capital contributions; thereafter, 25% of cash flow from
operations, and (ii) 25% of distributions from net proceeds from sale and
financing of the Partnership's properties remaining after distribution to all
partners of any portion thereof required to cause distributions to partners from
all sources to equal their capital contributions. Because of the Partnership's
disappointing operating results, the General Partners waived their incentive
distributions associated with the Partnership's distributions to Limited
Partners from the second quarter of 1988 through fourth quarter 1990. In 1996,
the General Partner received $59,000 in incentive distributions and $7,000 with
respect to his capital contributions.
11
<PAGE>
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
----------------------------------------------------------------
(a) List of Documents filed as part of the Report.
1. Financial Statements:
See Index to Financial Statements and Financial Statement Schedule.
2. Financial Statement Schedules:
See Index to Financial Statements and Financial Statement Schedule.
3. Exhibits:
(27) Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the last quarter of
fiscal 1996.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
QSR INCOME PROPERTIES, LTD.,
a California Limited Partnership
Dated: March 26, 1997 By: \s\ B.Wayne Hughes
------------------
B. Wayne Hughes
General Partner
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following person on behalf of the
Registrant in the capacity and on the date indicated.
Signature Capacity Date
- ------------------- -------------------- ----------------
\s\ B. Wayne Hughes
- ------------------- General Partner March 26, 1997
B. Wayne Hughes
12
<PAGE>
QSR INCOME PROPERTIES, LTD.,
A California Limited Partnership
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE
(Item 14 (a))
Page
Reference
----------
Report of Independent Auditors F-1
Financial Statements and Schedules:
Balance sheets as of December 31, 1996 and 1995 F-2
For the years ended December 31, 1996, 1995 and 1994:
Statements of Operations F-3
Statements of Partners' Equity F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6 - F-10
Schedule:
III - Real Estate and Accumulated Depreciation F-11 - F-12
All other schedules have been omitted since the required information
is not present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the financial
statements or the notes thereto.
<PAGE>
Report of Independent Auditors
The Partners
QSR Income Properties, Ltd.,
a California Limited Partnership
We have audited the accompanying balance sheets of QSR Income Properties, Ltd.,
a California Limited Partnership, as of December 31, 1996 and 1995, and the
related statements of operations, partners' equity and cash flows for each of
the three years in the period ended December 31, 1996. Our audits also included
the schedule listed in the index at item 14(a). These financial statements and
schedule are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of QSR Income Properties, Ltd., a
California Limited Partnership, at December 31, 1996 and 1995, and the results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
March 18, 1997
Los Angeles, California
F-1
<PAGE>
<TABLE>
<CAPTION>
QSR INCOME PROPERTIES, LTD.,
a California Limited Partnership
BALANCE SHEETS
December 31, 1996 and 1995
1996 1995
---------- ----------
ASSETS
------
<S> <C> <C>
Cash and cash equivalents $1,816,000 $1,630,000
Accounts receivable 1,000 10,000
Notes receivable 202,000 234,000
Restaurant facilities, net 7,335,000 9,743,000
Other assets 46,000 -
---------- ----------
$9,400,000 $11,617,000
========== ===========
LIABILITIES AND PARTNERS' EQUITY
--------------------------------
Accounts payable $157,000 $148,000
Partners' equity:
Limited partners' equity, 9,174,000 11,378,000
$500 per unit, 100,000 units authorized,
52,004 units issued and outstanding
General partner equity 69,000 91,000
---------- ----------
Total partners' equity 9,243,000 11,469,000
---------- ----------
$9,400,000 $11,617,000
========== ===========
</TABLE>
See accompanying notes.
