U S RESTAURANT PROPERTIES MASTER L P, S-3/A, 1996-06-12

U S RESTAURANT PROPERTIES MASTER L P
S-3/A, 1996-06-12
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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 12, 1996

REGISTRATION NO. 333-02675
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 2
TO
FORM S-3

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

U.S. RESTAURANT PROPERTIES MASTER L.P.
(Exact name of Registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 6512 41-1541631
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>

5310 HARVEST HILL ROAD, SUITE 270
DALLAS, TEXAS 75230
(214) 387-1487
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)

ROBERT J. STETSON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
U.S. RESTAURANT PROPERTIES, INC.
MANAGING GENERAL PARTNER
5310 HARVEST HILL ROAD, SUITE 270
DALLAS, TEXAS 75230
(214) 387-1487
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------

COPIES TO:

<TABLE>
<S> <C>
Richard S. Wilensky, Esq. Janice V. Sharry, Esq.
Middleberg, Riddle & Gianna Haynes and Boone, L.L.P.
2323 Bryan Street 901 Main Street
Suite 1600 Suite 3100
Dallas, Texas 75201 Dallas, Texas 75202
Phone (214) 220-6300 Phone (214) 651-5000
Fax (214) 220-0179 Fax (214) 651-5940
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.

CROSS REFERENCE SHEET
SHOWING LOCATIONS IN PROSPECTUS OF REQUIRED INFORMATION

<TABLE>
<CAPTION>
FORM S-3 ITEM AND CAPTION LOCATION IN PROSPECTUS
- ---------------------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
1. Forepart of Registration Statement and Outside Front
Cover Page of Prospectus............................ Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus.......................................... Inside Front and Outside Back Cover Pages
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges........................... Prospectus Summary; Risk Factors
4. Use of Proceeds...................................... Use of Proceeds
5. Determination of Offering Price...................... Outside Front Cover Page; Underwriting
6. Dilution............................................. *
7. Selling Security Holders............................. *
8. Plan of Distribution................................. Outside Front Cover Page; Underwriting
9. Description of Securities to be Registered........... Description of Units
10. Interest of Named Experts and Counsel................ *
11. Material Changes..................................... Business and Properties; Incorporation by Reference
12. Incorporation of Certain Information by Reference.... Incorporation by Reference
13. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities...................... *
</TABLE>

- ------------------------
* Not Applicable
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>

SUBJECT TO COMPLETION, DATED JUNE 12, 1996

PROSPECTUS
U.S. RESTAURANT PROPERTIES MASTER L.P.
----------------------------------------

1,800,000 UNITS OF BENEFICIAL INTEREST
------------------

U.S. Restaurant Properties Master L.P., a Delaware limited partnership (the
"Partnership"), acquires, owns and manages income-producing properties that it
leases on a triple net basis to operators of fast food and casual dining
restaurants, primarily Burger King-Registered Trademark- and other national and
regional brands, including Dairy Queen-Registered Trademark-,
Hardee's-Registered Trademark- and Chili's-Registered Trademark-. The
Partnership is one of the largest publicly-owned entities in the United States
dedicated to acquiring, owning and managing restaurant properties. At June 11,
1996, the Partnership's portfolio consisted of 231 restaurant properties located
in 39 states (the "Current Properties"), approximately 99% of which were leased.
As of the date hereof, the Partnership has an additional 39 restaurant
properties under binding agreements for acquisition (the "Acquisition
Properties").

This Prospectus relates to the sale of 1,800,000 Units of Beneficial
Interest (the "Units") of the Partnership by the Partnership. The Units are
listed on the New York Stock Exchange (the "NYSE") under the symbol "USV." On
June 11, 1996, the last reported sale price of the Units on the NYSE was $24 1/8
per Unit. Since the Partnership's initial public offering in 1986, the
Partnership has made regular quarterly distributions to Unitholders. See "Price
Range of Units and Distribution Policy."

SEE "RISK FACTORS" WHICH BEGINS ON PAGE 9 OF THIS PROSPECTUS FOR CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
---------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO PUBLIC DISCOUNT (1) PARTNERSHIP (2)
<S> <C> <C> <C>
Per Unit................................. $ $ $
Total (3)................................ $ $ $
</TABLE>

(1) The Partnership has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."

(2) Before deducting estimated expenses of $400,000, payable by the
Partnership.

(3) The Partnership has granted the Underwriters a 30-day option to purchase up
to an additional 270,000 Units at the Price to Public less Underwriting
Discount solely to cover over-allotments, if any. If all such 270,000 Units
are purchased, the total Price to Public, Underwriting Discount and
Proceeds to Partnership will be $ , $ and $ ,
respectively. See "Underwriting."

------------------------------

The Units are offered by the several Underwriters, subject to prior sale,
when, as and if issued to and accepted by the Underwriters and subject to
approval of certain legal matters by counsel for the Underwriters and to certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. It is expected that
delivery of the Units offered hereby will be made on or about , 1996.

MORGAN KEEGAN & COMPANY, INC.
EVEREN SECURITIES, INC.
SOUTHWEST SECURITIES, INC.

The date of this Prospectus is , 1996
<PAGE>
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE UNITS AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE OVER-
THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

2
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ALL RESPECTS BY THE MORE DETAILED
INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES THERETO
APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED ALL
INFORMATION IN THIS PROSPECTUS ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT
OPTION IS NOT EXERCISED. THE PARTNERSHIP AND THE OPERATING PARTNERSHIP (AS
DEFINED BELOW) ARE GENERALLY REFERRED TO COLLECTIVELY HEREIN AS THE
"PARTNERSHIP" OR THE "PARTNERSHIPS," AND ALL REFERENCES HEREIN TO THE
PARTNERSHIP WHEN USED WITH RESPECT TO THE ACQUISITION, OWNERSHIP AND OPERATION
OF THE PROPERTIES REFER TO THE COMBINED OPERATIONS OF THE PARTNERSHIP AND
OPERATING PARTNERSHIP.

THE PARTNERSHIP

GENERAL

The Partnership acquires, owns and manages income-producing properties that
it leases on a triple net basis to operators of fast food and casual dining
restaurants, primarily Burger King and other national and regional brands,
including Dairy Queen, Hardee's and Chili's. The Partnership acquires properties
either from third party lessors or from operators on a sale/leaseback basis.
Under a triple net lease, the tenant is obligated to pay all costs and expenses,
including all real property taxes and assessments, repairs and maintenance and
insurance. Triple net leases do not require substantial reinvestments by the
property owner and, as a result, more cash from operations may be used for
distributions to Unitholders or for acquisitions.

The Partnership is one of the largest publicly-owned entities in the United
States dedicated to acquiring, owning and managing restaurant properties. At
June 11, 1996, the Partnership's portfolio consisted of 231 restaurant
properties in 39 states (the "Current Properties"), approximately 99% of which
were leased. From the Partnership's initial public offering in 1986 until March
31, 1995, the Partnership's portfolio was limited to approximately 125
restaurant properties, all of which were leased on a triple net basis to
operators of Burger King restaurants. In May 1994, an investor group led by
Robert J. Stetson and Fred H. Margolin acquired the Managing General Partner. In
March 1995, certain amendments to the Partnership Agreement were proposed by the
new management and adopted by the Unitholders which authorized the Partnership
to acquire additional properties, including restaurant properties not affiliated
with Burger King Corporation. Since adoption of the amendments, the Partnership
has acquired 109 properties for an aggregate purchase price of approximately $57
million, including 93 properties acquired since January 1, 1996 and has entered
into binding agreements to acquire 39 additional restaurant properties (the
"Acquisition Properties") for an aggregate purchase price of approximately $27
million. Upon acquisition of the Acquisition Properties, the Partnership's
portfolio will consist of an aggregate of 270 properties in 40 states,
consisting of 170 Burger King restaurants, 40 Dairy Queen restaurants, 27
Hardee's restaurants, 11 Pizza Hut-Registered Trademark- restaurants, five
Schlotzsky's-Registered Trademark- restaurants, two Chili's restaurants and 15
other properties, most of which are regional brands.

The Partnership's management team consists of senior executives with
extensive experience in the acquisition, operation and financing of fast food
and casual dining restaurants. Mr. Stetson, the President -- Chief Executive
Officer of the Managing General Partner is the former President of the Retail
Division and Chief Financial Officer of Burger King Corporation ("BKC"), as well
as the former Chief Financial Officer of Pizza Hut, Inc. As a result, management
has an extensive network of contacts within the franchised fast food and casual
dining restaurant industry. Based on management's assessment of market
conditions and its knowledge and experience, the Partnership believes that
substantial opportunities exist for it to acquire additional restaurant
properties on advantageous terms.

The Partnership is a Delaware limited partnership. U.S. Restaurant
Properties, Inc. (formerly named QSV Properties Inc.), is the Managing General
Partner of the Partnership. The principal executive offices of the Partnership
and the Managing General Partner are located at 5310 Harvest Hill Road, Suite
270, Dallas, Texas 75230. The telephone number is (214) 387-1487, FAX (214)
490-9119.

3
<PAGE>
STRATEGY

Since the adoption of the amendments to the Partnership Agreement in March
1995, the Partnership's principal business objective has been to expand and
diversify the Partnership's portfolio through frequent acquisitions of small to
medium-sized portfolios of fast food and casual dining restaurant properties.
The Partnership intends to achieve growth and diversification while maintaining
low portfolio investment risk through adherence to proven acquisition criteria
with a conservative capital structure. The Partnership intends to continue to
expand its portfolio by acquiring triple net leased properties and structuring
sale/leaseback transactions consistent with the following strategies:

-FOCUS ON RESTAURANT PROPERTIES. The Partnership takes advantage of senior
management's extensive experience in fast food and casual dining restaurant
operations to identify new investment opportunities and acquire restaurant
properties satisfying the Partnership's investment criteria. Management
believes, based on its industry knowledge and experience, that relative to
other real estate sectors, restaurant properties provide numerous
acquisition opportunities at attractive valuations.

-INVEST IN MAJOR RESTAURANT BRANDS. The Partnership intends to continue to
acquire properties operated as major national and regional restaurant
brands, such as Burger King, Dairy Queen, Hardee's and Chili's by
competent, financially-stable operators. Certain of the Partnership's
Current Properties are also operated as Pizza Hut,
KFC-Registered Trademark- and Taco Bell-Registered Trademark- restaurants.
Management believes, based on its industry knowledge and experience, that
successful restaurants operated under these types of brands offer stable,
consistent income to the Partnership with minimal risk of default or
non-renewal of the lease and franchise agreement. As a result of its
concentration on major national and regional brands, in the last three
fiscal years, of all rental revenues due, more than 99.5% has been
collected.

-ACQUIRE EXISTING RESTAURANTS. The Partnership's strategy is to focus
primarily on the acquisition of existing fast food and casual dining chain
restaurant properties that have a history of profitable operations with a
remaining term on the current lease of at least five years. The average
remaining lease term for the Current Properties is ten years. Management
believes, based on its industry knowledge and experience, that acquiring
existing restaurant properties provides a higher risk-adjusted rate of
return to the Partnership than acquiring newly-constructed restaurants.

-CONSOLIDATE SMALLER PORTFOLIOS. Management believes, based on its industry
knowledge and experience, that pursuing multiple transactions involving
smaller portfolios of restaurant properties (generally having an
acquisition price of less than $3 million) results in a more attractive
valuation because the size of such transactions generally does not attract
large institutional property owners. Smaller buyers typically are not well
capitalized and may be unable to compete for such transactions. Larger
transactions involving multiple properties generally attract several
institutional bidders, often resulting in a higher purchase price and lower
investment returns to the purchaser. In certain circumstances, however, the
Partnership has identified, evaluated and pursued portfolios valued at up
to $50 million that present attractive risk/return ratios and recently
closed a transaction of approximately $18 million, including closing costs.

-MAINTAIN CONSERVATIVE CAPITAL STRUCTURE. The Partnership has a policy of
maintaining a ratio of total indebtedness of 50% or less to the greater of
(i) the market value of all issued and outstanding Units plus total
outstanding indebtedness ("Total Market Capitalization") or (ii) the
original cost of all of the Partnership's properties as of the date of such
calculation. The Partnership's ratio of total indebtedness to Total Market
Capitalization was approximately 30% at June 11, 1996. See "Capitalization"
and "Pro Forma Consolidated Financial Statements." The Partnership,
however, may from time to time reevaluate its borrowing policies in light
of then-current economic conditions, relative costs of debt and equity
capital, market values of properties, growth and acquisition opportunities
and other factors.

4
<PAGE>
INDUSTRY

Industry sources estimate that total food service industry sales during 1995
were approximately $277 billion and that there are more than 100,000 free
standing fast food and casual dining chain restaurant locations with a total
current property value of more than $100 billion, with the number of locations
and value growing. Management believes, based on its industry knowledge and
experience, that the Partnership competes with numerous other publicly-owned
entities some of which dedicate substantially all of their assets and efforts to
acquiring, owning and managing chain restaurant properties. In addition, the
Partnership competes with numerous private firms and private individuals for the
acquisition of restaurant properties. Management believes that this fragmented
market provides the Partnership with substantial acquisition opportunities.

Approximately 74% of the Partnership's Current Properties (63% assuming
consummation of the Acquisition Properties) consists of properties leased to
operators of Burger King restaurants. Based on publicly-available information,
Burger King is the second largest fast food restaurant system in the United
States in terms of system wide sales. According to publicly-available
information, there are approximately 6,500 Burger King restaurant units in the
United States. With respect to the Burger King restaurants in the Partnership's
portfolio, for the year-ended December 31, 1995, same-store sales (consisting of
the stores included in the portfolio at January 1, 1994 and at December 31,
1995) increased 7% over the prior year.

RECENT DEVELOPMENTS

RECENT ACQUISITIONS: Since January 1, 1996, the Partnership has acquired 93
restaurant properties for an aggregate purchase price of approximately $46
million. The acquired properties are leased on a triple net basis to operators
of Burger King, Dairy Queen, Taco Bell, KFC and other brand name restaurants.

PENDING ACQUISITIONS: At June 11, 1996, the Partnership had entered into
binding agreements to purchase interests in 39 Acquisition Properties for an
aggregate purchase price of approximately $27 million, including the purchase of
25 Hardee's, nine Pizza Huts and five Schlotzsky's. The Partnership intends to
finance the Acquisition Properties principally by utilizing the Partnership's
mortgage warehouse facility and the net proceeds of this Offering. See "Use of
Proceeds" and "Capitalization."

CREDIT FACILITIES: The Partnership's revolving credit agreement with a
syndicate of banks was recently increased to $40 million. At June 11, 1996,
approximately $3.5 million remained available for borrowings under the credit
agreement. A portion of the net proceeds of this Offering will be used to reduce
outstanding borrowings under this credit agreement by up to $ million. The
Partnership also has a $20 million mortgage warehouse facility secured by
certain Current Properties which, at June 11, 1996, had approximately $4.2
million available. See "History and Structure of the Partnership" and
"Capitalization."

REIT CONVERSION: The Partnership and its advisers are analyzing all aspects
of a conversion to a Real Estate Investment Trust (REIT) including feasibility
and tax effects. Assuming that the Partnership and its advisers determine that a
conversion to a REIT is in the best interests of the Partnership and its limited
partners, the Partnership would attempt to complete such a conversion by
December 31, 1997, subject to the approval of the limited partners. Even if the
Partnership does not convert to a REIT, the Partnership intends to become
self-managed and self-advised by December 31, 1997, subject to the approval of
the limited partners. See "Business and Properties -- REIT Conversion."

5
<PAGE>
DISTRIBUTION POLICY

The Partnership currently pays a quarterly distribution of $0.47 per Unit,
which on an annualized basis is equal to an annual distribution of $1.88 per
Unit. The Managing General Partner has declared a distribution of $0.47 per Unit
payable June 13, 1996 to Unitholders of record on June 6, 1996. Purchasers of
Units offered hereby will not be entitled to receive such quarterly
distribution.

RISK FACTORS

An investment in the Units involves various risks. Investors should
carefully consider the matters discussed under "Risk Factors" beginning on page
9.

THE OFFERING

<TABLE>
<S> <C>
Units outstanding before the Offering:....... 4,987,003 Units
Units to be outstanding after the 6,787,003 Units (1)
Offering:...................................
Use of Proceeds:............................. For the acquisition of the Acquisition
Properties; to reduce debt; and for other
general corporate purposes. See "Use of
Proceeds."
NYSE Symbol.................................. USV
</TABLE>

- ------------------------
(1) Does not include options to purchase 400,000 Units held by the Managing
General Partner which are currently exercisable. See "Underwriting."

6
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA
FINANCIAL INFORMATION AND OTHER DATA
(Dollars in Thousands, except per Unit amounts)

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
YEARS ENDED DECEMBER 31, (1) ---------------------------------
----------------------------------------------
PRO FORMA(3) HISTORICAL PRO FORMA
HISTORICAL (UNAUDITED) (UNAUDITED) (UNAUDITED)
------------------------------- ------------- -------------------- -----------
1993 1994 1995 1995 1995 1996 1996
--------- --------- --------- ------------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME:
Total revenues................... $ 8,332 $ 8,793 $ 9,780 $ 21,207 $ 2,123 $ 2,955 $ 5,089
Expenses......................... $ 3,804 $ 3,860 $ 4,557 $ $ 1,033 $ 1,633 $
Net income allocable to
Unitholders..................... $ 4,437 $ 4,834 $ 5,119 $ $ 1,069 $ 1,296 $
Net income per Unit.............. $ 0.96 $ 1.04 $ 1.10 $ $ 0.23 $ 0.26 $
Weighted average Units
outstanding..................... 4,635 4,635 4,638 6,808 4,635 4,903 6,787
CASH FLOW DATA:
Cash flows from operating
activities...................... $ 7,475 $ 6,990 $ 9,287 $ $ 2,542 $ 2,368 $
Cash flows from (used in)
investing activities............ $ 1,130 $ -- $ (12,038) $ (77,483) $ (1,295) $ (10,325) $ (65,525)
Cash flows from (used in)
financing activities............ $ (8,302) $ (7,569) $ 2,077 $ $ (1,553) $ 7,968 $
OTHER DATA:
Number of properties............. 123 123 139 270 124 163 270
Regular cash distributions
declared per Unit applicable to
respective year................. $ 1.48* $ 1.61 $ 1.71 $ -- $ 0.42 $ 0.47 $ --
CASH FLOW RECONCILIATION:
Cash flow from operating
activities...................... $ 7,475 $ 6,990 $ 9,287 $ $ 2,542 $ 2,368 $
Net change in marketable
securities, receivables, prepaid
expenses and accounts payable... (22) 987 (657) (657) (667) (15) (15)
Reduction in capitalized lease
obligations..................... (172) (191) (212) (212) (51) (55) (55)
--------- --------- --------- ------------- --------- --------- -----------
Cash flow from operations based
upon taxable income (2)......... $ 7,281 $ 7,786 $ 8,418 $ $ 1,824 $ 2,298 $
--------- --------- --------- ------------- --------- --------- -----------
--------- --------- --------- ------------- --------- --------- -----------
</TABLE>

- ------------------------
* Does not include special capital transaction distributions of $.24 per Unit.

<TABLE>
<CAPTION>
MARCH 31,
DECEMBER 31, (1) ---------------------------
------------------------------- PRO FORMA AS
HISTORICAL ADJUSTED (3)
HISTORICAL (UNAUDITED) (UNAUDITED)
------------------------------- ----------- --------------
1993 1994 1995 1996 1996
--------- --------- --------- ----------- --------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Net investment in direct financing leases............. $ 22,910 $ 21,237 $ 19,371 $ 18,875 $ 18,875
Land.................................................. 23,414 23,414 27,493 31,203 49,328
Buildings and leasehold improvements, net............. 1,734 1,548 6,257 18,845 52,059
Equipment............................................. -- -- 224 257 3,429
Intangibles, net...................................... 15,503 14,317 14,804 14,524 16,249
Total assets.......................................... 65,322 62,889 71,483 87,351 142,633
Line of credit........................................ -- -- 10,931 21,226
Capitalized lease obligations......................... 966 775 563 508 508
General partners' capital............................. 1,357 1,309 1,241 1,222 1,222
Limited partners' capital............................. 62,757 60,361 58,072 63,770
</TABLE>

- ------------------------
(1) The information for the years ended December 31, 1993, 1994 and 1995 was
derived from the Partnership's audited financial statements included
elsewhere in this Prospectus.

7
<PAGE>

(2) "Cash flow from operations based upon taxable income" is calculated as the
sum of taxable income plus charges for depreciation and amortization. All
leases are treated as operating leases for taxable income purposes which
results in a reconciling item from "cash flows from operating activities."
In addition, "cash flow from operations based upon taxable income" does not
consider changes in working capital items. As a result, "cash flow from
operations based upon taxable income" should not be considered as an
alternative to net income determined in accordance with generally accepted
accounting principles as an indication of the Partnership's performance or
as an alternative to cash flow determined in accordance with generally
accepted accounting principles as a measure of liquidity. The Partnership
believes that "cash flow from operations based upon taxable income" is
important because taxable income flows through to the partners and it is the
most consistent indicator of cash generated by operations and eliminates the
fluctuations of changes in working capital items.

(3) The unaudited pro forma consolidated statement of income information for the
year ended December 31, 1995 is presented as if the following had occurred
as of January 1, 1995: (a) the purchase of 16 properties acquired on various
dates from March 1995 through December 1995; (b) the purchase of 93
properties and the sale of one property completed since January 1, 1996; (c)
the acquisition of 39 properties under binding contracts with the assumption
of related tenant and ground leases (all of which are treated as operating
leases based on preliminary assessments); (d) additional borrowings to
purchase the Acquisition Properties; and (e) the issuance and sale by the
Partnership in this Offering of 1,800,000 Units and the application of the
net proceeds therefrom.

The unaudited pro forma consolidated statement of income information for the
quarter ended March 31, 1996 is presented as if the following had occurred
as of January 1, 1996: (a) adjustments to operations for 24 properties
acquired during the quarter ended March 31, 1996 and the purchase of 69
properties and sale of one property since April 1, 1996; (b) the acquisition
of 39 properties under binding contracts with the assumption of related
tenant and ground leases (all of which are treated as operating leases based
on preliminary assessments); (c) additional borrowings to purchase the
Acquisition Properties; and (d) the issuance and sale by the Partnership in
this Offering of 1,800,000 Units and the application of the net proceeds
therefrom.

The unaudited pro forma balance sheet data at March 31, 1996, represents the
Partnership's March 31, 1996 balance sheet adjusted on a pro forma basis to
reflect as of March 31, 1996: (a) the purchase of 69 properties and the sale
of one property since April 1, 1996; (b) the acquisition of 39 properties
under binding contracts with the assumption of related tenant and ground
leases (all of which are treated as operating leases based on preliminary
assessments); (c) additional borrowings to purchase the Acquisition
Properties; and (d) the issuance and sale by the Partnership in this
Offering of 1,800,000 Units and the application of the net proceeds
therefrom.

The unaudited pro forma income statement and balance sheet information is
not necessarily indicative of what the actual financial position of the
Partnership would have been at March 31, 1996 or what the actual results of
operations of the Partnership for the quarter ended March 31, 1996 or the
year ended December 31, 1995 would have been had all of these transactions
occurred and does not purport to represent the future financial position or
results of operations of the Partnership.

8
<PAGE>
RISK FACTORS

IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS AND INCORPORATED BY
REFERENCE HEREIN, THE FOLLOWING FACTORS SHOULD BE CAREFULLY CONSIDERED BY
PERSONS CONTEMPLATING AN INVESTMENT IN THE UNITS OFFERED HEREBY.

ACQUISITION AND EXPANSION RISKS

FAILURE TO ACQUIRE ACQUISITION PROPERTIES. As of the date of this
Prospectus, the Partnership had 39 properties under binding agreements of
acquisition. In connection with the execution of such agreements, the
Partnership made deposits of approximately $.6 million which may be
non-refundable in whole or in part if the Partnership elects not to close some
or all of such acquisitions. In addition, if some or all of such acquisitions
are not closed, the Partnership may have proceeds from the Offering without a
designated use and there can be no assurance that the Partnership will be able
to locate additional restaurant properties that meet the Partnership's
acquisition criteria.

RISK OF REFINANCING EXISTING INDEBTEDNESS. Currently, the Partnership's
borrowings do not have long-term maturities and as a result, the Partnership
will be required to refinance such borrowings prior to the maturities of the
lease terms of its properties. Refinancing will depend upon the creditworthiness
of the Partnership and the availability of financing under market conditions at
the time such refinancing is required. Such refinancing of the Partnership's
borrowings could result in higher interest costs and adversely affect results
from operations. The granting of liens on its restaurant properties may preclude
the Partnership from subsequently borrowing against such restaurant properties
and distributing such loan proceeds to the Unitholders. Payment of the interest
on, or amortization of, any such indebtedness could also decrease the cash
distributable to the Unitholders if the financing and other costs of the
expanded business strategy exceed any incremental revenue generated.

RISK OF LEVERAGE. In order to fund the Partnership's expanded business
strategy, the Partnership may borrow funds and grant liens on its restaurant
properties to secure such indebtedness. If the Partnership were unable to repay
or otherwise default in respect of any indebtedness, the Partnership's
properties could become subject to foreclosure, with possible adverse income tax
consequences to the Unitholders, such as allocations of capital gain or
discharge of indebtedness income without any cash distributions from which to
pay the related income tax liability. The Partnership Agreement does not
restrict the amount of such indebtedness, and the extent of the Partnership's
indebtedness from time to time may affect its interest costs, results of
operations, and its ability to respond to future business adversities and
changing economic conditions. The Partnership has implemented a non-binding
policy to maintain a ratio of total indebtedness of 50% or less to the greater
of Total Market Capitalization or the original cost of all of the Partnership's
properties as of the date of such calculation. Because it is anticipated that
the Partnership will not fix all of its interest costs for the long term, future
changes in interest rates may positively or negatively affect the Partnership.

RISK OF MANAGING EXPANDED PORTFOLIO. At March 31, 1995, the Partnership
owned and managed less than 125 restaurant properties. The Partnership's Current
Properties consist of 231 restaurant properties. As a result of the rapid growth
of the Partnership's portfolio and the anticipated additional growth, there can
be no assurance that management will be able to adapt its management,
administrative, accounting and operational systems to respond to the growth
represented by the Acquisition Properties or any future growth. In addition,
there can be no assurance that the Partnership will be able to maintain its
current rate of growth or negotiate and acquire any acceptable restaurant
properties in the future. A larger portfolio of restaurant properties could
entail additional operating expenses that would be payable by the Partnership.
Such acquisitions may also require loans to prospective tenants. Making loans to
existing or prospective tenants involves credit risks and could

9
<PAGE>
subject the Partnership to regulation under various federal and state laws. Any
operation of restaurants, even on an interim basis, would also subject the
Partnership to operating risks (such as uncertainties associated with labor and
food costs), which may be significant. See "Business and Properties."

CONFLICTS OF INTEREST

The Partnership Agreement provides that the Partnership pays one-time and
continuing fees to the Managing General Partner with respect to additional
properties purchased regardless of whether the Partnership receives the
contemplated revenue from such additional properties or whether the Partnership
makes any cash distributions to the Unitholders after such properties are
purchased. This creates an incentive for the Managing General Partner to cause
the Partnership to purchase more properties, pay higher prices, and sell
existing properties or use more leverage to make such purchases. The sale of any
of the restaurant properties acquired from BKC in 1986 (122 at June 11, 1996)
would not reduce the management fee for existing properties, while new fees
would benefit the Managing General Partner incrementally with each purchase. The
Managing General Partner, however, does not presently intend to cause the
Partnership to sell a significant number of its Current Properties. In addition,
the Partnership Agreement provides the Managing General Partner with a fee
providing a percentage participation above a threshold in the cash flow from
newly-purchased properties. Moreover, the Managing General Partner is not
restricted from acquiring for its own account properties of the type to be
purchased by the Partnership. See "Business and Properties -- Payments to the
Managing General Partner."

In addition, the Partnership Agreement does not restrict the ability of the
Managing General Partner or its principals from owning and/or operating
restaurants on Partnership properties or elsewhere. At June 11, 1996, the
Managing General Partner owned 90% of Arkansas Restaurants #10 L.P., the
operator of three Burger King franchises on properties leased from the
Partnership. The Managing General Partner or its principals may acquire future
operating restaurants on Partnership properties, including in connection with
the Acquisition Properties. Financing may also be provided on an arm's length
basis by the Partnership to consummate the acquisition of operating restaurants
by the Managing General Partner, its principals or others.

INVESTMENT CONCENTRATION IN SINGLE INDUSTRY

The Partnership's current strategy is to acquire interests in restaurant
properties, specifically fast food and casual dining restaurant properties. As a
result, a downturn in the fast food or casual dining segment could have a
material adverse effect on the Partnership's total rental revenues and amounts
available for distribution to its Unitholders. See "Business and Properties --
The Properties."

DEPENDENCE ON SUCCESS OF BURGER KING

Of the Partnership's Current Properties, 170 are occupied by operators of
Burger King restaurants. In addition, the Partnership intends to acquire
additional Burger King properties. As a result, the Partnership is subject to
the risks inherent in investments concentrated in a single franchise brand, such
as a reduction in business following adverse publicity related to the brand or
if the Burger King restaurant chain (and its franchisees) were to suffer a
system-wide decrease in sales, the ability of franchisees to pay rents
(including percentage rents) to the Partnership may be adversely affected. See
"Business and Properties -- Strategy" and "Business and Properties -- The
Properties."

POSSIBLE RENT DEFAULTS AND FAILURE TO RENEW LEASES AND FRANCHISE AGREEMENTS

The Partnership's Current Properties are leased to restaurant franchise
operators pursuant to leases with remaining terms varying from one to 28 years
at June 11, 1996 and an average remaining term of ten years. No assurance can be
given that such leases will be renewed at the end of the lease

10
<PAGE>
terms or that the Partnership will be able to renegotiate terms which are
acceptable to the Partnership. The Partnership has attempted to extend the terms
of certain of its existing leases pursuant to an "Early Renewal Program," but in
connection therewith has had to commit to paying for certain improvements on
such properties. See "Business and Properties -- The Properties."

REAL ESTATE INVESTMENT RISKS

GENERAL RISKS. The Partnership's investments in real estate are subject to
varying degrees of risk inherent in the ownership of real property. The
underlying value of the Partnership's real estate and the income therefrom and,
consequently, the ability of the Partnership to make distributions to
Unitholders are dependent upon the operators of the restaurant properties
generating income in excess of operating expenses in order to make rent
payments. Income from the properties may be adversely affected by changes in
national economic conditions, changes in local market conditions due to changes
in general or local economic conditions and neighborhood characteristics,
changes in interest rates and the availability, cost and terms of mortgage
funds, the impact of compliance with present or future environmental laws, the
ongoing need for capital improvements, particularly for older restaurants,
increases in operating expenses, adverse changes in governmental rules and
fiscal policies, civil unrest, acts of God (which may result in uninsured
losses), acts of war, adverse changes in zoning laws, and other factors beyond
the Partnership's control.

ILLIQUIDITY OF REAL ESTATE MAY LIMIT ITS VALUE. Real estate investments are
relatively illiquid. The ability of the Partnership to vary its portfolio in
response to changes in economic and other conditions is limited. No assurance
can be given that the market value of any of the Partnership's properties will
not decrease in the future. If the Partnership must sell an investment, there
can be no assurance that the Partnership will be able to dispose of it in a
desirable time period or that the sales price will recoup or exceed the amount
of the Partnership investment.

POSSIBLE LIABILITY THAT COULD RESULT FROM ENVIRONMENTAL MATTERS. The
Partnership's operating costs may be affected by the obligation to pay for the
cost of complying with existing environmental laws, ordinances and regulations,
as well as the cost of compliance with future legislation. Under current
federal, state and local environmental laws, ordinances and regulations, a
current or previous owner or operator of real property may be liable for the
costs of removal or remediation of hazardous or toxic substances on, under or in
such property. Such laws often impose liability whether or not the owner or
operator knew of, or was responsible for, the presence of such hazardous or
toxic substances. In addition, the presence of contamination from hazardous or
toxic substances, or the failure to remediate such contaminated property
properly, may adversely affect the ability of the owner of the property to use
such property as collateral for a loan or to sell such property. Environmental
laws also may impose restrictions on the manner in which a property may be used
or transferred or in which businesses may be operated, and may impose remedial
or compliance costs. The costs of defending against claims of liability or
remediating contaminated property and the cost of complying with environmental
laws could materially adversely affect the Partnership's results of operations
and financial condition.

In connection with the Partnership's acquisition of a property, a Phase I
environmental assessment is obtained. A Phase I environmental assessment
involves researching historical usages of a property, databases containing
registered underground storage tanks and other matters including an on-site
inspection to determine whether an environmental issue exists with respect to
the property which needs to be addressed. If the results of a Phase I
environmental assessment reveal potential issues, a Phase II assessment which
may include soil testing, ground water monitoring or borings to locate
underground storage tanks, is ordered for further evaluation and, depending upon
the results of such assessment, the transaction is consummated or the
acquisition is terminated.

AMERICANS WITH DISABILITIES ACT. The Americans with Disabilities Act (the
"ADA") generally requires that all public accommodations, including restaurants,
comply with certain federal requirements relating to physical access and use by
persons with physical disabilities. A determination that the Partnership or one
of the Partnership's properties is not in compliance with the ADA could result

11
<PAGE>
in the imposition of fines, injunctive relief, damages or attorney's fees. The
Partnership's leases contemplate that compliance with the ADA is the
responsibility of the operator. While the Partnership believes that compliance
with the ADA can be accomplished without undue costs, the costs of compliance
may be substantial and may adversely impact the ability of such lessees to pay
rentals to the Partnership. In addition, a determination that the Partnership is
not in compliance with the ADA could result in the imposition of fines or an
award of damages to private litigants.

UNINSURED AND UNDERINSURED LOSSES COULD RESULT IN LOSS OF VALUE OF
FACILITIES. The Partnership requires its lessees to maintain comprehensive
insurance on each of the properties, including liability, fire and extended
coverage and the Partnership is an additional named insured under such policies.
Management believes such specified coverage is of the type and amount
customarily obtained for or by an owner on real property assets. The Partnership
intends to require lessees of subsequently acquired property, including the
Acquisition Properties, to obtain similar insurance coverage. However, there are
certain types of losses, generally of a catastrophic nature, such as earthquakes
and floods, that may be uninsurable or not economically insurable, as to which
the Partnership's properties (including the Current Properties and the
Acquisition Properties) are at risk depending on whether such events occur with
any frequency in such areas. In addition, because of coverage limits and
deductibles, insurance coverage in the event of a substantial loss may not be
sufficient to pay the full current market value or current replacement cost of
the Partnership's investment. Inflation, changes in building codes and
ordinances, environmental considerations, and other factors also might make it
infeasible to use insurance proceeds to replace a facility after it has been
damaged or destroyed. Under such circumstances, the insurance proceeds received
by the Partnership might not be adequate to restore its economic position with
respect to such property.

DEPENDENCE ON KEY PERSONNEL

The Partnership's continued success is dependent upon the efforts and
abilities of its key executive officers. In particular, the loss of the services
of either Robert J. Stetson or Fred H. Margolin could have a material adverse
effect on the Partnership's operations and its ability to effectuate its growth
strategy. There can be no assurance that the Partnership would be able to
recruit or hire any additional personnel with equivalent experience and
contacts. The Partnership does not own key-man life insurance on the lives of
Mr. Stetson or Mr. Margolin. See "Management."

COMPETITION

ACQUISITIONS. Numerous entities and individuals compete with the
Partnership to acquire triple net leased restaurant properties, including
entities which have substantially greater financial resources than the
Partnership. These entities and individuals may be able to accept more risk than
the Partnership is willing to undertake. Competition generally may reduce the
number of suitable investment opportunities available to the Partnership and may
increase the bargaining power of property owners seeking to sell. There can be
no assurance that the Partnership will find attractive triple net leased
properties or sale/leaseback transactions in the future.

OPERATIONS. The restaurants operated on the properties are subject to
significant competition (including competition from other national and regional
fast food restaurant chains) including Burger King restaurants, local
restaurants, restaurants owned by BKC or affiliated entities, national and
regional restaurant chains that do not specialize in fast food but appeal to
many of the same customers, and other competitors such as convenience stores and
supermarkets that sell prepared and ready-to-eat foods. The success of the
Partnership depends, in part, on the ability of the restaurants operated on the
properties to compete successfully with such businesses. The Partnership does
not intend to engage directly in the operation of restaurants. However, the
Partnership would operate restaurants located on its properties if required to
do so in order to protect the Partnership's investment. As a result, the
Partnership generally will be dependent upon the experience and ability of the
lessees operating the restaurants located on the properties. See "Business and
Properties -- Strategy" and "Business and Properties -- Industry."

12
<PAGE>
DEVELOPMENT RISKS

The Partnership may pursue certain restaurant property developments. New
project developments are subject to numerous risks including construction delays
or costs that may exceed budgeted or contracted amounts, new project
commencement risks such as receipt of zoning, occupancy and other required
governmental approvals and permits and the incurrence of development costs in
connection with projects that are not pursued to completion. In addition,
development involves the risk that developed properties will not produce desired
revenue levels once leased, the risk of competition for suitable development
sites from competitors which may have greater financial resources than the
Partnership, and the risk that debt or equity financing are not available on
acceptable terms. There can be no assurance that development activities might
not be curtailed or, if consummated will perform in accordance with the
Partnership's expectations and distributions to Unitholders might be adversely
affected.

RISK OF NEWLY-CONSTRUCTED RESTAURANT PROPERTIES

The Partnership may pursue the acquisition of newly-constructed restaurant
properties that do not have operating histories. For example, the Partnership
recently entered into a binding agreement to acquire five newly-constructed
restaurant properties that are leased to operators of Schlotzsky's. The
acquisition of newly-constructed restaurant properties involves numerous risks,
including the risk that newly-constructed restaurant properties will not produce
desired revenue levels (and, therefore, lease rentals) once opened. See
"Business and Properties -- Strategy" and "Business and Properties --
Regulation."

RELIANCE ON MANAGING GENERAL PARTNER

Unitholders will have no right or power to take part in the management of
the Partnership except through the exercise of voting rights on certain
specified matters. The Partnership will rely on the services and expertise of
the Managing General Partner for strategic business direction. See "Business and
Properties -- General," "Business and Properties -- Strategy" and "Management."

POTENTIAL DILUTION FROM UNITS AVAILABLE FOR FUTURE SALE

In March 1995, the Unitholders authorized the grant to the Managing General
Partner of options to purchase 400,000 Units at $15.50 per Unit. Such options
are currently fully exercisable. The sale to the public of additional Units
owned or that may be acquired by the Managing General Partner could adversely
affect the trading price of the Units. Each of the Managing General Partner,
Robert J. Stetson, Fred H. Margolin, Darrell Rolph, David Rolph, Gerald H.
Graham and Eugene G. Taper has executed a lock-up agreement under which each has
agreed not to sell any of its or his Units for a period of 180 days after the
date of the Offering.

POTENTIAL PAYMENTS FOR CERTAIN UNIT PRICE GUARANTEES

During 1995, the Partnership acquired three properties in part for 54,167
Units. As a term of the acquisition, the Partnership agreed that, if the market
price for the Units was less than $24 per Unit on October 10, 1998, and the
Units had not been sold prior to that date for a price at least equal to $24 per
Unit, the Partnership would pay such Unitholder the difference in cash between
$24 and the average closing price for the 20 trading days preceding such date.
In connection with the acquisition of 15 properties in 1996, the Partnership
issued 327,836 Units and agreed that, as a term of those acquisitions, if the
market price for the Units was less than $23 per Unit (as to 28,261 Units) on
January 23, 1999 or $24 per Unit (as to 299,575 Units) on January 25, 1998, and
the Units had not been sold prior to that date for a price at least equal to $23
or $24 per Unit, respectively, the Partnership would pay the difference between
$23 or $24, respectively, and the average closing price for the 20 trading days
preceding such date by the issuance of additional Units.

ADVERSE EFFECT OF INCREASES IN INTEREST RATES

One of the factors that may influence the market price of the Units is the
annual yield from distributions made by the Partnership on the Units as compared
to yields on certain financial

13
<PAGE>
instruments. Thus, a general increase in market interests rates could result in
higher yields on certain financial instruments which could adversely affect the
market price for the Units, since alternative investment vehicles may be more
attractive.

TAX RISKS

There are numerous federal and state income tax considerations associated
with acquiring, owning and disposing of Units. See "Federal Income Tax
Considerations" and "State and Other Taxes."

POTENTIAL LOSS OF PARTNERSHIP STATUS. The availability to a Unitholder of
the federal income tax benefits of an investment in the Partnership depends in
large part on the classification of the Partnerships as partnerships for federal
income tax purposes. Based upon certain representations of the Managing General
Partner, Middleberg, Riddle & Gianna, counsel to the Partnership, has rendered
its opinion that under current law and regulations, the Partnerships will be
classified as partnerships for federal income tax purposes. However, the opinion
of counsel is not binding on the IRS. Neither Partnership satisfies requirements
to obtain an advance ruling from the IRS, and, as a result, no advance ruling
from the IRS as to such status has been or will be requested. If the IRS were to
challenge the federal income tax status of the Partnerships or the amount of a
Unitholder's allocable share of the Partnership's taxable income, such challenge
could result in an audit of the Unitholder's entire tax return and in
adjustments to items on that return that are unrelated to the ownership of
Units. In addition, each Unitholder would bear the cost of any expenses incurred
in connection with an examination of his personal tax return.

Middleberg, Riddle & Gianna's opinion is based on the assumption that at
least 90% of the Partnership's gross income for each taxable year will
constitute either (i) real property rents, (ii) gain from the sale or other
disposition of real property, or (iii) other qualifying income within the
meaning of Section 7704(d) of the Internal Revenue Code of 1986, as amended (the
"Code"), and the further assumption that the Managing General Partner will act
independently of and not as an agent for the Unitholders.

If either Partnership were taxable as a corporation or treated as an
association taxable as a corporation in any taxable year, its income, gains,
losses, deductions and credits would be reflected only on its tax return rather
than being passed through to its partners, and its taxable income would be taxed
at corporate rates. In addition, its distributions to each of its partners would
be treated as dividend income (to the extent of its current and accumulated
earnings and profits), and, in the absence of earnings and profits, as a
nontaxable return of capital (to the extent of such partner's tax basis in his
interest therein), or as taxable capital gain (after such partner's tax basis in
his interest therein is reduced to zero). Furthermore, losses realized by such
Partnership would not flow through to the Unitholders. Accordingly, treatment of
either Partnership as a corporation for federal income tax purposes would
probably result in a material reduction in a Unitholder's cash flow and
after-tax return. See "Federal Income Tax Considerations -- Partnership Status."

LIMITED DEDUCTIBILITY OF PARTNERSHIP LOSSES. Losses generated by the
Partnership, if any, will be available to Unitholders that are subject to the
passive activity loss limitations of Section 469 of the Code to offset only
future income generated by the Partnership and cannot be used to offset income
to a Unitholder from other passive activities or investments or any other
source. Losses from the Partnership that are not deductible because of the
passive loss limitations may be deducted when the Unitholder disposes of all of
his Units in a fully taxable transaction with an unrelated party. Net passive
income from the Partnership may be offset only by a Unitholder's investment
interest expense and by unused Partnership losses carried over from prior years.
See "Federal Income Tax Considerations -- Tax Consequences of Unit Ownership --
Limitations on the Deductibility of Losses."

RISK OF CHALLENGE TO PARTNERSHIP ALLOCATIONS. Certain aspects of the
allocations contained in the Partnership Agreement may be challenged
successfully by the IRS. If an allocation contained in the Partnership Agreement
is not given effect for federal income tax purposes, items of income, gain,
loss,

14
<PAGE>
deduction or credit will be reallocated to the Unitholders and the Managing
General Partner in accordance with their respective interests in such items,
based upon all the relevant facts and circumstances. Such reallocation among the
Unitholders and the Managing General Partner of such items of income, gain,
loss, deduction or credit allocated under the Partnership Agreement could result
in additional taxable income to the Unitholders. Such reallocation of
Partnership items also could affect the uniformity of the intrinsic federal tax
characteristics of the Units. See "Federal Income Tax Considerations --
Allocation of Partnership Income, Gain, Loss and Deduction."

POSSIBLE UNSUITABILITY OF UNITS FOR TAX-EXEMPT ENTITIES, REGULATED
INVESTMENT COMPANIES AND FOREIGN INVESTORS. An investment in Units may not be
suitable for tax-exempt entities, regulated investment companies and foreign
investors. See "Federal Income Tax Considerations -- Tax Treatment of Operations
- -- Tax-Exempt Entities, Regulated Investment Companies and Foreign Investors."