F-2
<PAGE>
<TABLE>
<CAPTION>
QSR INCOME PROPERTIES, LTD.,
a California Limited Partnership
STATEMENTS OF OPERATIONS
For the years ended December 31, 1996, 1995 and 1994
1996 1995 1994
------------- ------------ -----------
REVENUES:
<S> <C> <C> <C>
Lease income $ 1,095,000 $ 1,062,000 $ 1,023,000
Interest income 105,000 88,000 110,000
------------- ------------ -----------
1,200,000 1,150,000 1,133,000
------------- ------------ -----------
COSTS AND EXPENSES:
Cost of operations 141,000 140,000 136,000
Depreciation 58,000 248,000 249,000
Idle facility cost 32,000 46,000 36,000
Write-down of restaurant facilities 2,350,000 400,000 -
Administrative expense 103,000 90,000 94,000
------------- ------------ -----------
2,684,000 924,000 515,000
------------- ------------ -----------
Net (loss) income before loss on sale of
real estate facility (1,484,000) 226,000 618,000
Loss on sale of real estate facility - (406,000) -
------------- ------------ -----------
NET (LOSS) INCOME $ (1,484,000) $ (180,000) $ 618,000
============= ============= ===========
Allocation of net (loss) income:
Limited partners $ (1,528,000) $ (237,000) $ 453,000
General partner 44,000 57,000 165,000
------------- ------------ -----------
$ (1,484,000) $ (180,000) $ 618,000
============= ============= ===========
Limited partners' allocation per unit $ (29.38) $ (4.55) $ 8.71
============= ============= ===========
</TABLE>
See accompanying notes.
F-3
<PAGE>
<TABLE>
<CAPTION>
QSR INCOME PROPERTIES, LTD.,
a California Limited Partnership
STATEMENTS OF PARTNERS' EQUITY For the
years ended December 31, 1996, 1995 and 1994
Limited General
Partners Partner Total
------------- ------------- -------------
<S> <C> <C> <C>
Balances at December 31, 1993 $13,672,000 $ 114,000 $13,786,000
Net income 453,000 165,000 618,000
Distributions (1,834,000) (179,000) (2,013,000)
------------- ------------- -------------
Balances at December 31, 1994 12,291,000 100,000 12,391,000
Net (loss) income (237,000) 57,000 (180,000)
Distributions (676,000) (66,000) (742,000)
------------- ------------- -------------
Balances at December 31, 1995 11,378,000 91,000 11,469,000
Net (loss) income (1,528,000) 44,000 (1,484,000)
Distributions (676,000) (66,000) (742,000)
------------- ------------- -------------
Balances at December 31, 1996 $ 9,174,000 $ 69,000 $ 9,243,000
============= ============= =============
</TABLE>
See accompanying notes.
F-4
<PAGE>
<TABLE>
<CAPTION>
QSR INCOME PROPERTIES, LTD.,
a California Limited Partnership
STATEMENTS OF CASH FLOWS For
the years ended December 31, 1996, 1995 and 1994
1996 1995 1994
------------- ------------- ------------
Cash flows from operating activities:
<S> <C> <C> <C>
Net (loss) income $ (1,484,000) $ (180,000) $618,000
Adjustments to reconcile net(loss) income to
net cash provided by operating activities:
Loss on sale of real estate facility - 406,000 -
Depreciation 58,000 248,000 249,000
Write-down of restaurant facilities 2,350,000 400,000 -
Decrease (increase) in accounts receivable 9,000 5,000 (5,000)
Increase in other assets (46,000) - -
Increase (decrease) in accounts payable 9,000 (11,000) (26,000)
------------- ------------- ------------
Total adjustments 2,380,000 1,048,000 218,000
Net cash provided by operating activities 896,000 868,000 836,000
------------- ------------- ------------
Cash flows from investing activities:
Proceeds from sale of real estate facility - 352,000 -
Principal payments on notes receivable 32,000 37,000 56,000
------------- ------------- ------------
Net cash provided by investing activities 32,000 389,000 56,000
------------- ------------- ------------
Cash flows from financing activities:
Distributions paid to partners (742,000) (742,000) (2,013,000)
------------- ------------- ------------
Net cash used for financing activities (742,000) (742,000) (2,013,000)
------------- ------------- ------------
Net increase (decrease) in cash and cash equivalents 186,000 515,000 (1,121,000)
Cash and cash equivalents at the beginning of the year 1,630,000 1,115,000 2,236,000
------------- ------------- ------------
Cash and cash equivalents at the end of the year $1,816,000 $1,630,000 $1,115,000
============= ============= ============
</TABLE>
See accompanying notes.
F-5
<PAGE>
QSR INCOME PROPERTIES, LTD.,
a California Limited Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
1. Summary of Significant Accounting Policies and Partnership Matters
Description of Partnership
--------------------------
QSR Income Properties, Ltd., a California Limited Partnership
(the "Partnership"), was formed in November 1985 to acquire, own and
operate Rocky Rococo Restaurants. The offering terminated on April 30,
1987 with 52,004 units issued and outstanding, which resulted in
$26,002,000 of limited partner funds being raised. During 1989, the
limited partners approved the resignation of Madison Pizza Corporation
("MPC") as Corporate General Partner and the designation of B. Wayne
Hughes, the Individual General Partner, to succeed to the Corporate
General Partner's interest.
The Partnership operated its facilities as Rocky Rocco pizza
restaurants until 1988. During 1988, the General Partners decided to
discontinue restaurant operations because the restaurants had not
operated profitably. The Partnership currently leases its facilities
to unaffiliated third parties.
Restaurant Facilities
---------------------
The cost of land includes appraisal fees, closing costs and legal
fees related to the acquisition. Buildings and equipment are
depreciated on the straight-line basis over their estimated useful
lives of 30 years and 5 years, respectively. Buildings which are
situated on leased premises are depreciated over their minimum lease
term, 20 years.
In November 1995, the Partnership's Iliff, Colorado facility was
sold for $382,000 resulting in a $406,000 loss on the sale of the
facility. The Partnership received net sales proceeds of $352,000 net
of selling cost of $30,000. The Partnership's net book value at the
time of the sale was $758,000.
In 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No.121 ("Statement 121"),
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of." Statement 121 requires impairment losses to
be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets' carrying amount.
Statement 121 also addresses the accounting for long-lived assets that
are expected to be disposed of. The Partnership adopted Statement 121
in 1996 and based on current circumstances, the Partnership wrote-down
the carrying value of its real estate facilities to net realizable
values (see footnote 4).
Other Assets
------------
Other assets at December 31, 1996 represent primarily capitalized
costs associated with the proposed sale of the Partnership assets in
1997 (see footnote 4). The amounts will be expensed in 1997 upon
consummation of the sale.
Distributions
-------------
Cash distributions per unit were $13.00, $13.00, and $35.25 for
the years ended December 31, 1996, 1995 and 1994, respectively.
Incentive distributions to the General Partner amounted to $59,000,
$59,000 and $161,000 for 1996, 1995 and 1994, respectively.
F-6
<PAGE>
Allocation of Net Income or Loss
--------------------------------
The general partner's share of net income or loss consists of a
percentage of incentive distributions received, cash flow (as defined)
which relates to the general partner's share of cash distributions as
set forth in the Partnership Agreement. In addition, the general
partner's share of net income or loss consists of amounts attributable
to his 1% capital contribution. All remaining net income or loss is
allocated to the limited partners.
Use of Estimates
----------------
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could
differ from those estimates.
Reclassifications
-----------------
Certain reclassifications have been made to the financial
statements for the years ended December 31, 1995 and 1994 in order to
conform with the 1996 presentation.
2. Cash and Cash Equivalents
The Partnership considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents.
3. Notes Receivable
As of September 30, 1988, Rocky Rococo Corporation ("RRC"), an
affiliate of MPC, owed the Partnership approximately $275,000, which
comprised $205,000 in unearned management fees and $70,000 in certain
other advances. As RRC did not have the funds available to repay these
moneys, the Partnership elected to have RRC assign to them a $275,000
interest in a secured note receivable due to RRC. The note bears
interest at the prime rate plus 2% per annum (10.5% at December 31,
1996) and provides for monthly principal and interest payments through
April 22, 2002, the maturity date of the note, at which time
outstanding principal and accrued interest is due and payable. At
December 31, 1996 and 1995 this note had a remaining balance of
$108,000 and $119,000, respectively.