RISK OF TAX LIABILITY EXCEEDING CASH DISTRIBUTIONS OR PROCEEDS FROM
DISPOSITIONS OF UNITS. Because the Partnership is not a taxable entity and
incurs no federal income tax liability, a Unitholder will be required to pay
federal income tax and, in certain cases, state and local income taxes on his
allocable share of the Partnership's income, whether or not he receives cash
distributions from the Partnership. There can be no assurance that Unitholders
will receive cash distributions equal to their allocable share of taxable income
from the Partnership. Further, upon the sale or other disposition of Units, a
Unitholder may incur tax liability in excess of the amount of cash received. To
the extent that a Unitholder's tax liability exceeds the amount distributed to
him or the amount he receives on the sale or other disposition of his Units, he
will incur an out-of-pocket expense. See "Federal Income Tax Considerations --
Tax Consequences of Unit Ownership."

ADDITIONAL DILUTION RISKS

The Partnership Agreement permits the Partnership to issue an unlimited
number of additional Units at such prices or for such consideration, including
real property, as may be determined by the Managing General Partner in its
discretion, without the approval of the Unitholders. Depending upon the amount
of consideration that the Partnership receives for any additional Units or the
rents generated by the restaurant properties purchased, such issuance could
dilute the value of the outstanding Units. The Partnership's ability to issue
additional Units for property, moreover, may be restricted by applicable
securities laws.

Under certain circumstances, the Managing General Partner may require the
Partnership to register under applicable securities laws the Managing General
Partner's transfer of Units that it owns or may acquire. The availability to the
public of additional Units because of such a registration could adversely affect
the trading price of the Units. The issuance of additional Units would also
cause the Partnership to incur additional administrative and record-keeping
costs, which may be significant.

15
<PAGE>
HISTORY AND STRUCTURE OF THE PARTNERSHIP

The Partnership, formerly Burger King Investors Master L.P., was formed in
1985 by BKC and QSV Properties Inc. ("QSV"), both of which were at that time
wholly-owned subsidiaries of The Pillsbury Company ("Pillsbury"). QSV acted as
the managing general partner of the Partnership. BKC was a special general
partner of the Partnership until its withdrawal on November 30, 1994.

The Partnership effected an initial public offering in 1986 and the proceeds
therefrom were used to buy the Partnership's initial portfolio of 128 properties
from BKC. From 1986 through March 1995, the Partnership's limited partnership
agreement limited the activities of the Partnership to managing the original
portfolio of properties.

In May 1994, an investor group led by Robert J. Stetson and Fred H.
Margolin, acquired QSV and later changed its name to U.S. Restaurant Properties,
Inc. In March 1995, the Unitholders approved certain amendments to the
Partnership's limited partnership agreement that permit the Partnership to incur
debt, to acquire additional properties, including restaurant properties not
affiliated with BKC.

The Partnership operates through U.S. Restaurant Properties Operating L.P.
(the "Operating Partnership"), formerly Burger King Operating Limited
Partnership, which holds the interests in the properties. Through its ownership
of all of the limited partner interests in the Operating Partnership, the
Partnership owns a 99.01% partnership interest in the Operating Partnership. The
Partnerships (defined below) are Delaware limited partnerships and continue in
existence until December 31, 2035, unless sooner dissolved or terminated.

U.S. Restaurant Properties Business Trust #1, a Delaware Business Trust
("Business Trust"), was organized in 1996 to obtain permanent financing for the
Partnership which would be secured by certain of the Partnership's Current
Properties and Acquisition Properties. At June 11, 1996, the Business Trust's
portfolio consisted of 42 properties. See "Capitalization."

16
<PAGE>
The following chart sets forth the organizational structure of the
Partnership and its related entities prior to the consummation of the
acquisition of the Acquisition Properties:

[LOGO]

* In connection with the $20 million mortgage warehouse facility from Morgan
Keegan Mortgage Company, Inc., 42 of the Current Properties are included in
the Business Trust. All properties owned by the Business Trust secure the
mortgage warehouse facility.

17
<PAGE>
CAPITALIZATION

The following table sets forth the historical capitalization of the
Partnership at March 31, 1996, and as adjusted on a pro forma basis to give
effect to (i) the issuance and sale of the 1,800,000 Units offered hereby and
the application of the estimated net proceeds therefrom as described under "Use
of Proceeds" and (ii) the acquisition of the Acquisition Properties. This
information should be read in conjunction with the Consolidated Financial
Statements and Pro Forma Consolidated Financial Statements and Notes thereto
appearing elsewhere in this Prospectus.

<TABLE>
<CAPTION>
PRO FORMA AS
ADJUSTED(1)(2)
ACTUAL (UNAUDITED)
--------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Line of credit (3).................................................................. $ 21,226 $ --
Capitalized lease obligations....................................................... 508 508
Partners' capital:
General partner's................................................................. 1,222 1,222
Limited partners'
4,987,003 Units outstanding (2)
6,787,003 Units, as adjusted..................................................... 63,770 --
--------- ----------------
Total Capitalization............................................................ $ 86,726 $ --
--------- ----------------
--------- ----------------
</TABLE>

- ------------------------

(1) Gives effect to the sale of 1,800,000 Units in the Offering and the
application of the net proceeds therefrom of $ million (after deducting
estimated expenses of the Offering of $400,000) and to the purchase of the
properties under contract as described in the Pro Forma Consolidated
Financial Statements and Notes thereto appearing elsewhere in this
Prospectus.

(2) Excludes 400,000 Units issuable upon exercise of options held by the
Managing General Partner.

(3) Consists of a revolving credit agreement from a syndicate of banks for up to
$40 million which is secured by the Partnership's real estate including its
leasehold interests. Subsequent to March 31, 1996, a $20 million mortgage
warehouse facility has been entered into by the Business Trust and Morgan
Keegan Mortgage Company, Inc., which is secured by certain of the Current
Properties. At June 11, 1996, the amounts borrowed under the revolving
credit agreement and the mortgage warehouse facility were approximately
$36.5 million and approximately $15.8 million, respectively. A portion of
the net proceeds of the Offering will be used to reduce the borrowings under
the $40 million revolving credit facility and the mortgage warehouse
facility. See "Use of Proceeds."

18
<PAGE>
USE OF PROCEEDS

THE PARTNERSHIP ESTIMATES THAT THE NET PROCEEDS FROM THE OFFERING WILL BE
APPROXIMATELY $ MILLION (APPROXIMATELY $ MILLION IF THE UNDERWRITERS'
OVER-ALLOTMENT OPTION IS EXERCISED IN FULL). THE PARTNERSHIP INTENDS TO USE SUCH
NET PROCEEDS AS FOLLOWS:

<TABLE>
<CAPTION>
APPROXIMATE AMOUNT
(IN MILLIONS)
--------------------
<S> <C>
Purchase of additional properties, including certain of the Acquisition Properties........... $ --
Reduce line of credit........................................................................ -- (1)
Reduce mortgage warehouse facility........................................................... -- (2)
-----
TOTAL...................................................................................... $ --
-----
-----
</TABLE>

- ------------------------

(1) To reduce by up to $ million the outstanding balance owing under the $40
million line of credit with a syndicate of banks. This line of credit
expires on June 27, 1998 and provides that borrowings thereunder bear
interest at 180 basis points over the London Interbank Offered Rate (LIBOR).
See "Capitalization" and "Management's Discussion and Analysis of Results of
Operations and Financial Condition -- Liquidity and Capital Resources."

(2) To reduce by up to $ million the outstanding balance owing under the $20
million mortgage warehouse facility from Morgan Keegan Mortgage Company,
Inc. The mortgage warehouse facility expires on November 30, 1996 and
provides that borrowings thereunder bear interest at 300 basis points over
LIBOR. The mortgage warehouse facility was entered into as of April 29, 1996
and the proceeds therefrom were used to finance the acquisition of various
restaurant properties owned by the Business Trust and for the payment of the
distribution to Unitholders on June 13, 1996. See "Capitalization" and
"Management's Discussion and Analysis of Results of Operations and Financial
Condition -- Liquidity and Capital Resources."

PRICE RANGE OF UNITS AND DISTRIBUTION POLICY

The Units are traded on the New York Stock Exchange under the symbol "USV."
Quarterly distributions are declared for payment early in the next calendar
quarter. The high and low sales prices of the Units and the distributions
declared during the first quarter of 1996 and to date in the second quarter of
1996 and for each calendar quarter of 1995 and 1994 are set forth below. The
Offering will be completed after the record date established for payment of the
dividend with respect to the quarter ended March 31, 1996 and, therefore, the
purchasers of the Units offered hereby will not be entitled to receive such
dividend.

<TABLE>
<CAPTION>
DISTRIBUTIONS
HIGH LOW DECLARED
-------- ------- -------------
<S> <C> <C> <C>
1994
First Quarter..................................................................... $ 16 3/4 $15 7/8 $ .39
Second Quarter.................................................................... 17 1/4 15 3/8 .39
Third Quarter..................................................................... 17 1/2 16 3/4 .41
Fourth Quarter.................................................................... 17 3/8 13 .42
-----
$ 1.61
-----
-----
1995
First Quarter..................................................................... $ 16 1/2 $14 1/4 $ .42
Second Quarter.................................................................... 17 1/8 15 3/4 .42
Third Quarter..................................................................... 18 7/8 16 3/4 .43
Fourth Quarter.................................................................... 20 1/4 18 .44
-----
$ 1.71
-----
-----
1996
First Quarter..................................................................... $ 23 3/8 $19 1/2 $ .47
Second Quarter (through June 11).................................................. 25 22 3/8
</TABLE>

19
<PAGE>

On June 11, 1996, the last reported sales price of the Units was $24 1/8 as
reported in NYSE Composite Transactions. At May 22, 1996, there were 1,850
Unitholders of record in the Partnership.

In July 1995, the Partnership announced its intention to repurchase up to
300,000 Units, because at the time management believed that the repurchase of
the Units represented a good investment value for the Partnership and the
Unitholders. Through March 31, 1996, the Partnership purchased 30,000 Units. No
further repurchases have been made or are currently contemplated, because
management currently believes that a better investment value for the Partnership
and the Unitholders is the acquisition of additional restaurant properties.

The Partnership intends to maximize the cash available for distributions and
enhance Unitholder value by acquiring or developing additional restaurant
properties that meet its investment criteria and by participating in increased
revenue from restaurant properties through percentage leases. See "Business and
Properties -- Strategy." In connection therewith, the Partnership intends to
make regular quarterly distributions to its Unitholders. Currently, on an
annualized basis, the distribution is $1.88 per Unit. The Managing General
Partner has declared a distribution of $0.47 per Unit for the first quarter of
fiscal 1996, payable on June 13, 1996, to Unitholders of record on June 6, 1996.
Purchasers of Units offered hereby will not be entitled to receive such
quarterly distribution.

Management intends to distribute from 75% to 95% of the estimated cash
available for distribution within the general objective of continued annual
growth in the distributions. The Partnership expects to maintain such
distribution rate for the foreseeable future based upon actual results of
operations, financial condition of the Partnership, capital expenditure
requirements, or other factors management deems relevant. However, such
distribution rate may vary depending on future market conditions, the
Partnership's financial condition and the Managing General Partner's perception
of operating cash needed by the Partnership to fund operations.

The amounts distributed representing a return of capital were $.75 per Unit
in 1991, $1.03 per Unit in 1992, $.52 per Unit in 1993, $.52 per Unit in 1994
and $.59 per Unit in 1995.

20
<PAGE>
SELECTED HISTORICAL AND PRO FORMA
FINANCIAL INFORMATION AND OTHER DATA

(DOLLARS AND UNITS IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------
PRO FORMA
(UNAUDITED)
(2)
1991 1992 1993 1994 1995 1995
--------- --------- --------- --------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME:
Total revenues............................. $ 8,750 $ 8,489 $ 8,332 $ 8,793 $ 9,780 $ 21,207
EXPENSES:
Ground rent.............................. 1,177 1,187 1,295 1,348 1,405 2,151
Depreciation and amortization............ 1,499 1,473 1,383 1,361 1,541 4,667
Taxes, general and administrative........ 1,062 1,097 1,008 1,144 1,419 2,252
Interest expense (income), net........... 36 60 44 (4) 192 --
Provision for write down or disposition
of properties........................... 943 2,186 74 11 -- --
--------- --------- --------- --------- ---------- --------------
Total expenses........................... 4,717 6,003 3,804 3,860 4,557 --
--------- --------- --------- --------- ---------- --------------
Net income............................... $ 4,033 $ 2,486 $ 4,528 $ 4,933 $ 5,223 $ --
Net income allocable to Unitholders...... $ 3,952 $ 2,436 $ 4,437 $ 4,834 $ 5,119 $ --
Weighted average number of Units
outstanding............................. 4,635 4,635 4,635 4,635 4,638 6,808
Net income per Unit...................... $ 0.85 $ 0.53 $ 0.96 $ 1.04 $ 1.10 $ --
Cash distributions declared per Unit
applicable to respective year........... $ 1.58 $ 1.54 $ 1.48* $ 1.61 $ 1.71 --
CASH FLOW DATA:
Cash flows from operating activities... $ 7,725 $ 7,366 $ 7,475 $ 6,990 $ 9,287 $ --
Cash flows from (used in) investing
activities............................ $ -- $ -- $ 1,130 $ -- $ (12,038) $ (77,483)
Cash flows from (used in) financing
activities............................ $ (7,732) $ (7,542) $ (8,302) $ (7,569) $ 2,077 $ --
OTHER DATA:
Number of properties................... 123 123 123 123 139 270
Regular cash distributions declared per
Unit applicable to respective year.... $ 1.58 $ 1.54 $ 1.48* $ 1.61 $ 1.71 --
CASH FLOW RECONCILIATION:
Cash flow from operating activities.... $ 7,725 $ 7,366 $ 7,475 $ 6,990 $ 9,287 $ --
Net change in marketable securities,
receivables, prepaid expenses and
accounts payable...................... (20) (10) (22) 987 (657) (657)
Reduction in capitalized lease
obligations........................... (164) (164) (172) (191) (212) (212)
--------- --------- --------- --------- ---------- --------------
Cash flow from operations based upon
taxable income (1).................... $ 7,541 $ 7,192 $ 7,281 $ 7,786 $ 8,418 $ --
--------- --------- --------- --------- ---------- --------------
--------- --------- --------- --------- ---------- --------------
</TABLE>

- ------------------------------
*Does not include special capital transaction distributions of $.24 per Unit.

21
<PAGE>

<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
----------------------------------
PRO FORMA
-----------
1995 1996 1996
--------- ---------- -----------
<S> <C> <C> <C>
STATEMENT OF INCOME:
Total revenues............................................................. $ 2,123 $ 2,955 $ 5,089
EXPENSES:
Ground rent................................................................ 336 412 542
Depreciation and amortization.............................................. 337 534 1,123
Taxes, general and administrative.......................................... 370 370 526
Interest expense (income), net............................................. (10) 317 --
--------- ---------- -----------
Total expenses............................................................. 1,033 1,633 --
--------- ---------- -----------
Net income................................................................. $ 1,090 $ 1,322 $ --
--------- ---------- -----------
--------- ---------- -----------
Net income allocable to Unitholders........................................ $ 1,069 $ 1,296 $ --
Weighted average number of Units outstanding............................... 4,635 4,903 6,787
Net income per Unit........................................................ $ 0.23 $ 0.26 $ --
--------- ---------- -----------
--------- ---------- -----------
Cash distributions declared per Unit applicable to respective year......... $ 0.42 $ 0.47 $ --
CASH FLOW DATA:
Cash flows from operating activities....................................... $ 2,542 $ 2,368 $ --
Cash flows from (used in) investing activities............................. $ (1,295) $ (10,325) $ (65,525)
Cash flows from (used in) financing activities............................. $ (1,553) $ 7,968 $ --
OTHER DATA:
Number of properties....................................................... 124 163 270
Regular cash distributions declared per Unit applicable to respective
period.................................................................... $ .42 $ .47 $ --
CASH FLOWS RECONCILIATION:
Cash flows from operating activities....................................... $ 2,542 $ 2,368 $ --
Net change in deferred financing costs, marketable securities, receivables,
prepaid expenses and accounts payable..................................... (667) (15) (15)
Reduction in capitalized lease obligations................................. (51) (55) (55)
--------- ---------- -----------
Cash flow from operations based upon taxable income (1).................... $ 1,824 $ 2,298 $ --
--------- ---------- -----------
--------- ---------- -----------
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1996
-------------------------
(UNAUDITED)
DECEMBER 31, PRO FORMA
----------------------------------------------------- AS ADJUSTED
1991 1992 1993 1994 1995 HISTORICAL (2)
--------- --------- --------- --------- --------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Net investment in direct financing
leases................................ $ 27,383 $ 24,760 $ 22,910 $ 21,237 $ 19,371 $ 18,875 $ 18,875
Land................................... 24,388 23,816 23,414 23,414 27,493 31,203 49,328
Buildings and leasehold improvements,
net................................... 1,797 1,919 1,734 1,548 6,257 18,845 52,059
Equipment.............................. -- -- -- -- 224 257 3,429
Intangibles, net....................... 18,920 17,123 15,503 14,317 14,804 14,524 16,249
Total assets........................... 74,170 69,087 65,322 62,889 71,483 87,351 142,633
Line of credit......................... -- -- -- -- 10,931 21,226 --
Capitalized lease obligations.......... 1,302 1,138 966 775 563 508 508
General partners' capital.............. 1,527 1,429 1,357 1,309 1,241 1,222 1,222
Limited partners' capital.............. 71,082 66,287 62,757 60,361 58,072 63,770 --
</TABLE>

- ------------------------------

(1) "Cash flow from operations based upon taxable income" is calculated as the
sum of taxable income plus charges for depreciation and amortization. All
leases are treated as operating leases for taxable income purposes which
results in a reconciling item from "cash flows from operating activities."
In addition, "cash flow from operations based upon taxable income" does not
consider changes in working capital items. As a result, "cash flow from
operations based upon taxable income" should not be considered as an
alternative to net income determined in accordance with generally accepted

22
<PAGE>

accounting principles as an indication of the Partnership's performance or
as an alternative to cash flow determined in accordance with generally
accepted accounting principles as a measure of liquidity. The Partnership
believes that "cash flow from operations based upon taxable income" is
important because taxable income flows through to the partners and it is
the most consistent indicator of cash generated by operations and
eliminates the fluctuations of changes in working capital items.

(2) The unaudited pro forma consolidated statement of income information for
the year ended December 31, 1995 is presented as if the following had
occurred as of January 1, 1995: (a) the purchase of 16 properties acquired
on various dates from March 1995 through December 1995; (b) the purchase of
93 properties and the sale of one property completed since January 1, 1996;
(c) the acquisition of 39 properties under binding contracts with the
assumption of related tenant and ground leases (all of which are treated as
operating leases based on preliminary assessments); (d) additional
borrowings to purchase the Acquisition Properties; and (e) the issuance and
sale by the Partnership in this Offering of 1,800,000 Units and the
application of the net proceeds therefrom.

The unaudited pro forma statement of income information for the quarter
ended March 31, 1996 is presented as if the following had occurred as of
January 1, 1996: (a) adjustments to operations for 24 properties acquired
during the quarter ended March 31, 1996 and the purchase of 69 properties
and sale of one property since April 1, 1996; (b) the acquisition of 39
properties under contract with the assumption of related tenant and ground
leases (all of which are treated as operating leases based on preliminary
assessments); (c) additional borrowings to purchase the Acquisition
Properties; (d) the issuance and sale by the Partnership in this Offering
of 1,800,000 Units and the application of the net proceeds therefrom.

The unaudited pro forma balance sheet data at March 31, 1996, represents
the Partnership's March 31, 1996 balance sheet adjusted on a pro forma
basis to reflect as of March 31, 1996: (a) the purchase of 69 properties
and the sale of one property since April 1, 1996; (b) the acquisition of 39
properties under binding contracts with the assumption of related tenant
and ground leases (all of which are treated as operating leases based on
preliminary assessments); (c) additional borrowings to purchase the
Acquisition Properties; and (d) the issuance and sale by the Partnership in
this Offering of 1,800,000 Units and the application of the net proceeds
therefrom.

The unaudited pro forma income statement and balance sheet information is
not necessarily indicative of what the actual financial position of the
Partnership would have been at March 31, 1996 or what the actual results of
operations of the Partnership for the quarter ended March 31, 1996 or the
year ended December 31, 1995 would have been had all of these transactions
occurred and it does not purport to represent the future financial position
or results of operations of the Partnership.

23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

OVERVIEW

The Partnership derives its revenue from the leasing of the Partnership's
restaurant properties to operators on a "triple net" basis, which is a lease
that imposes on the tenant all obligations for real property taxes and
assessments, repairs and maintenance and insurance. To the extent the landlord
retains any of these responsibilities, the lease becomes less than "triple net."

The Partnership's leases provide for a base rent plus a percentage of the
restaurant's sales in excess of a threshold amount. Total restaurant sales, the
primary determinant of the Partnership's revenues, are a function of the number
of restaurants in operation and their performance. Sales at individual
restaurants are influenced by local market conditions, by the efforts of
specific restaurant operators, by marketing, by new product programs, support by
the franchisor, and by the general state of the economy.

Some of the leases of the Partnership's properties are treated as direct
financing leases, rather than operating leases, for purposes of generally
accepted accounting principles ("GAAP"); however, the leases do not grant the
lessees thereunder the right to acquire the properties at the expiration of such
leases. As a result, the lease is reflected as an asset on the Partnership's
balance sheet as net investment in direct financing leases, and the underlying
depreciable real property is not considered an asset of the Partnership for GAAP
purposes. Accordingly, the related depreciation is not reflected on the
Partnership's income statement; instead, there is a charge for amortization of
the investment in direct financing leases. For tax accounting purposes, however,
the depreciable real property is treated as being owned by the Partnership (and
not a direct financing lease) and the related charge for depreciation is
reflected on the Partnership's income statement. Primarily due to this
treatment, GAAP revenue and net income differ from gross rental receipts and net
income, as determined for tax purposes. The reconciliation between the GAAP and
tax treatment of these leases is described in Note 9 to the Partnership's
audited Consolidated Financial Statements. Management believes that most if not
all acquisitions made by the Partnership since March 1995, as well as all future
acquisitions and related leases, will qualify as operating leases according to
GAAP and, therefore, were not recorded as a net investment in direct financing
leases.

The following discussion should be read in conjunction with "Selected
Financial Information" and all of the financial statements and notes thereto
included elsewhere in this Prospectus.

COMPARISON OF THREE MONTHS ENDED MARCH 31, 1996 TO THREE MONTHS ENDED MARCH 31,
1995

For the quarter ended March 31, 1996, rental revenues increased 39% over the
same period for the previous year. Comparable store sales growth (the increase
in sales at those restaurants open for the entire reporting period in both the
current period and the same period for the prior year) was 4%. Management
believes the growth reflects improvements in the overall performance of the
Burger King system and efforts by BKC with selected tenants to improve their
restaurant's sales.

General and administrative expenses in 1996 remained constant, as compared
to the same quarter in 1995. An increase in the management fee of $59,663 for
the quarter and expenses that directly correspond to the active growth of the
Partnership in the first quarter of 1996 were offset by non-recurring costs
relating to the proxy in the first quarter of 1995. Depreciation expense
increased 59% which related to the property acquisitions as well as the 22%
increase in ground lease expense. There was an increase in interest expense of
$314,131 due to the financing of acquisitions.

COMPARISON OF YEAR ENDED DECEMBER 31, 1995 TO YEAR ENDED DECEMBER 31, 1994

The number of restaurants owned at December 31, 1995 was 139 compared to 123
at December 31, 1994, a 13% increase. Total sales in restaurants located on
Partnership real estate in 1995 was $135,297,000 compared to $122,315,000
reported in 1994, a 10.6% increase, which was attributable to the increase in
the number of restaurants in the portfolio and to an increase in the average
sales per store.

24
<PAGE>
The Partnership's total revenues in 1995 increased 11.2% to $9,780,000
compared to $8,793,000 recorded in 1994. Rental revenues from properties owned
throughout 1994 and 1995 increased 6.4% in 1995 over 1994. The remaining
increase in revenues in 1995 over 1994 was attributable to the 16 properties
acquired on various dates during the last half of 1995.

Expenses for 1995 increased 18% to $4,557,000 compared to $3,860,000 for
1994 (including a write down of $11,000 in 1994 which was related to one closed
property). This increase in expenses was primarily due to the increase in the
number of restaurant properties owned by the Partnership and related financing
costs.

Ground rent expense increased 4.3% to $1,405,380, compared to $1,347,748 for
1994. The increase in expense was due to the addition of six new ground leases
relating to the 1995 acquisitions and nominal rent escalations on existing
ground leases. Depreciation and amortization increased 13.2% to $1,540,900
compared to $1,361,136 for 1994. This was primarily due to the increase in the
number of restaurant properties owned by the Partnership.

Taxes and general and administrative expenses increased 24% to $1,419,279,
compared to $1,143,956 for 1994. This increase was due to increased professional
fees, consulting fees, and other various general administration expenses that
relate directly to the increased activity of the Partnership.

Interest expense (income), net increased to $192,142 compared to ($3,515)
for 1994. This increase is primarily due to the financing of acquisitions.

There were no write downs of assets and intangible values related to closed
properties during 1995, as compared to write downs for 1994 of $11,000. Write
downs are not a normal part of the Partnership's business. However, store
closings do occur periodically in retail businesses, including the
Partnership's. Management does not believe that there is an established trend in
its business with respect to store closings because virtually all of the
restaurants included within the Current Properties are currently performing on
their leases and are not in default.

Net income allocable to Unitholders in 1995 was $5,119,000 or $1.10 per
Unit, up 5.8% or $0.06 per Unit from $4,834,000 or $1.04 per Unit in 1994. This
was attributable to the increase in total revenues and management's ability to
limit expenses.

COMPARISON OF YEAR ENDED DECEMBER 31, 1994 TO YEAR ENDED DECEMBER 31, 1993

The number of restaurants owned at December 31, 1994 and 1993 was 123. Total
sales in restaurants located on Partnership real estate in 1994 was $122,315,000
compared to $112,880,000 reported in 1993, an 8.4% increase, which was
attributable to an increase in the average sales per store.

The Partnership's total revenues in 1994 increased 5.5% to $8,793,000
compared to $8,332,000 recorded in 1993. The Partnership owned and leased 123
sites throughout 1993 and 1994.

Expenses excluding the provision for write down of properties for 1994
increased 3.2% to $3,849,000 compared to $3,730,000 for 1993. Write downs of
assets and intangible values related to closed properties during 1994 were
$11,000 as compared to write downs for 1993 of $73,739. Write downs are not a
normal part of the Partnership's business. However, store closings do occur
periodically in retail businesses, including the Partnership's. Management does
not believe that there is an established trend in its business with respect to
store closings because virtually all of the restaurants included within the
Current Properties are currently performing on their leases and are not in
default.

Net income allocable to Unitholders in 1994 was $4,834,000 or $1.04 per
Unit, up 8.3% from $4,437,000 or $0.96 per Unit in 1993. This was attributable
to increased total revenues while expenses remained relatively constant.

25
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

The Partnership's principal source of cash to meet its cash requirements is
rental revenues generated by the Partnership's properties. Cash generated by the
portfolio in excess of operating needs is used to reduce amounts outstanding
under the Partnership's credit agreements. As a result, amounts are drawn under
the Partnership's credit agreements to cover payment of quarterly distributions
to the Unitholders. Currently, the Partnership's primary source of funding for
acquisitions is its existing revolving line of credit and its Morgan Keegan
Mortgage Company, Inc. mortgage warehouse facility. The Partnership anticipates
meeting its future long-term capital needs through the incurrence of additional
debt or the issuance of additional Units, along with cash generated from
internal operations.

The Partnership currently has approximately $36.5 million outstanding under
its $40 million line of credit with a syndicate of banks. After application of
the net proceeds from the Offering, approximately $ million will be available
for borrowings under the line of credit. This line of credit is secured by the
Partnership's real estate including its leasehold interests. The Partnership may
request advances under this line of credit to finance the acquisition of
restaurant properties, to repair and update restaurant properties and for
working capital. The banks will also issue standby letters of credit for the
account of the Partnership under this loan facility. This credit agreement
expires on June 27, 1998 and provides that borrowings thereunder bear interest
at 180 basis points over the London Interbank Offered Rate (LIBOR). Interest
expense for 1995 was $199,000. The Partnership also has a $20 million mortgage
warehouse facility from Morgan Keegan Mortgage Company, Inc., which is secured
by certain of the Partnership's Current Properties. As of June 11, 1996,
approximately $4.2 million remained available for borrowings. This facility
expires on November 30, 1996, and borrowings thereunder bear interest at the
rate of 300 basis points over LIBOR. The proceeds from this facility were used
to finance the acquisition and proposed acquisition of various restaurant
properties owned by the Business Trust. See "History and Structure of the
Partnership." The Partnership intends to repay borrowings under this facility
using any availability under its existing line of credit after application of
the net proceeds of this Offering or additional borrowings which may be
subsequently incurred.

Pursuant to the Partnership Agreement, the Managing General Partner is
required to make available to the Partnership an unsecured, interest-free,
revolving line of credit in the principal amount of $500,000 to provide the
Partnership with necessary working capital to minimize or avoid seasonal
fluctuation in the amount of quarterly cash distributions. The Managing General
Partner is not required, however, to make financing available under this line of
credit before the Partnership obtains other financing, whether for acquisitions,
reinvestment, working capital or otherwise. The Managing General Partner may
make other loans to the Partnership. Each loan must bear interest at a rate not
to exceed the Morgan Guaranty Trust Company of New York prime rate plus 1% or
the highest lawful rate (whichever is less), and in no event may any such loan
be made on terms and conditions less favorable to the Partnership than it could
obtain from unaffiliated third parties or banks for the same purpose. To
management's knowledge, no loans have ever been made pursuant to these
arrangements and no loans were made or outstanding at any time during each of
the three years ended December 31, 1995.

The Partnership paid distributions in 1995 of $1.69 per Unit, which
represented 95% of cash flow from operations based upon taxable income. The
Partnership paid distributions for the first quarter of 1996 of $.44 per Unit.
Management intends to distribute from 75% to 95% of the estimated cash generated
from operations within the general objective of continued annual growth in the
distributions. The Partnership expects to maintain such distribution rate for
the foreseeable future based upon actual results of operations, the financial
condition of the Partnership, capital or other factors management deems
relevant. During 1995, the Partnership distributed an aggregate of $8,002,000 to
its partners.

26
<PAGE>
INFLATION

Some of the Partnership's leases are subject to adjustments for increases in
the Consumer Price Index, which reduces the risk to the Partnership of the
adverse effects of inflation. Additionally, to the extent inflation increases
sales volume, percentage rents may tend to offset the effects of inflation on
the Partnership. Because triple net leases also require the restaurant operators
to pay for some or all operating expenses, property taxes, property repair and
maintenance costs and insurance, some or all of the inflationary impact of these
expenses will be borne by the restaurant operators and not by the Partnership.

Operators of restaurants, in general, possess the ability to adjust menu
prices quickly. However, competitive pressures may limit a restaurant operator's
ability to raise prices in the face of inflation.

SEASONALITY

Fast food restaurant operations historically have been seasonal in nature,
reflecting higher unit sales during the second and third quarters due to warmer
weather and increased leisure travel. This seasonality can be expected to cause
fluctuations in the Partnership's quarterly unit revenue to the extent it
receives percentage rent.

27
<PAGE>
BUSINESS AND PROPERTIES

GENERAL

The Partnership acquires, owns and manages income-producing properties that
it leases on a triple net basis to operators of fast food and casual dining
restaurants, primarily Burger King (the second largest restaurant chain in the
United States in terms of system wide sales), and other national and regional
brands including Dairy Queen, Hardee's and Chili's. The Partnership acquires
properties either from third party lessors or from operators on a sale/leaseback
basis. Under a triple net lease, the tenant is obligated to pay all costs and
expenses, including all real property taxes and assessments, repairs and
maintenance and insurance. Triple net leases do not require substantial
reinvestments by the property owner and, as a result, more cash from operations
may be used for distributions to Unitholders or for acquisitions.

The Partnership is one of the largest publicly-owned entities in the United
States dedicated to acquiring, owning and managing restaurant properties. At
June 11, 1996, the Partnership's portfolio consisted of 231 restaurant
properties in 39 states (the "Current Properties"), approximately 99% of which
were leased. From the Partnership's initial public offering in 1986 until March
31, 1995, the Partnership's properties were limited to approximately 125
restaurant properties, all of which were leased on a triple net basis to
operators of Burger King restaurants. In May, 1994, an investor group led by
Robert J. Stetson and Fred H. Margolin acquired the Managing General Partner. In
March 1995, certain amendments to the Partnership Agreement were proposed by the
new management and approved by the Unitholders, which authorized the Partnership
to acquire additional restaurant properties not affiliated with BKC. Since
adoption of the amendments, the Partnership has acquired 109 properties for an
aggregate purchase price of approximately $57 million including 93 properties
acquired since January 1, 1996, and has entered into binding agreements to
acquire 39 additional properties (the "Acquisition Properties") for an aggregate
purchase price of approximately $27 million. Upon acquisition of the Acquisition
Properties, the Partnership's portfolio will consist of an aggregate of 270
properties in 40 states consisting of 170 Burger King restaurants, 40 Dairy
Queen restaurants, 27 Hardee's restaurants, 11 Pizza Hut restaurants, five
Schlotzsky's restaurants, two Chili's restaurants and 15 other properties, most
of which are regional brands.

The Partnership's management team consists of senior executives with
extensive experience in the acquisition, operation and financing of fast food
and casual dining restaurants. Mr. Stetson, the President - Chief Executive
Officer of the Managing General Partner is the former President of the Retail
Division and Chief Financial Officer of BKC, as well as the former Chief
Financial Officer of Pizza Hut, Inc. As a result, management has an extensive
network of contacts within the franchised fast food and casual dining restaurant
industry. Based on management's assessment of market conditions and its industry
knowledge and experience, the Partnership believes that substantial
opportunities exist for it to acquire additional properties on advantageous
terms.

INDUSTRY

The restaurant industry has grown significantly over the past 20 years as a
result of population growth, the influence of the baby boom generation, the
growth of two-income families and the growth in consumers' disposable income.
The total food service industry sales during 1995 have been estimated at
approximately $277 billion. The fast food segment, which offers value pricing
and convenience, is the largest segment in the restaurant industry with
projected 1996 sales of $100 billion. In 1995, industry sources estimate that
fast food restaurants accounted for 71% of total restaurant traffic, 52% of
chain restaurant locations and 47% of consumers' restaurant dollars spent.

The growth of the fast food segments has exceeded that of the entire
restaurant industry for over 20 years. According to industry sources, fast food
restaurant sales have grown at a 6.9% compound annual growth rate with 1995
sales up 7.1% over 1994 levels, and fast food restaurant sales are anticipated
to grow 6.7% in 1996 to over $100 billion. Additionally, industry sources
suggest that in the fast food industry, operators are increasingly moving toward
leasing rather than owning their

28
<PAGE>
restaurants. Currently, approximately two-thirds of fast food restaurant
operators lease their restaurant properties. Leasing enables a restaurant
operator to reallocate funds to the improvement of current restaurants, the
acquisition of additional restaurants or other uses.

Management believes, based on its industry knowledge and experience, that
the Partnership competes with numerous other publicly-owned entities, some of
which dedicate substantially all of their assets and efforts to acquiring,
owning and managing chain restaurant properties. The Partnership also competes
with numerous private firms and private individuals for the acquisition of
restaurant properties. In addition, there are a number of other publicly-owned
entities that are dedicated to acquiring, owning and managing triple net lease
properties. A majority of chain restaurant properties are owned by restaurant
operators and real estate investors. Management believes, based on its industry
knowledge and experiences that this fragmented market provides the Partnership
with substantial acquisition opportunities. Management also believes that the
inability of most small restaurant owners to obtain funds with which to compete
for acquisitions as timely and inexpensively as the Partnership provides the
Partnership with a competitive advantage when seeking to acquire a restaurant
property.

In addition to the Partnership's large number of leases to operators of
Burger King restaurants, the Partnership also leases multiple restaurant
properties to operators of Pizza Hut, Taco Bell, Hardee's and Dairy Queen brand
names, substantially all of which, according to industry sources, rank in the
top 15 with respect to restaurant sales in 1995. Based on publicly-available
information, Burger King is the second largest fast food restaurant system in
the world in terms of system wide sales. According to publicly-available
information, there are approximately 6,500 Burger King restaurant units in the
United States. With respect to the Burger King restaurants in the Partnership's
portfolio, for the year-ended December 31, 1995, same-store sales increased 7%
over the prior year.

STRATEGY

Since the adoption of the amendments to the Partnership Agreement in March
1995, the Partnership's principal business objective has been to expand and
diversify the Partnership's portfolio through frequent acquisitions of small to
medium-sized portfolios of fast food and casual dining restaurant properties.
The Partnership intends to achieve growth and diversification while maintaining
low portfolio investment risk through adherence to proven acquisition criteria
with a conservative capital structure. The Partnership has and intends to
continue to expand its portfolio by acquiring triple net leased properties and
structuring sale/leaseback transactions consistent with the following
strategies:

-INVEST IN MAJOR RESTAURANT BRANDS. The Partnership intends to continue to
acquire properties operated as major national and regional restaurant
brands, such as Burger King, Dairy Queen, Hardee's and Chili's by
competent, financially stable franchisees. Certain of the Partnership's
Current Properties are also operated as Pizza Hut, KFC and Taco Bell
restaurants. Management believes, based on its industry knowledge and
experience, that successful restaurants operated under these brands offer
stable, consistent income to the Partnership with minimal risk of default
or non-renewal of the lease and franchise agreement. As a result of its
concentration on major national and regional brands, in the last three
fiscal years, of all rental revenues due, more than 99.5% has been
collected.

-ACQUIRE EXISTING RESTAURANTS. The Partnership's strategy is to focus
primarily on the acquisition of existing fast food and casual dining chain
restaurants that have a history of profitable

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<PAGE>
operations with a remaining term on the current lease of at least five
years. The average remaining lease term for the Current Properties is nine
years. Management believes, based on its industry knowledge and experience,
that acquiring existing restaurants provides a higher risk-adjusted rate of
return to the Partnership than acquiring newly-constructed restaurants.

-CONSOLIDATE SMALLER PORTFOLIOS. Management believes, based on its industry
knowledge and experience, that pursuing multiple transactions involving
smaller portfolios of restaurant properties (generally having an
acquisition price of less than $3 million) result in a more attractive
valuation because the size of such transactions generally does not attract
large institutional property owners and smaller buyers typically are not
well capitalized and may be unable to complete a transaction. Larger
transactions involving multiple properties generally attract several
institutional bidders, often resulting in a higher purchase price and lower
investment returns to the purchaser. In certain circumstances, however, the
Partnership has identified, evaluated and pursued portfolios valued at up
to $50 million that present attractive risk/return ratios and recently
closed a transaction of approximately $18 million.

-MAINTAIN CONSERVATIVE CAPITAL STRUCTURE. The Partnership intends to
maintain a ratio of total indebtedness of 50% or less to the greater of (i)
the market value of all issued and outstanding Units plus total outstanding
indebtedness ("Total Market Capitalization") or (ii) the original cost of
all of the Partnership's properties as of the date of such calculation. The
Partnership's ratio of total indebtedness to Total Market Capitalization
was approximately 30% at June 11, 1996. See "Capitalization." The
Partnership, however, may from time to time reevaluate its borrowing
policies in light of then-current economic conditions, relative costs of
debt and equity capital, market values of properties, growth and
acquisition opportunities and other factors.

INVESTMENT CRITERIA

The Partnership has recently acquired 93 restaurant properties and intends
to acquire additional restaurant properties of national and regional fast food
or casual dining restaurant chains, which may include Burger King, that satisfy
some or all of the following criteria:

-The rent on such restaurant properties has produced cash flow that, after
deducting management fees and interest and debt amortization or Unit
issuance, would improve the Partnership's existing cash flow per Unit.

-The restaurants' annual sales would be in the highest 70% of the
restaurants in that chain.

-The restaurants would have historically generated at least the normal
profit for restaurants in that chain and be projected to continue to
generate a profit even if sales decreased by 10%.

-The restaurant properties would be located where the average per capita
income was stable or increasing.

-The restaurants' franchisees would possess significant net worth and
preferably operate multiple restaurants.

-The restaurant properties would be in good repair and operating condition.

The Managing General Partner receives acquisition proposals from a number of
sources. The Managing General Partner utilizes two independent real estate
professionals who assist the Partnership in examining and analyzing proposed
acquisitions of property. These professionals are compensated principally upon
the Partnership's closing of an acquisition of property. There can be no
assurance that the Managing General Partner will be able to identify restaurant
properties that satisfy all or a significant number of such criteria, or that if
identified, the Partnership will be able to purchase such restaurant properties.

The Partnership believes that the Partnership can generate improved
operating results as a result of the acquisition of additional restaurant
properties and by making loans to tenants for

30
<PAGE>
renovation and improvement of the Current Properties. The Partnership also
believes that expansion and diversification of the Partnership's restaurant
property portfolio to include more balance among restaurant brands decreases the
Partnership's dependence on one chain.

THE PROPERTIES

At June 11, 1996, the Current Properties consisted of 231 properties, 99% of
which were leased by operators of fast food and casual dining restaurants. In
addition, at such date the Acquisition Properties (totaling 39) were subject to
binding agreements of acquisition. Set forth below are summary descriptions of
the Current Properties and Acquisition Properties.

BURGER KING PROPERTIES. At June 11, 1996, the Partnership owned 170
properties operated as Burger King restaurants. The Burger King restaurant
properties that are part of the Current Properties are operated by more than 80
operators, the largest of which operates five Burger King restaurants.

HARDEE'S PROPERTIES. At June 11, 1996, the Partnership owned two properties
in Georgia and has entered into agreements to acquire 25 additional properties
in Georgia and South Carolina operated as Hardee's restaurants. The Hardee's
restaurant properties that are part of the Current Properties are operated by
two operators, the larger of which operates 23 Hardee's restaurants.

DAIRY QUEEN PROPERTIES. At June 11, 1996, the Partnership owned 40
properties operated as Dairy Queen restaurants, all in Texas. The Dairy Queen
restaurant properties are operated by two operators.

CHILI'S PROPERTIES. At June 11, 1996, the Partnership owned two properties
in Texas which are operated by a single operator.

OTHER PROPERTIES. At June 11, 1996, the Partnership owned 31 additional
properties, most of which were operated under other major national and regional
brand names, including, but not limited to, Pizza Hut, KFC and Taco Bell. The
Partnership may, from time to time, acquire restaurant properties operated under
brand names less-established than major national and regional brands. The
Partnership does not intend to acquire a significant number of such properties.

BURGER KING-Registered Trademark- IS A REGISTERED TRADEMARK OF BURGER KING
BRANDS, INC., SCHLOTZSKY'S-Registered Trademark- IS A REGISTERED TRADEMARK OF
SCHLOTZSKY'S, INC., DAIRY QUEEN-Registered Trademark- IS A REGISTERED TRADEMARK
OF AMERICAN DAIRY QUEEN CORPORATION, PIZZA HUT IS A REGISTERED TRADEMARK OF
PIZZA HUT, INC., HARDEE'S-Registered Trademark- IS A REGISTERED TRADEMARK OF
HARDEE'S FOOD SYSTEMS, INC., CHILI'S-Registered Trademark- IS A REGISTERED
TRADEMARK OF BRINKER RESTAURANT CORPORATION, KFC-Registered Trademark- IS A
REGISTERED TRADEMARK OF KFC CORPORATION AND TACO BELL-Registered Trademark- IS A
REGISTERED TRADEMARK OF TACO BELL CORP. THE FOREGOING ENTITIES HAVE NOT ENDORSED
OR APPROVED THE PARTNERSHIP OR THE OFFERING MADE HEREBY.

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<PAGE>

The Partnership's Current Properties consist of 231 properties. The table
below sets forth, as of June 11, 1996, the number of properties in each state
and the franchise affiliation of such properties assuming the consummation of
the Acquisition Properties.

<TABLE>
<CAPTION>
TOTAL BURGER DAIRY PIZZA
STATE PROPERTIES KING QUEEN HARDEE'S HUT CHILI'S OTHER
- ------------------------------------------------------------ ---------- ------ ----- -------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Alabama..................................................... 2 1 1
Arizona..................................................... 15 13 1 1
Arkansas.................................................... 6 6
California.................................................. 17 15 2
Colorado.................................................... 3 3
Connecticut................................................. 3 3
Delaware.................................................... 1 1
Florida..................................................... 8 6 2
Georgia..................................................... 32 7 24 1
Illinois.................................................... 1 1
Indiana..................................................... 3 2 1
Iowa........................................................ 2 2
Kansas...................................................... 2 2
Kentucky.................................................... 3 3
Louisiana................................................... 4 4
Maine....................................................... 4 4
Maryland.................................................... 3 2 1
Massachusetts............................................... 3 3
Michigan.................................................... 4 4
Minnesota................................................... 1 1
Mississippi................................................. 2 2
Missouri.................................................... 3 3
Montana..................................................... 1 1
Nebraska.................................................... 1 1
Nevada...................................................... 1 1
New Jersey.................................................. 5 5
New Mexico.................................................. 1 1
New York.................................................... 5 5
North Carolina.............................................. 9 8 1
Ohio........................................................ 9 9
Oklahoma.................................................... 5 3 1 1
Oregon...................................................... 5 5
Pennsylvania................................................ 13 13
South Carolina.............................................. 9 6 2 1
Tennessee................................................... 5 3 2
Texas....................................................... 64 9 40 1 2 12
Vermont..................................................... 1 1
Washington.................................................. 7 7
West Virginia............................................... 2 2
Wisconsin................................................... 5 5
-- --
---------- ------ ----- ----- -----
Total....................................................... 270(1) 169 40 27 11 2 21
-- --
-- --
---------- ------ ----- ----- -----
---------- ------ ----- ----- -----
% Total................................................... 100% 63% 15% 10% 4% 1% 7%
-- --
-- --
---------- ------ ----- ----- -----
---------- ------ ----- ----- -----
</TABLE>

- ------------------------
(1) Includes one vacant restaurant property.

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<PAGE>
LEASES WITH RESTAURANT OPERATORS

The Partnership's strategy is to acquire operating restaurant properties
rather than developing new properties. Typically, the Partnership acquires a
property that has been operated as a fast food or casual dining restaurant and
which is subject to a lease with a remaining term of five-20 years and a
co-terminous franchise agreement. Management believes, based on its experience,
that this strategy reduces the Partnership's financial risk since the restaurant
operated on such property has a proven operating record which mitigates the risk
of default or non-renewal under the lease. At June 11, 1996, the Current
Properties have remaining lease terms ranging from one to 28 years.

Substantially all of the Partnership's existing leases are "triple net,"
which means that the tenant is obligated to pay all costs and expenses,
including all real property taxes and assessments, repairs and maintenance and
insurance. The Partnership's leases provide for a base rent plus a percentage of
the restaurant's sales in excess of a threshold amount. The triple net lease
structure is designed to provide the Partnership with a consistent stream of
income without the obligation to reinvest in the property. For the year ended
December 31, 1995, base rental revenues and percentage rental revenues
represented 66% and 34%, respectively, of total gross rental revenues.
Management intends to renew and restructure leases to increase the percentage of
total rental revenues derived from base rental revenues and, consequently,
decrease the percentage of total revenues from percentage rental revenues. In
addition, in order to encourage the early renewal of existing leases, the
Partnership has offered certain lessees remodeling grants of up to $30,000. To
date, the Partnership has renewed 18 leases early under this program. Management
considers the grants to be prudent given the increased sales resulting at the
remodeled restaurants and the lower costs incurred because of the early lease
renewals.

The Partnership generally acquires properties from third party lessors or
from operators in a sale/ leaseback transaction in which the operator sells the
property to the Partnership and enters into a long-term lease (typically 20
years). A sale/leaseback transaction is attractive to the operator because it
allows the operator to realize the value of the real estate while retaining
occupancy for a long term. A sale/leaseback transaction may also provide
specific accounting, earnings and market value benefits to the selling operator.
For example, the lease on the property may be structured by the tenant as an
off-balance sheet operating lease, consistent with Financial Accounting
Standards Board rules, which may increase the operator's earnings, net worth and
borrowing capacity. The following table sets forth certain information regarding
lease expirations for Current Properties and Acquisition Properties.

LEASE EXPIRATION SCHEDULE

<TABLE>
<CAPTION>
NUMBER OF LEASES NET RENTAL
YEAR EXPIRING % OF TOTAL INCOME (1) % OF TOTAL
- ------------------------------------------ ----------------- ----- ----------- -----
<S> <C> <C> <C> <C>
1996...................................... 0 0 $ 0 0
1997...................................... 7 3 367 2
1998...................................... 9 4 675 3
1999...................................... 22 8 1,731 9
2000...................................... 35 13 2,108 10
2001-05................................... 87 32 6,892 34
2006-10................................... 11 4 806 4
2011-15................................... 12 4 1,214 6
2016-25................................... 86 32 6,487 32
--- --- ----------- ---
269(2) 100% $ 20,280 100%
--- --- ----------- ---
--- --- ----------- ---
</TABLE>

- ------------------------

(1) Net Rental Income equals the higher of (i) 1995 rentals (including any
percentage rents based upon sales in 1995), or (ii) the base rent in the
last year of the lease, less (iii) ground rents in the last year of the
lease.

(2) Excludes one vacant restaurant property.

33
<PAGE>
OWNERSHIP OF REAL ESTATE INTERESTS

The Partnership's Current Properties and Acquisition Properties consist of
190 properties where the Partnership owns both the land and the restaurant
building in fee simple (the "Fee Properties"), one property where the
Partnership owns only the land and the building is owned by the tenant and 79
properties where the Partnership leases the land, the building or both (the
"Leasehold Properties") under leases from third-party lessors.

Of the 79 Leasehold Properties, 14 are Primary Leases, whereby the
Partnership leases from a third party both the underlying land and the
restaurant building and the other improvements thereon and then subleases the
property to the restaurant operator. Under the terms of the remaining 65
Leasehold Properties (the "Ground Leases"), the Partnership leases the
underlying land from a third party and owns the restaurant building and the
other improvements constructed thereon. In any event, upon expiration or
termination of a Primary Lease or Ground Lease, the owner of the underlying land
generally will become the owner of the building and all improvements thereon. At
June 11, 1996, the remaining terms of the Primary Leases and Ground Leases
ranged from one to 21 years. With renewal options exercised, the remaining terms
of the Primary Leases and Ground Leases ranged from approximately five to 35
years and the average remaining term was 21 years.

The terms and conditions of each Primary Lease and each Ground Lease vary
substantially. However, each Primary Lease and each Ground Lease have certain
provisions in common including that (i) the initial term is 20 years or less,
(ii) the rentals payable are stated amounts that may escalate over the terms of
the Primary Leases and Ground Leases (and/or during renewal terms) but normally
(although not always) are not based upon a percentage of sales of the
restaurants thereon, and (iii) the Partnership is required to pay all taxes and
operating, maintenance, and insurance expenses for the Leasehold Properties. In
addition, under substantially all of the Leases, the Partnership may renew the
term one or more times at its option (although the provisions governing any such
renewal vary significantly in that, for example, some renewal options are at a
fixed rental amount, while others are at fair rental value at the time of
renewal). Several Primary Leases and Ground Leases also give the owner the right
to require the Partnership, upon the termination or expiration thereof, to
remove all improvements situated on the property.

Although the Partnership, as lessee under each Primary Lease and Ground
Lease, generally has the right to assign or sublet all of its rights and
interests thereunder without obtaining the landlord's consent, the Partnership
is not permitted to assign or sublet any of its rights or interests under 22
Primary Leases and Ground Leases without obtaining the landlord's consent or
satisfying certain other conditions. In addition, approximately 20% of the
Primary Leases and Ground Leases require the Partnership to use such Leasehold
Properties only for the purpose of operating a Burger King restaurant or another
type of restaurant thereon. In any event, no transfer will release the
Partnership from any of its obligations under the Primary Lease or Ground Lease,
including the obligation to pay rent.

Of the Current Properties, 70 are leased or subleased to a BKC franchisee
under a Lease/ Sublease, pursuant to which the franchisee is required to operate
a Burger King restaurant thereon in accordance with the lessee's Franchise
Agreement and to make no other use thereof. Upon its acquisition of such
properties, the Partnership assumed the rights and obligations of BKC under the
Leases/Subleases. Five properties are leased to BKC on substantially the same
terms and conditions as those contained in the Lease/Sublease with the prior
lessees.

Although the provisions of BKC's standard form of lease to franchisees have
changed over time, the material provisions of the Lease/Subleases generally are
substantially similar to BKC's current standard form of lease (except to the
extent BKC has granted rent reductions or deferrals or made other lease
modifications in order to alleviate or lessen the impact of business or other
economic problems that a franchisee may have encountered). The Leases/Subleases
generally provide for a term of 20 years from the date of opening of the
Restaurant and do not grant the lessee any renewal options or purchase options.
The Partnership, however, is required under the Partnership Agreement to

34
<PAGE>

renew a Lease/Sublease if BKC renews or extends the lessee's Franchisee
Agreement. The Partnership believes BKC's policy generally is to renew a
Franchise Agreement if BKC determines, in its sole discretion, that economic and
other factors justify renewal or extension and if the franchisee has complied
with all obligations under the Franchise Agreement. At June 11, 1996, the
remaining terms of all the Leases/Subleases ranged from approximately one to 25
years, and the average remaining term was nine years.

USE AND OTHER RESTRICTIONS ON THE OPERATION AND TRANSFER OF BURGER KING
RESTAURANT PROPERTIES

The Partnership was originally formed for the purpose of acquiring all of
BKC's interests in the original portfolio and leasing or subleasing them to BKC
franchisees under the Leases/Subleases. Accordingly, the Partnership Agreement
contains provisions that state, except as expressly permitted by BKC, that the
Partnership may not use such properties for any purpose other than to operate a
Burger King restaurant. In furtherance thereof, the Partnership Agreement (i)
requires the Partnership, in certain specified circumstances, to renew or extend
a Lease/Sublease and enter into a new lease with another franchisee of BKC, to
approve an assignment of a Lease/Sublease, to permit BKC to assume a
Lease/Sublease at any time, and to renew a Primary Lease, and (ii) imposes
certain restrictions and limitations upon the Partnership's ability to sell,
lease, or otherwise transfer any interest in such properties. The Partnership
Agreement requires the Partnership to provide BKC notice of default under a
Lease/Sublease and an opportunity to cure such defaults prior to taking any
remedial action. The Partnership Agreement also requires the Partnership under
certain circumstances to provide tenants with assistance with remodeling costs.
Such terms with respect to such properties imposed on the Partnership by the
Partnership Agreement may be less favorable than those imposed upon other
lessors of Burger King restaurants. BKC has advised the Partnership that it
intends to waive or not impose certain of the restrictive provisions contained
in the Partnership Agreement and the Partnership is discussing BKC's position
with BKC to clarify such provisions.

RESTAURANT ALTERATIONS AND RECONSTRUCTION

It is important that the Current Properties be improved, expanded, rebuilt,
or replaced from time to time. In addition to normal maintenance and repair
requirements, each franchisee is required under BKC's Franchise Agreement and
Lease/Sublease, at its own cost and expense, to make such alterations to a
Burger King restaurant as may be reasonably required by BKC from time to time in
order to modify the appearance of the restaurant to reflect the then current
image requirements for Burger King restaurants. Most of the Current Properties
that are operating as Burger Kings are 15 to 20 years old, and the Partnership
believes that many of these properties require substantial improvements to
maximize sales, and the condition of many of these properties is below BKC's
current image requirements.

Recently, in order to encourage the early renewal of existing
Leases/Subleases, the Partnership has established an "Early Renewal Program"
whereby the Partnership has offered to certain tenants the right to renew
existing Leases/Subleases for up to an additional 20 years in consideration for
remodeling grants for the properties of up to $30,000. As a result of this
Program, to date, the Partnership has extended the lease term for 18
Leases/Subleases. The purpose of this Program is to extend the term of existing
Leases/Subleases prior to the end of the lease term and to enhance the value of
the underlying property to the Partnership.

COMPETITION

The restaurants operated on the properties are subject to significant
competition (including competition from other national and regional fast food
restaurant chains, including Burger King restaurants, local restaurants,
restaurants owned by BKC or affiliated entities, national and regional
restaurant chains that do not specialize in fast food but appeal to many of the
same customers, and other competitors such as convenience stores and
supermarkets that sell prepared and ready-to-eat foods. The success of the
Partnership depends, in part, on the ability of the restaurants operated on the
properties to compete successfully with such businesses. The Partnership does
not anticipate that it will seek to engage directly in or meet such competition.
Instead, the Partnership will be dependent

35
<PAGE>
upon the experience and ability of the lessees operating the restaurants located
on the properties and the particular franchise system generally to compete with
these other restaurants and similar operations. The Partnership believes that
the ability of its lessees to compete is affected by their compliance with the
image requirements at their restaurants.

Management believes, based on its industry knowledge and experience, that
the Partnership competes with numerous other publicly-owned entities, some of
which dedicate substantially all of their assets and efforts to acquiring and
managing properties operated as fast food or casual dining restaurants. In
addition, the Partnership competes with numerous private firms and private
individuals, for the acquisition of restaurant properties. Such investors may
have greater financial resources than the Partnership.

REGULATION

The Partnership, through its ownership of interests in and management of
real estate, is subject to various environmental, health, land-use and other
regulation by federal, state and local governments that affects the development
and regulation of restaurant properties. The Partnership's leases impose the
primary obligation for regulatory compliance on the operators of the restaurant
properties.

ENVIRONMENTAL REGULATION. Under various federal, state and local laws,
ordinances and regulations, an owner or operator of real property may become
liable for the costs of removal or remediation of certain hazardous substances
released on or within its property. Such liability may be imposed without regard
to whether the owner or operator knew of, or caused the release of the hazardous
substances. In addition to liability for cleanup costs, the presence of
hazardous substances on a property could result in the owner or operator
incurring liability as a result of a claim by an employee or another person for
personal injury or a claim by an adjacent property owner for property damage.

In connection with the Partnership's acquisition of a new property, a Phase
I environmental assessment is obtained. A Phase I environmental assessment
involves researching historical usages of a property, databases containing
registered underground storage tanks and other matters including an on-site
inspection to determine whether an environmental issue exists with respect to
the property which needs to be addressed. If the results of a Phase I
environmental assessment reveal potential issues, a Phase II assessment which
may include soil testing, ground water monitoring or borings to locate
underground storage tanks, is ordered for further evaluation and, depending upon
the results of such assessment, the transaction is consummated or the
acquisition is terminated.

The Partnership is not currently a party to any litigation or administrative
proceeding with respect to any property's compliance with environmental
standards. Furthermore, the Partnership is not aware of nor does it anticipate
any such action, or the need to expend any of its funds, in the foreseeable
future in connection with its operations or ownership of existing properties
which would have a material adverse effect upon the Company.

AMERICANS WITH DISABILITIES ACT ("ADA"). Under the ADA, all public
accommodations, including restaurants, are required to meet certain federal
requirements relating to physical access and use by disabled persons. A
determination that the Partnership or a property of the Partnership is not in
compliance with the ADA could result in the imposition of fines, injunctive
relief, damages or attorney's fees. The Partnership's leases contemplate that
compliance with the ADA is the responsibility of the operator. The Partnership
is not currently a party to any litigation or administrative proceeding with
respect to a claim of violation of the ADA and does not anticipate any such
action or proceeding that would have a material adverse effect upon the
Partnership.

LAND-USE; FIRE AND SAFETY REGULATIONS. In addition, the Partnership and its
restaurant operators are required to operate the properties in compliance with
various laws, land-use regulations, fire and safety regulations and building
codes as may be applicable or later adopted by the governmental

36
<PAGE>
body or agency having jurisdiction over the location or the property or the
matter being regulated. The Partnership does not believe that the cost of
compliance with such regulations and laws will have a material adverse effect
upon the Partnership.

HEALTH REGULATIONS. The restaurant industry is regulated by a variety of
state and local departments and agencies, concerned with the health and safety
of restaurant customers. These regulations vary by restaurant location and type
(i.e., fast food or casual dining). The Partnership's leases provide for
compliance by the restaurant operator with all health regulations and
inspections and require that the restaurant operator obtain insurance to cover
liability for violation of such regulations or the interruption of business due
to closure caused by failure to comply with such regulations. The Partnership is
not currently a party to any litigation or administrative proceeding with
respect to the compliance with health regulations of any property it finances,
and does not anticipate any such action or proceeding that would have a material
adverse effect upon the Partnership.

INSURANCE

The Partnership requires its lessees to maintain adequate comprehensive
liability, fire, flood and extended loss insurance provided by reputable
companies with commercially reasonable and customary deductibles and limits and
the Partnership is an additional named insured under such policies. Certain
types and amounts of insurance are required to be carried by each restaurant
operator under the leases with the Partnership and the Partnership actively
monitors tenant compliance with this requirement. The Partnership intends to
require lessees of subsequently acquired property, including the Acquisition
Properties, to obtain similar insurance coverage. There are, however, certain
types of losses generally of a catastrophic nature, such as earthquakes and
floods, that may be either uninsurable or not economically insurable, as to
which the Partnership's properties (including the Current Properties and the
Acquisition Properties) are at risk depending on whether such events occur with
any frequency in such areas. An uninsured loss could result in a loss to the
Partnership of both its capital investment and anticipated profits from the
affected property. In addition, because of coverage limits and deductibles,
insurance coverage in the event of a substantial loss may not be sufficient to
pay the full current market value or current replacement cost of the
Partnership's investment. Inflation, changes in building codes and ordinances,
environmental considerations, and other factors also might make it infeasible to
use insurance proceeds to replace a facility after it has been damaged or
destroyed. Under such circumstances, the insurance proceeds received by the
Partnership might not be adequate to restore its economic position with respect
to such property.

PAYMENTS TO THE MANAGING GENERAL PARTNER

The Partnership pays the Managing General Partner a non-accountable (no
support is required for payment) annual allowance designed to cover the costs
that the Managing General Partner incurs in connection with the management of
the Partnership and the Properties (other than reimbursements for out-of-pocket
expenses paid to third parties). The allowance is adjusted annually to reflect
any cumulative increases in the Consumer Price Index occurring after January 1,
1986, and was $585,445 for the year ended December 31, 1995. The allowance is
paid quarterly, in arrears.

In addition, to compensate the Managing General Partner for its efforts and
increased internal expenses resulting from additional properties, the
Partnership will pay the Managing General Partner, with respect to each
additional property purchased: (i) a one-time acquisition fee equal to 1% of the
purchase price for such property and (ii) an annual fee equal to 1% of the
purchase price for such property, adjusted for increases in the Consumer Price
Index. For 1995, the one-time acquisition fee equaled $109,238 which was
capitalized and the increased annual fee equaled $29,375. This creates an
incentive for the Managing General Partner to cause the Partnership to purchase
more properties, to pay higher prices therefor, and to sell existing properties
or to use more leverage to make such purchases. See "Risk Factors -- Conflicts
of Interest."

In addition, if the Rate of Return (as defined in the Partnership Agreement)
on the Partnership's equity in all additional properties exceeds 12% per annum
for any fiscal year, the Managing General Partner will be paid an additional fee
equal to 25% of the cash flow received with respect to such

37
<PAGE>
additional properties in excess of the cash flow representing a 12% rate of
return thereon. However, to the extent the Managing General Partner receives
distributions in excess of those provided by its 1.98% Partnership interest,
such distributions will reduce the fee payable with respect to such excess cash
flow from any additional properties. See "Partnership Allocations" below. Except
as provided above, such payments are in addition to distributions made by the
Partnership to the Managing General Partner in its capacity as a partner in the
Partnership. The Partnership may pay or reimburse the Managing General Partner
for payments to affiliates for goods or other services if the price and the
terms for providing such goods or services are fair to the Partnership and not
less favorable to the Partnership than would be the case if such goods or
services were obtained from or provided by an unrelated third party.

PARTNERSHIP ALLOCATIONS

Net cash flow from operations of the Partnership that is distributed is
allocated 98.02% to the Unitholders and 1.98% to the Managing General Partner
until the Unitholders have received a simple (non-cumulative) annual return for
such year equal to 12% of the Unrecovered Capital per Unit (as defined in the
Partnership Agreement; such Unrecovered Capital is currently $19.68 per Unit and
will be adjusted to give effect to the issuance of the Units hereunder in order
to make the Unrecovered Capital uniform for all outstanding Units) reduced by
any prior distributions of net proceeds of capital transactions); then any
distributed cash flow for such year is allocated 75.25% to the Unitholders and
24.75% to the Managing General Partner until the Unitholders have received a
total simple (non-cumulative) annual return for such year equal to 17.5% of the
Unrecovered Capital Per Unit; and then any excess distributed cash flow for such
year is allocated 60.4% to the Unitholders and 39.6% to the Managing General
Partner. The Partnership may retain otherwise distributable cash flow to the
extent the Managing General Partner deems appropriate.

Net proceeds from financing and sales or other dispositions of the
Partnership's properties are allocated 98.02% to the Unitholders and 1.98% to
the Managing General Partner until the Unitholders have received an amount equal
to the Unrecovered Capital Per Unit plus a cumulative, simple return equal to
12% of the balance of their Unrecovered Capital Per Unit outstanding from time
to time (to the extent not previously received from distributions of prior
capital transactions); then such proceeds are allocated 75.25% to the
Unitholders and 24.75% to the Managing General Partner until the Unitholders
have received a total cumulative, simple return equal to 17.5% of the
Unrecovered Capital per Unit; and then such proceeds are allocated 60.4% to the
Unitholders and 39.6% to the Managing General Partner. The Partnership may
retain otherwise distributable net proceeds from financing and sales or other
dispositions of the Partnership's properties to the extent the Managing General
Partner deems appropriate.

Operating income and loss of the Partnership for each year generally is
allocated between the Managing General Partner and the Unitholders in the same
aggregate ratio as cash flow is distributed or distributable for that year. Gain
and loss from a capital transaction generally is allocated among the Managing
General Partner and the Unitholders in the same aggregate ratio as net proceeds
of the capital transaction are distributed or distributable except to the extent
necessary to reflect capital account adjustments. In the case of both operating
income or loss and gain or loss from capital transactions, however, the amount
of such income, gain or loss allocated to the Managing General Partner and the
Unitholders for the year will not necessarily equal the total cash distributed
to the Managing General Partner and the Unitholders for such year. Upon transfer
of a Unit, tax items allocable thereto generally will be allocated among the
transferor and the transferee based on the period during the year that each
owned the Unit, with each Unitholder on the last day of the month being treated
as a Unitholder for the entire month.

REIT CONVERSION

The Partnership, together with its legal and financial advisors, is
currently evaluating the merits of converting to a self-advised, self-managed
REIT. A conversion to a REIT involves numerous complex legal, financial and tax
issues that must be analyzed fully before determining whether

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converting to a REIT is in the best interests of the Partnership and the
Unitholders. Moreover, any such conversion must be approved by the limited
partners in accordance with the terms of the Partnership Agreement.

The Partnership anticipates that the necessary analysis will be completed in
the fourth quarter of 1996. If the Partnership determines that converting to a
REIT is in the best interests of the Partnership and the Unitholders, the
conversion process is anticipated to be commenced prior to December 31, 1996,
and should be completed as soon as possible thereafter, which the Partnership
anticipates being prior to December 31, 1997.

A REIT is not subject to federal income tax provided that certain
restrictions are complied with. These restrictions are extensive and affect the
structure and operations of REITs.

A REIT is structured as a corporation, trust or association which is managed
by one or more trustees or directors. A self-advised, self-managed REIT is a
REIT that is managed by the officers of the REIT and not by a third party. The
Partnership has indicated that even if it does not convert to a REIT that it may
become self-advised and self-managed, subject to the approval of the limited
partners. This would entail the officers of the Managing General Partner
becoming officers of the Partnership and being compensated by the Partnership.
Currently, the Partnership compensates the Managing General Partner for managing
the Partnership and acquiring properties, which in turn compensates its officers
and employees.

EMPLOYEES

The Partnership and the Managing General Partner each currently employ five
individuals on either a full or part-time basis. In addition, the Managing
General Partner retains, at the expense of the Partnership on an independent
contract basis, other parties in connection with the operation of the
Partnership and the Current Properties, including auditing, legal, property
origination and other services.

LEGAL PROCEEDINGS

The Partnership is not presently involved in any material litigation nor, to
its knowledge, is any material litigation threatened against the Partnership or
its properties, other than routine litigation arising in the ordinary course of
business.

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MANAGEMENT

The Partnership is a limited partnership (of which U.S. Restaurant
Properties, Inc. is the Managing General Partner) and has no directors or
officers. The executive officers of the Managing General Partner are Robert J.
Stetson, President and Chief Executive Officer, and Fred H. Margolin, Chairman
of the Board, Secretary and Treasurer. They have served in such positions and as
directors since the acquisition of the Managing General Partner on May 27, 1994.
Messrs. Stetson and Margolin are controlling stockholders and serve as executive
officers and directors of the Managing General Partner (subject to election by
its board of directors). The following is a biographical summary of the
experience of the directors and executive officers of the Managing General
Partner.

ROBERT J. STETSON. Mr. Stetson is the President, Chief Executive Officer
and a director of the Managing General Partner. Since 1978, Mr. Stetson has been
primarily engaged in restaurant chain management, including the acquisition and
management of restaurant properties. Prior to 1987, Mr. Stetson served in
several positions with PepsiCo Inc. and its subsidiaries, including Chief
Financial Officer of Pizza Hut. From 1987 until 1992, Mr. Stetson served as a
senior executive in restaurant and retailing subsidiaries of Grand Metropolitan
PLC, the ultimate parent corporation of Burger King. During this period, Mr.
Stetson served as the Chief Financial Officer and later President - Retail
Division of Burger King and Chief Financial Officer and later Chief Executive
Officer of Pearle Vision. As Chief Financial Officer of Burger King, Mr. Stetson
was responsible for managing more than 750 restaurants that Burger King leased
to tenants. Mr. Stetson is also a director of Bayport Restaurant Group, a
publicly-traded restaurant company. Mr. Stetson received a Bachelor of Arts
degree from Harvard College and an M.B.A. from Harvard Business School. Mr.
Stetson is 45 years old.

FRED H. MARGOLIN. Mr. Margolin is the Chairman, Secretary, Treasurer and a
director of the Managing General Partner. In 1977, Mr. Margolin founded Intercon
General Agency, a national insurance agency specializing in the development and
marketing of insurance products for financial institutions. Mr. Margolin served
as the Chief Executive Officer of Intercon General Agency from its inception
until its sale to a public company in 1982. In 1979, Mr. Margolin founded and
became the President of American Eagle Premium Finance Company, one of the
largest independent premium finance companies in Texas. From 1982 through 1988,
Mr. Margolin developed and then leased or sold shopping centers having an
aggregate cost of approximately $50,000,000. Mr. Margolin received a Bachelor of
Science degree from the Wharton School of the University of Pennsylvania and an
M.B.A. from Harvard Business School. Mr. Margolin is 46 years old.

GERALD H. GRAHAM. Mr. Graham is a director of the Managing General Partner.
Mr. Graham is a professor and the Dean of the Barton School of Business at
Wichita State University. Mr. Graham is 58 years old.

DAVID K. ROLPH. Mr. Rolph is a director of the Managing General Partner.
Mr. Rolph is the President of the Tex-Mex restaurant chain, "Carlos O'Kellys"
and the Vice President of Sasnak Management Corp., a restaurant management
company. Mr. Rolph is 47 years old.

DARREL L. ROLPH. Mr. Rolph is a director of the Managing General Partner.
Mr. Rolph is the Secretary of "Carlos O'Kellys" and the President of the Sasnak
Management Corp., a restaurant management company. Mr. Rolph is 59 years old.

EUGENE G. TAPER. Mr. Taper is a director of the Managing General Partner.
Mr. Taper is a certified public accountant and a business consultant and retired
partner, since 1993, of Deloitte & Touche LLP, an international public
accounting firm. Mr. Taper is 59 years old.

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DESCRIPTION OF UNITS

The following paragraphs generally describe the Units and certain provisions
of the Deposit Agreement and the Depositary Receipt. The following discussion is
qualified in its entirety by reference to the Partnership Agreement, the Deposit
Agreement and the Depositary Receipt, which have been filed as exhibits to the
Registration Statement of which this Prospectus forms a part.

GENERAL

The percentage interest in the Partnership represented by a Unit is equal to
the ratio it bears at the time of such determination to the total number of
Units in the Partnership (including any undeposited Units) outstanding,
multiplied by the aggregate percentage interest in the Partnerships of all
Unitholders. Each Unit evidences entitlement to a portion of the Partnership's
cash flow, proceeds from capital transactions and allocations of net income and
net loss, as determined in accordance with certain provisions of the Partnership
Agreement, including provisions for increased distributions and allocations to
the Managing General Partner (and correspondingly decreased distributions and
allocations to the Unitholders) of cash flow and proceeds of capital
transactions above certain levels. To maintain the uniformity of the Units, the
Managing General Partner is authorized to make certain adjustments to the
capital accounts, unrecovered capital and preferred returns so that all of the
Units will reflect the same amounts on a per Unit basis. Such adjustments to the
unrecovered capital will generally dilute the interests of purchasers of the
Units. In addition, a Unitholder's percentage interest in the Partnership will
be diluted if the Partnership issues Units to a general partner in connection
with the conversion of its interest as a general partner into Units upon its
withdrawal or removal.

Upon the consummation of this Offering (and upon consummation of any
exercise of the over-allotment option), the Managing General Partner will
deposit all of the Units offered and sold pursuant hereto with Morgan Guaranty
Trust Company of New York, as depositary (the "Depositary"). Purchasers of Units
in this Offering will not be required to execute Transfer Applications, but
subsequent transferees of the Depositary Receipts (or their brokers, agents or
nominees on their behalf) will be required to execute a Transfer Application in
the form appearing on the back of the Depositary Receipt. Although purchasers of
Units in this Offering will not be required to execute Transfer Applications,
they will be deemed to have agreed to be bound by the terms and conditions of
the Partnership Agreement, the Deposit Agreement and the Depositary Receipt.

Depositary Receipts may be held in a "street name" account or by any other
nominee holder. In such event, the nominee holder will be required to provide
the Partnership an undertaking to provide transferees with copies of all reports
issued by the Partnership to the Unitholders. The Partnership will not recognize
the transfer of Units held by a nominee holder from one beneficial owner to
another unless the nominee holder submits an executed Transfer Application on
behalf of the transferee. In the absence of written notice to the Partnership or
the Depositary to the effect that a holder of Units is holding such Units in the
capacity of nominee holder and identifying the beneficial owner thereof, the
Partnership will treat the nominee holder of a Depositary Receipt as the
absolute owner thereof for all purposes, and the beneficial owner's rights shall
be limited solely to those that it has against the nominee holder as a result of
or by reason of any understanding or agreement between such beneficial owner and
nominee holder.

TRANSFER OF THE DEPOSITARY RECEIPTS

The Depositary Receipts are transferable upon compliance with the procedure
described below. A transferee of a Depositary Receipt will be an assignee with
respect to the Unit evidenced thereby unless and until the Managing General
Partner, in its sole and absolute discretion, consents to the admission of such
transferee as a Substituted Limited Partner (as defined in the Partnership
Agreement) with respect to such Unit and amends the Partnership Agreement to
reflect such admission. Although the Managing General Partner reserves the
right, in its sole and absolute discretion, to

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refuse to consent to the admission of any transferee of a Depositary Receipt for
any reason or for no reason at all, the Managing General Partner currently
anticipates that it generally will consent to the admission of transferees of
Depositary Receipts who comply with the procedure described below.

A subsequent transferee of a Depositary Receipt (or his or her broker,
dealer or nominee holder on his or her behalf) will be required to deliver an
executed Transfer Application to the Depositary prior to registration of a
transfer by the Depositary. Transfer Applications appear on the back of each
Depositary Receipt and also will be furnished at no charge by the Depositary or
other transfer agent upon receipt of a request therefor. A subsequent transferee
of a Depositary Receipt, whether or not a Transfer Application has been executed
by or on his behalf, will be deemed to have (a) agreed to be bound by the terms
and conditions of the Deposit Agreement and Depositary Receipt, (b) agreed to be
bound by the terms and conditions of the Partnership Agreement, (c) executed any
documents reasonably required by the Partnership in connection with the transfer
and such admission, and (d) granted the power of attorney described below. A
request by any broker, dealer or other nominee holder to register transfer of a
Depositary Receipt, however signed (including by any stamp, mark or symbol
executed or adopted with intent to authenticate the Depositary Receipt), will be
deemed to be execution of a Transfer Application by and on behalf of such
nominee and the beneficial owner of such Depositary Receipt. Until the transfer
of a Depositary Receipt has been registered on the books of the Depositary or
another transfer agent, the Depositary and the Partnership will treat the record
holder thereof as the absolute owner thereof for all purposes.

Transferees who do not execute a Transfer Application (either themselves or
through their broker, agent or nominee on their behalf) will not be treated
either as an Assignee or as a record holder of Units and will not receive cash
distributions, federal income tax allocations or reports furnished to record
holders of Units. Nonetheless, any transferee of a Unit conclusively will be
deemed to have agreed to be bound by the terms of the Partnership Agreement, the
Deposit Agreement and the Depositary Receipt.

Pursuant to the terms of the Partnership Agreement, each purchaser of a Unit
in this Offering and each subsequent transferee of a Depositary Receipt appoints
the Managing General Partner and each of the Managing General Partner's
authorized officers and attorneys-in-fact as such transferee's attorney-in-fact
(a) to enter into the Deposit Agreement and deposit the Units of such transferee
in the deposit account established by the Depositary, and (b) to make, execute,
file and/or record (i) documents with respect to the qualification of the
Partnership as a limited partnership in Delaware and any other appropriate
jurisdictions; (ii) other documents requested by, or appropriate under the laws
of, any appropriate jurisdiction; (iii) instruments with respect to any
amendment of the Partnership Agreement; (iv) conveyances and other instruments
or documents with respect to the dissolution, termination, and liquidation of
the Partnership pursuant to the terms of the Partnership Agreement; (v)
financing statements or other documents necessary to grant or perfect a security
interest, mortgage, pledge or lien on all or any of the assets of the
Partnership; (vi) instruments or papers required to continue the business of the
Partnership pursuant to the Partnership Agreement; (vii) instruments relating to
the admission of any Partner to the Partnership; and (viii) all other
instruments deemed necessary or advisable to carry out the provisions of the
Partnership Agreement. Such power of attorney is irrevocable, will survive the
subsequent death, incompetency, dissolution, disability, incapacity, bankruptcy
or termination of granting transferee, and will extend to such transferee's
heirs, successors and assigns.

WITHDRAWAL OF UNITS

The Deposit Agreement generally provides that a record holder of a Unit on
deposit may withdraw such Unit from the Depositary upon written request and
surrender of the Depositary Receipt evidencing such Unit. A Unit withdrawn from
the Depositary will be evidenced by a certificate issued by the Partnership.
Withdrawn Units may not be transferred except upon death, by operation of law or
by transfer to the Partnership, but record holders of withdrawn Units will
continue to receive their respective share of distributions and allocations
pursuant to the terms of the Partnership Agreement.

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In order to transfer a Unit withdrawn from the Depositary (other than upon
death, by operation of law or to the Partnership), a Unitholder must redeposit
the certificate representing such Unit with the Depositary and request issuance
of a Depositary Receipt, which then may be transferred. Any redeposit of such
Unit with the Depositary will require 60 days' advance written notice and
payment of a redeposit fee (currently $5.00 per 100 Units (or portion thereof))
and will be subject to satisfaction of certain other procedural requirements
under the Deposit Agreement.

RESIGNATION AND REMOVAL OF DEPOSITARY

The Depositary at any time may resign as Depositary and at any time may be
removed by the Partnership. The resignation or removal of the Depositary becomes
effective upon the appointment of a successor Depositary by the Partnership and
written acceptance by the successor Depositary of such appointment. In the event
a successor Depositary is not appointed within 30 days of notification of such
resignation or removal, the Managing General Partner will act as Depositary
until a successor Depositary is appointed. Any corporation into or with which
the Depositary may be merged or consolidated will be the successor Depositary
without the execution or filing of any document or any further act.

AMENDMENT

Subject to the restrictions described below, the Deposit Agreement
(including the form of Depositary Receipt) may be amended by the mutual
agreement of the Managing General Partner, the Partnership and the Depositary.
In the event any such amendment adversely affects any substantial rights of
holders of Units on deposit, such amendment will not be effective without the
affirmative vote or consent of record holders of a majority of the Units on
deposit, as described below. No amendment to the Deposit Agreement may impair
the right of a Unitholder to surrender the Depositary Receipt and withdraw any
or all of the Units evidenced thereby or to redeposit Units pursuant to the
Deposit Agreement and receive a Depositary Receipt evidencing such redeposited
Units.

Any amendment of the Deposit Agreement that imposes any fee, tax or charge
(other than the fees and charges set forth in the Deposit Agreement) upon
Depositary Receipts will not be effective until the expiration of 30 days after
notice of the amendment has been given to the record holders of Depositary
Receipts or, if the amendment is presented for a vote of the record holders of
Units on deposit, until it has been approved by the affirmative vote of the
record holders of a majority of such Units.

For the purpose of considering any amendment of the Deposit Agreement that
adversely affects any substantial right of the record holders of Units on
deposit, the Partnership may call a meeting of the record holders of such Units
according to the procedures set forth in the Deposit Agreement. Such an
amendment of the Deposit Agreement also may be approved if record holders of a
majority of such Units, as of a record date selected by the Depositary, consent
thereto in a writing filed with the Depositary.

TERMINATION

The Partnership may not terminate the Deposit Agreement unless such
termination (a) is in connection with the Partnership entering into a similar
agreement with a new depositary selected by the Managing General Partner, (b) is
as a result of the Partnership's receipt of an opinion of counsel to the effect
that such termination is necessary for the Partnership to avoid being treated as
an association taxable as a corporation for federal income tax purposes or to
avoid being in violation of any applicable federal or state securities laws, or
(c) is in connection with the dissolution of the Partnership. The Depositary
will terminate the Deposit Agreement, when directed to do so by the Partnership
not less than 45 days prior to the date fixed for termination, by mailing notice
of termination to the record holders of all Depositary Receipts then outstanding
at least 30 days before the date fixed for the termination in such notice.
Termination will be effective on the date fixed in the notice, which date must
be at least 30 days after it is mailed.

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DUTIES AND STATUS OF DEPOSITARY

The Managing General Partner may request the Depositary to act as paying
agent with respect to any distributions by the Partnership. In addition to its
out-of-pocket expenses, the Depositary will charge the Partnership fees for
serving as Depositary, for transferring Depositary Receipts, for withdrawal or
redepositing of Units and for any preparation and mailing of distribution
checks. All such fees and expenses will be borne by the Partnership, except that
fees similar to those customarily paid by stockholders for surety bond premiums
to replace lost or stolen certificates, tax or other governmental charges,
special charges for services requested by Unitholders (including redeposit of
withdrawn Units) and other similar fees or charges will be borne by the affected
Unitholders. There will be no charge to Unitholders for any disbursements by the
Depositary of Partnership distributions.

First Chicago Trust Company of New York currently acts as the registrar and
transfer agent for the Depositary Receipts.

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FEDERAL INCOME TAX CONSIDERATIONS

This section was prepared by Middleberg, Riddle & Gianna, counsel to the
Partnership ("Counsel") and addresses all material income tax consequences to
individuals who are citizens or residents of the United States. This section
reflects Counsel's opinion with respect to the matters set forth except for
statements of fact and the representations and estimates of the results of
future operations of the Managing General Partner included in such discussion as
to which no opinion is expressed. Counsel bases its opinions on its
interpretation of the Internal Revenue Code of 1986, as amended (the "Code") and
Treasury Regulations issued thereunder, judicial decisions, the facts set forth
in this Prospectus and certain factual representations made by the Managing
General Partner. Counsel's opinions are subject to both the accuracy of such
facts and the continued applicability of such legislative, administrative and
judicial authorities, all of which authorities are subject to changes and
interpretations that may or may not be retroactively applied.

No ruling has been requested from the IRS with respect to the classification
of the Partnerships as partnerships for federal income tax purposes or any other
matter affecting the Partnerships. Accordingly, the IRS may adopt positions that
differ from Counsel's conclusions expressed herein. It may be necessary to
resort to administrative or court proceedings in an effort to sustain some or
all of Counsel's conclusions, and some or all of these conclusions ultimately
may not be sustained. The costs of any contest with the IRS will be borne
directly or indirectly by some or all of the Unitholders and the Managing
General Partner. Furthermore, no assurance can be given that the tax
consequences of investing in the Partnership will not be significantly modified
by future legislation or administrative changes or court decisions. Any such
modifications may or may not be retroactively applied.

It is impractical to comment on all aspects of federal, state, local and
foreign laws that may affect the tax consequences of the transactions
contemplated by the sale of Units made by this Prospectus and of an investment
in such Units. Moreover, certain types of taxpayers such as tax-exempt entities,
regulated investment companies and insurance companies may be subject to rules
and regulations unique to their status or form of organization in addition to
those rules and regulations described herein. Each prospective Unitholder should
consult his own tax advisor in deciding to acquire Units.

PARTNERSHIP STATUS

A partnership is not a taxable entity and incurs no federal income tax
liability. Each partner is required to take into account in computing his
federal income tax liability his allocable share of income, gains, losses,
deductions and credits of the partnership, regardless of whether cash
distributions are made. Distributions by a partnership to a partner are
generally not taxable unless the distribution is in excess of the partner's tax
basis in his partnership interest.

Counsel is of the opinion that under present law, and subject to the
conditions and qualifications set forth below, for federal income tax purposes,
the Partnerships will be treated as partnerships. Counsel's opinion as to the
partnership status of the Partnerships is based principally upon its
interpretation of the factors set forth in Treasury Regulations under Section
7701 of the Code, its interpretation of Section 7704 of the Code, and upon
certain representations made by the Managing General Partner. However, it should
be noted that neither Partnership satisfies the requirements to obtain an
advance ruling from the IRS with respect to its classification as a partnership
for federal income tax purposes.

The Treasury Regulations under Section 7701 of the Code provide that the
determination of whether a limited partnership will be classified as a
partnership or as an association taxable as a corporation for federal income tax
purposes depends upon the extent to which the partnership has the corporate
characteristics of continuity of life, free transferability of interests,
centralization of management and limited liability. A limited partnership having
no more than two of these four characteristics will ordinarily be classified as
a partnership for federal income tax purposes. Under Proposed Regulations
Section 301.7701-1, the classification determination would be elective for many
business entities including the Partnership. Although the current regulations
will continue to apply until the

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Proposed Regulations are finalized, transitional rules state that the IRS will
not challenge the partnership classification of certain eligible entities which
have a reasonable basis for their claimed classification. In Counsel's opinion,
neither Partnership has the corporate characteristics of continuity of life or
limited liability, and the Operating Partnership does not have the corporate
characteristic of free transferability of interests. Based on this analysis,
Counsel has concluded that neither Partnership will be classified as an
association taxable as a corporation under Section 7701 of the Code.

Section 7704 of the Code provides that publicly-traded partnerships shall,
as a general rule, be taxed as corporations despite the fact that they are not
classified as associations taxable as corporations under Section 7701. Section
7704 of the Code provides an exception to this general rule (the "Real Property
Rent Exception") for a publicly traded partnership if 90% or more of its gross
income for every taxable year consists of "qualifying income." "Qualifying
income" includes real property rental income and gain from the sale or other
disposition of real property and gains from the sale or other disposition of
capital assets held for the production of income that otherwise constitutes
"qualifying income."

Real property rent is defined, under Section 7704 of the Code, as amounts
which would qualify as rent from real property under Section 856(d) of the Code
(the provisions of the Code dealing with Real Estate Investment Trusts).
Although substantially all of the income of the Partnership consists of
qualifying rental income, the Partnership currently engages in activities that
give rise to non-qualifying rental income and may enter into other such
transactions in the future. Rental income of the Partnership may not qualify as
real property rent pursuant to Section 856 of the Code if the Partnership,
directly or indirectly through the constructive ownership rules contained in
Section 318 of the Code, owns more than 10% of the capital or profits interest
in any tenant leasing real property from the Partnership. The Partnership,
through such attribution rules, owns greater than a 10% interest in one tenant
which leases three (3) Burger King restaurant properties from the Partnership.
However, such non-qualifying income is less than 3.5% of total Partnership gross
income. With respect to other transactions in which the Managing General Partner
has or may acquire an ownership interest in any tenant, the Managing General
Partner has represented that it and its affiliates will not acquire, or allow
any Unitholder owning more than 5% of total Units outstanding to acquire,
greater than a 10% ownership interest in such tenant.

Additionally, the Partnership has purchased items of personalty and
equipment and leased such items to tenants in conjunction with real property
leases. To the extent that the rental income attributable to such equipment
exceeds 15% of total rental income for the real property and equipment, such
rental income would not qualify as real property rent. The Partnership generally
separately allocates rental income between equipment and real property, and the
equipment component of such rental income is generally less than 15% of the
total rental income. Assuming that such allocation is valid, no portion of the
rental income attributable to equipment and personal property should constitute
non-qualifying income.

The Partnership estimates that a total of 3.5% of its gross income for
taxable year 1996 will not constitute qualifying income, and estimates that less
than 3.5% of its gross income for each subsequent taxable year will not
constitute qualifying income.

If the Partnership fails to meet the Real Property Rent Exception to the
general rule of Section 7704 of the Code (other than a failure determined by the
IRS to be inadvertent which is cured within a reasonable time after discovery),
the Partnership will be treated as if it had transferred all of its assets
(subject to liabilities) to a newly-formed corporation (on the first day of the
year in which it fails to meet the Real Property Rent Exception) in return for
stock in such corporation, and then distributed such stock to the Unitholders in
liquidation of their interest in the Partnership.