In connection with the sale of the Partnership's assets to USRP
Operating LP, the Partnership will sell its interest in the RRC note
to B. Wayne Hughes, the General Partner at its then outstanding
principal balance. (See Note 4).
The Partnership has received several notes related to the sale of
restaurant equipment through December 31, 1991. These notes, which
total approximately $34,000, require quarterly payments, are fully
amortizing and accrue interest at 8.5%. In addition, the Partnership
has received one note from a lessee as partial payment of some
leasehold improvements. The notes mature on various dates through
2003. The Partnership received $4,000, $5,000 and $8,000 in interest
from these notes during the years ended December 31, 1996, 1995 and
1994, respectively.
Future minimum principal payments of all notes due the
Partnership as of December 31, 1996 are as follows:
1997 $ 48,000
1998 45,000
1999 36,000
2000 13,000
2001 -
Thereafter 60,000
----------
$202,000
==========
F-7
<PAGE>
4. Restaurant Facilities and Lease Commitments / Proposed Sale of Assets
At December 31, restaurant facilities, which are recorded at net
realizable value, were comprised of the following:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Land $ 4,951,000 $ 4,951,000
Buildings and leasehold improvements 7,058,000 7,058,000
Equipment 933,000 933,000
------------ ------------
12,942,000 12,942,000
Less: Accumulated depreciation (2,712,000) (2,654,000)
Reserve to estimated net realizable value
of restaurant facilities (2,750,000) (400,000)
Reserve to estimated net realizable value
of equipment (145,000) (145,000)
------------- ------------
$ 7,335,000 $ 9,743,000
============ ===========
</TABLE>
In November 1995, the general partner decided to place the
facility assets for sale and hired an investment banker to determine
the valuation of the assets and solicit offers. Based on offers to buy
the assets received, the general partner determined that the carrying
value of the restaurant facilities needed to be reduced to present the
value of such assets at their net realizable value. Consequently, the
Partnership wrote-down the carrying value of its restaurant facilities
which resulted in a charge to income of $2,350,000 for the year ended
December 31, 1996.
On September 16, 1996, the general partner entered into a
purchase and sale agreement with US Restaurants Properties Master LP,
a Delaware limited partnership and US Restaurants Properties Operating
LP, a Delaware limited partnership whereby the Partnership would sell
its restaurant assets to USRP Operating LP for $7,571,234 and certain
of its notes receivable at a price which provides USRP Operating LP
with a 13.5% yield. USRP Operating LP will pay for the purchase of the
assets with limited partnership units of USRP Master LP. USRP Master
LP is a New York Stock Exchange traded master limited partnership
traded under the symbol "USV".
The transaction which is subject to certain contingencies,
including approval by the limited partners of the Partnership is
expected to close in the first half of 1997. The transaction is
expected to be tax-free for most limited partners. After the sale of
the Partnership assets, the Partnership expects to liquidate
distributing to the Unitholders the limited partnership interests in
USRP Master LP and any cash reserves.
During 1995, the Partnership wrote-down the carrying value of its
Coon Rapids, Minnesota restaurant facility to its estimated net
realizable value. The write-down resulted in a charge to income of
$400,000 in 1995.
Equipment was fully depreciated at December 31, 1994.