In rendering its opinion that neither Partnership will be treated as a
corporation for federal income tax purposes, Counsel has relied on the following
factual representations by the Managing General Partner as to the Partnerships:

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1. Each Partnership will be operated in accordance with applicable state
partnership statutes, its partnership agreement and the statements
and representations made in this Prospectus.

2. Except as otherwise required by Section 704(c) of the Code, the
general partner of each Partnership will have at least a 0.99%
interest in each material item of income, gain, loss, deduction and credit
of its respective Partnership.

3. For each taxable year, less than 10% of each Partnership's gross
income will be derived from sources other than (i) real property
rental income and gain from the sale or other disposition of real property,
or (ii) other items of "qualifying income" within the meaning of Section
7704(d) of the Code.

4. The Managing General Partner of each Partnership will act
independently of such Partnership's limited partners.

If either Partnership was taxable as a corporation or treated as an
association taxable as a corporation in any taxable year, its income, gains,
losses, deductions and credits would be reflected only on its tax return rather
than being passed through to its partners and its taxable income would be taxed
at corporate rates. In addition, its distributions to each of its partners would
be treated as either dividend income (to the extent of its current or
accumulated earnings and profits), and, in the absence of earnings and profits,
as a nontaxable return of capital (to the extent of such partner's tax basis in
his interest therein) or taxable capital gain (after such partner's tax basis in
his interest therein is reduced to zero). Furthermore, losses realized by such
Partnership would not flow through to the Unitholders. Accordingly, treatment of
either Partnership as a corporation for federal income tax purposes would
probably result in a material reduction in a Unitholder's cash flow and
after-tax return.

The discussion below is based on the assumption that each Partnership will
be classified as a partnership for federal income tax purposes. If that
assumption proves to be erroneous, most, if not all, of the tax consequences
described below would not be applicable to Unitholders.

PARTNER STATUS

Unitholders who have become limited partners of the Partnership pursuant to
the provisions of the Partnership Agreement will be treated as partners of the
Partnership for federal income tax purposes.

The IRS has ruled that assignees of partnership interests who have not been
admitted to a partnership as partners, but who have the capacity to exercise
substantial dominion and control over the assigned partnership interests, will
be treated as partners for federal income tax purposes. On the basis of such
ruling, except as otherwise described herein, (i) assignees who have executed
and delivered transfer applications, and are awaiting admission as limited
partners of the Partnership, and (ii) Unitholders whose Units are held in street
name or by another nominee will be treated as partners for federal income tax
purposes. As such ruling does not extend, on its facts, to assignees of Units
who are entitled to execute and deliver transfer applications and thereby become
entitled to direct the exercise of attendant rights, but who fail to execute and
deliver transfer applications, the tax status of such Unitholders is unclear,
and Counsel expresses no opinion with respect to the status of such assignees.
Such Unitholders should consult their own tax advisors with respect to their
status as partners in the Partnership for federal income tax purposes. A
purchaser or other transferee of Units who does not execute and deliver a
transfer application may not receive certain federal income tax information or
reports furnished to record holders of Units unless the Units are held in a
nominee or street name account and the nominee or broker has executed and
delivered a transfer application with respect to such Units.

A beneficial owner of Units whose Units have been transferred to a short
seller to complete a short sale would appear to lose his status as a partner
with respect to such Units for federal income tax purposes. See "-- Tax
Treatment of Operations -- Treatment of Short Sales."

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TAX CONSEQUENCES OF UNIT OWNERSHIP

FLOW-THROUGH OF TAXABLE INCOME

The Partnership's income, gains, losses, deductions and credits will consist
of its allocable share of the income, gains, losses, deductions and credits of
the Operating Partnership and dividends from its corporate subsidiaries. Because
the Partnership is not a taxable entity and incurs no federal income tax
liability, each Unitholder will be required to take into account his allocable
share of income, gain, loss and deductions of the Operating Partnership (through
the Partnership) without regard to whether corresponding cash distributions are
received by Unitholders. Consequently, a Unitholder may be allocated income from
the Partnership although he has not received a cash distribution in respect of
such income.

TREATMENT OF PARTNERSHIP DISTRIBUTIONS

Under Section 731 of the Code, distributions by the Partnership to a
Unitholder generally will not be taxable to such Unitholder for federal income
tax purposes to the extent of his tax basis in his Units immediately before the
distribution. Cash distributions (and, in certain circumstances, distributions
of marketable securities) in excess of such basis generally will be considered
to be gain from the sale or exchange of the Units, taxable in accordance with
the rules described under "-- Disposition of Units." Any reduction in a
Unitholder's share of the Partnership's liabilities included in his tax basis in
his Units will be treated as a distribution of cash to such Unitholder. See "--
Tax Basis of Units." A decrease in a Unitholder's percentage interest in the
Partnership because of a Partnership offering of additional Units will decrease
such Unitholder's share of nonrecourse liabilities and, thus, will result in a
corresponding deemed distribution of cash.

A non-pro rata distribution of money or property may result in ordinary
income to a Unitholder, regardless of his tax basis in his Units, if such
distribution reduces the Unitholder's share of the Partnership's "unrealized
receivables" (including depreciation recapture) and/or substantially appreciated
"inventory items" (both as defined in Section 751 of the Code) (collectively,
"Section 751 Assets"). To that extent, the Unitholder will be treated as having
received his proportionate share of the Section 751 Assets and having exchanged
such assets with the Partnership in return for the non-pro rata portion of the
actual distribution made to him. This latter deemed exchange will generally
result in the Unitholder's realization of ordinary income under Section 751(b)
of the Code. Such income will equal the excess of (i) the non-pro rata portion
of such distribution over (ii) the Unitholder's tax basis for the share of such
Section 751 Assets deemed relinquished in the exchange.

TAX BASIS OF UNITS

In general, a Unitholder's tax basis for his Units initially will be equal
to the price of such Units to him. A Unitholder's tax basis will generally be
increased by (i) his share of Partnership taxable income and (ii) his share of
Partnership liabilities that are without recourse to any Partner ("nonrecourse
liabilities"), if any. Generally, a Unitholder's tax basis in his interest will
be decreased (but not below zero) by (i) his share of Partnership distributions,
(ii) his share of decreases in nonrecourse liabilities of the Partnership, (iii)
his share of losses of the Partnership and (iv) his share of nondeductible
expenditures of the Partnership that are not chargeable to capital. A
Unitholder's share of nonrecourse liabilities will generally be based on his
share of the Partnership's profits. The Partnership's present debt financing in
the maximum principal amount of $40 million is fully recourse to the Managing
General Partner and would therefore not be includable in the Unitholder's tax
basis for their Units, although the Business Trust has obtained debt financing
which is nonrecourse to the Partnership in the maximum principal amount of $20
million. Accordingly, at the time that a Unitholder makes the adjustment to his
share of Partnership properties pursuant to Section 743(b) of the Code, the
Unitholder will not be permitted to include the recourse debt financing of the
Partnership but may be entitled to include a portion of the Partnership's
nonrecourse financing, in such adjustment. See "-- Tax Treatment of Operations
- -- Section 754 Election."

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LIMITATIONS ON DEDUCTIBILITY OF LOSSES

The passive loss limitations contained in Section 469 of the Code generally
provide that individuals, estates, trusts and certain closely-held corporations
and personal service corporations can deduct losses from passive activities
(generally, activities in which the taxpayer does not materially participate)
only to the extent of the taxpayer's income from such passive activities or
investments. The passive loss limitations are to be applied separately with
respect to publicly-traded partnerships. Consequently, losses generated by the
Partnership, if any, will be available to offset only future income generated by
the Partnership and will not be available to offset income from other passive
activities or investments (including other publicly traded partnerships) or
salary or active business income. Passive losses that are not deductible because
they exceed the Unitholder's income generated by the Partnership may be deducted
in full when the Unitholder disposes of his entire investment in the Partnership
to an unrelated party in a fully taxable transaction.

A Unitholder's share of net income from the Partnership may be offset by any
suspended passive losses from the Partnership, but may not be offset by any
other current or carryover losses from other passive activities, including those
attributable to other publicly traded partnerships. According to an IRS
announcement, Treasury regulations will be issued which characterize net passive
income from a publicly traded partnership as investment income for purposes of
deducting investment interest.

In addition to the foregoing limitations, a Unitholder may not deduct from
taxable income his share of Partnership losses, if any, to the extent that such
losses exceed the lesser of (i) the tax basis of his Units at the end of the
Partnership's taxable year in which the loss occurs and (ii) the amount for
which the Unitholder is considered "at risk" under Section 465 of the Code at
the end of that year. In general, a Unitholder will initially be "at risk" to
the extent of the purchase price of his Units. A Unitholder's "at risk" amount
increases or decreases as his tax basis in his Units increases or decreases,
except that nonrecourse liabilities (or increases or decreases in such
liabilities) of the Partnership generally do not affect his "at risk" amount.
Losses disallowed to a Unitholder as a result of these rules can be carried
forward and will be allowable to the Unitholder to the extent that his tax basis
or "at risk" amount (whichever was the limiting factor) is increased in a
subsequent year. The "at risk" rules apply to an individual Unitholder, a
shareholder of a corporate Unitholder that is an S corporation and a corporate
Unitholder if 50% or more of the value of such stock is owned directly or
indirectly by five or fewer individuals.

ALLOCATION OF PARTNERSHIP INCOME, GAIN, LOSS AND DEDUCTION

The Partnership Agreement requires that a capital account be maintained for
each partner in accordance with the tax accounting principles set forth in
applicable Treasury Regulations under Section 704 of the Code. Distributions
upon liquidation of the Partnership are to be made in accordance with positive
capital account balances.

In general, if the Partnership has a net profit, items of income, gain, loss
and deduction will be allocated among the Managing General Partner and the
Unitholders in accordance with their respective interests in the Partnership.
Notwithstanding the above, as required by Section 704(c) of the Code, certain
items of Partnership income, gain, loss and deduction will be allocated to
account for the difference between the tax basis and fair market value of
certain property held by the Partnership ("Contributed Property"). Transactions
which result in a required Section 704(c) allocation with respect to Contributed
Property may arise if (i) a Unitholder contributes appreciated or depreciated
property, rather than cash, to the Partnership, or (ii) additional Partnership
Units are issued for cash, and at the time of such issuance, the capital account
of the existing partners are restated to account for the difference between the
tax basis and fair market value of Partnership property. The Partnership has
previously participated in several transactions described in clause (i) above.
Upon the issuance of the Units, the capital accounts of the existing partners
will be restated as described in clause (ii) above. Accordingly, with respect to
each such transaction, the Partnership will be required to make Section 704(c)
allocations.

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In addition, certain items of recapture income will be allocated to the
extent possible to the partner allocated the deduction giving rise to the
treatment of such gain as recapture income in order to minimize the recognition
of ordinary income by some Unitholders, but these allocations may not be
respected. If these allocations of recapture income are not respected, the
amount of the income or gain allocated to a Unitholder will not change, but a
change in the character of the income allocated to a Unitholder would result.
Finally, although the Partnership does not expect that its operations will
result in the creation of negative capital accounts, if negative capital
accounts nevertheless result, items of Partnership income and gain will be
allocated in an amount and manner sufficient to eliminate the negative balances
as quickly as possible.

Under Section 704(c) of the Code, the partners in a partnership cannot be
allocated more depreciation, gain or loss than the total amount of any such item
recognized by that partnership in a particular taxable period (the "ceiling
limitation"). To the extent the ceiling limitation is or becomes applicable, the
Partnership Agreement will require that certain items of income and deduction be
allocated in a way designed to effectively "cure" this problem and eliminate the
impact of the ceiling limitation. Such allocations will not have substantial
economic effect because they will not be reflected in the capital accounts of
the Unitholders. Treasury Regulations under Section 704(c) of the Code permit a
partnership to make reasonable curative allocations to reduce or eliminate
disparities between the tax basis and value attributable to Contributed
Properties.

Counsel is of the opinion that, with the exception of the allocation of
recapture income discussed above, allocations under the Partnership Agreement
will be given effect for federal income tax purposes in determining a partner's
distributive share of an item of income, gain, loss or deduction. There are,
however, uncertainties in the Treasury Regulations relating to allocations of
partnership income, and investors should be aware that the allocations of
recapture income in the Partnership Agreement may be successfully challenged by
the IRS.

TAX TREATMENT OF OPERATIONS

INCOME AND DEDUCTIONS IN GENERAL

No federal income tax will be paid by the Partnership. Instead, each
Unitholder will be required to report on his income tax return his allocable
share of income, gains, losses and deductions of the Partnership. Such items
must be included on the Unitholder's federal income tax return without regard to
whether the Partnership makes a distribution of cash to the Unitholder. A
Unitholder is generally entitled to offset his allocable share of the
Partnership's passive income with his allocable share of losses generated by the
Partnership, if any. See "-- Tax Consequences of Unit Ownership -- Limitations
on Deductibility of Losses."

The Partnership has adopted a convention with respect to transferring
Unitholders which generally allocates the Net Income or Net Loss of the
Partnership proportionately to each day of the year, and treats any Unitholder
owning a Unit as of the last day of the month as owning the Unit for the entire
month.

ACCOUNTING METHOD AND TAXABLE YEAR

The Partnership utilizes the calendar year as its taxable year and adopted
the accrual method of accounting for federal income tax purposes.

DEPRECIATION METHOD

The Partnership elected to use the straight-line depreciation method with
respect to its real property assets. Property subsequently acquired or
constructed by the Partnership may be depreciated using accelerated depreciation
methods permitted by Section 168 of the Code.

SECTION 754 ELECTION

Each Partnership will make the election permitted by Section 754 of the Code
effective for Partnership taxable year 1996. Such election will generally permit
a purchaser of Units to adjust his share of the tax basis in the Partnership's
properties pursuant to Section 743(b) of the Code. Such

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elections are irrevocable without the consent of the IRS. The Section 743(b)
adjustment is attributed solely to a purchaser of Units and is not added to the
tax basis of the Partnership's assets associated with all of the Unitholders
described above under the heading "-- Initial Tax Basis of Partnership Assets"
(the "Common Bases"). The amount of the adjustment under Section 743(b) is the
difference between the Unitholder's tax basis in his Units and the Unitholder's
proportionate share of the Common Bases attributable to the Units pursuant to
Section 743. The aggregate amount of the adjustment computed under Section
743(b) is then allocated among the various assets of the Partnership pursuant to
the rules of Section 755. The Section 743(b) adjustment acts in concert with the
Section 704(c) allocations (including the curative allocations, if respected) in
providing the purchaser of Units with the equivalent of a tax basis in his share
of the Partnership's properties equal to the fair market value of such share.
See "-- Allocation of Partnership Income, Gain, Loss and Deduction -- The
Partnership Agreement" and "-- Uniformity of Units."

Proposed Treasury Regulation Section 1.168-2(n) generally requires the
Section 743(b) adjustment attributable to recovery property to be depreciated as
if the total amount of such adjustment were attributable to newly-acquired
recovery property placed in service when the transfer occurs. The legislative
history of Section 197 of the Code indicates that the Section 743(b) adjustment
attributable to an amortizable Section 197 intangible should be similarly
treated. Under Treasury Regulation Section 1.167(c)-1(a)(6), a Section 743(b)
adjustment attributable to property subject to depreciation under Section 167 of
the Code rather than cost recovery deductions under Section 168 is generally
required to be depreciated using either the straight-line method or the 150%
declining balance method. The Partnership utilizes the straight line method on
such property. The depreciation and amortization methods and useful lives
associated with the Section 743(b) adjustment, therefore, may differ from the
methods and useful lives generally used to depreciate the Common Bases in such
properties. The Managing General Partner is authorized to adopt a convention to
preserve the uniformity of Units despite its inconsistency with Proposed
Treasury Regulation Section 1.168-2(n) and Treasury Regulation Section
1.167(c)-1(a)(6). See "-- Uniformity of Units."

Although Counsel is unable to opine as to the validity of such an approach,
the Partnership intends to depreciate the portion of a Section 743(b) adjustment
attributable to unrealized appreciation in the value of Contributed Property (to
the extent of any unamortized disparity between the tax basis and value
attributable to Contributed Property) using a rate of depreciation or
amortization derived from the depreciation or amortization method and useful
life applied to the Common Bases of such property, despite its inconsistency
with Proposed Treasury Regulation Section 1.168-2(n), Treasury Regulation
Section 1.167(c)-1(a)(6) or the legislative history of Section 197 of the Code.
If the Partnership determines that such position cannot reasonably be taken, the
Partnership may adopt a depreciation or amortization convention under which all
purchasers acquiring Units in the same month would receive depreciation or
amortization, whether attributable to Common Bases or Section 743(b) basis,
based upon the same applicable rate as if they had purchased a direct interest
in the Partnership's property. Such an aggregate approach may result in lower
annual depreciation or amortization deductions than would otherwise be allowable
to certain Unitholders. See "-- Uniformity of Units."

The allocation of the Section 743(b) adjustment must be made in accordance
with the principles of Section 1060 of the Code. Based on these principles, the
IRS may seek to reallocate some or all of any Section 743(b) adjustment not so
allocated by the Partnership to goodwill which, as an intangible asset, would be
amortizable over a longer period of time than certain of the Partnership's
tangible assets. Alternatively, it is possible that the IRS might seek to treat
the portion of such Section 743(b) adjustment attributable to the underwriters'
discount as if it were allocable to a non-deductible syndication cost.

A Section 754 election is advantageous when the transferee's tax basis in
such Units is higher than such Units' share of the aggregate tax basis in the
Partnership's assets immediately prior to the transfer. In such case, pursuant
to the election, the transferee will take a new and higher tax basis in his
share of the Partnership's assets for purposes of calculating, among other
items, his depreciation

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deductions and his share of any gain or loss on a sale of the Partnership's
assets. Conversely, a Section 754 election would be disadvantageous if the
transferee's tax basis in such Units is lower than such Units' share of the
aggregate tax basis in the Partnership's assets immediately prior to the
transfer. Thus, the amounts that a Unitholder would be able to obtain on a sale
or other disposition of his Units may be affected favorably or adversely by the
elections under Section 754.

The calculations and adjustments in connection with the Section 754 election
depend, among other things, on the date on which a transfer occurs and the price
at which the transfer occurs. To help reduce the complexity of those
calculations and the resulting administrative cost to the Partnership, the
Managing General Partner will apply the following method in making the necessary
adjustments pursuant to the Section 754 election on transfers subsequent to the
transfers pursuant to this offering: the price paid by a transferee for his
Units will be deemed to be the lowest quoted trading price for the Units during
the calendar month in which the transfer was deemed to occur, without regard to
the actual price paid. The application of such convention yields a less
favorable tax result, as compared to adjustments based on actual price, to a
transferee who paid more than the "convention price" for his Units. The
calculations under Section 754 elections are highly complex, and there is little
legal authority concerning the mechanics of the calculations, particularly in
the context of publicly traded partnerships. It is possible that the IRS will
successfully assert that the adjustments made by the Managing General Partner do
not meet the requirements of the Code or the applicable regulations and require
a different tax basis adjustment to be made.

Should the IRS require a different tax basis adjustment to be made, and
should, in the Managing General Partner's opinion, the expense of compliance
exceed the benefit of the election, the Managing General Partner may seek
permission from the IRS to revoke the Section 754 election previously made for
the Partnership. Such a revocation may increase the ratio of a Unitholder's
distributive share of taxable income to cash distributions and adversely affect
the amount that a Unitholder will receive from the sale of his Units.

ESTIMATES OF RELATIVE FAIR MARKET VALUES AND BASIS OF PROPERTIES

The consequences of the acquisition, ownership and disposition of Units will
depend in part on estimates by the Managing General Partner of the relative fair
market values and determinations of the tax basis of the assets of the
Partnership. The federal income tax consequences of such estimates and
determinations of tax basis may be subject to challenge and will not be binding
on the IRS or the courts. If the estimates of fair market value or
determinations of tax basis were found to be incorrect, the character and amount
of items of income, gain, loss, deduction or credit previously reported by
Unitholders might change, and Unitholders might be required to amend their
previously filed tax returns or to file claims for refund. See "--
Administrative Matters -- Valuation Overstatements."

TREATMENT OF SHORT SALES

A Unitholder whose Units are loaned to a "short seller" to cover a short
sale of Units would appear to be considered as having transferred beneficial
ownership of such Units and would, thus, no longer be a partner with respect to
such Units during the period of such loan. As a result, during such period, any
Partnership income, gains, deductions, losses or credits with respect to such
Units would appear not to be reportable by such Unitholder, any cash
distributions received by the Unitholder with respect to such Units would be
fully taxable and all of such distributions would appear to be treated as
ordinary income. The IRS also may contend that a loan of Units to a "short
seller" constitutes a taxable exchange. If such a contention were successfully
made, the lending Unitholder may be required to recognize gain or loss.
Unitholders desiring to assure their status as partners should modify their
brokerage account agreements, if any, to prohibit their brokers from borrowing
their Units. The IRS has announced that it is actively studying issues relating
to the tax treatment of short sales of partnership interests.

ALTERNATIVE MINIMUM TAX

Each Unitholder will be required to take into account his share of any items
of Partnership income, gain or loss for purposes of the alternative minimum tax.
A portion of the Partnership's

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depreciation deductions may be treated as an item of tax preference for this
purpose. A Unitholder's alternative minimum taxable income derived from the
Partnership may be higher than his share of Partnership net income because the
Partnership may use more accelerated methods of depreciation for purposes of
computing federal taxable income or loss. Prospective Unitholders should consult
with their tax advisors as to the impact of an investment in Units on their
liability for the alternative minimum tax.

TAX-EXEMPT ENTITIES, REGULATED INVESTMENT COMPANIES AND FOREIGN INVESTORS

Employee benefit plans and most other organizations exempt from federal
income tax (including individual retirement accounts ("IRAs") and other
retirement plans) are subject to federal income tax on unrelated business
taxable income ("UBIT"). Substantially all of the income of the Partnership is
rental income from real property which is excluded from the definition of UBIT.
However, to the extent that any rental income is attributable to debt-financed
property, as defined in Section 514 of the Code, such income will not satisfy
the rental income exclusion and will be taxable to a tax-exempt Unitholder as an
item of UBIT. Although the Partnership currently has only a small amount of
debt-financed property (as defined under Section 514 of the Code), the Managing
General Partner expects such proportion of debt-financed properties to increase
as the Partnership continues its acquisition program. Accordingly, a larger
percentage of the Partnership's total income may become UBIT.

Regulated investment companies are required to derive 90% or more of their
gross income from interest, dividends, gains from the sale of stocks or
securities or foreign currency or certain related sources. It is not anticipated
that any significant amount of the Partnership's gross income will be qualifying
income.

Nonresident aliens and foreign corporations, trusts or estates that acquire
Units will be considered to be engaged in business in the United States on
account of ownership of such Units and as a consequence will be required to file
federal tax returns in respect of their distributive shares of Partnership
income, gain, loss, deduction or credit and pay federal income tax at regular
rates (net of credits, including withholding) on such income. Generally, a
partnership is required by Section 1446 of the Code to pay a withholding tax on
the portion of the partnership's income that is effectively connected with the
conduct of a United States trade or business and that is allocable to the
foreign partners, regardless of whether any actual distributions have been made
to such partners. However, under rules applicable to publicly-traded
partnerships, the Partnership will withhold (currently at the rate of 39.6%) on
actual cash distributions made quarterly to foreign Unitholders. Each foreign
Unitholder must obtain a taxpayer identification number from the IRS and submit
that number to the transfer agent of the Partnership on a Form W-8 in order to
obtain credit for the taxes withheld. Subsequent adoption of the Treasury
Regulations or the issuance of other administrative pronouncements may require
the Partnership to change these procedures.

Because a foreign corporation that owns Units will be treated as engaged in
a United States trade or business, such a Unitholder will be subject to United
States branch profits tax at a rate of 30%, in addition to regular federal
income tax, on its allocable share of the Partnership's earnings and profits (as
adjusted for changes in the foreign corporation's "U.S. net equity") that are
effectively connected with the conduct of a United States trade or business.
Such a tax may be reduced or eliminated by an income tax treaty between the
United States and the country with respect to which the foreign corporate
Unitholder is a "qualified resident." In addition, such a Unitholder is subject
to special information reporting requirements under Section 6038C of the Code.

A foreign Unitholder who sells or otherwise disposes of a Unit will be
subject to federal income tax on gain realized on the disposition of such Unit
to the extent that such gain is effectively connected with a United States trade
or business of the foreign Unitholder. The IRS has issued a ruling under which
all or a portion of any gain that is recognized on a sale of a Unit by a foreign
Unitholder will be subject to tax under the rule of the preceding sentence. The
Partnership does not expect that any material portion of any such gain will
avoid United States taxation. If less than all of any such gain is so taxable,
then Section 897 of the Code may increase the portion of any gain that is
recognized by a

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foreign Unitholder that is subject to United States income tax and withholding
of 10% of the amount realized on the disposition of a Unit may apply if that
foreign Unitholder has held more than 5% in value of the Units during the
five-year period ending on the date of the disposition or if the Units are not
regularly traded on an established securities market at the time of the
disposition.

UNIFORMITY OF UNITS

There can arise a lack of uniformity in the intrinsic tax characteristics of
Units sold pursuant to this offering and Units outstanding prior to this
offering. Without such uniformity, compliance with several federal income tax
requirements, both statutory and regulatory, could be substantially diminished.
In addition, such non-uniformity could have a negative impact on the ability of
a Unitholder to dispose of his interest in the Partnership. Such lack of
uniformity can result from the application of Proposed Treasury Regulation
Section 1.168-2(n) and Treasury Regulation Section 1.167(c)-1(a)(6) or the
application of certain "ceiling" limitations on the Partnership's ability to
make allocations to eliminate disparities between the tax basis and value
attributable to Contributed Properties.

Depreciation conventions may be adopted or items of income and deduction may
be specially allocated in a manner that is intended to preserve the uniformity
of intrinsic tax characteristics among all Units, despite the application of
either Proposed Treasury Regulation Section 1.168-2(n) and Treasury Regulation
Section 1.167(c)-l(a)(6) or the "ceiling" limitations to Contributed Properties.
Any such special allocation will be made solely for federal income tax purposes.
In the event the IRS disallows the use of such conventions, some or all of the
adverse consequences described in the preceding paragraph could result. See "--
Allocation of Partnership Income, Gain, Loss and Deduction" and "-- Tax
Treatment of Operations -- Section 754 Election."

DISPOSITION OF UNITS

GAIN OR LOSS IN GENERAL

If a Unit is sold or otherwise disposed of, the determination of gain or
loss from the sale or other disposition will be based on the difference between
the amount realized and the tax basis for such Unit. See "-- Tax Consequences of
Unit Ownership -- Basis of Units." Upon the sale of his Units, a Unitholder's
"amount realized" will be measured by the sum of the cash or other property
received plus the portion of the Partnership's nonrecourse liabilities allocated
to the Units sold. Similarly, upon a gift of his Units, a Unitholder will be
deemed to have realized gain with respect to the portion of the Partnership's
nonrecourse liabilities allocable to such Units. To the extent that the amount
of cash or property received plus the allocable share of the Partnership's
nonrecourse liabilities exceeds the Unitholder's tax basis for the Units
disposed of (in the case of a charitable gift, only a portion of such tax basis
may be offset against the nonrecourse debt), the Unitholder will recognize gain.
The tax liability resulting from such gain could exceed the amount of cash
received upon the disposition of such Units.

The IRS has ruled that a partner must maintain an aggregate tax basis for
his interests in a single partnership (consisting of all interests acquired in
separate transactions). On a sale of a portion of such aggregate interest, such
partner would be required to allocate his aggregate tax basis between the
interest sold and the interest retained by some equitable apportionment method.
If applicable, the aggregation of tax basis of a Unitholder effectively
prohibits a Unitholder from choosing among Units with varying amounts of
inherent gain or loss to control the timing of the recognition of such inherent
gain or loss as would be possible in a stock transaction. Thus, the IRS ruling
may result in an acceleration of gain or deferral of loss on a sale of a portion
of a Unitholder's Units. It is not clear whether such ruling applies to publicly
traded partnerships, such as the Partnership, the interests in which are
evidenced by separate registered certificates, providing a verifiable means of
identifying each separate interest and tracing the purchase price of such
interest. A Unitholder considering the purchase of additional Units or a sale of
Units purchased at differing prices should consult his tax advisor as to the
possible consequences of that IRS ruling.

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To the extent that a portion of the gain upon the sale of a Unit is
attributable to a Unitholder's share of "substantially appreciated inventory
items" and "unrealized receivables" of the Partnership, as those terms are
defined in Section 751 of the Code, such portion will be treated as ordinary
income. Unrealized receivables include (i) to the extent not previously
includable in Partnership income, any rights to pay for services rendered or to
be rendered and (ii) amounts that would be subject to recapture as ordinary
income if the Partnership had sold its assets at their fair market value at the
time of the transfer of a Unit.

Gain from the sale or other disposition of a Unit may constitute investment
income under Section 163(d) of the Code. A Unitholder must report to the
transfer agent of the Partnership (on behalf of the Partnership) any transfer of
Units. See "-- Information Return Filing Requirements."

The treatment of distributions received after a Unitholder has disposed of
his Units is unclear. Such a distribution may be fully taxable as ordinary
income or may reduce a Unitholder's tax basis for the Units disposed of,
resulting in a larger gain or smaller loss from such disposition.

TRANSFEROR/TRANSFEREE ALLOCATIONS

In general, the Partnership's taxable income and losses are determined
annually and are prorated on a monthly basis and subsequently apportioned among
the Unitholders in proportion to the number of Units owned by them as of the
opening of the New York Stock Exchange on the last business day of the month.
However, extraordinary gain or loss realized on a Terminating Capital
Transaction is allocated among the Unitholders of record as of the opening of
the NYSE on the date such Terminating Capital Transaction occurs. As a result of
this monthly allocation, a Unitholder transferring Units in the open market may
be allocated income, gain, loss, deduction and credit accrued after the
transfer.

The use of the monthly conventions discussed above may not be permitted by
existing Treasury Regulations and, accordingly, Counsel is unable to opine on
the validity of the method of allocating income and deductions between the
transferors and transferees of Units. If the IRS treats transfers of Units as
occurring throughout each month and a monthly convention is not allowed by the
regulations (or only applies to transfers of less than all of a partner's
interest), the IRS may contend that taxable income or losses of the Partnership
must be reallocated among the Partners. If any such contention were sustained,
certain Unitholders' respective tax liabilities would be adjusted to the
possible detriment of other Unitholders. The Managing General Partner is
authorized to revise the Partnership's method of allocation between transferors
and transferees (as well as among Partners whose interests otherwise vary during
a taxable period) to comply with any future regulations.

CONSTRUCTIVE TERMINATION OR DISSOLUTION OF PARTNERSHIP

Under Section 708(b)(l)(B) of the Code, a partnership will be considered to
have been terminated if within a twelve-month period there is a sale or exchange
of 50% or more of the interests in partnership capital and profits. A
termination results in a closing of the partnership's taxable year for all
partners, and the partnership's assets are treated as having been distributed to
the partners and reconveyed to the partnership, which is then treated as a new
partnership. A constructive termination of the Partnership will cause a
termination of the Operating Partnership. In the case of a Unitholder reporting
on a fiscal year other than a calendar year, the closing of a tax year of the
Partnership may result in more than twelve months' taxable income or loss of the
Partnership being includable in his taxable income for the year of termination.
In addition, each Unitholder will realize taxable gain to the extent that any
money distributed or deemed distributed to him (including any net reduction in
his share of the Partnership's nonrecourse liabilities) exceeds the tax basis of
his Units.

A termination of either Partnership under Section 708(b)(l)(B) could result
in adverse tax consequences to Unitholders because it could result in a change
in the tax basis for the Partnership's properties and would require that new tax
elections be made by the reconstituted partnerships. In

55
<PAGE>
addition, such a termination could result in a deferral of Partnership
depreciation deductions. Further, such a termination may either accelerate the
application of (or subject the reconstituted partnerships to the application of)
any change in law effective as of a date after the termination.

The Partnership may not have the ability to determine when a constructive
termination occurs as a result of transfers of Units because the Units will be
freely transferable under "street name" ownership. Thus, the Partnership may be
subject to penalty for failure to file a tax return and may fail to make certain
Partnership elections in a timely manner, including the Section 754 Election.

PARTNERSHIP INCOME TAX INFORMATION RETURNS AND PARTNERSHIP AUDIT PROCEDURES

The Partnership will use all reasonable efforts to furnish Unitholders with
tax information within 75 days after the close of each Partnership taxable year.
Specifically, the Partnership intends to furnish to each Unitholder a Schedule
K-1 which sets forth his allocable share of the Partnership's income, gains,
losses, deductions and credits, if any. In preparing such information, the
Managing General Partner will necessarily use various accounting and reporting
conventions to determine each Unitholder's allocable share of income, gains,
losses, deductions and credits. There is no assurance that any such conventions
will yield a result that conforms to the requirements of the Code, regulations
thereunder or administrative pronouncements of the IRS. The Managing General
Partner cannot assure prospective Unitholders that the IRS will not contend that
such accounting and reporting conventions are impermissible. Contesting any such
allegations could result in substantial expense to the Partnership. In addition,
if the IRS were to prevail, Unitholders may incur substantial liabilities for
taxes and interest.

The federal income tax information returns filed by the Partnership may be
audited by the IRS. The Code contains partnership audit procedures that
significantly simplify the manner in which IRS audit adjustments of partnership
items are resolved. Adjustments (if any) resulting from such an audit may
require each Unitholder to file an amended tax return, and possibly may result
in an audit of the Unitholder's return. Any audit of a Unitholder's return could
result in adjustments of non-partnership as well as partnership items.

Under Sections 6221 through 6233 of the Code, partnerships generally are
treated as separate entities for purposes of federal tax audits, judicial review
of administrative adjustments by the IRS and tax settlement proceedings. The tax
treatment of partnership items of income, gain, loss, deduction and credit is
determined at the partnership level in a unified partnership proceeding rather
than in separate proceedings with the partners. The Code provides for one
partner to be designated as the "Tax Matters Partner" for these purposes. The
Partnership Agreement appoints the Managing General Partner as the Tax Matters
Partner for the Partnership.

The Tax Matters Partner is entitled to make certain elections on behalf of
the Partnership and Unitholders and can extend the statute of limitations for
assessment of tax deficiencies against Unitholders with respect to Partnership
items. In connection with adjustments to partnership tax returns proposed by the
IRS, the Tax Matters Partner may bind any Unitholder with less than a 1% profits
interest in the Partnership to a settlement with the IRS unless the Unitholder
elects, by filing a statement with the IRS, not to give such authority to the
Tax Matters Partner. The Tax Matters Partner may seek judicial review (to which
all the Unitholders are bound) of a final Partnership administrative adjustment
and, if the Tax Matters Partner fails to seek judicial review, such review may
be sought by any Unitholder having at least a 1% profit interest in the
Partnership and by Unitholders having, in the aggregate, at least a 5% profits
interest. Only one judicial proceeding will go forward, however, and each
Unitholder with an interest in the outcome may participate.

The Unitholders will generally be required to treat Partnership items on
their federal income tax returns in a manner consistent with the treatment of
the items on the Partnership information return. In general, that consistency
requirement is waived if the Unitholder files a statement with the IRS
identifying the inconsistency. Failure to satisfy the consistency requirement,
if not waived, will result in an adjustment to conform the treatment of the item
by the Unitholder to the treatment on

56
<PAGE>
the Partnership return. Even if the consistency requirement is waived,
adjustments to the Unitholder's tax liability with respect to Partnership items
may result from an audit of the Partnership's or the Unitholder's tax return.
Intentional or negligent disregard of the consistency requirement may subject a
Unitholder to substantial penalties.

INFORMATION RETURN FILING REQUIREMENTS

A Unitholder who sells or exchanges Units is required by Section 6050K of
the Code to notify the Partnership in writing of such sale or exchange, and the
Partnership is required to notify the IRS of such transaction and to furnish
certain information to the transferor and transferee. However, these reporting
requirements do not apply with respect to a sale by an individual who is a
citizen of the United States and who effects such sale through a broker. In
addition, a transferor and a transferee of a Unit will be required to furnish to
the IRS the amount of the consideration received for such Unit that is allocated
to goodwill or going concern value of the Partnership. Failure to satisfy such
reporting obligations may lead to the imposition of substantial penalties.

NOMINEE REPORTING

Under Section 6031 (c) of the Code, persons who hold an interest in the
Partnership as a nominee for another person must report certain information to
the Partnership. Temporary Treasury Regulations provide that such information
should include (i) the name, address and taxpayer identification number of the
beneficial owners and the nominee; (ii) whether the beneficial owner is (a) a
person that is not a United States person, (b) a foreign government, an
international organization or any wholly owned agency or instrumentality of
either of the foregoing, or (c) a tax-exempt entity; (iii) the amount and
description of Units held, acquired or transferred for the beneficial owners;
and (iv) certain information including the dates of acquisitions and transfers,
means of acquisitions and transfers, and acquisition cost for purchases, as well
as the amount of net proceeds from sales. Brokers and financial institutions are
required to furnish additional information, including whether they are a United
States person and certain information on Units they acquire, hold or transfer
for their own account. A penalty of $50 per failure (up to a maximum of $100,000
per calendar year) is imposed for failure to report such information to the
Partnership. The nominee is required to supply the beneficial owner of the Units
with the information furnished to the Partnership.

STATE AND OTHER TAXES

In addition to federal income taxes, Unitholders may be subject to other
taxes, such as state and local income taxes, unincorporated business taxes, and
estate, inheritance or intangible taxes that may be imposed by the various
jurisdictions in which the Partners reside or in which either Partnership does
business or owns property. Although an analysis of those various taxes cannot be
presented here, each prospective Unitholder should consider the potential impact
of such taxes on his investment in the Partnership. The Operating Partnership
owns property and does business in 40 states. A Unitholder will likely be
required to file state income tax returns in such states (other than states such
as Texas and Florida not having a state income tax or states in which the
Partnership is required or has elected to withhold and pay taxes on behalf of
the Unitholders) and may be subject to penalties for failure to comply with such
requirements. In addition, an obligation to file tax returns or to pay taxes may
arise in other states. Moreover, in certain states, tax losses may not produce a
tax benefit in the year incurred (if, for example, the Partner has no income
from sources within that state) and also may not be available to offset income
in subsequent taxable years.

It is the responsibility of each prospective Unitholder to investigate the
legal and tax consequences, under the laws of pertinent states or localities, of
his investment in the Partnership. Accordingly, each prospective Unitholder
should consult, and must depend upon, his own tax counsel or other advisor with
regard to those matters. Further, it is the responsibility of each Unitholder to
file all state and local, as well as federal, tax returns that may be required
of such Unitholder.

57
<PAGE>
INVESTMENT IN THE PARTNERSHIP BY EMPLOYEE BENEFIT PLANS

An investment in the Partnership by an employee benefit plan is subject to
certain additional considerations because the investments of such plans are
subject to the fiduciary responsibility and prohibited transaction provisions of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
restrictions imposed by Section 4975 of the Code. As used herein, the term
"employee benefit plan" includes, but is not limited to, qualified pension,
profit-sharing and stock bonus plans, Keogh plans, Simplified Employee Pension
Plans, and tax deferred annuities or Individual Retirement Accounts established
or maintained by an employer or employee organization. Among other things,
consideration should be given to (a) whether such investment is prudent under
Section 404(a)(1)(B) of ERISA; (b) whether in making such investment such plan
will satisfy the diversification requirement of Section 404(a)(1)(C) of ERISA;
and (c) (i) the fact that such investment could result in recognition of UBIT by
such plan even if there is no net income, (ii) the effect of an imposition of
income taxes on the potential investment return for an otherwise tax-exempt
investor, and (iii) whether, as a result of the investment, the plan will be
required to file an exempt organization business income tax return with the IRS.
See "Federal Income Tax Considerations -- Tax Treatment of Operations --
Tax-Exempt Entities, Regulated Investment Companies and Foreign Investors." The
person with investment discretion with respect to the assets of an employee
benefit plan (a "fiduciary") should determine whether an investment in the
Partnership is authorized by the appropriate governing instrument and is a
proper investment for such plan.

In addition, a fiduciary of an employee benefit plan should consider whether
such plan will, by investing in the Partnership, be deemed to own an undivided
interest in the assets of the Partnership, with the result that the Managing
General Partner also would be a fiduciary of such plan and the Partnership would
be subject to the regulatory restrictions of ERISA, including its prohibited
transaction rules, as well as the prohibited transaction rules of the Code.

Section 406 of ERISA and Section 4975 of the Code (which also applies to
Individual Retirement Accounts which are not considered part of an employee
benefit plan) prohibit an employee benefit plan from engaging in certain
transactions involving "plan assets" with parties that are "parties in interest"
under ERISA or "disqualified persons" under the Code with respect to the plan.
The Department of Labor issued final regulations on November 13, 1986, providing
guidance with respect to whether the assets of an entity in which employee
benefit plans acquire equity interests would be deemed "plan assets" under
certain circumstances. Pursuant to these regulations, an entity's assets would
not be considered to be "plan assets" if, among other things, (i) the equity
interests acquired by employee benefit plans are publicly offered securities,
i.e., the equity interests are widely held by 100 or more investors independent
of the issuer and each other, freely transferable and registered pursuant to
certain provisions of the federal securities laws, (ii) the entity is an
"operating company", i.e., it is primarily engaged in the production or sale of
a product or service other than the investment of capital either directly or
through a majority-owned subsidiary or subsidiaries, or (iii) there is no
significant investment by benefit plan investors, which is defined to mean that
less than 25% of the value of each class of equity interest (disregarding
certain interests held by the Managing General Partner, its affiliates and
certain other persons) is held by employee benefit plans (as defined in Section
3(3) of ERISA), whether or not they are subject to the provisions of Title I of
ERISA, plans described in Section 4975(e)(1) of the Code, and any entities whose
underlying assets include plan assets by reason of a plan's investments in the
entity. The Partnership's assets would not be considered "plan assets" under
these regulations because it is expected that the investment will satisfy the
requirements in (i) above, and also may satisfy requirements (ii) and (iii)
above.

58
<PAGE>
UNDERWRITING

The Underwriters named below, acting through their Representatives, Morgan
Keegan & Company, Inc., EVEREN Securities, Inc. and Southwest Securities, Inc.,
have agreed, subject to the terms and conditions contained in the Underwriting
Agreement, to purchase from the Partnership the number of Units set forth
opposite their respective names below:

<TABLE>
<CAPTION>
NUMBER OF UNITS
UNDERWRITER TO BE PURCHASED
- --------------------------------------------------------------------------------------- ---------------
<S> <C>
Morgan Keegan & Company, Inc...........................................................
EVEREN Securities, Inc.................................................................
Southwest Securities, Inc..............................................................

---------------
Total Underwriters............................................................... 1,800,000
---------------
---------------
</TABLE>

The Underwriting Agreement provides that the Underwriters are obligated to
purchase all of the Units offered hereby (other than those covered by the
over-allotment option described below) if any such Units are purchased. The
Partnership has been advised by the Representatives that the Underwriters
propose to offer the Units to the public at the offering price set forth on the
cover page of this Prospectus and to certain dealers at such price less a
concession not in excess of $. per Unit. The Underwriters may allow, and
such dealers may reallow, a discount not in excess of $. per Unit to other
dealers. The public offering price and the concessions and discount to dealers
may be changed by the Underwriters after the Offering.

The Partnership has granted to the Underwriters an option, expiring on the
close of business on the 30th day subsequent to the date of this Prospectus, to
purchase up to an additional 270,000 Units at the public offering price, less
underwriting discount, as shown on the cover page of this Prospectus. The
Underwriters may exercise such option solely for the purpose of covering
over-allotments incurred in the sale of the Units. To the extent that the
Underwriters exercise such option, each Underwriter will become obligated,
subject to certain conditions, to purchase approximately the same percentage of
such additional Units as the number of Units set forth next to such
Underwriter's name in the preceding table bears to the total offered initially.

The Partnership has agreed to indemnify the several Underwriters and certain
related persons or to contribute to losses arising out of certain liabilities,
including liabilities under the Securities Act of 1933, as amended (the
"Securities Act"). Insofar as the Underwriters may be indemnified for
liabilities arising under the Securities Act pursuant to the Underwriting
Agreement, the Partnership has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable.

With certain limited exceptions, the Partnership and certain Unitholders
have agreed not to offer, sell, contract to sell, grant any option to purchase
or otherwise dispose (or announce any offer, sale, grant of any option to
purchase or other disposition) of any Units, or any securities convertible into,
or exercisable or exchangeable for, Units for a period of 180 days from the date
of this Prospectus, without the prior written consent of the Representatives.

59
<PAGE>
The Partnership has agreed to pay Morgan Keegan & Company, Inc. a financial
advisory fee equal to $200,000. Such fee is payable upon the closing of the
Offering.

The Underwriters do not intend to sell Units to any account over which they
exercise discretionary authority.

The foregoing does not purport to be a complete statement of the terms and
conditions of the Underwriting Agreement and related documents, a copy of which
has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part.

LEGAL MATTERS

The validity of the Units to be issued by the Partnership in connection with
the Offering will be passed on by Middleberg, Riddle & Gianna, Dallas, Texas.
Certain matters will be passed upon for the Underwriters by Haynes and Boone,
L.L.P., Dallas, Texas.

EXPERTS

The financial statements of the Partnership as of December 31, 1995 and
1994, and for each of the three years in the period ended December 31, 1995
included in this Prospectus and the related financial statement schedule
incorporated by reference therein have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports which are included and
incorporated by reference herein, and have been so included and incorporated in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.

The financial statements of Burger King Limited Partnership II as of
December 31, 1995 and 1994 and for each of the years in the three-year period
ended December 31, 1995, and the related financial statement schedule as of
December 31, 1995, have been incorporated herein by reference, in reliance upon
the report of KMPG Peat Marwick LLP, independent certified public accountants,
incorporated herein by reference and upon the authority of said firm as experts
in accounting and auditing.

The financial statements of WW Services, Inc. as of September 30, 1995 and
1994, and for each of the two years then ended incorporated by reference herein
have been audited by Tanner and Long, P.C., independent auditors, as stated in
their report incorporated by reference herein and has been so included in
reliance on the report of such firm given upon their authority as experts in
accounting and auditing.

The financial statements of Wiggins Enterprises, Inc. as of September 30,
1995, and for the nine months then ended incorporated by reference herein have
been audited by Thigpen & Lanier, independent auditors, as stated in their
report incorporated by reference herein and has been so included in reliance on
the report of such firm given upon their authority as experts in accounting and
auditing.

The schedule of rental income and direct operating expenses for Selected
Partnership Properties Sold to U.S. Restaurant Properties Master L.P. for the
year ended December 31, 1995 incorporated by reference herein have been audited
by BDO Seidman, LLP, independent auditors, as stated in their report
incorporated by reference herein and has been so included in reliance on the
report of such firm given upon their authority as experts in accounting and
auditing.

The statement of direct revenues and operating expenses applicable to stores
to be acquired by U.S. Restaurant Properties Master L.P. from Matel Enterprises,
Inc. for the year ended December 31, 1995 incorporated by reference herein has
been audited by William C. Love, independent auditor, as stated in his report
incorporated by reference herein and has been so included in reliance on the
report of such firm given upon their authority as experts in accounting and
auditing.

60
<PAGE>
AVAILABLE INFORMATION

The Partnership is subject to the informational reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
regulations promulgated thereunder, and in connection therewith files reports
and other information with the Securities and Exchange Commission (the
"Commission"). Reports, proxy statements and other information filed by the
Partnership can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Commission's Regional Offices at 26 Federal Plaza, New York, New York
10278 and 219 South Dearborn, Room 1204, Chicago, Illinois 60604. In addition,
copies of such material can be obtained from the public reference section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at the Commission's
prescribed rates. The Partnership's Units are listed for trading on the New York
Stock Exchange under the symbol "USV". Reports and other information concerning
the Partnership can be inspected at the offices of such Exchange, 20 Broad
Street, New York, New York 10005.

The Partnership has filed with the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, a Registration Statement on Form S-3 (herein, together
with all amendments thereto, the "Registration Statement") under the Securities
Act of 1933, as amended (the "Act"), with respect to the Units. This Prospectus
does not contain all information set forth in the Registration Statement and in
the exhibits thereto. Statements herein concerning the contents of any contract
or other document are not necessarily complete, and in each instance, reference
is made to such contract or other document filed with the Commission as an
exhibit to the Registration Statement, or otherwise, each such statement being
qualified and amplified in all respects by such reference. Items of information
omitted from the Prospectus but contained in the Registration Statement may be
obtained from the public reference room of the Commission in Washington, D.C.
upon payment of the fee prescribed by the Rules and Regulations of the
Commission or may be examined there without charge.

INCORPORATION BY REFERENCE

The following documents previously filed by the Partnership with the
Commission are incorporated herein by reference:

(a) The Partnership's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, as amended by the Form 10-K/A filed May 23,
1996 and the Form 10-K/A filed June 12, 1996;

(b) The Partnership's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996;

(c) The Partnership's Current Report on Form 8-K dated April 19, 1996, as
amended by the Form 8-K/A filed April 30, 1996; and

(d) All documents subsequently filed by the Partnership pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
termination of the Offering. Such documents shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from
the date of filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated herein by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any
subsequently filed document which is incorporated or deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.

The Managing General Partner of the Partnership will provide without charge
to each person, including any beneficial owner, to whom a copy of this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the documents incorporated herein by reference, other than
exhibits to such documents unless such exhibits are specifically incorporated by
reference into such documents. Requests should be addressed to President, U.S.
Restaurant Properties, Inc., 5310 Harvest Hill Road, Suite 270, Dallas, Texas
75230. The telephone number is (214) 387-1487, FAX (214) 490-9119.

61
<PAGE>
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
U.S. RESTAURANT PROPERTIES MASTER L.P.

PRO FORMA FINANCIAL STATEMENTS

Pro Forma Financial Information.................................................... F-2

Pro Forma Consolidated Balance Sheet as of March 31, 1996 (unaudited) and Notes
thereto........................................................................... F-3

Pro Forma Condensed Consolidated Statement of Income for the quarter ended March
31, 1996 (unaudited) and Notes thereto............................................ F-5

Pro Forma Condensed Consolidated Statement of Income for the year ended December
31, 1995 (unaudited) and Notes thereto............................................ F-6

FINANCIAL STATEMENTS
U.S. RESTAURANT PROPERTIES MASTER L.P.

Independent Auditors' Report....................................................... F-8

Consolidated Balance Sheets at December 31, 1994 and 1995 and March 31, 1996
(Unaudited)....................................................................... F-9

Consolidated Statements of Income for the years ended December 31, 1993, 1994 and
1995 and quarters ended March 31, 1995 and 1996 (Unaudited)....................... F-10

Consolidated Statements of Partners' Capital for the years ended December 31, 1993,
1994 and 1995 and quarter ended March 31, 1996 (Unaudited)........................ F-11

Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1994
and 1995 and quarters ended March 31, 1995 and 1996 (Unaudited)................... F-12

Notes to Consolidated Financial Statements for the years ended December 31, 1993,
1994 and 1995 and for the quarters ended March 31, 1995 and 1996 (Unaudited)...... F-13
</TABLE>

F-1
<PAGE>
PRO FORMA FINANCIAL INFORMATION

The following March 31, 1996 unaudited Pro Forma Consolidated Balance Sheet
of U.S. Restaurant Properties Master L.P. (the "Partnership") consists of the
Partnership's March 31, 1996 balance sheet adjusted on a pro forma basis to
reflect as of March 31, 1996: (a) the purchase of 69 properties and sale of one
property since April 1, 1996; (b) the acquisition of 39 properties under binding
contracts with the assumption of related tenant and ground leases (all of which
are treated as operating leases based on preliminary assessments); (c)
additional borrowings to purchase the properties; and (d) the issuance and sale
by the Partnership in this Offering of 1,800,000 Units and the application of
the net proceeds therefrom. All properties acquired and under contract have been
accounted for using the purchase method of accounting. The unaudited Pro Forma
Consolidated Balance Sheet is not necessarily indicative of what the actual
financial position of the Partnership would have been at March 31, 1996 had all
of these transactions occurred and it does not purport to represent the future
financial position of the Partnership.

The unaudited Pro Forma Condensed Consolidated Statement of Income for the
quarter ended March 31, 1996 is presented as if the following had occurred as of
January 1, 1996: (a) adjustments to operations for 24 properties acquired during
the quarter ended March 31, 1996 and the purchase of 69 properties and sale of
one property since April 1, 1996; (b) the acquisition of 39 properties under
contract with the assumption of related tenant and ground leases (all of which
are treated as operating leases based on preliminary assessments); (c)
additional borrowings to purchase the properties; (d) the issuance and sale by
the Partnership in this Offering of 1,800,000 Units and the application of the
net proceeds therefrom. The unaudited Pro Forma Condensed Consolidated Statement
of Income is not necessarily indicative of what the actual results of operations
of the Partnership would have been assuming the transactions described above had
been completed as of January 1, 1996 nor do they purport to represent the
results of operations for future periods.

The unaudited Pro Forma Condensed Consolidated Statement of Income for the
year ended December 31, 1995 is presented as if the following had occurred as of
January 1, 1995: (a) the purchase of 16 properties acquired on various dates
from March 1995 through December 1995; (b) the purchase of 93 properties and
sale of one property completed since January 1, 1996; (c) the acquisition of 39
properties under contract with the assumption of related tenant and ground
leases (all of which are treated as operating leases based on preliminary
assessments); (c) additional borrowings to purchase the properties under
contract; and (d) the issuance and sale by the Partnership in this Offering of
1,800,000 Units and the application of the net proceeds therefrom. The purchase
and operations of the properties are being included in the pro forma financial
statements because (a) 93 of such properties have already been acquired and (b)
the proceeds of the Offering are being used to acquire the 39 properties under
contract and the Partnership presently intends to consummate such acquisitions.
The unaudited Pro Forma Condensed Consolidated Statement of Income is not
necessarily indicative of what the actual results of operations of the
Partnership would have been assuming the transactions described above had been
completed as of January 1, 1995 nor do they purport to represent the results of
operations for future periods.

These pro forma consolidated financial statements should be read in
conjunction with all of the financial statements and the notes thereto contained
elsewhere in this Prospectus. In management's opinion, all adjustments necessary
to properly reflect the above indicated transactions have been made.

F-2
<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.

PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
(UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
1996 PROPERTIES
ACQUISITIONS(A) UNDER OFFERING
HISTORICAL AND SALE ADJUSTED CONTRACT(B) ADJUSTMENTS(C) PRO FORMA
--------- -------------- ----------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Cash.......................... $ 19 $ 82 $ 101 $ $ -- $ 101
Receivables, net.............. 924 924 924
Purchase deposits............. 2,071 (1,136) 935 (643) 292
Prepaid expenses.............. 285 285 285
Notes receivable.............. 348 743 1,091 1,091
Net investment in direct
financing leases............. 18,875 18,875 18,875
Land.......................... 31,203 9,357 40,560 8,768 49,328
Buildings and leasehold
improvements, net............ 18,845 17,437 36,282 15,777 52,059
Machinery and equipment,
net.......................... 257 1,114 1,371 2,058 3,429
Intangibles, net.............. 14,524 1,560 16,084 165 16,249
--------- -------------- ----------- ----------- -------------- -----------
$ 87,351 $ 29,157 $ 116,508 $ 26,125 $ -- $ 142,633
--------- -------------- ----------- ----------- -------------- -----------
--------- -------------- ----------- ----------- -------------- -----------
Liabilities and Partners'
capital
Accounts payable.............. $ 625 $ $ 625 $ $ $ 625
Deferred gain................. 445 445 445
Line of credit................ 21,226 28,712 49,938 26,125 -- --
Capitalized lease
obligations.................. 508 508 508
General Partners' capital..... 1,222 1,222 1,222
Limited Partners' capital..... 63,770 63,770 -- --
--------- -------------- ----------- ----------- -------------- -----------
$ 87,351 $ 29,157 $ 116,508 $ 26,125 $ -- $ 142,633
--------- -------------- ----------- ----------- -------------- -----------
--------- -------------- ----------- ----------- -------------- -----------
</TABLE>

- ------------------------
(a) Reflects pro forma adjustments for 1996 acquisitions completed since March
31, 1996 which consists of the purchase for cash of 69 Properties and the
sale of one property as follows:

<TABLE>
<CAPTION>
PURCHASE
PRICE/
(CARRYING
NUMBER OF PROPERTIES COST)
----------------------- --------------
<S> <C> <C>
BK II................................................... 29 $ 17,716
Pizza Hut............................................... 2 437
Dairy Queen............................................. 37 11,137
Hardees................................................. 1 558
--- --------------
69 29,848
Sale of Wenatchee store................................. (1) (380)
--- --------------
Total of land, buildings and leasehold improvements,
machinery and equipment and intangibles.............. 68 29,468
Add cost of store sold.................................. 380
Less purchase deposits.................................. 1,136
--------------
Increase in line of credit............................ $ 28,712
--------------
--------------
</TABLE>

F-3
<PAGE>
Respective purchase price for the properties has been allocated between
land, building, machinery and intangibles on a preliminary basis. Final
determination of the proper allocation between these accounts will be made
prior to year end.

The Partnership sold one property for $82 in cash and a note receivable of
$743 which bears interest at 9.25% and interest is due monthly with
principal payable at maturity. The Partnership is accounting for the 1996
sale on the cost recovery method. Accordingly, the Partnership has recorded
a deferred gain of $445.

(b) Reflects the pro forma adjustments for the properties under contract which
are comprised of 39 Properties as follows:

<TABLE>
<CAPTION>
NUMBER OF PROPERTIES PURCHASE PRICE
----------------------- --------------
<S> <C> <C>
Schlotzky's............................................. 5 $ 3,626
Pizza Hut............................................... 9 1,919
Hardee's................................................ 1 643
Wiggins................................................. 24 20,580
--- --------------
39 $ 26,768
</TABLE>

The respective purchase price for the properties has been allocated between
land, building machinery and intangibles on a preliminary basis. Final
determination of the proper allocation between these accounts will be made
prior to year end.

All related tenant and ground leases have been determined to represent
operating leases, based on preliminary assessments. Final determination as
to the proper classification of leases is subject to the completion of the
acquisition transactions.

F-4
<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE QUARTER ENDED MARCH 31, 1996
(UNAUDITED)
(IN THOUSANDS EXCEPT FOR PER UNIT DATA)

<TABLE>
<CAPTION>
PROPERTIES
UNDER
CONTRACT
1996 AND
ACQUISITIONS OFFERING
HISTORICAL AND SALE(A) ADJUSTED ADJUSTMENTS PRO FORMA
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Total revenues...................................... $ 2,955 $ 1,212 $ 4,167 $ 922(b) $ 5,089
Expenses:
Rent................................................ 412 97 509 33(b) 542
Depreciation and amortization....................... 534 334 868 255(c) 1,123
Taxes, general and administrative................... 370 90 460 66(d) 526
Interest expense (income), net...................... 317 569 886 -- (e) --
----------- ----------- ----------- ----------- -----------
Total expenses...................................... 1,633 1,090 2,723 -- --
----------- ----------- ----------- ----------- -----------
Net income.......................................... $ 1,322 $ 122 $ 1,444 $ -- $ --
Net income allocable to unitholders................. $ 1,296 $ 1,415 $ --
Average number of units outstanding................. 4,903 4,987 1,800(f) 6,787
Net income per unit................................. $ 0.26 $ 0.28 $ --
</TABLE>

- ------------------------
(a) Reflects pro forma adjustments to operations for 24 properties acquired
during the quarter ended March 31, 1996 and for the 1996 acquisitions
completed since March 31, 1996, comprising 69 properties acquired on various
dates and the sale of one property also completed since March 31, 1996 as
follows (in thousands):

<TABLE>
<CAPTION>
1996
ACQUISITIONS 1996 SALE NET AMOUNT
----------- --------- -----------
<S> <C> <C> <C>
Rental revenues............................................ $ 1,215 $ (20) $ 1,195
Interest income............................................ 17 17
----------- --- -----------
Total revenues............................................. 1,215 (3) 1,212
Expenses:
Rent....................................................... 97 -- 97
Depreciation and amortization.............................. 334 -- 334
Taxes, general and administrative.......................... 90 -- 90
Interest expense (income), net............................. 569 -- 569
----------- --- -----------
Total expenses............................................. $ 1,090 $ 0 $ 1,090
</TABLE>

(b) Reflects pro forma adjustments for properties under contract comprised of 39
properties.

(d) Reflects pro forma increase in general and administrative expenses,
attributable to the increase in fees due to the Managing General Partner,
calculated as 1% of the contracted purchase price for the properties under
contract.

(e) Reflects the pro forma adjustment to interest expense as a result of the
Offering and purchase of the properties under contract.

Reduction of pro forma interest expense is based on the use of Offering
proceeds to reduce the total debt outstanding by $ at a pro forma
interest rate of 7.1%.

(f) Reflects the 1,800,000 Units to be issued in the Offering.

F-5
<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
(IN THOUSANDS EXCEPT FOR PER UNIT DATA)

<TABLE>
<CAPTION>
PROPERTIES
1996 UNDER CONTRACT
1995 ACQUISITIONS AND OFFERING
HISTORICAL ACQUISITIONS(A) AND SALE(C) ADJUSTED ADJUSTMENTS PRO FORMA
----------- -------------- ----------- --------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Total Revenues.................. $ 9,780 $ 1,280 $ 6,459 $ 17,519 $ 3,688(e) $ 21,207
Expenses:
Rent.......................... 1,405 123 492 2,020 131(e) 2,151
Depreciation and
amortization................. 1,541 291 1,815 3,647 1,020(f) 4,667
Taxes, general and
administrative............... 1,419 114 454 1,987 265(g) 2,252
Interest expense (income),
net.......................... 192 687 2,976 3,855 -- (h) --
----------- ------- ----------- --------- ------- -----------
Total expenses................ 4,557 1,215 5,737 11,509 -- --
----------- ------- ----------- --------- ------- -----------
Net income...................... $ 5,223 $ 65 $ 722 $ 6,010 $ -- $ --
Net income allocable to
unitholders.................... $ 5,119 $ 5,891 $ --
Average number of units
outstanding.................... 4,638 54(b) 328(d) 5,008 1,800(i) 6,808
Net income per unit............. $ 1.10 $ --
</TABLE>

- ------------------------
(a) Reflects pro forma adjustments for the results of operations for the 1995
acquisitions, comprised of 16 properties acquired on various dates from
March 1995 through December 1995. This adjustment represents the operations
of these acquired properties from January 1, 1995 through the date of
purchase.

(b) In connection with the acquisition of three properties, 54,167 Units were
issued.

(c) Reflects pro forma adjustments for the completed 1996 acquisitions,
comprising 93 properties acquired on various dates and the sale of one
property in 1996 as follows (in thousands):

<TABLE>
<CAPTION>
ACQUISITIONS SALE NET AMOUNT
----------- --------- -----------
<S> <C> <C> <C>
Rental revenues............................................ $ 6,468 $ (78) $ 6,390
Interest income from note receivable....................... 69 69
----------- --- -----------
Total revenues............................................. 6,468 (9) 6,459
Expenses:
Rent expense............................................... 492 -- 492
Depreciation and amortization.............................. 1,816 (1) 1,815
Taxes, general and administrative.......................... 454 -- 454
Interest expense........................................... 2,976 -- 2,976
----------- --- -----------
Total expenses............................................. $ 5,738 $ (1) $ 5,737
</TABLE>

(d) In connection with the acquisition of ten properties in 1996, 327,836 Units
were issued.

(e) Reflects pro forma adjustments for properties under contract comprised of 39
properties.

(f) Reflects pro forma increase in depreciation expense related to the purchase
of properties under contract.

F-6
<PAGE>
(g) Reflects pro forma increase in general and administrative expenses,
attributable to the increase in fees due to the Managing General Partner,
calculated as 1% of the contracted purchase price for the properties under
contract.

(h) Reflects the pro forma adjustment to interest expense as a result of the
Offering and purchase of the properties under contract.

Reduction of pro forma interest expense is based on the use of Offering
proceeds to reduce the total debt outstanding by $ at a pro forma
interest rate of 7.7%.

(i) Reflects the 1,800,000 Units to be issued in the Offering.

F-7
<PAGE>
INDEPENDENT AUDITORS' REPORT

The Partners
U.S. Restaurant Properties Master L.P.

We have audited the accompanying consolidated balance sheets of U.S.
Restaurant Properties Master L.P. (the Partnership) as of December 31, 1995 and
1994, and the related consolidated statements of income, partners' capital, and
cash flows for each of the three years in the period ended December 31, 1995.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
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, such consolidated financial statements present fairly, in
all material respects, the financial position of U.S. Restaurant Properties
Master L.P. as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP
Dallas, Texas
February 17, 1996

F-8
<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.
CONSOLIDATED BALANCE SHEETS
ASSETS

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------ -----------
1994 1995 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Cash and equivalents................................ $ 680,646 $ 7,127 $ 18,526
Marketable securities............................... 853,791 -- --
Receivables, net.................................... 715,202 951,095 924,402
Purchase deposits (Note 3).......................... -- 1,791,682 2,070,529
Prepaid expenses.................................... 122,962 315,189 284,552
Notes receivable (Note 10).......................... -- 268,654 348,238
Net investment in direct financing leases........... 21,237,432 19,371,015 18,875,331
Land................................................ 23,414,280 27,492,895 31,203,496
Buildings and leasehold improvements, net........... 1,548,375 6,257,188 18,844,373
Machinery and equipment, net........................ -- 223,739 257,141
Intangibles, net.................................... 14,316,583 14,804,155 14,524,275
----------- ----------- -----------
$62,889,271 $71,482,739 $87,350,863
----------- ----------- -----------
LIABILITIES AND PARTNERS' CAPITAL

Accounts payable.................................... $ 445,518 $ 677,398 $ 624,723
Line of credit...................................... -- 10,930,647 21,226,000
Capitalized lease obligations....................... 774,602 562,544 507,980
Commitments (Notes 7 and 8)
General Partners' capital........................... 1,308,543 1,240,604 1,222,468
Limited Partners' capital........................... 60,360,608 58,071,546 63,769,692
----------- ----------- -----------
$62,889,271 $71,482,739 $87,350,863
----------- ----------- -----------
</TABLE>

See Notes to Consolidated Financial Statements.

F-9
<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.
CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, QUARTER ENDED MARCH 31,
------------------------------------------- ----------------------------
1993 1994 1995 1995 1996
------------- ------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES FROM LEASED PROPERTIES
Rental income....................... $ 5,665,976 $ 6,339,993 $ 7,539,634 $ 1,539,963 $ 2,433,447
Amortization of unearned income on
direct financing leases............ 2,665,667 2,453,063 2,240,655 582,657 522,022
------------- ------------- ------------- ------------- -------------
Total Revenues...................... 8,331,643 8,793,056 9,780,289 2,122,620 2,955,469
EXPENSES
Rent................................ 1,294,669 1,347,748 1,405,380 336,496 411,521
Depreciation and amortization....... 1,383,489 1,361,136 1,540,900 336,576 534,037
Taxes, general and administrative... 1,007,914 1,143,956 1,419,279 369,668 369,638
Interest expense (income), net...... 44,234 (3,515) 192,142 (10,250) 317,588
------------- ------------- ------------- ------------- -------------
3,730,306 3,849,325 4,557,701 1,032,490 1,632,784
Provision for write down or
disposition of properties.......... 73,739 11,061 -- -- --
------------- ------------- ------------- ------------- -------------
Total Expenses...................... 3,804,045 3,860,386 4,557,701 1,032,490 1,632,784
------------- ------------- ------------- ------------- -------------
Net income............................ $ 4,527,598 $ 4,932,670 $ 5,222,588 $ 1,090,130 $ 1,322,685
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Net income allocable to unitholders... $ 4,437,051 $ 4,834,017 $ 5,119,175 $ 1,068,544 $ 1,296,496
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Average number of outstanding units... 4,635,000 4,635,000 4,637,865 4,635,000 4,903,008
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Net income per unit................... $ 0.96 $ 1.04 $ 1.10 $ 0.23 $ 0.26
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
</TABLE>

See Notes to Consolidated Financial Statements.

F-10
<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL

<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
------------- -------------- --------------
<S> <C> <C> <C>
Balance at January 1, 1993........................................ $ 1,429,488 $ 66,287,381 $ 67,716,869
Net income........................................................ 90,547 4,437,051 4,527,598
Cash distributions................................................ (162,588) (7,967,241) (8,129,829)
------------- -------------- --------------
Balance at December 31, 1993...................................... 1,357,447 62,757,191 64,114,638
------------- -------------- --------------
Net income........................................................ 98,653 4,834,017 4,932,670
Cash distributions................................................ (147,557) (7,230,600) (7,378,157)
------------- -------------- --------------
Balance at December 31, 1994...................................... 1,308,543 60,360,608 61,669,151
------------- -------------- --------------
Special general partner interest transfer......................... (12,899) (3,101) (16,000)
Net income........................................................ 103,413 5,119,175 5,222,588
Purchase of partnership units..................................... -- (546,750) (546,750)
Units issued for property......................................... -- 985,156 985,156
Cash distributions................................................ (158,453) (7,843,542) (8,001,995)
------------- -------------- --------------
Balance at December 31, 1995...................................... 1,240,604 58,071,546 59,312,150
Net income -- Unaudited........................................... 26,191 1,296,494 1,322,685
Units issued for property -- Unaudited............................ -- 6,595,933 6,595,933
Cash distributions -- Unaudited................................... (44,327) (2,194,281) (2,238,608)
------------- -------------- --------------
Balance at March 31, 1996 -- Unaudited............................ $ 1,222,468 $ 63,769,692 $ 64,992,160
------------- -------------- --------------
------------- -------------- --------------
</TABLE>

See Notes to Consolidated Financial Statements.

F-11
<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, QUARTER ENDED MARCH 31
-------------------------------------------- -----------------------------
1993 1994 1995 1995 1996
------------- ------------- -------------- ------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................... $ 4,527,598 $ 4,932,670 $ 5,222,588 $ 1,090,130 $ 1,322,685
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization............ 1,383,489 1,361,136 1,540,900 336,576 535,088
Amortization of deferred financing
costs................................... 10,285
Provision for write down or disposition
of properties........................... 73,739 11,061 -- -- --
Marketable securities.................... -- (853,791) 853,791 853,791 --
Decrease (increase) in receivables, net.. 10,873 (301,505) (235,893) 10,284 26,693
Decrease (increase) in prepaid
expenses................................ 1,262 (35,673) (192,227) 2,851 30,637
Reduction in net investment in direct
financing leases........................ 1,468,790 1,672,477 1,866,417 448,728 495,684
Increase (decrease) in accounts
payable................................. 9,506 203,333 231,880 (200,792) (52,675)
------------- ------------- -------------- ------------- --------------
2,947,659 2,057,038 4,064,868 1,451,438 1,045,712
------------- ------------- -------------- ------------- --------------
7,475,257 6,989,708 9,287,456 2,541,568 2,368,397
CASH FLOWS FROM (USED IN) INVESTING
ACTIVITIES:
Proceeds from sale of properties......... 1,130,000 -- -- -- --
Purchase of property..................... -- -- (8,083,302) (1,228,399) (9,926,741)
Purchase of intangibles.................. -- (1,662,729) -- --
Purchase of machines and equipment....... -- -- (231,609) (6,779) (39,901)
Purchase deposits paid................... -- -- (1,791,682) (60,000) (278,847)
Increase (decrease) in notes receivable.. -- -- (268,654) -- (79,584)
------------- ------------- -------------- ------------- --------------
1,130,000 -- (12,037,976) (1,295,178) (10,325,073)
CASH FLOWS FROM (USED IN) FINANCING
ACTIVITIES:
Increase in loan origination costs....... -- -- (76,843) -- (34,106)
Reduction in capitalized lease
obligations............................. (172,047) (191,008) (212,058) (50,954) (54,564)
Proceeds from line of credit............. -- -- 10,930,647 500,000 11,435,000
Repayment of line of credit.............. (1,139,647)
Cash distributions....................... (8,129,829) (7,378,157) (8,001,995) (1,986,025) (2,238,608)
Purchase of partnership units............ -- -- (546,750) --
Purchase of special general partner
interest................................ -- -- (16,000) (16,000) --
------------- ------------- -------------- ------------- --------------
(8,301,876) (7,569,165) 2,077,001 (1,552,979) 7,968,075
------------- ------------- -------------- ------------- --------------
Increase (decrease) in cash and
equivalents............................. 303,381 (579,457) (673,519) (306,589) 11,399
Cash and equivalents at beginning of
year.................................... 956,722 1,260,103 680,646 680,646 7,127
------------- ------------- -------------- ------------- --------------
Cash and equivalents at end of year...... $ 1,260,103 $ 680,646 $ 7,127 $ 374,057 $ 18,526
------------- ------------- -------------- ------------- --------------
------------- ------------- -------------- ------------- --------------
SUPPLEMENTAL DISCLOSURE:
Interest paid during the year............ $ 108,874 $ 89,912 $ 256,325 $ 19,264 $ 333,395
------------- ------------- -------------- ------------- --------------
------------- ------------- -------------- ------------- --------------
NON-CASH INVESTING ACTIVITIES
Units issued for property................ $ -- $ -- $ 985,156 $ -- $ 6,595,933
------------- ------------- -------------- ------------- --------------
------------- ------------- -------------- ------------- --------------
</TABLE>

See Notes to Consolidated Financial Statements.

F-12
<PAGE>
U.S. RESTAURANTS PROPERTIES MASTER L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 AND FOR
THE QUARTERS ENDED MARCH 31, 1995 AND 1996 (UNAUDITED)

1. ORGANIZATION
U.S. Restaurant Properties Master L.P. (Partnership), formerly Burger King
Investors Master L.P., a Delaware limited partnership, was formed on December
10, 1985. The Partnership, through its 99% limited partnership interest in U.S.
Restaurant Properties Operating Limited Partnership (Operating Partnership),
also a Delaware Limited Partnership, acquired from Burger King Corporation (BKC)
in February 1986 for $94,592,000 an interest in 128 restaurant properties
(Properties) owned or leased by BKC and leased or subleased on a net lease basis
to BKC franchisees. The Partnership is the sole limited partner of the Operating
Partnership, and they are referred to collectively as the "Partnerships". U.S.
Restaurant Properties, Inc., formerly QSV Properties, Inc., (QSV), the managing
general partner and BKC, the special general partner, were both indirect
wholly-owned subsidiaries of Grand Metropolitan PLC prior to May 17, 1994, at
which time QSV was sold to the current owners. On January 20, 1995, the
Partnership paid Burger King Corporation $16,000 for its 0.02% interest in the
Operating and Master Limited Partnership.

The Partnership may issue an unlimited number of units. The units
outstanding as of December 31, 1994 and 1995 and March 31, 1996 totaled
4,635,000, 4,659,167 and 4,987,003 respectively.

2. ACCOUNTING POLICIES
The financial statements have been prepared in accordance with generally
accepted accounting principles; however, this will not be the basis for
reporting taxable income to unitholders (see Note 9 for a reconciliation of
financial reporting income to taxable income). The financial statements reflect
the consolidated accounts of the Partnerships after elimination of significant
inter-partnership transactions.

Cash and equivalents include short-term, highly liquid investments with
original maturities of three months or less.

Marketable securities consist of U.S. treasury securities which have been
treated as trading securities as of December 31, 1994. As a result, they are
stated at market value.

An intangible asset was recorded for the excess of cost over the net
investment in direct financing leases in 1986. This intangible asset represents
the acquired value of future contingent rent receipts (based on a percentage of
each restaurant's sales) and is being amortized on a straight-line basis over 40
years.

Also included in intangible assets is the amount paid to acquire certain
leases with favorable rents payable to third party lessors. This amount is being
amortized over the remaining lease terms.

DEPRECIATION

Depreciation is computed using the straight-line method over estimated
useful lives of 10 to 20 years for financial statement purposes. Accelerated and
straight-line methods are used for tax purposes.

USE OF ESTIMATES

The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect reported amounts of certain assets, liabilities, and
revenues and expenses as of and for the reporting periods. Actual results may
differ from such estimates.

F-13
<PAGE>
U.S. RESTAURANTS PROPERTIES MASTER L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. ACCOUNTING POLICIES (CONTINUED)
LONG-LIVED ASSETS

In March 1995, Statement of Financial Accounting Standard ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed of" was issued. The Partnerships adopted SFAS No. 121 in 1995.
Long-lived assets include real estate, direct financing leases, and intangibles
which are evaluated on an individual property basis. Based on the Partnership's
policy for reviewing impairment of long-lived assets, there was no adjustment
necessary to the accompanying consolidated financial statements.

INCOME TAXES

No federal or, in most cases, state income taxes are reflected in the
consolidated financial statements because the Partnerships are not taxable
entities. The partners must report their allocable shares of taxable income or
loss in their individual income tax returns.

FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS

The notes receivable and the line of credit are carried at amounts that
approximate their fair value.

STOCK-BASED COMPENSATION

In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," was issued, effective for calendar
year 1996. This statement applies to transactions in which an entity issues its
equity instruments to acquire goods or services from non-employees. Those
transactions must be accounted for based on the fair value of the consideration
received or the fair value of the equity instruments issued, whichever is more
reliably measurable. The Partnership has not completed the process of evaluating
the impact that will result from adopting such statement and therefore is unable
to disclose the impact the adoption will have on its financial position and
results of operations. Additionally, the effect of adopting the statement will
depend on the calculated value of the units issued and the extent to which units
are used in acquiring real estate properties in the future.

3. OTHER BALANCE SHEET INFORMATION

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31
------------------------ -----------
1994 1995
----------- -----------
1996
-----------
(UNAUDITED)
RECEIVABLES, NET
<S> <C> <C> <C>
Receivables........................... $ 832,093 $ 1,067,986 $ 1,041,293
Less allowance for doubtful
accounts............................. 116,891 116,891 116,891
----------- ----------- -----------
$ 715,202 $ 951,095 $ 924,402
----------- ----------- -----------
----------- ----------- -----------
BUILDINGS AND LEASEHOLD IMPROVEMENTS,
NET
Buildings and leasehold improvements.. $ 3,892,294 $ 8,882,138 $21,694,210
Less accumulated depreciation......... 2,343,919 2,624,950 2,849,837
----------- ----------- -----------
$ 1,548,375 $ 6,257,188 $18,844,373
----------- ----------- -----------
----------- ----------- -----------
INTANGIBLES, NET
Intangibles........................... $26,392,197 $28,178,508 $28,224,300
Less accumulated amortization......... 12,075,614 13,374,353 13,700,025
----------- ----------- -----------
$14,316,583 $14,804,155 $14,524,275
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

F-14
<PAGE>
U.S. RESTAURANTS PROPERTIES MASTER L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. OTHER BALANCE SHEET INFORMATION (CONTINUED)
Total purchase deposits of $1,791,682 at December 31, 1995 included
$1,075,000 of non-refundable deposits.

On December 31, 1995, the Partnerships owned the land at 79 Properties and
leased the land at 60 Properties from third party lessors under operating
leases. The Partnerships in turn leased or subleased the land primarily to BKC
franchisees under operating leases.

On December 31, 1995, the Partnerships owned the buildings on 124 Properties
and leased the buildings on 14 Properties from third party lessors under leases
accounted for as capital leases. The Partnerships own one property in which only
the land is owned and leased. The Partnerships leased 28 owned buildings to
franchisees under operating leases. These 28 buildings are stated at cost, net
of accumulated depreciation, on the balance sheet. A total of 109 buildings are
leased primarily to franchisees under direct financing leases. The net
investment in the direct financing leases represents the present value of the
future minimum lease receipts for these 109 buildings. One property is not
currently leased.

On December 31, 1995, there were 138 Partnership restaurant sites in
operation, and there was one closed site. The Partnerships continue to seek a
suitable tenant for the remaining site. The write-down of the closed site was
$11,061 and $73,739 in 1994 and 1993, respectively.

4. PROPERTY PURCHASES IN 1996
During the first quarter the Partnership completed the purchase of 24
properties. Nine of the properties were purchased for a cash price of
$4,426,264. These properties included three Dairy Queens, two KFCs and a Pizza
Inn. Fifteen of the properties were purchased for a combination of cash and
units. The total purchase price included $5,500,477 in cash and 327,836 units
with a guaranteed value of $7,839,800. Of the 327,836 partnership units issued,
28,261 units are guaranteed to have a market value of $23 three years from the
transaction date and 299,575 partnership units are guaranteed to have a market
value of $24 two years from that transaction date. All 327,836 units have
certain registration rights. The properties included thirteen Burger Kings, one
Sizzler, and one Taco Cabana. The allocation of the cost of the properties
purchased is done on a preliminary basis during the year and will be finalized
at year end.

In the normal course of business, the Partnership may sign purchase
agreements to acquire restaurant properties. Such agreements become binding
obligations upon the completion of a due diligence period ranging usually from
15 - 30 days.

On March 31, 1996, purchase deposits included earnest money amounting to
$1,779,000 for the purchase of 29 Burger Kings, five Schlotskys', 37 Dairy
Queens, 27 Hardees, and nine Pizza Huts.

5. GUARANTEED STOCK PRICE

Three properties were acquired on October 10, 1995, with a combination of
cash and 54,167 partnership units. The partnership units are guaranteed to have
a value of $24 per unit three years from the transaction date. The unit price on
the date issued was $18 3/8. Any difference between the guaranteed value and the
actual value of the units at the end of the three year period is to be paid in
cash. These properties were recorded at the guaranteed value of the units
discounted to reflect the present value on the date the units were issued
(estimated fair value). As a result, the market price of the units at the date
of issuance was used to record this transaction. If a cash payment is required
as a result of the guarantee, an adjustment will be made to reduce partnership
capital for the amount of cash paid.

During the quarter ended March 31, 1996, the Partnership issued 327,836 for
the acquisition of properties. Of these units, 28,261 units are guaranteed to
have a market value of $23 three years from

F-15
<PAGE>
U.S. RESTAURANTS PROPERTIES MASTER L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. GUARANTEED STOCK PRICE (CONTINUED)
the transaction date and 299,575 units are guaranteed to have a market value of
$24 two years from the transaction date. The accounting described in the
paragraph above was used to record these transactions. They were recorded using
current market prices at the date of issuance of approximately $20 per unit.

6. LINE OF CREDIT
On December 31, 1995, $10,930,647 had been drawn on the $20 million line of
credit. The line of credit was increased in February 1996 to $40,000,000 with
substantially all properties included as collateral on this line of credit. The
interest rate is the lower of LIBOR plus 180 basis points or the prime rate
which was 8.25% on March 31, 1996. There is an unused line of credit fee of .25%
per annum on the average daily excess of the commitment amount over the
aggregate unpaid balance of the revolving loan which is charged and is payable
on a quarterly basis. The LIBOR rate at December 31, 1995, was 5.375%. The line
of credit also requires the Partnerships to maintain a tangible net worth in
excess of $40,500,000, a debt to tangible net worth ratio of not more than 0.5
to 1, and a cash flow coverage ratio of not less than 2 to 1 based upon a pro
forma five year bank debt amortization. The $40 million line of credit matures
on June 27, 1998.

7. INVESTMENTS AND COMMITMENTS AS LESSOR
The Partnerships lease land and buildings primarily to BKC franchisees. The
building portions of most of the leases are direct financing leases while the
land portions are operating leases. The leases generally provide for a term of
20 years from the opening of the related restaurant, and do not contain renewal
options. The Partnerships, however, have agreed to renew a franchise lease if
BKC renews or extends the lessee's franchise agreement. As of December 31, 1995,
the remaining lease terms ranged from 1 to 28 years. The leases provide for
minimum rents and contingent rents based on a percentage of each restaurant's
sales, and require the franchisee to pay executory costs.
<TABLE>
<CAPTION>
DIRECT
FINANCING OPERATING
LEASES LEASES
-------------- --------------
<S> <C> <C>
MINIMUM FUTURE LEASE RECEIPTS FOR YEARS ENDING DECEMBER 31:
1996....................................................... $ 4,172,825 $ 4,957,086
1997....................................................... 4,115,977 4,943,011
1998....................................................... 3,810,947 4,886,906
1999....................................................... 3,018,938 4,599,365
2000....................................................... 2,056,720 3,798,127
Later........................................................ 2,602,150 19,086,897
-------------- --------------
$ 19,777,557 $ 42,271,392
-------------- --------------
-------------- --------------

1994 1995
-------------- --------------
<S> <C> <C>
NET INVESTMENT IN DIRECT FINANCING LEASES AT DECEMBER 31:
Minimum future lease receipts.............................. $ 23,950,382 $ 19,777,557
Estimated unguaranteed residual values..................... 7,561,965 7,561,965
Unearned amount representing interest...................... (10,274,915) (7,968,507)
-------------- --------------
$ 21,237,432 $ 19,371,015
-------------- --------------
-------------- --------------
</TABLE>

F-16
<PAGE>
U.S. RESTAURANTS PROPERTIES MASTER L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. INVESTMENTS AND COMMITMENTS AS LESSOR (CONTINUED)

<TABLE>
<CAPTION>
QUARTER ENDED MARCH
YEAR ENDED DECEMBER 31 31,
---------------------------------- ----------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
RENTAL INCOME:
Minimum rental income........ $3,029,998 $3,061,951 $3,583,609 $1,365,785 $2,033,277
Contingent rental income..... 2,635,978 3,278,042 3,956,025 756,835 922,192
---------- ---------- ---------- ---------- ----------
$5,665,976 $6,339,993 $7,539,634 $2,122,620 $2,955,469
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>

If the restaurant properties are not adequately maintained during the term
of the tenant leases, such properties may have to be rebuilt before the leases
can be renewed, either by the Partnership as it considers necessary or pursuant
to Burger King's successor policy. The successor policy, which is subject to
change from time to time in Burger King's discretion, is intended to encourage
the reconstruction, expansion, or other improvement of older Burger King
restaurants and generally affects properties that are more than ten years old or
are the subject of a franchise agreement that will expire within five years.

Under the current partnership agreement, Burger King can require that a
restaurant property be rebuilt. If the tenant does not elect to undertake the
rebuilding, the Partnership would be required to make the required improvement
itself. However, as a condition to requiring the Partnership to rebuild, Burger
King would be required to pay the Partnership its percentage share ("Burger
King's Percentage Share") of the rebuilding costs. Such percentage share would
be equal to (i) the average franchise royalty fee percentage rate payable to
Burger King with respect to such restaurant, divided by (ii) the aggregate of
such average franchise royalty fee percentage rate and the average percentage
rate payable to the Partnership with respect to such restaurant property. The
managing general partner believes that Burger King's Percentage Share would
typically be 29% for a restaurant property.

The managing general partner believes it is unlikely that any material
amount of rebuilding of Burger King restaurant properties will be required in
the next several years, if ever.

8. COMMITMENTS
The land at 46 Properties and the land and buildings at 14 Properties are
leased by the Partnerships from third party lessors. The building portions of
the leases are generally capital leases while the land portions are operating
leases. Commitment leases provide for an original term of 20 years and most are
renewable at the Partnership's option. As of December 31, 1995, the remaining
lease terms (excluding renewal option terms) ranged from 1 to 11 years. If all
renewal options are taken into

F-17
<PAGE>
U.S. RESTAURANTS PROPERTIES MASTER L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. COMMITMENTS (CONTINUED)
account, the terms ranged from 8 to 33 years. Rents payable may escalate during
the original lease and renewal terms. For six properties, the leases provide for
contingent rent based on each restaurant's sales.

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
----------- -------------
<S> <C> <C>
MINIMUM FUTURE LEASE OBLIGATIONS FOR YEARS ENDING DECEMBER 31:
1996...................................................................... $ 247,603 $ 1,357,289
1997...................................................................... 198,819 1,387,445
1998...................................................................... 139,610 1,349,357
1999...................................................................... 60,250 1,173,489
2000...................................................................... 4,328 938,647
Later..................................................................... 1,082 3,290,229
----------- -------------
Total minimum obligations (a)............................................... 651,692 $ 9,496,456
-------------
-------------
Amount representing interest................................................ (89,148)
-----------
Present value of minimum obligations........................................ $ 562,544
-----------
-----------
</TABLE>

- ------------------------
(a) Minimum Lease Obligations have not been reduced by minimum sublease rentals.

<TABLE>
<CAPTION>
QUARTER ENDED MARCH
YEARS ENDED DECEMBER 31 31,
---------------------------------- --------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
RENTAL EXPENSE
Minimum rental expense.......... $1,213,564 $1,245,986 $1,303,666 $ 315,770 $ 390,907
Contingent rental expense....... 81,105 101,762 101,714 20,726 20,614
---------- ---------- ---------- --------- ---------
$1,294,669 $1,347,748 $1,405,380 $ 336,496 $ 411,521
---------- ---------- ---------- --------- ---------
---------- ---------- ---------- --------- ---------
</TABLE>

On July 21, 1995, the managing general partner authorized the Partnership to
repurchase up to 300,000 of its units in the open market. During 1995, 30,000
units were repurchased by the Partnership.

F-18
<PAGE>
U.S. RESTAURANTS PROPERTIES MASTER L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. RECONCILIATION OF FINANCIAL REPORTING INCOME TO TAXABLE INCOME
Financial reporting income differs from taxable income primarily because
generally accepted accounting principles reflect the building portion of leases
from Partnerships to franchisees as a net investment in direct financing leases.
For tax purposes, these leases are treated as operating leases. In addition,
differences exist in depreciation methods and asset lives.