F-8
<PAGE>
Sixteen facilities owned or leased by the Company were leased or
subleased to unaffiliated third parties on a triple net basis for
minimum lease terms of 2 to 20 years. The minimum future lease income
to be received from these operating leases is as follows:
1997 $1,093,000
1998 1,123,000
1999 1,079,000
2000 1,032,000
2001 1,015,000
Thereafter 3,583,000
-----------
$8,925,000
===========
The Partnership is obligated under various operating leases on
its closed restaurant facilities. Each of these facilities has been
subleased to an unaffiliated third party. Sub-lease income under these
leases was $209,000, $203,000 and $203,000 for the period ended
December 31, 1996, 1995 and 1994, respectively. Lease expense incurred
under these leases for the period ended December 31, 1996, 1995 and
1994 was $120,000, $121,000 and $115,000, respectively. At December
31, 1996 the Partnership had agreements for the following minimum
sublease income and lease obligations (not including impact of options
to extend maturity dates):
Sublease Lease
Income Expense
------------ ---------
1997 $ 214,000 $ 113,000
1998 227,000 126,000
1999 213,000 129,000
2000 180,000 129,000
2001 189,000 129,000
Thereafter 442,000 884,000
------------ ---------
$1,465,000 $1,510,000
========== ==========
5. General Partner Equity
Initially, the general partners contributed 1% of the aggregate
capital contributions of the Partnership. The general partner has an
8% interest in cash distributions attributable to operations
(exclusive of distributions attributable to sale and financing
proceeds) until the limited partners recover all of their investment,
regardless of source. Thereafter, the general partner has a 25%
interest in all cash distributions (including sale and financing
proceeds). At December 31, 1996 cumulative distributions to limited
partners were $7,634,000; accordingly $18,368,000 of additional
distributions are required to be made to the limited partners for the
limited partners to recover their capital contributions.
6. Taxes Based on Income
Taxes based on income are the responsibility of the individual
partners and, accordingly, the Partnership's financial statements do
not reflect a provision for such taxes. Taxable net income was
$669,000, $132,000 and $549,000 for the years ended December 31, 1996,
1995 and 1994, respectively. The difference between taxable net income
and net income is primarily related to depreciation expense resulting
from differences in depreciation methods and estimated reserves for
net realizable value of restaurant facilities.
F-9
<PAGE>
7. Cost of Operations
For the years ended December 31, 1996, 1995 and 1994 cost of
operations were comprised of the following:
1996 1995 1994
---------- ---------- --------
Cost of leasing $120,000 $121,000 $115,000
Other operating expenses 21,000 19,000 21,000
--------- --------- ---------
$141,000 $140,000 $136,000
======== ======== ========
8. Idle Facility Cost
Idle facility cost is primarily comprised of utility costs,
building maintenance, property taxes and insurance costs of a
restaurant facility that was closed until December 1996 when it was
leased to an unaffiliated third party.
F-10
<PAGE>
<TABLE>
<CAPTION>
QSR Income Properties, Ltd.
Schedule III - Real Estate and Accumulated Depreciation
Cost
Initial Cost subsequent to
--------------------------- Acquisition
Description Encumbrance Land Buildings (Improvements)
- ------------------------------- ----------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Indianapolis/Lafayett - $ 659,000 $ 257,000 $ -
Greenwood/U.S. 31 S. - 749,000 273,000 -
Indianapolis/Washington - 344,000 452,000 -
Bloomington/College Mall - - 432,000 5,000
Muncie/McGalliard - 186,000 401,000 5,000
Green Village/Arapahoe Rd. - 683,000 734,000 3,000
Bloomington/W. 98th St. - - 478,000 18,000
Coon Rapids/Coon Rapids Blvd. - 363,000 652,000 1,000
Eagan/Cliff Rd. - 324,000 520,000 7,000
Fenton/Old Sugar Creek - 296,000 454,000 5,000
Brentwood/Manchester Rd. - - 634,000 5,000
Belville I/N. Belt West - 282,000 504,000 5,000
Belville II/S. Illinois St. - 246,000 584,000 17,000
Bristol/122nd Ave. - 210,000 576,000 -
Bolingbrook/Bolingbrook Dr. - 258,000 425,000 -
Crystal Creek/Northwest Hwy. - 351,000 538,000 6,000
----------- ----------- ---------
SubTotal 4,951,000 7,914,000 77,000
Less: reserve to estimated net
realizable value of restaurant
facilities - - -
Total $4,951,000 $7,914,000 $77,000
========== ========== =======
</TABLE>
<TABLE>
<CAPTION>
QSR Income Properties, Ltd.