<TABLE>
<CAPTION>
1995
FINANCIAL
REPORTING RECONCILING TAXABLE
INCOME DIFFERENCES INCOME
------------- -------------- --------------
<S> <C> <C> <C>
REVENUES FROM LEASED PROPERTIES:
Rental income................................................... $ 7,539,634 $ 4,107,072 $ 11,646,706
Amortization of unearned income on direct financing leases...... 2,240,655 (2,240,655) --
------------- -------------- --------------
$ 9,780,289 $ 1,866,417 $ 11,646,706
------------- -------------- --------------
------------- -------------- --------------
EXPENSES:
Rent............................................................ $ 1,405,380 $ 280,872 $ 1,686,252
Depreciation and amortization................................... 1,540,900 1,396,966 2,937,866
General and administrative...................................... 1,419,279 -- 1,419,279
Interest expense (income), net.................................. 192,142 (68,814) 123,328
------------- -------------- --------------
4,557,701 1,609,024 6,166,725
------------- -------------- --------------
Net income...................................................... $ 5,222,588 $ 257,393 $ 5,479,981
------------- -------------- --------------
------------- -------------- --------------
</TABLE>

10. RELATED PARTY TRANSACTIONS
The managing general partner is responsible for managing the business and
affairs of the Partnerships. The Partnerships pay the managing general partner a
non-accountable annual allowance (adjusted annually to reflect increases in the
Consumer Price Index), plus reimbursement of out-of-pocket costs incurred to
other parties for services rendered to the Partnerships. The allowance for the
years ended December 31, 1993, 1994, and 1995, and March 31, 1995 and 1996 was
$528,000, $542,508, $585,445, $139,018 and $198,681, respectively. The
Partnerships' accounts payable balance includes $187,204 and $135,627 for this
allowance as of December 31, 1995 and 1994, respectively. The managing general
partner paid no out-of-pocket costs to other parties on behalf of the
Partnerships during 1993, 1994, and 1995.

To compensate the Managing General Partner for its efforts and increased
internal expenses with respect to additional properties, the Partnership will
pay the Managing General Partner, with respect to each additional property
purchased: (i) a one-time acquisition fee equal to one percent of the purchase
price for such property and (ii) an annual fee equal to one percent of the
purchase price for such property, adjusted for increases in the Consumer Price
Index. For 1995 and the quarter ended March 31, 1996, the one-time acquisition
fee equaled $109,238 and $154,251, respectively, which was capitalized, and the
increase in the non-accountable annual fee for 1995 equaled $29,375. In
addition, if the Rate of Return (as defined) on the Partnership's equity in all
additional properties exceeds 12 percent per annum for any fiscal year, the
Managing General Partner will be paid an additional fee equal to 25 percent of
the cash flow received with respect to such additional properties in excess of
the cash flow representing a 12 percent Rate of Return thereon. However, to the
extent such distributions are ultimately received by the Managing General
Partner in excess of those provided by its 1.98 percent Partnership interest,
they will reduce the fee payable with respect to such excess flow from any
additional properties.

F-19
<PAGE>
U.S. RESTAURANTS PROPERTIES MASTER L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. RELATED PARTY TRANSACTIONS (CONTINUED)
In 1994, the Partnerships with the consent and financial participation of
BKC, continued rent relief for three properties.

In 1993, the Partnerships sold two non-operating properties at slightly less
than their book values to BKC. At that time, BKC was the special general partner
and had an ownership interest of 0.02% in the Partnerships.

The managing general partner has agreed to make available to the Partnership
an unsecured, interest-free, revolving line of credit in the principal amount of
$500,000 to provide the Partnerships with the necessary working capital to
minimize or avoid seasonal fluctuation in the amount of quarterly cash
distributions. No loans were made or were outstanding at any time during the
years ended December 31, 1993, 1994, and 1995.

A note receivable of $255,000 and $300,000 is due from Arkansas Restaurants
#10 L.P. at December 31, 1995 and March 31, 1996, respectively. The note
receivable is due on September 1, 1996, and has an interest rate of 9.0% per
annum.

As of December 31, 1995 and March 31, 1996, the managing general partner
owned 90% of Arkansas Restaurants #10 L.P.

On March 17, 1995 the limited partners granted the managing general partner
options to acquire up to 400,000 units, subject to certain adjustments under
anti-dilution provisions. The initial exercise price of each option is $15.50
which is the average closing price of the depository receipts for the units on
the New York Stock Exchange for the five trading days immediately after the date
of grant. The options are non-transferable except by operation of law and vest
and become exercisable on the first anniversary of the date as of which the
exercise price is determined, subject to earlier vesting and exercisability if
the managing general partner is removed as general partner. The term of the
options expires on the tenth anniversary of the date as of which the exercise
price is determined.

11. DISTRIBUTIONS AND ALLOCATIONS
Under the amended partnership agreement, cash flow from operations of the
Partnerships each year will be distributed 98.02% to the unitholders and 1.98%
to the general partners until the unitholders have received a 12% simple
(noncumulative) annual return for such year on the unrecovered capital per unit
($20.00, reduced by any prior distributions of net proceeds of capital
transactions); then any cash flow for such year will be distributed 75.25% to
the unitholders and 24.75% to the general partners until the unitholders have
received a total simple (noncumulative) annual return for such year of 17.5% on
the unrecovered capital per unit; and then any excess cash flow for such year
will be distributed 60.40% to the unitholders and 39.60% to the general
partners. The unitholders received 98.02% of all cash flow distributions for
1995 and 98% for 1994 and 1993.

Under the amended partnership agreement, net proceeds from capital
transactions (for example, disposition of the Properties) will be distributed
98.02% to the unitholders and 1.98% to the general partners until the
unitholders have received an amount equal to the unrecovered capital per unit
plus 12.0% cumulative, simple return on the unrecovered capital per unit
outstanding from time to time (to the extent not previously received from
distribution of cash flow or proceeds of prior capital transactions); then such
proceeds will be distributed 75.25% to the unitholders and 24.75% to the general
partners until the unitholders have received the total cumulative, simple return
of 17.5% on the unrecovered capital per unit; and then such proceeds will be
distributed 60.40% to the unitholders and 39.60% to the general partners. There
were no capital transactions in 1995 or 1994.

F-20
<PAGE>
U.S. RESTAURANTS PROPERTIES MASTER L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. DISTRIBUTIONS AND ALLOCATIONS (CONTINUED)
During 1993 two non-operating properties were sold at slightly less than
their book values. Both dispositions were capital transactions and resulted in
the special distributions to unitholders of 11 cents and 13 cents per unit on
September 13, and December 13, 1993, respectively.

All operating income and loss of the Partnership for each year generally
will be allocated among the partners in the same aggregate ratio as cash flow is
distributed for that year. Gain and loss from a capital transaction generally
will be allocated among the partners in the same aggregate ratio as proceeds of
the capital transactions are distributed except to the extent necessary to
reflect capital account adjustments.

12. SUMMARY BY QUARTER (UNAUDITED)

<TABLE>
<CAPTION>
PER UNIT
---------------------------
ALLOCABLE RELATED CASH
REVENUES NET INCOME NET INCOME DISTRIBUTIONS*
------------- ------------- ----------- --------------
<S> <C> <C> <C> <C>
1993
First quarter........................................ $ 1,871,146 $ 925,817 $ 0.20 $ 0.37
Second quarter....................................... 2,116,827 1,146,078 0.24 0.48**
Third quarter........................................ 2,248,966 1,304,560 0.28 0.50**
Fourth quarter....................................... 2,094,704 1,151,143 0.24 0.37
------------- ------------- ----- -----
Annual............................................... $ 8,331,643 $ 4,527,598 $ 0.96 $ 1.72**
------------- ------------- ----- -----
------------- ------------- ----- -----
1994
First quarter........................................ $ 1,983,987 $ 1,099,981 $ 0.23 $ 0.39
Second quarter....................................... 2,297,313 1,340,560 0.28 0.39
Third quarter........................................ 2,329,969 1,392,292 0.29 0.41
Fourth quarter....................................... 2,181,787 1,099,837 0.24 0.42
------------- ------------- ----- -----
Annual............................................... $ 8,793,056 $ 4,932,670 $ 1.04 $ 1.61
------------- ------------- ----- -----
------------- ------------- ----- -----
1995
First quarter........................................ $ 2,122,620 $ 1,090,130 $ 0.23 $ 0.42
Second quarter....................................... 2,494,818 1,406,993 0.30 0.42
Third quarter........................................ 2,592,283 1,495,433 0.32 0.43
Fourth quarter....................................... 2,570,568 1,230,032 0.25 0.44
------------- ------------- ----- -----
Annual............................................... $ 9,780,289 $ 5,222,588 $ 1.10 $ 1.71
------------- ------------- ----- -----
------------- ------------- ----- -----
1996
First quarter........................................ $ 2,955,469 $ 1,322,685 $ 0.26 $ 0.47
------------- ------------- ----- -----
------------- ------------- ----- -----
</TABLE>

- ------------------------
* Represents amounts declared and paid in the following quarter.
** Includes special cash distributions of $0.11 for the second quarter and $0.13
for the third quarter.

13. PRO FORMA (UNAUDITED)
The 1995 acquisitions consisted of 16 properties that were valued at
$10,731,187 based upon the purchase method of accounting. These properties were
acquired on various dates from March 1995 through December 1995. Three of the
properties were acquired with a combination of cash and 54,167 partnership
units. The 54,167 partnership units are guaranteed to have a market value of $24
three years from the transaction date and have certain registration rights.

F-21
<PAGE>
U.S. RESTAURANTS PROPERTIES MASTER L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13. PRO FORMA (UNAUDITED) (CONTINUED)
The following pro forma information for the years ended December 31, 1994
and 1995 was prepared by adjusting the actual consolidated results of the
Partnership for the years ended December 31, 1994 and 1995 for the effects of
the 1995 acquisitions as if all such acquisitions and related financing
transactions including the issuance of 54,167 units had occurred on January 1,
1994. Interest expense for pro forma purposes was calculated assuming a 7.7%
interest rate for both years presented, which approximates the interest rate the
Partnership paid during 1995.

The following pro forma information for the quarters ended March 31, 1995
and 1996 was prepared by adjusting the actual consolidated results of the
Partnership for the quarters ended March 31, 1995 and 1996, respectively, for
the effects of the 1995 and 1996 acquisitions as if all acquisitions and related
financing transactions including the issuance of 54,167 and 327,836 units had
occurred on January 1, 1995 and 1996, respectively. Interest expense for pro
forma purposes was calculated assuming a 7.7% and 7.1% interest rate for the
quarter ended March 31, 1995 and 1996, respectively, which approximates the rate
the Partnership paid during such quarters.

These pro forma operating results are not necessarily indicative of what the
actual results of operations of the Partnership would have been assuming all of
the properties were acquired as of January 1, 1994, 1995 and 1996, and they do
not purport to represent the results of operations for future periods.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, QUARTER ENDED MARCH 31,
------------------------------ ----------------------------
1994 1995 1995 1996
-------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues from leased properties................... $ 10,502,979 $ 11,059,859 $ 3,059,645 $ 3,084,186
Net income....................................... $ 5,048,828 $ 5,288,037 $ 1,243,732 $ 1,343,234
-------------- -------------- ------------- -------------
-------------- -------------- ------------- -------------
Net income allocable to unitholders.............. $ 4,947,851 $ 5,183,334 $ 1,219,106 $ 1,316,638
-------------- -------------- ------------- -------------
-------------- -------------- ------------- -------------
Average number of outstanding units.............. 4,689,167 4,679,715 5,017,003 4,987,003
-------------- -------------- ------------- -------------
-------------- -------------- ------------- -------------
Net income per unit.............................. $ 1.06 $ 1.11 $ 0.24 $ 0.26
-------------- -------------- ------------- -------------
-------------- -------------- ------------- -------------
</TABLE>

14. SUBSEQUENT EVENTS (UNAUDITED)
On April 22, 1996 the board of directors of the Managing General Partner
declared a cash distribution of $.47 per unit. The cash distribution is payable
on June 13, 1996 to Unitholders of record on June 6, 1996.

In April 1996, two Pizza Hut properties and one Hardee's property were
purchased for $420,000 and $546,000, respectively. In May 1996, 37 Dairy Queen
properties were purchased for $11,000,000 and 29 Burger King properties were
purchased for $17,325,000. All of the purchase prices are exclusive of the 1%
paid to the Managing General Partner and other closing costs.

On April 19, 1996, the Partnership filed a registration statement with the
Securities and Exchange Commission to register 1,800,000 partnership units to be
sold in the public market. The Partnership also granted an option to the
underwriters for 270,000 units to cover over-allotments. The registration
statement has not yet become effective.

On April 29, 1996, U.S. Restaurant Properties Business Trust #1, a financing
subsidiary of the Partnership closed on a $20 million credit facility with
Morgan Keegan Mortgage Company, Inc., of which approximately $15,800,000 has
been drawn as of June 11, 1996. The Morgan Keegan credit facility bears interest
at a rate of 300 basis points in excess of LIBOR, with interest payable monthly,
with a final maturity date of November 30, 1996. The Morgan Keegan credit
facility is nonrecourse to the Partnership and is secured by 42 properties owned
by the Trust.

F-22
<PAGE>
U.S. RESTAURANTS PROPERTIES MASTER L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

14. SUBSEQUENT EVENTS (UNAUDITED) (CONTINUED)

As of June 11, 1996, the Partnership had approximately $36,500,000 borrowed
under its bank line of credit.

On May 1, 1996, a restaurant property located in Wenatchee, Washington was
sold for $825,000 at a gain. The sales price consisted of $82,500 in cash plus a
$742,500 installment note receivable. Interest on the note receivable is due
monthly at an interest rate of 9.25 percent per annum and the principal is due
at maturity in 30 months.

As of June 11, 1996, the Partnership has entered into binding agreements to
acquire 39 additional restaurant properties for an aggregate purchase price of
approximately $27 million.

F-23
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE PARTNERSHIP OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY ANY
SECURITY OTHER THAN THE UNITS OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE
AN OFFER TO SELL AS A SOLICITATION OF ANY OFFER TO BUY THE UNITS BY ANYONE IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR
TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN ANY
CIRCUMSTANCES. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE PARTNERSHIP SINCE THE DATE HEREOF OR THAT
THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Summary........................................ 3
Risk Factors................................... 9
History and Structure of The Partnership....... 16
Capitalization................................. 18
Use of Proceeds................................ 19
Price Range of Units and Distribution Policy... 19
Selected Historical and Pro Forma Financial
Information and Other Data.................... 21
Management's Discussion and Analysis........... 24
Business and Properties........................ 28
Management..................................... 40
Description of Units........................... 41
Federal Income Tax Considerations.............. 45
Underwriting................................... 59
Legal Matters.................................. 60
Experts........................................ 60
Available Information.......................... 61
Incorporation by Reference..................... 61
Index to Financial Statements.................. F-1
</TABLE>

------------------------------

UNTIL , 1996 (25 DAYS FROM THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

1,800,000 UNITS OF
BENEFICIAL INTEREST

U.S. RESTAURANT
PROPERTIES MASTER L.P.
---------------------------

---------------------

PROSPECTUS

---------------------

MORGAN KEEGAN & COMPANY, INC.

EVEREN SECURITIES, INC.

SOUTHWEST SECURITIES, INC.

, 1996

- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

Set forth below is an estimate of the approximate amount of the fees and
expenses payable by the Registrant in connection with the issuance and
distribution of the Units:

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.............. $ 16,150
NYSE listing fee................................................. 6,300
NASD filing fee.................................................. 5,183
Printing and mailing expenses.................................... 125,000
Accountant's fees and expenses................................... 130,000
Engraving expenses............................................... 10,000
Blue Sky fees and expenses....................................... 15,000
Legal fees....................................................... 80,000
Transfer Agent's fees............................................ 3,000
Miscellaneous expenses........................................... 9,367
---------
Total........................................................ $ 400,000
---------
---------
</TABLE>

- ------------------------
* To be supplied by amendment.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Partnership Agreement provides that the Managing General Partner and its
affiliates, officers, directors, agents, and employees will not be personally
liable to the Partnership or to any of its Unitholders for any actions that do
not constitute actual fraud, gross negligence, or willful or wanton misconduct
if the Managing General Partner or such other person acted (or failed to act) in
good faith and in a manner they believed to be in, or not opposed to, the
interests of the Partnership. Therefore, the Unitholders have a more limited
right against the Managing General Partner than they would have absent the
limitations in the Partnership Agreement. The Partnership also indemnifies the
Managing General Partner and such persons and entities against all liabilities,
costs, and expenses (including legal fees and expenses) incurred by a Managing
General Partner or any such person or entity arising out of or incidental to the
business of the Partnership, including without limitation, liabilities under the
federal and state securities laws if (i) the Managing General Partner or such
person or entity acted (or failed to act) in good faith and in a manner it
believed to be in, or not opposed to, the interests of the Partnership and, with
respect to any criminal proceedings, had no reasonable cause to believe such
conduct was unlawful; and (ii) the conduct of the General Partner or of such
person or entity did not constitute actual fraud, gross negligence, or willful
or wanton misconduct. A successful indemnification of the Managing General
Partner could deplete the assets of the Partnership unless the Partnership's
indemnification obligation is covered by insurance. The Partnership's
indemnification obligation is currently not covered by insurance. No
determination has been made whether to attempt to secure such insurance, which
may not be available at a reasonable price or at all. Any Unitholder who
recovers from any indemnified party an amount for which the indemnified party is
entitled to indemnification will be personally liable to the Partnership and the
indemnified party (in aggregate) for and to the extent of such amount.

Reference is made to Section 7 of the Underwriting Agreement filed as
Exhibit 1.1 to this Registration Statement.

Subject to any terms, conditions, or restrictions set forth in the
Partnership Agreement, Section 17-108 of the Delaware Revised Limited
Partnership Act empowers a Delaware limited partnership to indemnify by and hold
harmless any partner or other person from and against any and all claims and
demands whatsoever.

II-1
<PAGE>
Section 145 of the Delaware General Corporation Law sets forth the extent to
which a person who is a director or officer of a Delaware corporation or serves
at the request of a Delaware corporation as a director, officer, employee or
agent of any other enterprise may be indemnified against any liabilities they
may incur in their capacity as such. Article VIII of the Managing General
Partner's Bylaws provide for the indemnification of directors and officers of
the Managing General Partner and such directors and officers who serve at the
request of the Managing General Partner as directors, officers, employees, or
agents of any other enterprise against certain liabilities under certain
circumstances.

ITEM 16. EXHIBITS

<TABLE>
<CAPTION>
<C> <S> <C>
1.1 Form of Underwriting Agreement, including the Agreement Among Underwriters and Selected
Dealer's Agreement.
2.1 Amended and Restated Purchase and Sale Agreement dated as of February 3, 1986, filed as
Exhibit 10(a) to Amendment No. 2 to the Registrant's Registration Statement on Form S-11
(Registration No. 33-2382) and incorporated herein by reference.
4.1 Second Amended and Restated Partnership Agreement.
4.2 Certificate of Limited Partnership of the Partnership.
4.3 Deposit Agreement and Form of Depositary Receipt and Application for Transfer of Depositary
Units to Morgan Guaranty Trust Company of New York dated February 3, 1986, filed as
Exhibit 4.5 to Amendment No. 3 to the Registrant's Registration Statement on Form S-11
(Registration No. 33-2382) and incorporated herein by reference.
4.4 First Amendment to Deposit Agreement, dated as of May 5, 1987, filed as Exhibit (4)A to
Registrant's Current Report on Form 8-K dated as of September 30, 1987 and incorporated
herein by reference.
5.1 Opinion of Middleberg, Riddle & Gianna.
8.1 Opinion of Middleberg, Riddle & Gianna relating to tax matters.
10.2 Amendment No. 91 to Limited Partnership Agreement effective November 30, 1994, regarding
Burger King Corporation Withdrawal as Special General Partner and Name Change, filed as
Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the period ended
September 30, 1994 and incorporated herein by reference.
10.3 Consulting Agreement dated as of April 30, 1987, filed as Exhibit 10.2 to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1987 and incorporated herein by
reference.
10.4 Option Agreement dated as of March 24, 1995, between U.S. Restaurant Properties Master L.P.
and QSV Properties Inc., filed as Exhibit 10.3 to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1987 and incorporated herein by reference.
10.5 Stock Purchase Agreement dated as of May 27, 1994 between Pillsbury Company and Robert J.
Stetson, et al regarding sale of QSV Properties Inc., filed as Exhibit 10.1 to
Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 1984 and
incorporated herein by reference.
10.6 Amended and Restated Secured Loan Agreement dated as of February 15, 1996 between the
Registrant and various banks, filed as Exhibit 10.6 to Registrant's Annual Report on Form
10-K for the year ended December 31, 1995 and incorporated herein by reference.
</TABLE>

II-2
<PAGE>

<TABLE>
<C> <S> <C>
10.7 Demand Promissory Note dated as of August 15, 1995, executed by Arkansas Restaurants #10,
L.P. for the benefit of U.S. Restaurant Properties Operating, L.P.
10.8 Mortgage Warehouse Facility dated as of April 29, 1996 between U.S. Restaurant Properties
Business Trust I and Morgan Keegan Mortgage Company, Inc.
**10.9 Amendment No. 1 to the Mortgage Warehouse Facility dated as of June 1, 1996 between U.S.
Restaurant Properties Business Trust I and Morgan Keegan Mortgage Company, Inc.
**23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of KPMG Peat Marwick LLP.
23.3 Consent of Tanner and Long, P.C.
23.4 Consent of Thigpen & Lanier.
23.5 Consent of BDO Seidman, LLP.
23.6 Consent of William C. Love, CPA.
23.7 Consent of Middleberg, Riddle & Gianna (included in Exhibit 5.1).
24.1 Power of Attorney (set forth on signature page hereof).
</TABLE>

- ------------------------
**Filed herein.

ITEM 17. UNDERTAKINGS.

The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act, and will be governed by the final adjudication
of such issue.

For purposes of determining any liability under the Securities Act of 1933,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.

For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

II-3
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Dallas, State of Texas on June 12, 1996.

U.S. RESTAURANT PROPERTIES MASTER L.P.

By: U.S. Restaurant Properties, Inc.
Managing General Partner

By: /s ROBERT J. STETSON

-----------------------------------
Robert J. Stetson
PRESIDENT AND CHIEF EXECUTIVE
OFFICER

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ----------------------------------------------- -----------------

<C> <S> <C>
Director of U.S. Restaurant Properties, Inc.
s/ ROBERT J. STETSON (Principal Accounting Officer, Principal
------------------------------------ Executive Officer and Principal Financial June 12, 1996
Robert J. Stetson Officer)

s/ FRED H. MARGOLIN
------------------------------------ Director of U.S. Restaurant Properties, Inc. June 12, 1996
Fred H. Margolin

s/ EUGENE G. TAPER
------------------------------------ Director of U.S. Restaurant Properties, Inc. June 12, 1996
Eugene G. Taper

s/ GERALD H. GRAHAM
------------------------------------ Director of U.S. Restaurant Properties, Inc. June 12, 1996
Gerald H. Graham

s/ DARREL ROLPH
------------------------------------ Director of U.S. Restaurant Properties, Inc. June 12, 1996
Darrel Rolph

s/ DAVID ROLPH
------------------------------------ Director of U.S. Restaurant Properties, Inc. June 12, 1996
David Rolph
</TABLE>

II-4
<PAGE>
INDEX TO EXHIBITS

<TABLE>
<CAPTION>
PAGE
---------
<C> <S> <C>
1.1 Form of Underwriting Agreement (including the Agreement Among Underwriters and Selected
Dealer's Agreement).
2.1 Amended and Restated Purchase and Sale Agreement dated as of February 3, 1986, filed as Exhibit
10(a) to Amendment No. 2 to the Registrant's Registration Statement on Form S-11 (Registration
No. 33-2382) and incorporated herein by reference.
4.1 Second Amended and Restated Partnership Agreement.
4.2 Certificate of Limited Partnership of the Partnership.
4.3 Deposit Agreement and Form of Depositary Receipt and Application for Transfer of Depositary
Units to Morgan Keegan Trust Company of New York dated February 3, 1986, filed as Exhibit 4.5
to Amendment No. 3 to the Registrant's Registration Statement on Form S-11 (Registration No.
33-2382) and incorporated herein by reference.
4.4 First Amendment to Deposit Agreement, dated as of May 5, 1987, filed as Exhibit (4)A to
Registrant's Current Report on Form 8-K dated as of September 30, 1987 and incorporated herein
by reference.
5.1 Opinion of Middleberg, Riddle & Gianna.
8.1 Opinion of Middleberg, Riddle & Gianna relating to tax matters.
10.2 Amendment No. 91 to Limited Partnership Agreement effective November 30, 1994 regarding Burger
King Corporation Withdrawal as Special General Partner and Name Change, filed as Exhibit 10.1
to the Registrant's Quarterly Report on Form 10-Q for the period ended September 30, 1994 and
incorporated herein by reference.
10.3 Consulting Agreement dated as of April 30, 1987, filed as Exhibit 10.2 to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1987 and incorporated herein by reference.
10.4 Option Agreement dated as of March 24, 1995, between U.S. Restaurant Properties Master L.P. and
QSV Properties Inc., filed as Exhibit 10.3 to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1987 and incorporated herein by reference.
10.5 Stock Purchase Agreement dated as of May 27, 1994 between Pillsbury Company and Robert J.
Stetson, et al regarding sale of QSV Properties Inc., filed as Exhibit 10.1 to Registrant's
Quarterly Report on Form 10-Q for the period ended June 30, 1984 and incorporated herein by
reference.
10.6 Amended and Restated Secured Loan Agreement dated as of February 15, 1996 between the
Registrant and various banks, filed as Exhibit 10.6 to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995 and incorporated herein by reference.
10.7 Demand Promissory Note dated as of August 15, 1995, executed by Arkansas Restaurants #10, L.P.
for the benefit of U.S. Restaurant Properties Operating, L.P.
10.8 Mortgage Warehouse Facility dated as of April 29, 1996 between U.S. Restaurant Properties
Business Trust I and Morgan Keegan Mortgage Company, Inc.
**10.9 Amendment No. 1 to Mortgage Warehouse Facility dated as of June 1, 1996 between U.S. Restaurant
Properties Business Trust I and Morgan Keegan Mortgage Company, Inc.
**23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of KPMG Peat Marwick LLP.
23.3 Consent of Tanner and Long, P.C.
23.4 Consent of Thigpen & Lanier.
23.5 Consent of BDO Seidman, LLP.
23.6 Consent of William C. Love, CPA.
23.7 Consent of Middleberg, Riddle & Gianna (included in Exhibit 5.1).
24.1 Power of Attorney (set forth on signature page hereof).
</TABLE>

- ------------------------
**Filed herein.

<PAGE>

Exhibit 1.1

U.S. RESTAURANT PROPERTIES MASTER L.P.

1,800,000 Units

AGREEMENT AMONG UNDERWRITERS,
INCLUDING
UNDERWRITING AGREEMENT
AND
SELECTED DEALER AGREEMENT

DATED: JUNE ____, 1996

<PAGE>

U.S. RESTAURANT PROPERTIES MASTER L.P.

(a Delaware limited partnership)

1,800,000 Units

AGREEMENT AMONG UNDERWRITERS

DATED: JUNE ____, 1996

<PAGE>

AGREEMENT AMONG UNDERWRITERS

June __, 1996

MORGAN KEEGAN & COMPANY, INC.
EVEREN SECURITIES, INC.
SOUTHWEST SECURITIES, INC.
c/o Morgan Keegan & Company, Inc.
50 Front Street
Memphis, Tennessee 38103

Ladies and Gentlemen:

1. UNDERWRITING AGREEMENT. The undersigned Underwriters
("Underwriters") agree among themselves as follows with reference to their
proposed purchases severally from U.S. Restaurant Properties Master L.P. (the
"Partnership") of 1,800,000 Units of beneficial interest of the Partnership (the
"Firm Units") and the proposed purchase, severally, of up to an additional
270,000 Units (the "Option Units") from the Partnership. The Firm Units and
the Option Units are collectively referred to herein as the "Units." Each
Underwriter will agree to purchase (a) the number of Firm Units set forth
opposite its name in Schedule A to the Underwriting Agreement, and (b) that
portion of the Option Units as to which the option is exercised equal to the
proportion which such Underwriter's share of the number of the Firm Units bears
to the total number of the Firm Units.

2. REGISTRATION STATEMENT AND PROSPECTUS. The Units are more
particularly described in a registration statement (Registration No. 333-02675)
filed with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "1933 Act"). Amendments to such
registration statement (or a final prospectus, as contemplated by Rule 430A
under the 1933 Act) have been or are being filed in which, with our consent
hereby confirmed, we have been named as the underwriters of the Units. A copy
of the registration statement as filed and a copy of each amendment as filed
(excluding exhibits) have heretofore been delivered to us. We confirm that we
have examined the registration statement, including amendments thereto, relating
to the Units, as filed with the Commission, that we are willing to accept the
responsibilities of an Underwriter under the 1933 Act in respect of the
registration statement and we are willing to proceed with a public offering of
the Units in the manner described in the registration statement. The
registration statement and the related prospectus may be further amended, but no
such amendment or change shall release or affect our obligations hereunder or
under the Underwriting Agreement. As used herein, the terms "Registration
Statement," "Preliminary Prospectus" and "Prospectus" shall have the same
meanings as set forth in the Underwriting Agreement.

3. AUTHORITY OF THE REPRESENTATIVES. We hereby authorize Morgan Keegan
& Company, Inc., EVEREN Securities, Inc. and Southwest Securities, Inc., acting
on our behalf, as our representatives (the "Representatives") (a) to complete,
execute and deliver the Underwriting Agreement, to determine the public
offering price of the Units and the underwriting discount with respect thereto
and to make such variations, if any, as in your judgment are appropriate and
are not material, provided that the aggregate number of Firm Units set forth
opposite our respective names in Schedule A to the Underwriting Agreement shall
not be increased without our consent, except as provided herein, (b) to waive
performance or satisfaction by the Partnership of obligations or conditions
included in the Underwriting Agreement, if in your judgment such waiver will
not have a material adverse effect upon the interests of the Underwriters, and
(c) to take such actions as in your discretion may be necessary or advisable to
carry out the Underwriting Agreement, this Agreement and the transactions for
the accounts of the several Underwriters contemplated thereby and hereby. We
also authorize you to determine all matters relating to the public
advertisement of the Units.

4. PUBLIC OFFERING. We authorize you, with respect to any Units which we
so agree to purchase, to reserve for sale, and on our behalf to sell, to the
dealers selected by you (including you or any of the other Underwriters, such
dealers so selected being hereinafter called "Selected Dealers") and to others,
all or part of our Units as you may determine. Reservations for sales to
persons other than Selected Dealers shall be as nearly as

<PAGE>

practicable in proportion to the respective underwriting obligations of the
Underwriters, unless you agree to a small proportion at the request of an
Underwriter. Reservations for sales to Selected Dealers need not be in such
proportion. All sales of reserved Units shall be as nearly as practicable in
proportion to the respective reservations as calculated from day to day.

In your discretion, from time to time, you may add to the reserved Units
any Units retained by us remaining unsold, and you may upon our request release
to us any of our Units reserved but not sold. Any Units so released shall not
thereafter be deemed to have been reserved. Upon termination of this Agreement,
or prior thereto at your discretion, you shall deliver to us any of our Units
reserved but not sold and delivered, except that if the aggregate of all
reserved but unsold and undelivered Units is less than 180,000, you are
authorized to sell such Units for the accounts of the several Underwriters at
such price or prices as you may determine. Sales of reserved Units shall be
made to Selected Dealers at the public offering price less a concession
initially not in excess of [$_____] per Unit (the "Selected Dealers'
Concession") and to others at the public offering price. Underwriters and
Selected Dealers may reallow a portion of such concession not in excess of
[$_____] per Unit to any other members of the National Association of Securities
Dealers, Inc. ("NASD"), acting as principal or buyer's agent, provided such
member agrees that the reallowance is to be retained and not reallowed in whole
or in part and also agrees in writing to comply with Section 24 of Article III
of the Rules of Fair Practice of the NASD.

After advice from you that the Units are released for sale to the public,
we will offer to the public in conformity with the terms of the offering set
forth in the Prospectus such Units as you advise us are reserved. We authorize
you after Units are released for sale to the public, in your discretion, to
change the public offering price of the Units and the concession, and to buy
Units for our account from Selected Dealers at the public offering price less
such amount not in excess of the Selected Dealers' Concession as you may
determine.

Sales of Units among Underwriters may be made with your prior consent, or
as you deem advisable for state securities law purposes.

We agree that we will not sell to any accounts over which we exercise
discretionary authority.

5. ADDITIONAL PROVISION REGARDING SALES. Any Units sold by us (otherwise
than through you) which you contract for or purchase in the open market or
otherwise for the account of any Underwriter shall be repurchased by us on
demand at the cost of such purchase plus commission and taxes on redelivery.
Units delivered on such repurchase need not be the identical Units purchased by
you. In lieu of demanding repurchase by us, you may in your discretion (a) sell
for our account the Units so purchased by you, at such price and upon such terms
as you may determine, and debit or credit our account with the loss and expense
or net profit resulting from such sale or (b) charge our account with an amount
not in excess of the Selected Dealers' Concession with respect to such Units.
If we are a member of, or clear through a member of, the Depository Trust
Company ("DTC"), you, in your discretion, may deliver our Units through the
facilities of DTC.

6. PAYMENT AND DELIVERY. At or before the Closing Time (as defined in
the Underwriting Agreement) and at the Date of Delivery (as defined in the
Underwriting Agreement), we will deliver to you at DTC or to the office of
Morgan Keegan & Company, Inc. at 50 Front Street, Memphis, Tennessee 38103, a
certified or bank cashiers' check payable to your order, in clearing house
funds, in the amount equal to the offering price set forth in the Prospectus
less the Selected Dealers' Concession in respect of the number of Firm Units or
Option Units, as the case may be, to be purchased by us pursuant to the
Underwriting Agreement. We authorize you for our account to make payment of the
purchase price for the Firm Units or Option Units, as the case may be, to be
purchased by us against delivery to you of such Units, and the difference
between such price and the amount of our check delivered to you therefor shall
be credited to our account. Unless we notify you at least three (3) full
business days prior to such Closing Time to make other arrangements, you may, in
your discretion, advise the Partnership to prepare our certificates in our name.
If you have not received our funds as requested, you may in your discretion make
such payment on our behalf, in which event we will reimburse you promptly. Any
such payment by you shall not relieve us from any of our obligations hereunder
or under the Underwriting Agreement.

<PAGE>

We authorize you for our account to accept delivery of our Units from the
Partnership and to hold such of our Units as you have reserved for sale to
Selected Dealers and others and to deliver such Units against such sales. You
will deliver to us our unreserved Units as promptly as practicable.

Notwithstanding the foregoing provision of this Section 6, payment for and
delivery of our Units may be made through the facilities of DTC, if we are a
member, unless we have otherwise notified you prior to a date to be specified by
you, or, if we are not a member, settlement may be made through a correspondent
who is a member pursuant to instructions we may send to you prior to such
specified date.

As promptly as practicable after you receive payment for reserved Units
sold for our account, you will remit to us the purchase price paid by us for
such Units and credit or debit our account with the difference between the sale
price and such purchase price.

7. AUTHORITY TO BORROW. In connection with the transactions contemplated
in the Underwriting Agreement or this Agreement, we authorize you, in your
discretion, to advance your own funds for our account, charging current interest
rates, to arrange loans for our account and in connection therewith to execute
and deliver any notes or other instruments and hold or pledge as security
therefor any of our Units purchased for our account. Any lender may rely upon
your instructions in all matters relating to any such loan.

Any of our Units purchased for our account held by you may from time to
time be delivered to us for carrying purposes, and any such securities will be
redelivered to you upon demand.

8. STABILIZATION AND OTHER MATTERS. We authorize you in your discretion
to make purchases and sales of the Units of the Partnership for our account in
the open market or otherwise, for long or short account, on such terms as you
deem advisable and in arranging sales to over-allot. If you have purchased
Units for stabilizing purposes prior to the execution of this Agreement, such
purchases shall be treated as having been made pursuant to the foregoing
authorization. We also authorize you, either before or after the termination of
the offering provisions of this Agreement, to cover any short position incurred
pursuant to this Section 8 on such terms as you deem advisable. All such
purchases and sales and over-allotments shall be made for the accounts of the
several Underwriters as nearly as practicable in proportion to their respective
underwriting obligations. Our net commitment under this Section 8 (excluding
any commitment incurred under the Underwriting Agreement upon exercise of the
right to purchase Option Units) shall not, at the end of any business day,
exceed 15% of our underwriting obligation as set forth in Schedule A to the
Underwriting Agreement. We will on your demand, take up and pay for at cost any
Units so purchased or sold or overallotted for our account, and, if any other
Underwriter defaults in its corresponding obligation, we will assume our
proportionate share of such obligation without relieving the defaulting
Underwriter from liability. We will be obligated in respect of purchases and
sales made for our account hereunder whether or not any proposed purchase of
Units is consummated. The existence of this provision is no assurance that the
price of the Units will be stabilized or that if stabilizing is commenced, it
may not be discontinued at any time.

We agree to advise you, from time to time upon your request, during the
term of this Agreement, of the number of Units retained by us remaining unsold,
and will, upon your request, sell to you for the accounts of one or more of the
several Underwriters such number of Units as you may designate at such prices,
not less than the net price to Selected Dealers nor more than the public
offering price, as you may determine.

If you effect any stabilizing purchase pursuant to this Section 8, you will
notify us promptly of the date and time when the first stabilizing purchase was
effected and the date and time when stabilizing was terminated. We authorize
you on our behalf to file any reports required to be filed with the Commission
in connection with any transactions made by you for our account pursuant to this
Section 8 and we agree to furnish you with any information needed for such
reports. We agree to transmit to you for filing with the Commission any and all
reports required to be made by us pursuant to paragraph (c) of Rule 17a-2 under
the Securities Exchange Act of 1934, as amended (the "1934 Act"), as a result of
any transactions in connection with the offering of Units.

With respect to the Underwriting Agreement, you are also authorized in your
discretion (a) to exercise the option therein as to all or any part of the
Option Units, and to terminate such option in whole or in part prior to its
expiration, (b) to postpone either or both the Closing Time and Date of Delivery
referred to in the Underwriting

<PAGE>

Agreement, and any other time or date specified therein, (c) to exercise any
right of cancellation or termination, (d) to arrange for the purchase by other
persons (including yourself or any other Underwriter) of any Units not taken up
by any defaulting Underwriter, and (e) to consent to such other changes in the
Underwriting Agreement as in your judgment do not materially adversely affect
the substance of our rights and obligations thereunder.

We further agree that (a) prior to the termination of this Agreement we
will not, directly or indirectly, bid for or purchase Units for our own account,
except as provided in this Agreement and in the Underwriting Agreement and (b)
prior to the completion (as defined in Rule 10b-6 under the 1934 Act) of our
participation in the distribution, we will otherwise comply with Rule 10b-6
under the 1934 Act.

9. ALLOCATION OF EXPENSES AND SETTLEMENT. We authorize you to charge our
account with (a) all transfer taxes on Units purchased by us pursuant to the
Underwriting Agreement and sold by you for our account, (b) Selected Dealers'
Concessions in connection with the purchase, marketing and sale of the Units for
our account and (c) our proportionate share (based upon our underwriting
obligation) of all other expenses incurred by the Underwriters in connection
with the purchase, carrying, sale, and distribution of the Units. Your
determination of the amount and allocation of such expenses shall be conclusive.
In the event of the default of any Underwriter in carrying out its obligations
hereunder, the expenses chargeable to such Underwriter pursuant to this
Agreement and not paid by it, as well as any additional losses or expenses
arising from such default, may be proportionately charged by you against the
other Underwriters not so defaulting, without, however, relieving such
defaulting Underwriter from its liability therefor.

As soon as practicable after termination of this Agreement, the accounts
hereunder will be settled, but you may reserve from distribution such amount as
you deem necessary to cover possible additional expenses. You may at any time
make partial distributions of credit balances or call for payment of debit
balances. Any of our funds in your hands may be held with your general funds
without accountability for interest. Notwithstanding the termination of this
Agreement or any settlement, we will pay on demand (a) our proportionate share
(based on our underwriting obligation) for all expenses and liabilities which
may be incurred by or for the accounts of the Underwriters, including any
liability based on the claim that the Underwriters constitute an association,
unincorporated business or other separate entity, and of any expenses incurred
by you or any other Underwriter with your approval in contesting any such claim
or liability and (b) any transfer taxes paid after such settlement on account of
any sale or transfer for our account.

10. TERMINATION. This Agreement shall terminate thirty (30) days after
the Units are released by you for sale to the public unless extended by you.
You may extend such provisions for a period or periods not exceeding an
additional thirty (30) days in the aggregate, provided the Selected Dealer
Agreements, if any, are similarly extended. Whether or not said provisions may
be terminated in whole or in part by notice from you, you may, in your
discretion, on notice to us prior to such time, terminate the effectiveness of
this Agreement or any portion of it.

11. DEFAULT OF UNDERWRITERS. Default by one or more Underwriters in
respect of their obligations hereunder or under the Underwriting Agreement shall
not release us from any of our obligations or in any way affect the liability of
any defaulting Underwriter to the other Underwriters for damages resulting from
such default. In case of such default by one or more Underwriters, you are
authorized to increase, pro rata with other non-defaulting Underwriters, the
number of Units which we shall be obligated to purchase pursuant to the
Underwriting Agreement, provided that the aggregate number of all such increases
for our account shall not exceed our pro rata share (together with other non-
defaulting Underwriters) of 180,000 Units; and you are further authorized to
arrange, but shall not be obligated to arrange, for the purchase by other
persons, who may include yourselves or other Underwriters, of all or a portion
of any aggregate number not taken up. If any such arrangements are made, the
respective amount of Units to be purchased by the non-defaulting Underwriters
and by any such other persons shall be taken as a basis for the underwriting
obligations under this Agreement.

12. POSITION OF THE REPRESENTATIVES. Except as in this Agreement
otherwise specifically provided, you shall have full authority to take such
action as you may deem advisable in respect of all matters pertaining to the
Underwriting Agreement and this Agreement and in connection with the purchase,
carrying, sale and distribution of the Units (including authority to terminate
the Underwriting Agreement as provided therein). You shall be under

<PAGE>

no liability to us for or in respect of the value of the Units or the validity
or the form thereof, the Registration Statement, the Preliminary Prospectus, the
Prospectus, the Underwriting Agreement or other instruments executed by the
Partnership or others; or for or in respect of the issuance, transfer or
delivery of the Units; or for the performance by the Partnership or others of
any agreement on its or their part; nor shall you, as Representatives or
otherwise, be liable under any of the provisions hereof or for any matters
connected herewith, except for your own want of good faith, for obligations
expressly assumed by you in this Agreement and for any liabilities imposed upon
you by the 1933 Act. No obligations on your part shall be implied or inferred
herefrom. Authority with respect to matters to be determined by you, or by you
and the Partnership, pursuant to the Underwriting Agreement, shall survive the
termination of this Agreement.

In taking all actions hereunder, except in the performance of your own
obligations hereunder and under the Underwriting Agreement, you shall act only
as Representatives of each of the Underwriters. The commitments and liabilities
of each of the several Underwriters are several in accordance with their
respective purchase obligations and are not joint or joint and several. Nothing
contained herein shall constitute the Underwriters partners or render any of
them liable to make payments otherwise than as herein provided. If for federal
income tax purposes the Underwriters should be deemed to constitute a
partnership, then each Underwriter elects to be excluded from the application of
Subchapter K, Chapter 1, Subtitle A, of the Internal Revenue Code of 1986, as
amended, and agrees not to take any position inconsistent with such election.
You, as Representatives of the several Underwriters, are authorized, in your
discretion, to execute such evidence of such election as may be required by the
Internal Revenue Service.

13. COMPENSATION TO THE MANAGING UNDERWRITERS. As compensation for the
services of the managing underwriters in connection with the purchase of Units
and the management of the public offering of the Units, we agree to pay you and
authorize you to charge our account with an amount equal to [$_____] for each
Share which we have agreed to purchase pursuant to the Underwriting Agreement.

14. INDEMNIFICATION AND FUTURE CLAIMS. Each Underwriter, including
yourselves, agrees to indemnify, hold harmless and reimburse each other
Underwriter and each person, if any, who controls any other Underwriter within
the meaning of Section 15 of the 1933 Act, and any successor of any other
Underwriter, to the extent that, and upon the terms upon which, each Underwriter
agrees to indemnify, hold harmless and reimburse the Partnership as set forth in
the Underwriting Agreement.

In the event that at any time any person other than an Underwriter asserts
a claim against one or more of the Underwriters or against you as
Representatives of the Underwriters arising out of an alleged untrue statement
or omission in the Registration Statement (or any amendment thereto) or in any
Preliminary Prospectus or the Prospectus (or any amendment or supplement
thereto) or relating to any transaction contemplated by this Agreement, we
authorize you to make such investigation, to retain such counsel for the
Underwriters and to take such action in the defense of such claim as you may
deem necessary or advisable. You may settle such claim with the approval of a
majority in interest of the Underwriters. We will pay our proportionate share
(based upon our underwriting obligation) of all expenses incurred by you
(including the fees and expenses of counsel for the Underwriters in
investigating and defending against such claim, after deducting any contribution
or indemnification obtained pursuant to the Underwriting Agreement, or
otherwise, from persons other than Underwriters), whether such liability is the
result of any such settlement. There shall be credited against any amount paid
or payable by us pursuant to this paragraph any loss, damage, liability or
expense which is incurred by us as a result of any such claim asserted against
us, and if such loss, claim, damage, liability or expense is incurred by us
subsequent to any payment by us pursuant to this paragraph, appropriate
provisions shall be made to effect such credit, by refund or otherwise. Any
Underwriter may retain separate counsel at its own expense. A claim against or
liability incurred by a person who controls an Underwriter shall be deemed to
have been made against or incurred by such Underwriter. In the event of default
by any Underwriter in respect of its obligations under this Section 14, the non-
defaulting Underwriters shall be obligated to pay the full amount thereof in the
proportions that their respective underwriting obligations bear to the
underwriting obligations of all non-defaulting Underwriters, without relieving
such defaulting Underwriter of its liability hereunder. Our agreements
contained in this Section 14 will remain in full force and effect regardless of
any investigation made by or on behalf of such other Underwriter or controlling
person and will survive the delivery of and payment for the Units and the
termination of this Agreement and the similar agreements entered into with the
other Underwriters. We will give prompt notice to you if we receive notice of
assertion of any claim

<PAGE>

against the Underwriters. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.

15. BLUE SKY AND OTHER MATTERS. You will not have any responsibility with
respect to the right of any Underwriter or other person to sell the Units in any
jurisdiction notwithstanding any information you may furnish in that connection.
We authorize you to file a New York Further State Notice, if required, and to
make and carry out on our behalf any agreements which you may deem necessary in
order to procure registration or qualification of any of the Units in any
jurisdiction, and we will at your request make such payments, and furnish to you
such information, as you may deem required by reason of any such agreements.

We authorize you to file on behalf of the several Underwriters with the
National Association of Securities Dealers, Inc. (the "NASD") such documents and
information, if any, which are available or have been furnished to you for
filing pursuant to applicable rules, statements and interpretations of the NASD.

16. TITLE TO UNITS. The Units purchased by the respective Underwriters
and any other securities purchased by you hereunder for their respective
accounts shall remain the property of such Underwriters until sold and no title
to any such Units or other securities shall in any event pass to you, as
Representatives, by virtue of any of the provisions of this Agreement.

17. CAPITAL REQUIREMENTS. We confirm that our net capital and the ratio
of our aggregate indebtedness to our net capital is such that we may, in
accordance with and pursuant to Rule 15c3-1 under the 1934 Act or the rules of
any other exchange to which we are subject, obligate ourselves to purchase, and
purchase, the Units which we agree to purchase under the Underwriting Agreement
and hereunder.

18. LIABILITY FOR FUTURE CLAIMS. Neither any statement by you, as
Representatives of the several Underwriters, of any credit or debit balance in
our account nor any reservation from distribution to cover possible additional
expenses relating to the Units will constitute any representation by you as to
the existence or nonexistence of possible unforeseen expenses or liabilities of
or charge against the several Underwriters. Notwithstanding the distribution of
any net credit balance to us, we will be and remain liable for, and will pay and
demand, (a) our proportionate share (based upon our underwriting obligation) of
all expenses and liabilities which may be incurred by or for the accounts of the
Underwriters, including any liability which may be incurred by the Underwriters
or any of them based on the claim that the Underwriters constitute any
association, unincorporated business, partnership or any separate entity, and
(b) any transfer taxes paid after such settlement on account of any sale or
transfer for our account.

19. ACKNOWLEDGMENT OF REGISTRATION STATEMENT, ETC. We hereby confirm that
we have examined the Registration Statement (including any amendments or
supplements thereto) relating to the Units filed with the Commission, that we
are willing to accept the responsibilities of an underwriter thereunder and that
we are willing to proceed as therein contemplated. We confirm that we have
authorized you to advise the Partnership on our behalf (a) as to the statements
to be included in any Preliminary Prospectus and in the Prospectus relating to
the Units under the heading "Underwriting," insofar as they relate to us, and
(b) that there is no information about us required to be stated in said
Registration Statement or said Preliminary Prospectus or the Prospectus other
than as set forth in the Underwriters' Questionnaire previously delivered by us
to you. We understand that the aforementioned documents are subject to further
change and that we will be supplied with copies of any amendment or amendments
to the Registration Statements and of any amended Prospectus promptly, if and
when received by you, but the making of such changes and amendments will not
release us or affect our obligations hereunder or under the Underwriting
Agreement.

20. NOTICES AND GOVERNING LAW. Any notice from you to us shall be mailed,
telephoned or sent via facsimile to us at our address as set forth in the
Underwriters' Questionnaire. Any notice from us to you shall be deemed to have
been duly given if mailed, telephoned or sent via facsimile to Morgan Keegan &
Company, Inc. at 50 Front Street, Memphis, Tennessee 38103. This Agreement
shall be governed by and construed in accordance with the laws of the State of
New York.

<PAGE>

21. OTHER PROVISIONS. We represent that we are actually engaged in the
investment banking and securities business and are a member in good standing of
the NASD or, if we are not such a member, that we are a foreign bank, dealer or
institution not eligible for membership in said Association and that we will not
offer or sell any Units in the United States of America, its territories or
possessions, or to persons who are citizens thereof or residents therein. In
making sales of the Units, if we are such a member, we agree to comply with all
applicable rules of the NASD, including, without limitation, the NASD's
Interpretation with Respect to Free-Riding and Withholding and Section 24 of
Article III of the NASD's Rules of Fair Practice, or if we are a foreign bank,
dealer or institution, we agree to comply with such Interpretation and Sections
8, 24, 25 (as such Section applies to foreign nonmembers) and 36 of the Article
III as that Section applies to a non-member broker or dealer in a foreign
country. We confirm that we have complied with the requirements of the 1933 Act
concerning delivery of each Preliminary Prospectus and the Prospectus. We are
aware of our statutory responsibilities under the 1933 Act, and you are
authorized on our behalf to so advise the Commission.

22. COUNTERPARTS. This Agreement may be signed in any number of
counterparts which, taken together, shall constitute one and the same agreement.

Very truly yours,

By: ______________________________________________
Attorney-in-fact for each Underwriter named in
Schedule A to the attached Underwriting Agreement

Confirmed as of the date first above written:

MORGAN KEEGAN & COMPANY, INC.
EVEREN SECURITIES, INC.
SOUTHWEST SECURITIES, INC.
As Representatives of the Several Underwriters

By: Morgan Keegan & Company, Inc.

By: __________________________
Name: _______________________
Title: Managing Director

<PAGE>

U.S. RESTAURANT PROPERTIES MASTER L.P.

(a Delaware limited partnership)

1,800,000 Units

AGREEMENT AMONG UNDERWRITERS

DATED: JUNE __, 1996

<PAGE>

U.S. RESTAURANT PROPERTIES MASTER L.P.

1,800,000 UNITS

UNDERWRITING AGREEMENT

June __, 1996

MORGAN KEEGAN & COMPANY, INC.
EVEREN SECURITIES, INC.
SOUTHWEST SECURITIES, INC.
c/o Morgan Keegan & Company, Inc.
50 Front Street
Memphis, Tennessee 38103

Dear Sirs:

U.S. Restaurant Properties Master L.P., a Delaware limited partnership (the
"Partnership"), proposes to issue and sell to the underwriters named in SCHEDULE
A (collectively, the "Underwriters") an aggregate of 1,800,000 Units of
beneficial interest of the Partnership (the "Firm Units"). The Firm Units are
to be sold to each Underwriter, acting severally and not jointly, in such
amounts as are set forth in SCHEDULE A opposite the name of such Underwriter.

The Partnership also grants to the Underwriters, severally and not jointly,
the option described in Section 2 to purchase, on the same terms as the Firm
Units, up to 270,000 additional Units (the "Option Units") solely to cover over-
allotments. The Firm Units, together with all or any part of the Option Units,
are collectively herein called the "Units." U.S. Restaurant Properties
Operating L.P., a Delaware limited partnership, is referred to herein as the
"Operating Partnership" and U.S. Restaurant Properties, Inc., the managing
general partner of the Partnership and the Operating Partnership, is referred to
herein as the "Company." The Operating Partnership and the Partnership are
collectively referred to herein as the "Partnerships." Other capitalized terms
used herein and not otherwise defined herein shall have the respective meanings
set forth in the Registration Statement (as hereinafter defined).

Section 1. REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP AND THE
COMPANY. The Partnership and Company hereby jointly and severally represent and
warrant to and agree with each of the Underwriters that:

(a) A registration statement on Form S-3 (File No. 333-02657) with
respect to the Units, including a preliminary form of prospectus, has been
prepared by the Partnership and the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the "1933 Act"),
and the applicable rules and regulations (the "1933 Act Regulations") of
the Securities and Exchange Commission (the "Commission"), and has been
filed with the Commission; and such amendments to such registration
statement as may have been required prior to the date hereof have been
filed with the Commission, and such amendments have been similarly
prepared. Copies of such registration statement and amendment or amendments
and of each related preliminary prospectus, and the exhibits, financial
statements and schedules, as finally amended and revised, have been
delivered to you. The Partnership and the Company have prepared in the same
manner, and propose to so file with the Commission, one of the following:
(i) prior to effectiveness of such registration statement, a further
amendment thereto, including the form of final prospectus, or (ii) a final
prospectus in accordance with Rules 430A and 424(b) of the 1933 Act
Regulations. As filed, such amendment and form of final prospectus, or such
final prospectus, shall include all Rule 430A Information (as defined
below) and, except to the extent that you shall agree in writing to a
modification, shall be in all respects in the form furnished to you prior
to the date and time that this Agreement was executed and delivered by the
parties hereto or, to the extent not completed at such date and time, shall
contain only such specific additional information and other changes (beyond
that contained in the latest preliminary prospectus) as the Partnership and
the Company shall have previously advised you in writing would be included
or made therein.

<PAGE>

The term "Registration Statement" as used in this Agreement shall mean
such registration statement at the time such registration statement becomes
effective and, in the event any post-effective amendment thereto becomes
effective prior to the Closing Time (as hereinafter defined), shall also
mean such registration statement as so amended; provided, however, that
such term shall also include all Rule 430A Information deemed to be
included in such registration statement at the time such registration
statement becomes effective as provided by Rule 430A of the 1933 Act
Regulations. The term "Preliminary Prospectus" shall mean any preliminary
prospectus referred to in the preceding paragraph and any preliminary
prospectus included in the Registration Statement at the time it becomes
effective that omits Rule 430A Information. The term "Prospectus" as used
in this Agreement shall mean the prospectus relating to the Units in the
form in which it is first filed with the Commission pursuant to Rule 424(b)
of the 1933 Act Regulations or, if no filing pursuant to Rule 424(b) of the
1933 Act Regulations is required, shall mean the form of final prospectus
included in the Registration Statement at the time such Registration
Statement becomes effective. The term "Rule 430A Information" means
information with respect to the Units and the offering thereof permitted by
the 1933 Act Regulations to be omitted from the Registration Statement when
it becomes effective. Any reference in this Agreement to the Registration
Statement, the Preliminary Prospectus or the Prospectus shall be deemed to
refer and include the documents incorporated by reference therein pursuant
to Item 12 of Form S-3 under the 1933 Act, as of the date of the
Registration Statement, Preliminary Prospectus or the Prospectus, as the
case may be, and any reference to any amendment or supplement to the
Registration Statement, any Preliminary Prospectus or the Prospectus shall
be deemed to refer to and include any documents filed after such date under
the Securities and Exchange Act of 1934, as amended (the "Exchange Act"),
which, upon filing, are incorporated by reference therein, as required by
paragraph (b) of Item 12 of Form S-3. As used herein, the term
"Incorporated Documents" means the documents which at the time are
incorporated by reference in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto.

(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and no proceedings for that
purpose have been instituted or threatened by the Commission or the state
securities or blue sky authority of any jurisdiction, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the 1933 Act and the 1933 Act Regulations,
and did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in reliance
upon and in conformity with information furnished in writing to the
Partnership by an Underwriter expressly for use in the Registration
Statement.

(c) The Partnership and the offering of the Units contemplated by
this Agreement meet the requirements for using Form S-3 under the 1933 Act.
When the Registration Statement shall become effective, when the Prospectus
is first filed pursuant to Rule 424(b) of the 1933 Act Regulations, when
any amendment to the Registration Statement becomes effective, and when any
supplement to the Prospectus is filed with the Commission and at the
Closing Time and Date of Delivery (as hereinafter defined), (i) the
Registration Statement, the Prospectus and any amendments thereof and
supplements thereto will conform in all material respects with the
applicable requirements of the 1933 Act and the 1933 Act Regulations, and
(ii) neither the Registration Statement, the Prospectus nor any amendment
or supplement thereto will contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein not misleading; provided, however,
that this representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information
furnished in writing to the Partnership by an Underwriter expressly for use
in the Registration Statement.

(d) The Incorporated Documents heretofore filed, when they were filed
(or, if any amendment with respect to any such document was filed, when
such amendment was filed), conformed in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder,
and any further Incorporated Documents so filed will, when they are filed,
conform in all material respects with the requirements of the Exchange Act
and the rules and regulations thereunder. No such document when it was

<PAGE>

filed (or, if an amendment with respect to any such document was filed,
when such amendment was filed), contained an untrue statement of the
material fact or omitted to state a material fact required to be stated
therein are necessary in order to make the statements therein not
misleading. No further Incorporated Document, when it is filed, will
contain an untrue statement of a material fact or will omit to state a
material fact required to be stated therein or necessary in order to make
the statements therein not misleading.

(e) At the effective time of the Registration Statement, the
Partnership owned 231 properties (the "Current Properties") as described in
the Prospectus. One hundred twenty-five of the Current Properties were
acquired in connection with the Partnership's initial public offering in
1986. At the effective time of the Registration Statement, the Partnership
had entered into binding agreements (the "Acquisition Agreements") as
described in the Prospectus to acquire 39 additional restaurant properties
(the "Acquisition Properties").

(f) The Partnership has been duly organized and is validly existing
as a limited partnership in good standing under the laws of the State of
Delaware with all requisite partnership power and authority to own, lease
and operate its properties and the properties it proposes to own, lease and
operate as described in the Registration Statement and the Prospectus and
to conduct its business as now conducted and as proposed to be conducted as
described in the Registration Statement and the Prospectus. The
Partnership has been duly qualified to do business and is in good standing
as a foreign partnership in each other jurisdiction in which the ownership
or leasing of its properties or the nature or conduct of its business as
now conducted requires such qualification, except where the failure to do
so would not have a material adverse effect on either of the Partnerships,
any Current Property or any Acquisition Property or on the condition,
financial or otherwise, earnings, assets, business affairs or business
prospects of either of the Partnerships or the Company or subject the
limited partners of either of the Partnerships to any material liability or
disability. The Partnership will be duly qualified, at the time of the
closing of the acquisition of the Acquisition Properties, in each
jurisdiction in which the ownership or leasing of its properties or the
nature or conduct of its business as proposed to be conducted as described
in the Registration Statement and the Prospectus requires such
qualification, except where the failure to do so would not have a material
adverse effect on either of the Partnerships, any Current Property or any
Acquisition Property or on the condition, financial or otherwise, earnings,
assets, business affairs or business prospects of either of the
Partnerships or the Company or subject the limited partners of either of
the Partnerships to any material liability or disability. The Partnership
does not own or control, directly or indirectly, any corporation,
partnership, association or other entity except the Operating Partnership,
U.S. Restaurant Properties Business Trust #1 (the "Business Trust") and
Restaurant Acquisition Corp.

(g) The Company is the sole general partner of the Partnership with a
general partnership interest in the Partnership of 1.0%. At the Closing
Time and Delivery Date, the Company will be the sole general partner of the
Partnership and will be the holder of a 1.0% general partnership interest
in the Partnership. Such general partner interest is duly authorized by
the Second Amended and Restated Agreement of Limited Partnership of the
Partnership (the "Partnership Agreement"), by and between the Company and
the Partnership and was validly issued to the Company and is fully paid and
nonassessable, except as provided in the Partnership Agreement. The
Company owns such general partner interest free and clear of any lien,
claim, charge or other encumbrance of any kind or nature whatsoever.

(h) The Company is the sole general partner of the Operating
Partnership with a general partnership interest in the Operating
Partnership of .99%. At the Closing Time and Delivery Date, the Company
will be the sole general partner of the Operating Partnership and will be
the holder of a .99% general partnership interest in the Operating
Partnership. The Partnership is the sole limited partner of the Operating
Partnership with a limited partnership interest of 99.01%. At the Closing
Time and the Delivery Date, the Partnership will be the sole limited
partner of the Operating Partnership with a limited partnership interest of
99.01%. Such general partner and limited partner interests are duly
authorized by the Second Amended and Restated Agreement of Limited
Partnership of the Operating Partnership (the "Operating Partnership
Agreement"), by and between the Company and the Operating Partnership and
were validly issued to the Company and the Partnership, as the case may be,
and are fully paid and nonassessable. The

<PAGE>

Company and the Partnership own such general partnership and limited
partnership interests, as the case may be, free and clear of any lien,
claim, charge or other encumbrance of any kind or nature whatsoever.
(This Agreement, the Partnership Agreement and the Operating Partnership
Agreement sometimes are hereinafter referred to as the "Operative
Documents.")

(i) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware.
The Company has all requisite corporate power and authority to own, lease
and operate its properties and conduct its business as now conducted and as
proposed to be conducted as described in the Registration Statement and the
Prospectus. The Company has been duly qualified to do business and is in
good standing as a foreign corporation in each other jurisdiction in which
the ownership or leasing of its properties or the nature or conduct of its
business as now conducted requires such qualification, except where the
failure to do so would not have a material adverse effect on either of the
Partnerships, any Current Property or any Acquisition Property or on the
condition, financial or otherwise, earnings, assets, business affairs or
business prospects of either of the Partnerships or the Company or subject
the limited partners of either of the Partnerships to any material
liability or disability. The Company will be duly qualified (at the time
of the closing of the acquisition of the Acquisition Properties) in each
jurisdiction in which the ownership or leasing of its properties or the
nature or conduct of its business as described in the Registration
Statement or Prospectus requires such qualification, except where the
failure to do so would not have a material adverse effect on either of the
Partnerships, any Current Property or any Acquisition Property or on the
condition, financial or otherwise, earnings, assets, business affairs or
business prospects of either of the Partnerships or the Company or subject
the limited partners of either of the Partnerships to any material
liability or disability. Except as disclosed in the Prospectus, the
Company does not own or control, directly or indirectly, any interest in
any entity other than the Partnership and the Operating Partnership.

(j) The Operating Partnership and the Business Trust each have been
duly formed and are validly existing as a limited partnership or business
trust, as the case may be, under the laws of their respective states of
formation. The Operating Partnership and the Business Trust have all
requisite partnership, trust or other power and authority, as the case may
be, to own, lease and operate their respective properties and to conduct
their businesses as now conducted. The Operating Partnership and the
Business Trust each have been duly qualified or registered to do business
and are in good standing as a foreign corporation or business trust, as
applicable, in each jurisdiction in which the ownership or leasing of its
properties or the nature or conduct of their businesses requires such
qualification, except where the failure to do so would not have a material
adverse effect on the condition, financial or otherwise, earnings, assets,
business affairs or business prospects of the Operating Partnership or the
Business Trust, as the case may be, or subject the limited partner of the
Operating Partnership or the beneficiaries of the Business Trust to any
material liability or disability.

(k) The Partnership and the Operating Partnership each own,
respectively, a 50% beneficial interest in the Business Trust. At the
Closing Time and Delivery Date, the Partnership and the Operating
Partnership will be the sole beneficiaries of the Business Trust. Such
beneficial interests have been duly authorized by the Business Trust and
were validly issued to both the Partnership and the Operating Partnership,
as the case may be, and are fully paid and nonassessable. The Partnership
and the Operating Partnership own such beneficial interests free and clear
of any lien, claim, charge or other encumbrance of any kind or nature
whatsoever.

(l) The Partnership has full partnership right, power and authority
to enter into this Agreement, to issue, sell and deliver the Units as
provided herein and to consummate the transactions contemplated herein.
This Agreement has been duly authorized, executed and delivered by the
Partnership and constitutes a legal, valid and binding obligation of the
Partnership, enforceable in accordance with its terms, except to the extent
that enforceability may be limited by bankruptcy, insolvency,
reorganization or other laws of general applicability relating to or
affecting creditors' rights, or by general equity principles and except to
the extent the indemnification provisions set forth in Section 7 of this
Agreement may be limited by federal or state securities laws or the public
policy underlying such laws.

<PAGE>

(m) On behalf of the Partnership and itself, the Company has full
corporate right, power and authority to enter into this Agreement and to
consummate the transactions contemplated herein. This Agreement has been
duly authorized, executed and delivered by the Company and constitutes a
legal, valid and binding obligation of the Company enforceable in
accordance with its terms, except to the extent that enforceability may be
limited by bankruptcy, insolvency, reorganization or other laws of general
applicability relating to or affecting creditors' rights, or by general
equity principles and except to the extent the indemnification provisions
set forth in Section 7 of this Agreement may be limited by federal or state
securities laws or the public policy underlying such laws.

(n) The Partnership Agreement has been duly authorized, executed and
delivered by the parties thereto and constitutes a legal, valid and binding
obligation, enforceable in accordance with its terms, except to the extent
enforceability may be limited by bankruptcy, insolvency, reorganization or
other laws of general applicability relating to or affecting creditors'
rights or by general equity principles. The Operating Partnership
Agreement has been duly authorized, executed and delivered by the parties
thereto and constitutes a legal, valid and binding obligation, enforceable
in accordance with its terms, except to the extent enforceability may be
limited by bankruptcy, insolvency, reorganization or the laws of general
applicability relating to or affecting creditors' rights or by general
equity principles.

(o) Each of the Acquisition Agreements relating to the Acquisition
Properties, when duly authorized, executed and delivered by the respective
parties thereto, will constitute valid and binding agreements, enforceable
in accordance with their respective terms, except to the extent
enforceability may be limited by bankruptcy, insolvency, reorganization or
other laws of general applicability relating to or affecting creditors'
rights or by general equity principles. Each of the parties to the
Acquisition Agreements has full legal right, power and authority to enter
into such agreements and to consummate the transactions contemplated
thereby. The Acquisition Agreements each have been duly authorized,
executed and delivered by the respective parties thereto and constitute
legal, valid and binding obligations, enforceable in accordance with their
respective terms, except to the extent enforceability may be limited by
bankruptcy, insolvency, reorganization or other laws of general
applicability relating to or affecting creditors' rights or by general
equity principles.

(p) Each consent, approval, authorization, order, license,
certificate, permit, registration, designation or filing by or with any
governmental agency or body necessary for the valid authorization,
issuance, sale and delivery of the Units, the execution, delivery and
performance of this Agreement and the consummation by the Partnership and
the Company of the transactions contemplated hereby has been made or
obtained and is in full force and effect.

(q) Neither the issuance, sale and delivery by the Partnership of the
Units, nor the execution, delivery and performance of this Agreement by the
Partnership and the Company, nor the consummation of the transactions
contemplated hereby by the Partnership or the Company, as applicable, will
conflict with or result in a breach or violation of any of the terms and
provisions of, or (with or without the giving of notice or the passage of
time or both) constitute a default under the certificate of incorporation,
bylaws, certificate of limited partnership or Partnership Agreement of the
Partnership or the Company, as the case may be; any indenture, mortgage,
deed of trust, loan agreement, note, lease or other agreement or instrument
(including the Operating Partnership Agreement and the constituent
documents of the Business Trust) to which either of the Partnerships, the
Company or the Business Trust is a party or to which they, any of them, any
of their respective properties or other assets or any Acquisition Property
is subject; or any applicable statute, judgment, decree, order, rule or
regulation of any court or governmental agency or body applicable to any of
the foregoing or any of their respective properties; or result in the
creation or imposition of any lien, claim, charge, or other encumbrance of
any kind or nature whatsoever upon any Acquisition Property or any property
or asset of the Company, either of the Partnerships or the Business Trust.

(r) No person or entity has exercised any right to require
registration of any securities in connection with, or otherwise to
participate in, the registration under the 1933 Act of the Units pursuant
to the Registration Statement; and, except as set forth in the Prospectus,
no person holds a right to require

<PAGE>

registration under the 1933 Act of any Units or other securities of the
Partnership at any other time. No person or entity has a right of
participation or first refusal with respect to the issuance or sale of the
Units by the Partnership. The form of certificates evidencing the Units
complies with all applicable requirements of Delaware law, the Partnership
Agreement, the Depositary Agreement and The New York Stock Exchange.

(s) The capitalization of the Partnership is as disclosed in the
Prospectus under "Capitalization." All of the Units have been duly
authorized and validly issued, are fully paid and nonassessable and conform
to the description of the Units contained in the Prospectus. None of the
issued Units is subject to any preemptive or similar right and none has
been issued, is owned or is held in violation of any preemptive or similar
right. Except as disclosed in the Prospectus, there is no outstanding
option, warrant or other right calling for the issuance of, and no
commitment, plan or arrangement to issue, any Units or any security
convertible into or exchangeable for Units. The Units to be issued and
sold at the Closing Time have been duly and validly authorized by the
Partnership. At the Closing Time and the Delivery Date, such Units will be
validly issued, fully paid and nonassessable and free of any preemptive or
similar right.

(t) All offers and sales of the Units prior to the date hereof were
at all relevant times duly registered under the 1933 Act or exempt from the
registration requirements of the 1933 Act by reason of Sections 3(b), 4(2)
or 4(6) thereof and were duly registered or the subject of an available
exemption from the registration requirements of the applicable state
securities or blue sky laws.

(u) The Company's authorized, issued and outstanding capital stock is
as disclosed in the Prospectus. All of the issued shares of capital stock
of the Company have been duly authorized, validly issued and are fully paid
and nonassessable. None of the issued capital stock is subject to any
preemptive or similar right and none has been issued, is owned or is held
in violation of any preemptive or similar right. All of the outstanding
capital stock has been issued, offered and sold in compliance with all
applicable laws (including, without limitation, federal and state
securities laws).

(v) The historical financial statements, together with the related
schedules and notes, included or incorporated in the Registration Statement
and Prospectus present fairly the financial position of the specified
entity as of the dates indicated and the financial position, results of
operations and changes in financial position of the specified entity for
the period specified, all in conformity with generally accepted accounting
principles applied on a consistent basis. The financial statement
schedules included in the Registration Statement and the amounts in the
Prospectus under the captions "Prospectus Summary -- Summary Historical and
Pro Forma Financial Information and Other Data" and "Selected Historical
and Pro Forma Financial Information and Other Data" fairly present the
information shown therein and have been compiled on a basis consistent with
the financial statements or schedules required by Form S-3 or otherwise
required to be included or incorporated in the Registration Statement, the
Prospectus or any Preliminary Prospectus. The unaudited pro forma
financial information (including the related notes) and other pro forma
financial information included in the Registration Statement, Prospectus or
any Preliminary Prospectus complies as to form in all material respects to
the applicable accounting requirements of the 1933 Act and the 1933 Act
Regulations, and management of the Partnership believes that the
assumptions underlying the pro forma adjustments are reasonable. Such pro
forma adjustments have been properly applied to the historical amounts in
the compilation of the information and such information fairly presents the
financial position, results of operations and other information purported
to be shown therein at the respective dates and for the respective periods
specified.

(w) Each accountant or accounting firm referenced under "Experts" in
the Registration Statement and the Prospectus, who have examined and are
reporting upon the audited financial statements and schedules included or
incorporated by reference in the Registration Statement and the Prospectus,
are, and were during the periods covered by their reports included in the
Registration Statement and the Prospectus, independent public accountants
within the meaning of the 1933 Act and the 1933 Act Regulations.

<PAGE>

(x) Neither the Company, either of the Partnerships, or the Business
Trust has sustained, since March 31, 1996, and, to the knowledge of the
Company or the Partnership, no entity from which either of the Partnerships
or the Business Trust proposes to acquire an Acquisition Property, has
sustained since March 31, 1996, any material loss or interference with its
business from fire, explosion, flood, hurricane, accident or other
calamity, whether or not covered by insurance, or from any labor dispute or
arbitrators' court or governmental action, order or decree, in each such
case that could materially adversely affect either of the Partnerships,
any Current Property, or any Acquisition Property or the condition,
financial or otherwise, earnings, assets, business affairs or business
prospects of the Company, either of the Partnerships, or the Business
Trust; and since the respective dates as of which information is given in
the Registration Statement and the Prospectus, and except as otherwise
stated in the Registration Statement and Prospectus, there has not been (i)
any material change in the capital stock or Units, as applicable, long-term
debt, obligations under capital leases or short-term borrowings of the
Company, either of the Partnerships or the Business Trust, (ii) any
material change, or any development which could reasonably be seen as
involving a prospective material change in or affecting the condition,
financial or otherwise, earnings, assets, business affairs or business
prospects of the Company, either of the Partnerships or the Business Trust,
(iii) any liability or obligation, direct or contingent, incurred or
undertaken by the Company, either of the Partnerships or the Business
Trust, which is material to the condition, financial or otherwise,
earnings, assets, business affairs or business prospects of any such
entity, except for current liabilities or current obligations incurred in
the ordinary course of business, (iv) any declaration or payment of any
dividend or distribution of any kind on or with respect to the capital
stock or Units, as applicable, of the Company, either of the Partnerships
or the Business Trust, or (v) any transaction that is material to the
Company, either of the Partnerships or the Business Trust, except
transactions in the ordinary course of business and consistent with past
practices or as otherwise disclosed in the Registration Statement and the
Prospectus.

(y) Each of the Partnership, the Operating Partnership and the
Business Trust, as the case may be, have good and marketable title in fee
simple to all real property and the improvements located thereon owned by
each of them, including, as applicable, those certain Current Properties
identified in the Registration Statement and the Prospectus as owned by the
Partnerships, or the Business Trust, free and clear of all liens, claims,
charges, and other encumbrances of any kind or nature whatsoever, except
such as are described in the Prospectus, except such as would not have a
material adverse effect on either of the Partnerships or the Business Trust
or on the condition, financial or otherwise, earnings, assets, business
affairs or business prospects of any such entity. Upon consummation of the
transactions involving the Acquisition Properties, the Partnerships or the
Business Trust, as the case may be, will have good and marketable title in
fee simple to the Acquisition Properties and all related real property,
free and clear of all liens, claims, charges, and other encumbrances of any
kind or nature whatsoever, except such as would not have a material adverse
effect on either of the Partnerships or the Business Trust or on the
condition, financial or otherwise, earnings, assets, business affairs or
business prospects of any such entity. The Partnership, the Operating
Partnership or the Business Trust, as the case may be, leases certain real
property as lessee with respect to those properties identified as leased
property in the Registration Statement and such properties are subject to
valid, binding and enforceable leases that are not in default. In
addition, the Partnership, the Operating Partnership or the Business Trust,
as the case may be, leases real property as lessor with respect to those
properties identified as such in the Registration Statement and such
properties are subject to valid, binding and enforceable leases, except
that with respect to only two such leases, the enforceability of the leases
may be limited by the bankruptcy of the tenant; all such leases are not in
default, except with respect to such two leases, such leases are in default
but are not in payment default. Each of the Current Properties and the
Acquisition Properties complies with all applicable codes, laws and
regulations (including, without limitation, building and zoning codes, laws
and regulations and laws relating to access to the Current Properties and
the Acquisition Properties), except if and to the extent disclosed in the
Prospectus and except for such failures to comply that would not
individually or in the aggregate have a material adverse effect on such
property or on the condition, financial or otherwise, earnings, assets,
business affairs or business prospects of either of the Partnerships, the
Company or the Business Trust. Neither the Company nor the Partnership has
knowledge of any pending or threatened condemnation proceedings, zoning
change, or other proceeding or action that will in any manner affect the
size of, use of, improvements on, construction on or access to the Current
Properties or the Acquisition Properties, except such proceedings or
actions that would not have a material adverse effect on any Current
Property

<PAGE>

or Acquisition Property or on the condition, financial or otherwise,
earnings, assets, business affairs or business prospects of either of the
Partnerships, the Business Trust or the Company.

(z) Neither the Company, either of the Partnerships nor the Business
Trust is in violation of its respective charter, bylaws, certificate of
limited partnership, partnership agreement or trust documents, as the case
may be, and no default exists, and no event has occurred, nor state of
facts exists, which, with notice or after the lapse of time to cure or
both, would constitute a default in the due performance and observance of
any obligation, agreement, term, covenant, consideration or condition
contained in any indenture, mortgage, deed of trust, loan agreement, note,
lease or other agreement or instrument to which any such entity is a party
or to which any such entity or any of its properties is subject. Neither
the Company, either of the Partnerships nor the Business Trust is in
violation of, or in default with respect to, any statute, rule, regulation,
order, judgment or decree, except such as in the aggregate do not now have
and will not in the future have a material adverse effect on the condition,
financial or otherwise, earnings, assets, business affairs or business
prospects, of any such entity, respectively.

(aa) There is not pending or, to the knowledge of the Company or the
Partnership, threatened, any action, suit, proceeding, inquiry or
investigation against the Company, either of the Partnerships, the Business
Trust or any of their respective officers and directors or to which the
properties (including the Current Properties and the Acquisition
Properties), assets or rights of either such entity are subject, before or
brought by any court or governmental agent or body or board of arbitrators,
which could result in any material adverse effect on the condition,
financial or otherwise, earnings, assets, business affairs or business
prospects, of any such entity or which could adversely affect the
consummation of the transactions contemplated by this Agreement and the
agreements regarding the purchase of the Acquisition Properties.

(bb) The descriptions in the Registration Statement and the Prospectus
of the contracts, leases and other legal documents therein described
present fairly the information required to be shown, and there are no
contracts, leases, or other documents of a character required to be
described in the Registration Statement or the Prospectus or Incorporated
Documents which are not described or filed as required. There are no
statutes or regulations applicable to the Partnerships, the Operating
Partnership, the Company or the Business Trust, or certificates, permits or
other authorizations from governmental regulatory officials or bodies
required to be obtained or maintained by the Partnerships, the Company or
the Business Trust of a character required to be disclosed in the
Registration Statement, the Prospectus or the Incorporated Documents which
have not been so disclosed and properly described herein. All agreements
between each of the Company, either of the Partnerships or the Business
Trust, as the case may be, and any third parties expressly referenced in
the Prospectus, the Registration Statement or the Incorporated Documents
are legal, valid and binding obligations of the Company, either of the
Partnerships, or the Business Trust, as the case may be, enforceable in
accordance with their respective terms, except to the extent enforceability
may be limited by bankruptcy, insolvency, reorganization or other laws of
general applicability relating to or affecting creditors' rights and by
general equitable principles.

(cc) Except as disclosed in the Prospectus, each of the Company, the
Partnerships or the Business Trust owns, possesses or has obtained all
material permits, licenses, franchises, certificates, consents, orders,
approvals and other authorizations of governmental or regulatory
authorities or other entities as are necessary to own or lease, as the case
may be, and to operate their respective properties and to carry on their
respective business as presently conducted, or as contemplated in the
Prospectus to be conducted, and there are not pending or, to the knowledge
of the Company or the Partnership, threatened, any proceedings relating to
the revocation or modification of any such licenses, permits, franchises,
certificates, consents, orders, approvals or authorizations.

(dd) Each of the Company, the Partnerships, and the Business Trust
owns or possesses adequate licenses or other rights to use all patents,
trademarks, service marks, trade names, copyrights, software and design
licenses, trade secrets, manufacturing processes, other intangible property
rights and know-how (collectively "Intangibles") necessary to entitle each
of the Company, the Partnerships or the Business Trust, as the case may be,
to conduct their respective businesses now, and as proposed to be,
conducted or operated as described in the Prospectus, the Registration
Statement or the Incorporated Documents, and

<PAGE>

neither the Company, either of the Partnerships nor the Business Trust has
received notice of infringement or of conflict with (and knows of no such
infringement of or conflict with) asserted rights of others with respect to
any Intangibles that could materially and adversely affect the condition,
financial or otherwise, earnings, assets, business affairs or business
prospects of the Company, either of the Partnerships or the Business Trust,
as the case may be.

(ee) To the Company's and the Partnership's knowledge, the
Partnership's system of internal accounting controls is sufficient to meet
the broad objectives of internal accounting control insofar as those
objectives pertain to the prevention or detection of errors or
irregularities in amounts that would be material in relation to the
Partnership's financial statements; and neither the Company, the
Partnership nor any employee or agent thereof, has made any payment of
funds of the Company or the Partnership, as the case may be, or received or
retained any funds and no funds of the Company or the Partnership have been
set aside to be used for any payment, in each case in violation of any law,
rule or regulation.

(ff) The Company, the Partnerships and the Business Trust have each
filed on a timely basis all necessary tax returns required to be filed
through the date hereof, including all federal, state, local and foreign
income, sales and franchise tax returns, and have paid all taxes shown as
due thereon; and no tax deficiency has been asserted against either such
entity, nor does either such entity know of any tax deficiency which is
likely to be asserted against either such entity which if determined
adversely to either such entity, could materially adversely affect the
condition, financial or otherwise, earnings, assets, business affairs or
business prospects of any such entity, respectively. All tax liabilities
are adequately provided for on the respective books of any such entities.

(gg) Each of the Company, the Partnerships and the Business Trust
maintain or cause to be maintained insurance (issued by insurers of
recognized financial responsibility) of the types and in the amounts
generally deemed adequate for their respective businesses and, to the
Company's and the Partnership's knowledge, consistent with insurance
coverage maintained by similar partnerships, trusts or companies (as the
case may be) in similar businesses, including, but not limited to,
insurance covering real and personal property owned or leased by any of the
Company, the Partnerships or the Business Trust, as the case may be,
against theft, damage, destruction, acts of vandalism and all other risks
customarily insured against, all of which insurance is in full force and
effect.

(hh) The Partnership and the Company each have five employees. The
Operating Partnership and the Business Trust have no employees. To the
best of the Partnership's knowledge, no general labor problem exists or is
imminent with the employees of the Partnership or the Company and there is
no pending or anticipated question of union representation or organization
relating to the employees of the Partnership or the Company.

(ii) Each of the Company, the Partnerships, the Business Trust and
their officers, directors or affiliates has not taken and will not take,
directly or indirectly, any action designed to, or that might reasonably be
expected to, cause or result in or constitute the stabilization or
manipulation of any security of the Partnership or to facilitate the sale
or resale of the Units.

(jj) The Units are registered pursuant to Section 12(g) of the 1934
Act and listed on The New York Stock Exchange. There is not pending or to
the knowledge of the Company or the Partnership, threatened, any proceeding
relating to the termination of the listing of the Units on The New York
Stock Exchange.

(kk) Neither the Partnership nor the Company has incurred any
liability for a fee, commission or other compensation on account of the
employment of a broker or finder in connection with the transactions
contemplated by this Agreement other than as contemplated hereby or as
described in the Registration Statement and the Prospectus.

(ll) Except as otherwise disclosed in the Prospectus, neither the
Company, the Partnership, the Operating Partnership, the Business Trust
nor, to the knowledge of the Company or the Partnership, any

<PAGE>

entity ("Selling Entity") from which the Partnership acquired a Current
Property or from which the Partnership, Operating Partnership or Business
Trust proposes to acquire an Acquisition Property has authorized or
conducted or has knowledge of the generation, transportation, storage,
presence, use, treatment, disposal, release, or other handling of any
hazardous substance, hazardous waste, hazardous material, hazardous
constituent, toxic substance, pollutant, contaminant, asbestos, radon,
polychlorinated biphenyls ("PCBs"), petroleum product or waste (including
crude oil or any fraction thereof), natural gas, liquefied gas, synthetic
gas or other material defined, regulated, controlled or potentially subject
to any remediation requirement under any environmental law (collectively,
"Hazardous Materials"), on, in, under or affecting any real property
currently leased or owned or by any means controlled by the Company, the
Partnership, the Operating Partnership, the Business Trust or any Selling
Entity, including the Current Properties and the Acquisition Properties
(the "Real Property") except as in material compliance with applicable
laws; to the knowledge of the Company and the Partnership, the Real
Property and the Company's, the Partnership's, the Operating Partnership's,
the Business Trust's and the Selling Entities' operations with respect to
the Real Property are or were at the respective time of operation in
compliance with all federal, state and local laws, ordinances, rules,
regulations and other governmental requirements relating to pollution,
control of chemicals, management of waste, discharges of materials into the
environment, health, safety, natural resources, and the environment
(collectively, "Environmental Laws"), and the Company, the Partnership, the
Operating Partnership, the Business Trust and the Selling Entities have,
and are in compliance with, all licenses, permits, registrations and
government authorizations necessary to operate under all applicable
Environmental Laws. Except as otherwise disclosed in the Prospectus, none
of the Company, the Partnership, the Operating Partnership or Business
Trust or, to the best knowledge of the Company or the Partnership, any
Selling Entity has received or received at any time any written or oral
notice from any governmental entity or any other person and there is no
pending or threatened claim, litigation or any administrative agency
proceeding that: alleges a violation of any Environmental Laws by the
Company, the Partnership, the Operating Partnership, or any Selling Entity;
alleges that the Company, the Partnership, the Operating Partnership, the
Business Trust, or any Selling Entity is a liable party or a potentially
responsible party under the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601, ET SEQ., or any
state superfund law; has resulted in or could result in the attachment of
an environmental lien on any of the Real Property; or alleges that the
Company, the Partnership, the Operating Partnership, the Business Trust or
any Selling Entity is liable for any contamination of the environment,
contamination of the Real Property, damage to natural resources, property
damage, or personal injury based on their activities or the activities of
their predecessors or third parties (whether at the Real Property or
elsewhere) involving Hazardous Materials, whether arising under the
Environmental Laws, common law principles, or other legal standards.

(mm) The Partnership and the Operating Partnership were organized in
conformity with the requirements for qualification as a limited partnership
under the Delaware Limited Partnership Act, and the Partnership and the
Operating Partnership are each treated as a partnership for federal income
purposes and not as a corporation or an association taxable as a
corporation.

(nn) Neither the Company, the Partnership, the Operating Partnership
nor the Business Trust is, or will become as a result of the transactions
contemplated hereby, or will conduct their respective businesses in a
manner in which any such entity would become, "an investment company," or a
company or partnership "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended.

(oo) No environmental engineering firm which prepared Phase I
environmental assessment reports with respect to the Current Properties and
the Acquisition Properties was employed for such purpose on a contingent
basis or has any substantial interest in the Company or the Partnership or,
to the knowledge of the Company or the Partnership any Selling Entity.

Any certificate signed by any officer of the Company on behalf of the
Company or the Partnership and delivered to you or to counsel for the
Underwriters shall be deemed a representation and warranty by such entities to
each Underwriter as to the matters covered thereby.

<PAGE>

Section 2. SALE AND DELIVERY OF THE UNITS TO THE UNDERWRITERS; CLOSING.

(a) On the basis of the representations and warranties herein
contained, and subject to the terms and conditions herein set forth, the
Partnership agrees to sell to each Underwriter, and each Underwriter
agrees, severally and not jointly, to purchase from the Partnership the
number of Firm Units set forth opposite the name of such Underwriter in
SCHEDULE A (the proportion which each Underwriter's share of the total
number of the Firm Units bears to the total number of Firm Units is
hereinafter referred to as such Underwriter's ("underwriting obligation
proportion"), at a purchase price of $_________ per Unit.

(b) In addition, on the basis of the representations and warranties
herein contained, and subject to the terms and conditions herein set forth,
the Partnership hereby grants an option to the Underwriters, severally and
not jointly, to purchase up to an additional 270,000 Option Units at the
same purchase price as shall be applicable to the Firm Units. The option
hereby granted will expire if not exercised within the thirty (30) day
period after the date of the Prospectus by giving written notice to the
Partnership. The option granted hereby may be exercised in whole or in
part (but not more than once), only for the purpose of covering over
allotments that may be made in connection with the offering and
distribution of the Firm Units. The notice of exercise shall set forth the
number of Option Units as to which the several Underwriters are exercising
the option, and the time and date of payment and delivery thereof. Such
time and date of delivery (the "Date of Delivery") shall be determined by
you but shall not be later than seven full business days after the exercise
of such option, nor in any event prior to the Closing Time. If the option
is exercised as to all or any portion of the Option Units, the Option Units
as to which the option is exercised shall be purchased by the Underwriters,
severally and not jointly, in their respective underwriting obligation
proportions.