Schedule III - Real Estate and Accumulated Depreciation
Gross Carrying Amount
at December 31, 1996
----------------------------------------- Accumulated Date
Description Land Buildings Total Depreciation Completed
- ------------------------------- --------------- ----------- --------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Indianapolis/Lafayett $ 659,000 $ 257,000 $ 916,000 $ 86,000 3/87
Greenwood/U.S. 31 S. 749,000 273,000 1,022,000 94,000 3/87
Indianapolis/Washington 344,000 452,000 796,000 140,000 7/87
Bloomington/College Mall - 437,000 437,000 166,000 (1)
Muncie/McGalliard 186,000 406,000 592,000 126,000 10/87
Green Village/Arapahoe Rd. 683,000 737,000 1,420,000 229,000 6/86
Bloomington/W. 98th St. - 496,000 496,000 159,000 (1)
Coon Rapids/Coon Rapids Blvd. 363,000 653,000 1,016,000 263,000 5/87
Eagan/Cliff Rd. 324,000 527,000 851,000 147,000 5/87
Fenton/Old Sugar Creek 296,000 459,000 755,000 145,000 9/87
Brentwood/Manchester Rd. - 639,000 639,000 252,000 (1)
Belville I/N. Belt West 282,000 509,000 791,000 165,000 11/86
Belville II/S. Illinois St. 246,000 601,000 847,000 242,000 7/87
Bristol/122nd Ave. 210,000 576,000 786,000 219,000 12/86
Bolingbrook/Bolingbrook Dr. 258,000 425,000 683,000 127,000 1/88
Crystal Creek/Northwest Hwy. 351,000 544,000 895,000 152,000 12/87
------------ ------------ -------------- ------------
SubTotal 4,951,000 7,991,000 12,942,000 2,712,000
Less: reserve to estimated net
realizable value of restaurant
facilities (140,000) (2,755,000) (2,895,000) -
Total 4,811,000 $5,236,000 $10,047,000 $2,712,000
============= ========== =========== ==========
</TABLE>
(1) Property is situated on land subject to a ground lease.
F-11
<PAGE>
<TABLE>
<CAPTION>
QSR Income Properties, Ltd.
Real Estate Reconciliation
Schedule III (continued)
(a) The following is a reconciliation of costs and related accumulated
depreciation:
COST
1996 1995 1994
----------------- --------------- --------------
<S> <C> <C> <C>
Balance at the beginning of the period $12,397,000 $13,838,000 $13,838,000
Additions during the period
Capital improvements - - -
Deductions during the period:
Write-down of facilities (2,350,000) (400,000) -
Sale of property - (1,041,000) -
----------------- --------------- --------------
Balance at the close of the period $10,047,000 $12,397,000 $13,838,000
================= =============== ==============
ACCUMULATED DEPRECIATION RECONCILIATION
1996 1995 1994
----------------- --------------- --------------
Balance at the beginning of the period $2,654,000 $2,639,000 $2,390,000
Additions during the period
Depreciation 58,000 248,000 249,000
Deductions during the period related to
property sold - (233,000) -
----------------- --------------- --------------
Balance at the close of the period $2,712,000 $2,654,000 $2,639,000
================= =============== ==============
</TABLE>
F-12
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000783287
<NAME> QSR INCOME PROPERTIES, LTD.
<MULTIPLIER> 1
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 12-Mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Dec-31-1996
<EXCHANGE-RATE> 1
<CASH> 1,816,000
<SECURITIES> 0
<RECEIVABLES> 203,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,065,000
<PP&E> 12,942,000
<DEPRECIATION> (5,607,000)
<TOTAL-ASSETS> 9,400,000
<CURRENT-LIABILITIES> 157,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 9,243,000
<TOTAL-LIABILITY-AND-EQUITY> 9,400,000
<SALES> 0
<TOTAL-REVENUES> 1,200,000
<CGS> 0
<TOTAL-COSTS> 199,000
<OTHER-EXPENSES> 2,485,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,484,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,484,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,484,000)
<EPS-PRIMARY> (29.38)
<EPS-DILUTED> (29.38)
</TABLE>