(c) Payment of the purchase price for and delivery of certificates in
definitive form representing the Firm Units shall be made at the offices of
Morgan Keegan & Company, Inc., 50 Front Street, Memphis, Tennessee 38103 or
at such other place as shall be agreed upon by the Partnership and you, at
10:00 a.m., either (i) on the third full business day after the effective
date of the Registration Statement, or (ii) at such other time not more
than ten full business days thereafter as you and the Partnership shall
agree (unless, in either case, postponed pursuant to Section 10), (such
date and time of payment and delivery being herein called the "Closing
Time"). In addition, in the event that any or all of the Option Units are
purchased by the Underwriters, payment of the purchase price for and
delivery of certificates in definitive form representing the Option Units
shall be made at the offices of Morgan Keegan & Company, Inc. in the manner
set forth above, or at such other place as the Partnership and you shall
determine, on the Date of Delivery as specified in the notice from you to
the Partnership. Payment for the Firm Units and the Option Units shall be
made to the Partnership by certified or official bank check or checks in
New York Clearing House next day funds payable to the order of the
Partnership, against delivery to you for the respective accounts of the
Underwriters of the Units to be purchased by them.

(d) The certificates representing the Units to be purchased by the
Underwriters shall be in such denominations and registered in such names as
you may request in writing at least three full business days before the
Closing Time or the Date of Delivery, as the case may be. The certificates
representing the Units will be made available at the offices of Morgan
Keegan & Company, Inc. or at such other place as Morgan Keegan & Company,
Inc. may designate for examination and packaging not later than 10:00 a.m.
at least two full business days prior to the Closing Time or the Date of
Delivery as the case may be.

(e) After the Registration Statement becomes effective, you intend to
offer the Units to the public as set forth in the Prospectus, but after the
public offering of such Units you may in your discretion vary the public
offering price.

Section 3. CERTAIN COVENANTS OF THE PARTNERSHIP AND THE COMPANY. The
Partnership and the Company covenant and agree with each Underwriter as follows:

(a) The Partnership and the Company will use their respective best
efforts to cause the Registration Statement to become effective (if not yet
effective at the date and time that this Agreement is

<PAGE>

executed and delivered by the parties hereto). If the Partnership elects
to rely upon Rule 430A of the 1933 Act Regulations or the filing of the
Prospectus is otherwise required under Rule 424(b) of the 1933 Act
Regulations, and subject to the provisions of Section 3(b) of this
Agreement, the Partnership and the Company will comply with the
requirements of Rule 430A and will file the Prospectus, properly completed,
pursuant to the applicable provisions of Rule 424(b) within the time period
prescribed. The Partnership or the Company will notify you immediately,
and confirm the notice in writing, (i) when the Registration Statement, or
any post-effective amendment to the Registration Statement, shall have
become effective, or any supplement to the Prospectus or any amended
Prospectus shall have been filed, (ii) of the receipt of any comments from
the Commission, (iii) of any request by the Commission to amend the
Registration Statement or amend or supplement the Prospectus or for
additional information, and (iv) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or of
any order preventing or suspending the use of any Preliminary Prospectus or
the suspension of the qualification of the Units for offering or sale in
any jurisdiction, or of the institution or threatening of any proceeding
for any such purposes. The Partnership and the Company will use every
reasonable effort to prevent the issuance of any such stop order or of any
order preventing or suspending such use and, if any such order is issued,
to obtain the withdrawal thereof at the earliest possible moment.

(b) Neither the Partnership nor the Company will at any time file or
make any amendment to the Registration Statement, or any amendment or
supplement (i) to the Prospectus, if the Partnership has not elected to
rely upon Rule 430A, or (ii) if the Partnership has elected to rely upon
Rule 430A, to either the prospectus included in the Registration Statement
at the time it becomes effective or to the Prospectus filed in accordance
with Rule 424(b), in either case if you shall not have previously been
advised and furnished a copy thereof a reasonable time prior to the
proposed filing, or if you or counsel for the Underwriters shall object to
such amendment or supplement.

(c) Either the Partnership or the Company has furnished or will
furnish to you, at its expense, as soon as available, as many signed copies
of the Registration Statement as originally filed and of all amendments
thereto, whether filed before or after the Registration Statement becomes
effective, copies of all exhibits and documents filed therewith and signed
copies of all consents and certificates of experts, as you may reasonably
request, and has furnished or will furnish to each Underwriter, one
conformed copy of the Registration Statement as originally filed and of
each amendment thereto (but without exhibits).

(d) The Partnership or the Company will deliver to each Underwriter,
at the Partnership's expense, from time to time, as many copies of each
Preliminary Prospectus as such Underwriter may reasonably request, and the
Partnership hereby consents to the use of such copies for purposes
permitted by the 1933 Act. The Partnership or the Company will deliver to
each Underwriter, at the Partnership's expense, as soon as the Registration
Statement shall have become effective and thereafter from time to time as
requested during the period when the Prospectus is required to be delivered
under the 1933 Act, such number of copies of the Prospectus (as
supplemented or amended) as each Underwriter may reasonably request. The
Partnership and the Company will comply to the best of its ability with the
1933 Act and the 1933 Act Regulations so as to permit the completion of the
distribution of the Units as contemplated in this Agreement and in the
Prospectus. If the delivery of a prospectus is required at any time prior
to the expiration of nine months after the time of issue of the Prospectus
in connection with the offering or sale of the Units and if at such time
any events shall have occurred as a result of which the Prospectus as then
amended or supplemented would include an untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were
made when such Prospectus is delivered not misleading, or, if for any
reason it shall be necessary during such same period to amend or supplement
the Prospectus in order to comply with the 1933 Act, the Partnership and
the Company will notify you and upon your request prepare and furnish
without charge to each Underwriter and to any dealer in securities as many
copies as you may from time to time reasonably request of an amended
Prospectus or a supplement to the Prospectus which will correct such
statement or omission or effect such compliance, and in case any
Underwriter is required to deliver a prospectus in connection with sales of
any of the Units at any time nine months or more after the time of issue of
the Prospectus, upon your request but at the expense of such Underwriter,
the Partnership or the Company will

<PAGE>

prepare and deliver to such Underwriter as many copies as you may request
of an amended or supplemented Prospectus complying with Section 10(a)(3) of
the 1933 Act.

(e) The Partnership and the Company will use their respective best
efforts to qualify the Units for offering and sale under the applicable
securities laws of such states and other jurisdictions as you may designate
and to maintain such qualifications in effect for as long as may be
necessary to complete the distribution of the Units; provided, however,
that neither the Partnership nor the Company shall be obligated to file any
general consent to service of process or to qualify as a foreign
corporation in any jurisdiction in which it is not so qualified or to make
any undertakings in respect of doing business in any jurisdiction in which
it is not otherwise so subject. The Partnership or the Company will file
such statements and reports as may be required by the laws of each
jurisdiction in which the Units have been qualified as above provided.

(f) The Partnership or the Company will make generally available to
its Unitholders as soon as practicable, but in any event not later than the
end of the fiscal quarter first occurring after the first anniversary of
the "effective date of the Registration Statement" (as defined in Rule
158(c) of the 1933 Act Regulations), an earnings statement (in reasonable
detail but which need not be audited) complying with the provisions of
Section 11(a) of the 1933 Act and Rule 158 thereunder and covering a period
of at least 12 months beginning after the effective date of the
Registration Statement.

(g) The Partnership and the Company will use the net proceeds
received by the Partnership from the sale of the Units in the manner
specified in the Prospectus under the caption "Use of Proceeds."

(h) The Partnership will furnish to its Unitholders, as soon as
practicable after the end of each respective period, annual reports
(including financial statements audited by independent public accountants)
and unaudited quarterly reports of operations for each of the first three
quarters of the fiscal year. During a period of five years after the date
hereof, the Partnership or the Company will furnish to you: (i)
concurrently with furnishing such reports to its Unitholders, statements of
operations of the Partnership for each of the first three quarters in the
form furnished to the Unitholders; (ii) concurrently with furnishing to its
Unitholders, a balance sheet of the Partnership as of the end of such
fiscal year, together with statements of operations, of cash flows and of
Unitholders' equity of the Partnership for such fiscal year, accompanied by
a copy of the certificate or report thereon of independent public
accountants; (iii) as soon as they are available, copies of all reports
(financial or otherwise) mailed to Unitholders; (iv) as soon as they are
available, copies of all reports and financial statements furnished to or
filed with the Commission, any securities exchange or the National
Association of Securities Dealers, Inc. ("NASD"); (v) every material press
release in respect of the Partnerships, the Company or the Business Trust
or their respective affairs which is released by any such entity; and (vi)
any additional information of a public nature concerning either of the
Partnerships, the Company or the Business Trust or their respective
businesses that you may reasonably request. During such five-year period,
the foregoing financial statements shall be on a consolidated basis to the
extent that the accounts of the Partnership are consolidated with any
subsidiaries, and shall be accompanied by similar financial statements for
any significant subsidiary that is not so consolidated.

(i) For a period of 180 days from the date hereof (the "Lock-Up
Period"), the Partnership will not, without your prior written consent,
directly or indirectly, sell, offer to sell, grant any option for the sale
of, or otherwise dispose of, any Units or securities convertible into or
exchangeale for Units, other than to the Underwriters pursuant to this
Agreement; provided, however, that notwithstanding to foregoing, the
Partnership may issue Units pursuant to any dividend reinvestment plan to
be adopted by the Partnership following the date hereof or in connection
with acquisition of additional properties, so long as in connection with
each such issuance of Units in connection with an acquisition, the holder
of Units is subject to restrictions on resale which extend at least until
the end of the Lock-Up Period.

(j) The Partnership will maintain a depositary and a transfer agent
and, if necessary under the jurisdiction of organization of the
Partnership, a registrar (which may be the same entity as the transfer
agent) for its Units.

<PAGE>

(k) The Partnership and the Company will use their respective best
efforts to maintain the listing of its Units on the New York Stock
Exchange.

(l) The Company and the Partnership are familiar with the Investment
Company Act of 1940, as amended, and the rules and regulations thereunder,
and have in the past conducted their affairs, and will in the future
conduct their affairs, in such a manner so as to ensure that the
Partnership and the Company were not and will not be an "investment
company" or an entity "controlled" by an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.

(m) The Partnership and its affiliates will not, and the Company and
its officers, directors and affiliates will not, in violation of the
Exchange Act and the rules and regulations promulgated thereunder, (i)
take, directly or indirectly prior to termination of the underwriting
syndicate contemplated by this Agreement, any action designed to stabilize
or manipulate the price of any security of the Partnership, or which may
cause or result in, or which might in the future reasonably be expected to
cause or result in, the stabilization or manipulation of the price of any
security of the Partnership, to facilitate the sale or resale of any of the
Units, (ii) sell (other than under this Agreement), bid for, purchase or
pay anyone any compensation for soliciting purchases of the Units or (iii)
pay or agree to pay to any person any compensation for soliciting any order
to purchase any other securities of the Partnership.

(n) If at any time during the 30-day period after the Registration
Statement becomes effective, any rumor, publication or event relating to or
affecting the Partnership shall occur as a result of which in your
reasonable opinion the market price of the Units has been or is likely to
be materially affected (regardless of whether such rumor, publication or
event necessitates a supplement to or amendment of the Prospectus) and
after written notice from you advising the Partnership to the effect set
forth above, the Partnership agrees to forthwith prepare, consult with you
concerning the substance of, and disseminate a press release or other
public statement, reasonably satisfactory to you, responding to or
commenting on such rumor, publication or event.

(o) The Partnership will notify the New York Stock Exchange of the
proposed issuance of the Units.

(p) The Partnership will file timely with the Commission and the NASD
a report on Form 10-C in accordance with the rules and regulations of the
Commission under the 1934 Act.

(q) The Partnership or the Operating Partnership will use their best
efforts to cause the closing of the acquisition of the Acquisition
Properties to occur on or prior to June 30, 1996.

Section 4. PAYMENT OF EXPENSES. The Partnership or the Company will pay
and bear all costs, fees and expenses incident to the performance of its
obligations under this Agreement (excluding fees and expenses of counsel for the
Underwriters, except as specifically set forth below), including (a) the
preparation, printing and filing of the Registration Statement (including
financial statements and exhibits), as originally filed and as amended, the
Preliminary Prospectuses and the Prospectus and any amendments or supplements
thereto, and the cost of furnishing copies thereof to the Underwriters, (b) the
preparation, printing and distribution of this Agreement, any Agreement Among
Underwriters, any Selected Dealers Agreement, the certificates representing the
Units, the Blue Sky Memoranda and any instruments relating to any of the
foregoing, (c) the issuance and delivery of the Units to the Underwriters,
including any transfer taxes payable upon the sale of the Units to the
Underwriters (other than transfer taxes on resales by the Underwriters), (d) the
fees and disbursements of the Partnership's counsel and accountants, (e) the
qualification of the Units under the applicable securities laws in accordance
with Section 3(e) of this Agreement, including filing fees and fees and
disbursements of counsel for the Underwriters in connection therewith and in
connection with the Blue Sky Memoranda, (f) all costs, fees and expenses in
connection with the notification to the New York Stock Exchange of the proposed
issuance of the Units, (g) filing fees relating to the review of the offering by
the NASD, (h) the transfer agent's and registrar's fees and all miscellaneous
expenses referred to in Item 14 of the Registration Statement, (i) costs related
to travel and lodging incurred by the Partnership and its representatives
relating to meetings with and presentations to prospective purchasers of the
Units reasonably determined by the Underwriters to be necessary or desirable to
effect the sale of the Units to the public, and (j) all

<PAGE>

other costs and expenses incident to the performance of the Partnership's
obligations hereunder (including costs incurred in closing the purchase of the
Option Units, if any) that are not otherwise specifically provided for in this
section. The Partnership or the Company, upon your request, will provide funds
in advance for filing fees in connection with "blue sky" qualifications.

If the sale of the Units provided for herein is not consummated because any
condition to the obligations of the Underwriters set forth in Section 5 hereof
is not satisfied, because of any termination pursuant to Section 9 hereof or
because of any refusal, inability or failure on the part of the Partnership or
the Company to perform any agreement herein or comply with any provision hereof
other than by reason of default by any of the Underwriters, the Partnership or
the Company will reimburse the Underwriters severally on demand for all
reasonable out-of-pocket expenses, including fees and disbursements of
Underwriters' counsel, reasonably incurred by the Underwriters in reviewing the
Registration Statement and the Prospectus, and in investigating and making
preparations for the marketing of the Units.

Section 5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of
the Underwriters to purchase and pay for the Units that they have respectively
agreed to purchase pursuant to this Agreement (including any Option Units as to
which the option granted in Section 2 has been exercised and the Date of
Delivery determined by you is the same as the Closing Time) are subject to the
accuracy of the representations and warranties of the Partnership and the
Company contained herein or in certificates of any officer of the Partnership
and the Company delivered pursuant to the provisions hereof, to the performance
by the Partnership and the Company of their obligations hereunder, and to the
following further conditions:

(a) The Registration Statement shall have become effective not later
than 5:30 p.m. on the date of this Agreement or, with your consent, at a
later time and date not later, however, than 5:30 p.m. on the first
business day following the date hereof, or at such later time or on such
later date as you may agree to in writing; and at the Closing Time no stop
order suspending the effectiveness of the Registration Statement shall have
been issued under the 1933 Act and no proceedings for that purpose shall
have been instituted or shall be pending or, to your knowledge or the
knowledge of the Partnership, shall be contemplated by the Commission, and
any request on the part of the Commission for additional information shall
have been complied with to the satisfaction of counsel for the
Underwriters. If the Partnership has elected to rely upon Rule 430A, a
prospectus containing the Rule 430A Information shall have been filed with
the Commission in accordance with Rule 424(b) (or a post-effective
amendment providing such information shall have been filed and declared
effective in accordance with the requirements of Rule 430A).

(b) At the Closing Time, you shall have received a favorable opinion
of Middleberg, Riddle & Gianna, counsel for the Company and the
Partnership, dated as of the Closing Time, together with signed or
reproduced copies of such opinion for each of the other Underwriters, in
form and substance satisfactory to counsel for the Underwriters, to the
effect that:

(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware with the corporate power and authority to own and lease
its properties and to conduct its business as now conducted and as
proposed to be conducted as described in the Registration Statement
and the Prospectus. The Company is qualified to transact business as
a foreign corporation and is in good standing in the states which
shall be specified in such opinion, which shall be the only states
where the nature of its business and conduct of its operations require
such qualification. The Company is the sole general partner of the
Partnership.

(ii) The Partnership is a limited partnership duly formed and
validly existing under the Delaware Limited Partnership Act (the
"Delaware Act") with the requisite power and authority to own and
lease its properties (including the Current Properties and the
Acquisition Properties) and to conduct its business as now conducted
and as proposed to be conducted as described in the Registration
Statement and the Prospectus. The Partnership is qualified to
transact business as a foreign partnership and is in good standing in
the states which shall be specified in such opinion,

<PAGE>

which shall be the only states where the nature of its business and
conduct of its operations require such qualifications. The
Partnership is in compliance with the Partnership Agreement.

(iii) The Operating Partnership and the Business Trust each
have been duly formed and are validly existing as a limited
partnership or business trust, as the case may be, under the laws of
their respective states of formation with the requisite partnership or
other power and authority, as the case may be, to own, lease and
operate their respective properties and conduct their business as now
conducted and as proposed to be conducted in the Registration
Statement and the Prospectus. The Operating Partnership is qualified
to transact business as a foreign partnership and is in good standing
in the states which shall be specified in such opinion, which shall be
the only states where the nature of its business and contact of its
operations require such qualification. The Operating Partnership is
in compliance with the Operating Partnership Agreement. The Business
Trust is qualified to transact business as a foreign trust and is in
good standing in the states which shall be specified in such opinion,
which shall be the only states where the nature of its business and
conduct of its operations require such qualification. The Business
Trust is in compliance with its constituent documents. The Company is
the sole general partner of the Operating Partnership. The Company is
the sole general partner of the Operating Partnership. The
Partnership is the sole limited partner of the Operating Partnership.
The sole beneficiaries of the Business Trust are the Partnership and
the Operating Partnership.

(iv) The Company has all requisite corporate power and authority
to execute, deliver and perform this Agreement, to issue, sell and
deliver the Shares as provided herein and to consummate the
transactions contemplated herein. This Agreement has been duly
authorized, executed and delivered by the Company and, assuming due
authorization, execution and delivery by the Underwriters, constitutes
a valid and binding agreement of the Company, enforceable in
accordance with its terms, except to the extent enforceability may be
limited by bankruptcy, insolvency, moratorium, reorganization or other
laws affecting the rights of creditors generally and by principles of
equity whether considered at law or in equity and except to the extent
that enforcement of the indemnification and contribution provisions
set forth in Section 7 of this Agreement may be limited by federal or
state securities laws or the public policy underlying such laws.

(v) The Partnership has the requisite partnership power and
authority to execute the Agreement, to issue, sell and deliver the
Units as provided herein and to consummate the transactions
contemplated herein. The Agreement has been duly authorized, executed
and delivered by the Partnership and, assuming due authorization,
execution and delivery by the Underwriters, constitutes a valid and
binding agreement of the Partnership enforceable in accordance with
its terms, except to the extent enforceability may be limited by
bankruptcy, insolvency, moratorium, reorganization or other laws
affecting the rights of creditors generally and by principles of
equity, whether considered at law or in equity and except to the
extent that enforcement of the indemnification and contribution
provisions set forth in Section 7 of the Agreement may be limited by
federal or state securities laws or the public policy underlying such
laws.

(vi) The Partnership or the Operating Partnership, as the case
may be, has the requisite power and authority to enter into the
Acquisition Agreements and to consummate the transactions contemplated
therein. Such agreements have been duly authorized, executed and
delivered by the Partnership and, assuming due authorization,
execution and delivery by the other parties thereto, constitute valid
and binding agreements, enforceable in accordance with their
respective terms, except to the extent enforceability may be limited
by bankruptcy, insolvency, reorganization or other laws of general
applicability relating to or affecting creditors' rights and by
general principles of equity whether considered at law or in equity.

(vii) No consent, approval, authorization, order, license,
certificate, permit, registration, or filing by or with any
governmental agency or body is necessary for the valid authorization,
issuance, sale and delivery of the Units, the execution, delivery and
performance of the Agreement

<PAGE>

and the consummation by the Partnership and the Company of the
transactions contemplated hereby, the execution and delivery of the
other Operative Documents to which either the Company or any of the
Partnerships is a party, except such as have been obtained or as may
be necessary under state securities laws or required by the National
Association of Securities Dealers, Inc. in connection with the
purchase and distribution of the Units by the Underwriters, as to
which such counsel need express no opinion.

(viii) Neither the issuance, sale and delivery by the
Partnership of the Units, nor the execution, delivery and performance
of this Agreement and the other Operative Documents to which any of
the Company or the Partnerships is a party, nor the consummation of
the transactions contemplated hereby or thereby by either such entity,
as applicable, will violate the Depository Agreement, the Certificate
of Incorporation, by-laws, certificate of limited partnership or
partnership agreement, as the case may be, of any such entity, as
applicable; result in a breach of, or constitute a default under, any
contract filed or incorporated by reference as an exhibit to the
Registration Statement; and neither the issuance, sale and delivery by
the Partnership of the Units nor the execution and delivery of the
Agreement or the other Operative Documents to which any of the Company
or either of the Partnerships is a party will violate any applicable
statute, judgment, decree, order, rule or regulation of any court or
governmental agency or body or, to such counsel's knowledge, result in
the creation or imposition of any lien, charge, claim or encumbrance
upon any property or asset of any of the foregoing.

(ix) The statements set forth in the Prospectus under the caption
"Description of Units," insofar as they purport to constitute a
summary of the terms of the Units, the Depositary Agreement and the
laws relating thereto, fairly summarize such terms and applicable law,
and present the information called for by the 1933 Act and the rules
and regulations thereunder. The Units conform in all material
respects as to legal matters to the description thereof contained in
the Registration Statement and the Prospectus.

(x) The Units to be issued and sold to the Underwriters
hereunder have been validly authorized by the Partnership. When
issued and delivered against payment therefor as provided in this
Agreement such Units will be validly issued, fully paid and
nonassessable. No preemptive rights of Unitholders exist with respect
to any of the Units. No person or entity has elected to require or
participate in the registration under the 1933 Act of the Units
pursuant to the Registration Statement, which has not been validly
waived; and, except as set forth in the Prospectus, no person holds a
right to require or participate in a registration under the 1933 Act
of any Units of the Partnership at any other time. No person or
entity has a right of participation or first refusal with respect to
the sale of the Units by the Partnership. The form of certificates
evidencing the Units complies with all applicable requirements of
Delaware law and the rules and regulations of the New York Stock
Exchange.

(xi) The Partnership has authorized Units as set forth in the
Prospectus under the caption "Capitalization" as of the date therein.
All of the issued Units of the Partnership have been duly and validly
authorized and issued by the Partnership and are fully paid and
nonassessable. None of the issued Units have been issued or are owned
or held in violation of any preemptive rights. The Units to be issued
at the Closing Time have been duly and validly authorized by the
Partnership. When issued and delivered against payment therefor as
provided in the Partnership Agreement, such Units will be duly and
validly issued, fully paid and nonassessable. The outstanding Units
have been and will be issued, offered and sold at or prior to the
Closing Time in compliance with all applicable laws (including,
without limitation, federal and state securities laws). All sales of
the Units prior to the date hereof were at all relevant times duly
registered under the Act or were exempt from the registration
requirements of the Act by reason of Sections 3(b), 4(2) or 4(6)
thereof. To the knowledge of such counsel, except as disclosed in the
Prospectus, there is no outstanding option, warrant or other right
calling for the issuance of, and no commitment, plan or arrangement to
issue, any Units of the Partnership or any security convertible into
or exchangeable for Units of the Partnership.

<PAGE>

(xii) Except as described in the Prospectus, there is not
pending or threatened, any action, suit, proceeding, inquiry or
investigation against the Company, either of the Partnerships or the
Business Trust or any of their respective officers and directors or to
which the properties, assets or rights of any such entity are subject,
which, if determined adversely to any such entity, would individually
or in the aggregate have a material adverse effect on the condition,
financial or otherwise, earnings, assets, business affairs or business
prospects of any such entity, respectively.

(xiii) The descriptions in the Registration Statement and the
Prospectus of the contracts, leases and other legal documents therein
described present fairly the information required to be shown and
there are no contracts, leases or other documents known to such
counsel of a character required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the
Registration Statement which are not described or filed as required.
There are no statutes or regulations applicable to the Company, either
of the Partnerships or the Business Trust or certificates, permits or
other authorizations from governmental regulatory officials or bodies
required to be obtained or maintained by any such entity, known to
such counsel, of a character required to be disclosed in the
Registration Statement or the Prospectus which have not been so
disclosed and properly described therein.

(xiv) The Units are approved and listed for trading on the
New York Stock Exchange.

(xv) The Partnership and the Operating Partnership are each
treated as a partnership for federal income purposes and not as a
corporation or an association taxable as a corporation.

(xvi) The Registration Statement has become effective under
the 1933 Act and, to the knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceeding for that purpose has been instituted or is
pending or contemplated under the 1933 Act. Other than financial
statements and other financial and operating data and schedules
contained therein, as to which counsel need express no opinion, the
Registration Statement, all Preliminary Prospectuses, the Prospectus
and any amendment or supplement thereto, appear on their face to
conform as to form in all material respects with the requirements of
Form S-3 under the 1933 Act Regulations and the Partnership is
entitled to use the Form S-3 in connection with the Registration
Statement and the offering of the Units contemplated thereby.

(xvii) Such counsel has no reason to believe that the
Registration Statement, or any further amendment thereto made prior to
the Closing Time, on its effective date and as of the Closing Time,
contained or contains any untrue statement of a material fact or
omitted or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, or
that the Prospectus, or any amendment or supplement thereto made prior
to the Closing Time, as of its issue date and as of the Closing Time,
contained or contains any untrue statement of a material fact or
omitted or omits to state a material fact necessary in order to make
the statements therein, in light of the circumstances under which they
were made, not misleading (provided that such counsel need express no
belief regarding the financial statements and related schedules and
other financial data contained in the Registration Statement, any
amendment thereto, or the Prospectus, or any amendment or supplement
thereto).

(xviii) Neither the Company nor either of the Partnerships is,
or solely as a result of the consummation of the transactions
contemplated hereby will become, an "investment company," or a company
"controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.

(xix) The descriptions in the Prospectus of statutes,
regulations, legal or governmental proceedings, and, to the extent
that they constitute a summary of such documents, the Depositary
Agreement, the Partnership Agreement and the Acquisition Agreements
therein described, are

<PAGE>

accurate in all material respects and present fairly a summary of the
information required to be shown under the 1933 Act and the 1933 Act
Regulations. The information in the Prospectus under the caption
"Federal Income Tax Considerations" to the extent that it constitutes
statements of law or legal conclusions, has been reviewed by such
counsel, is correct and presents fairly the information required to be
disclosed therein under the 1933 Act and the 1933 Act Regulations.

In rendering the foregoing opinion, such counsel may rely on the
following:

(A) as to matters involving the application of laws other
than the laws of the United States and jurisdictions in which
they are admitted, to the extent such counsel deems proper and to
the extent specified in such opinion, upon an opinion or opinions
(in form and substance reasonably satisfactory to Underwriters'
counsel) of other counsel familiar with the applicable laws, and

(B) as to matters of fact, to the extent they deem proper,
on certificates of responsible officers of the Partnership and
the Partnership, representations, warranties and certificates of
certain shareholders of the Company and partners of the
Partnership and certificates or other written statements of
officers or departments of various jurisdictions, having custody
of documents respecting the existence or good standing of the
Company and the Partnership provided that copies of all such
opinions, statements or certificates shall be delivered to
Underwriters' counsel. The opinion of counsel for the
Partnership shall state that the opinion of any other counsel, or
certificate or written statement, on which such counsel is
relying is in form satisfactory to such counsel and that you and
they are justified in relying thereon.

(c) At the Closing Time, you shall have received a favorable opinion
from Haynes and Boone, L.L.P., counsel for the Underwriters, dated as of
the Closing Time, with respect to the issuance and sale of the Units, the
Registration Statement, the Prospectus and other related matters as the
Underwriters may reasonably require, and the Partnership shall have
furnished to such counsel such documents as they may reasonably request for
the purpose of enabling them to pass on such matters.

(d) At the Closing Time, (i) the Registration Statement and the
Prospectus, as they may then be amended or supplemented, shall contain all
statements that are required to be stated therein under the 1933 Act and
the 1933 Act Regulations and in all material respects shall conform to the
requirements of the 1933 Act and the 1933 Act Regulations; the Partnership
shall have complied in all material respects with Rule 430A (if it shall
have elected to rely thereon) and neither the Registration Statement nor
the Prospectus, as they may then be amended or supplemented, shall contain
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading, (ii) there shall not have been, since the respective dates
as of which information is given in the Registration Statement, any
material adverse change in the business, prospects, properties, assets,
results of operations or condition (financial or otherwise) of any of the
Partnerships, the Company or the Business Trust, whether or not arising in
the ordinary course of business, (iii) no action, suit or proceeding at law
or in equity shall be pending or, to the best of Partnership's knowledge,
threatened against any of the Partnerships, the Company or the Business
Trust that would be required to be set forth in the Prospectus other than
as set forth therein and no proceedings shall be pending or, to the best
knowledge of the Partnership, threatened against any of the Partnerships,
the Company or the Business Trust before or by any federal, state or other
commission, board or administrative agency wherein an unfavorable decision,
ruling or finding could materially adversely affect the business,
prospects, assets, results of operations or condition (financial or
otherwise) of any of the Partnerships, the Company or the Business Trust,
other than as set forth in the Prospectus, (iv) the Partnership and the
Company shall have complied with all agreements and satisfied all
conditions on their part to be performed or satisfied at or prior to the
Closing Time, and (v) the representations and warranties of the Partnership
and the Company set forth in Section 1 shall be accurate as though
expressly made at and as of the Closing Time. At the Closing Time, you
shall have received a certificate executed by the Chairman of the Board and
President of the Company and the general partner of the Partnership, dated
as of the Closing Time, to such effect and with respect to certain
additional

<PAGE>

matters, including, without limitation: (A) the Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or preventing or suspending the
use of the Prospectus has been issued, and no proceedings for that purpose
have been instituted or are pending or, to the best of their knowledge,
threatened under the 1933 Act; and (B) they have reviewed the Registration
Statement and the Prospectus and, when the Registration Statement became
effective and at all times subsequent thereto up to the delivery of such
certificate, the Registration Statement and the Prospectus and any
amendments or supplements thereto contained all statements and information
required to be included therein or necessary to make the statements therein
not misleading and neither the Registration Statement nor the Prospectus
nor any amendment or supplement thereto included any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and,
since the effective date of the Registration Statement, there has occurred
no event required to be set forth in an amended or supplemented Prospectus
that has not been so set forth.

(e) At the time that this Agreement is executed by the Partnership
and the Company, you shall have received from each accountant or accounting
firm referenced under "Experts" in the Registration Statement and the
Prospectus (the "Accountants"), a letter, dated the date hereof, in form
and substance satisfactory to you, together with signed or reproduced
copies of such letter for each of the other Underwriters, confirming that
they are independent public accountants with respect to the Partnership or
the specified entities, as the case may be, within the meanings of the 1933
Act and 1933 Act Regulations, and stating in effect that:

(i) in their opinion, the financial statements and any
supplementary financial information and schedules included in the
Registration Statement or incorporated by reference therein, as the
case may be, and covered by their opinions therein comply as to form
in all material respects with the applicable accounting requirements
of the 1933 Act and the 1933 Act Regulations;

(ii) the financial statements of the Partnership and the
specified entities, to the extent applicable, as of and for the three-
month period ended March 31, 1996 and December 31, 1995, respectively
or as of and for such other periods as are covered by their opinion,
were reviewed by them in accordance with the standards established by
the American Institute of Certified Public Accountants and based upon
their review, they are not aware of any material modifications that
should be made to such financial statements for them to be in
conformity with generally accepted accounting principles and such
financial statements comply as to form in all material respects with
the applicable accounting requirements of the 1933 Act and the 1933
Act Regulations;

(iii) with respect to Deloitte & Touche LLP only, on the
basis of limited procedures (set forth in detail in such letter and
made in accordance with such procedures as may be specified by you)
not constituting an audit in accordance with generally accepted
auditing standards, consisting of (but not limited to) a reading of
the latest available internal unaudited financial statements of the
Partnership, a reading of the minute books of the Partnership and the
Company, inquiries of officials of the Partnership and the Company
responsible for financial and accounting matters, a reading of the
unaudited pro forma financial statements included in the Registration
Statement and the Prospectus and such other inquiries and procedures
as may be specified in such letter, nothing came to their attention
that caused them to believe that:

(A) any unaudited income statement data and balance sheet
items included in the Prospectus do not agree with corresponding
items in the unaudited financial statements from which such data
and items were derived, and any such unaudited data and items
were not determined on a basis substantially consistent with the
basis for the corresponding amounts in the audited financial
statements included in the Prospectus;

(B) any unaudited pro forma financial information included
in the Prospectus does not comply as to form in all material
respects with the applicable accounting

<PAGE>

requirements of the 1933 Act and the 1933 Act Regulations or the
pro forma adjustments have not been properly applied to
historical amounts in the compilation of that information;

(C) at a specified date not more than five days prior to
the date of delivery of such letter, there was any change in the
capital stock, any increase in debt and any decrease in
Unitholders' equity from that set forth in the Partnership's
balance sheet at March 31, 1996, except as described in such
letter; and

(D) for the period from March 31, 1996 to a specified date
not more than five days prior to the date of delivery of such
letter, there were any decreases in total revenues, or increases
in total expenses, depreciation and amortization or net loss for
the Current Properties, in each case as compared with the
corresponding period of the preceding year, except in each case
for decreases which the Prospectus discloses have occurred or may
occur or which are described in such letter; and

(iv) with respect to Deloitte & Touche LLP only, in addition to
the procedures referred to in clause (ii) above and the examination
referred to in their reports included in the Registration Statement,
they have carried out certain specified procedures, not constituting
an audit in accordance with generally accepted auditing standards,
with respect to certain amounts, percentages and financial information
specified by you which are derived from the general accounting records
of the Partnership, which appear in the Registration Statement or the
exhibits or schedules thereto and are specified by you, and have
compared such amounts, percentages and financial information with the
accounting records of the Partnership and with material derived from
such records and have found them to be in agreement.

(f) At the Closing Time, you shall have received from each of the
Accountants a letter, in form and substance satisfactory to you and dated
as of the Closing Time, to the effect that they reaffirm the statements
made in the letters furnished pursuant to subsection (e) above, except that
the specified date referred to shall be a date not more than five days
prior to the Closing Time.

(g) In the event that either of the letters to be delivered pursuant
to subsections (e) and (f) above sets forth any such changes, decreases or
increases, it shall be a further condition to your obligations that you
shall have reasonably determined, after discussions with officers of the
Company responsible for financial and accounting matters regarding the
Partnership and with Deloitte & Touche, LLP, that such changes, decreases
or increases as are set forth in such letters do not reflect a material
adverse change in the capitalization, long-term debt, or Unitholders'
equity of the Partnership as compared with the amounts shown in the latest
consolidated audited balance sheet of the Partnership, or a material
adverse change in total revenues or Unitholders' equity, as compared with
the corresponding period of the prior year.

(h) At the Closing Time, counsel for the Underwriters shall have been
furnished with all such documents, certificates and opinions as they may
request for the purpose of enabling them to pass upon the issuance and sale
of the Units as contemplated in this Agreement and the matters referred to
in Section 5(d) and in order to evidence the accuracy and completeness of
any of the representations, warranties or statements of the Partnership or
the Partnership, the performance of any of the covenants of the Partnership
or the Partnership, or the fulfillment of any of the conditions herein
contained; and all proceedings taken by the Partnership at or prior to the
Closing Time in connection with the authorization, issuance and sale of the
Units as contemplated in this Agreement shall be reasonably satisfactory in
form and substance to you and to counsel for the Underwriters. The
Partnership and the Company will furnish you with such number of conformed
copies of such opinions, certificates, letters and documents as you shall
reasonably request.

(i) The NASD, upon review of the terms of the public offering of the
Units, shall not have objected to such offering, such terms or the
Underwriters' participation in the same.

<PAGE>

(j) Subsequent to the date hereof there shall not have occurred any
of the following: (i) a suspension or material limitation in trading in
securities generally or in the Units on the New York Stock Exchange or
American Stock Exchange or the over-the-counter market, (ii) a general
moratorium on commercial banking activities in Delaware or New York
declared by either Federal or state authorities, as the case may be, or
(iii) the outbreak or escalation of hostilities involving the United States
or the declaration by the United States of a national emergency or war if
the effect of any such event specified in this clause (iii) in your
reasonable judgment makes it impracticable or inadvisable to proceed with
the public offering or the delivery of the Units on the terms and in the
manner contemplated in the Prospectus.

(k) The Partnership shall have provided to the Underwriters copies of
owner's title insurance policies relating to each of the Current Properties
and copies of the proposed title commitments for each of the Acquisition
Properties.

(l) The Partnership shall have provided to the Underwriters executed
lock-up agreements from the Company, Robert J. Stetson, Fred H. Margolin,
Darrell Rolph, David Rolph, Gerald H. Graham and Eugene G. Taper, in form
and substance satisfactory to you, pursuant to which each has agreed not to
sell any of its or his Units or any securities convertible into or
exchangeable for Units, for the Lock-Up Period.

If any of the conditions specified in this Section 5 shall not have been
fulfilled when and as required by this Agreement to be fulfilled, this Agreement
may be terminated by you on notice to the Partnership at any time at or prior to
the Closing Time, and such termination shall be without liability of any party
to any other party, except as provided in Section 4. Notwithstanding any such
termination, the provisions of Section 7 shall remain in effect.

Section 6. CONDITIONS TO PURCHASE OF OPTION UNITS. In the event that the
Underwriters exercise the option granted in Section 2 hereof to purchase all or
any part of the Option Units and the Date of Delivery determined by you pursuant
to Section 2 hereof is later than the Closing Time, the obligations of the
several Underwriters to purchase and pay for the Option Units that they shall
have respectively agreed to purchase pursuant to this Agreement are subject to
the accuracy of the representations and warranties of the Partnership and the
Partnership herein contained, to the performance by the Partnership and the
Partnership of their obligations hereunder and to the following further
conditions:

(a) The Registration Statement shall remain effective at the Date of
Delivery, and, at the Date of Delivery, no stop order suspending the
effectiveness of the Registration Statement shall have been issued under
the 1933 Act and no proceedings for that purpose shall have been instituted
or shall be pending or to your knowledge or the knowledge of the
Partnership, shall be contemplated by the Commission, and any request on
the part of the Commission for additional information shall have been
complied with to the reasonable satisfaction of counsel for the
Underwriters.

(b) At the Date of Delivery, the provisions of Sections 5(d)(i)
through 5(d)(v) shall have been complied with at and as of the Date of
Delivery and, at the Date of Delivery, you shall have received a
certificate executed by the Chairman of the Board and President of the
Company and the general partner of the Partnership, dated as of the Date of
Delivery, to such effect and to the effect set forth in clauses (A) and (B)
of Section 5(d).

(c) At the Date of Delivery, you shall have received an opinion of
Middleberg, Riddle & Gianna, counsel for the Company and the Partnership
together with signed or reproduced copies of such opinion for each of the
other Underwriters, in form and substance satisfactory to counsel for the
Underwriters, dated as of the Date of Delivery, relating to the Option
Units and otherwise to the same effect as the opinion required by Section
5(b).

(d) At the Date of Delivery, you shall have received an opinion of
Haynes and Boone, L.L.P., counsel for the Underwriters, dated as of the
Date of Delivery, relating to the Option Units and otherwise to the same
effect as the opinion required by Section 5(c).

<PAGE>

(e) At the Date of Delivery, you shall have received a letter from
each of the Accountants, in form and substance satisfactory to you and
dated as of the Date of Delivery, to the effect that they reaffirm the
statements made in the letter furnished pursuant to Section 5(e), except
that the specified date referred to shall be a date not more than five days
prior to the Date of Delivery.

(f) At the Date of Delivery, counsel for the Underwriters shall have
been furnished with all such documents, certificates and opinions as they
may reasonably request for the purpose of enabling them to pass upon the
issuance and sale of the Option Units as contemplated in this Agreement and
the matters referred to in Section 6(a) and in order to evidence the
accuracy and completeness of any of the representations, warranties or
statements of the Partnership and the Company, the performance of any of
the covenants of the Partnership and the Partnership, or the fulfillment of
any of the conditions herein contained; and all proceedings taken by the
Partnership at or prior to the Date of Delivery in connection with the
authorization, issuance and sale of the Option Units as contemplated in
this Agreement shall be reasonably satisfactory in form and substance to
you and to counsel for the Underwriters.

Section 7. INDEMNIFICATION AND CONTRIBUTION. (a) The Company and the
Partnership, jointly and severally, will indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject under the 1933 Act, the
1934 Act or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any breach of any
warranty or covenant of the Company or the Partnership herein contained or any
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse each Underwriter for any legal or other expenses reasonably incurred
by such Underwriter in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company or the
Partnership shall not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
any Preliminary Prospectus, the Registration Statement or the Prospectus, or any
such amendment or supplement in reliance upon and in conformity with written
information furnished to the Partnership by any Underwriter expressly for use
therein; provided further, that the indemnity agreement contained in Section
7(a) with respect to any Preliminary Prospectus shall not inure to the benefit
of any Underwriter from whom the person asserting any such losses, claims,
damages or liabilities purchased the Units which are the subject thereof (or to
the benefit of any person controlling such Underwriter), if such Underwriter
failed to send or give a copy of the Prospectus to such person at or prior to
the written confirmation of the sale of such Units to such person in any case
where such delivery is required by the 1933 Act or the 1933 Act Regulations and
if the Prospectus would have cured any untrue statement or alleged untrue
statement or omission or alleged omission giving rise to such loss, claim,
damage or liability. In addition to their other obligations under this Section
7(a), the Company and the Partnership agree that as an interim measure during
the pendency of any such claim, action, investigation, inquiry or other
proceeding arising out of or based upon any statement or omission, or any
alleged statement or omission, described in this Section 7(a), they will
reimburse the Underwriters on a monthly basis for all reasonable legal and other
expenses incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the absence
of a judicial determination as to the propriety and enforceability of the
Company's and the Partnership's obligation to reimburse the Underwriters for
such expenses and the possibility that such payments might later be held to have
been improper by a court of competent jurisdiction. Any such interim
reimbursement payments that are not made to an Underwriter within 30 days of a
request for reimbursement shall bear interest at the prime rate (or reference
rate or other commercial lending rate for borrowers of the highest credit
standing) published from time to time by The Wall Street Journal (the "Prime
Rate") from the date of such request. This indemnity agreement shall be in
addition to any liabilities that the Company and the Partnership may otherwise
have. For purposes of this Section 7, the information set forth in the last
paragraph on the front cover page (insofar as such information relates to the
Underwriters) and under "Underwriting" in any Preliminary Prospectus and in the
Prospectus constitutes the only information furnished by the Underwriters to the
Partnership for inclusion in any Preliminary Prospectus, the Prospectus or the
Registration Statement. Neither the Company nor the Partnership will, without
the prior written consent of each Underwriter, settle or compromise or consent
to the entry of any judgment in any pending or threatened action or claim or
related cause of action or portion of such cause of action in respect of which
indemnification may be sought hereunder (whether or not such Underwriter is a
party to such action or

<PAGE>

claim), unless such settlement, compromise or consent includes an unconditional
release of such Underwriter from all liability arising out of such action or
claim (or related cause of action or portion thereof).

The indemnity agreement in this Section 7(a) shall extend upon the same
terms and conditions to, and shall inure to the benefit of, each person, if any,
who controls any Underwriter within the meaning of the 1933 Act or the 1934 Act
to the same extent as such agreement applies to the Underwriters.

(b) Each Underwriter, severally but not jointly, will indemnify and hold
harmless the Partnership against any losses, claims, damages or liabilities to
which the Partnership may become subject, under the 1933 Act, the 1934 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any breach of any warranty or
covenant by such Underwriter herein contained or any untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement thereto in
reliance upon and in conformity with written information furnished to the
Partnership by such Underwriter expressly for use therein; and will reimburse
the Partnership for any legal or other expenses reasonably incurred by the
Partnership in connection with investigating or defending any such loss, claim,
damage, liability or action. In addition to its other obligations under this
Section 7(b), the Underwriters agree that, as an interim measure during the
pendency of any such claim, action, investigation, inquiry or other proceeding
arising out of or based upon any statement or omission, or any alleged statement
or omission, described in this Section 7(b), they will reimburse the Partnership
on a monthly basis for all reasonable legal and other expenses incurred in
connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of their
obligation to reimburse the Partnership for such expenses and the possibility
that such payments might later be held to have been improper by a court of
competent jurisdiction. Any such interim reimbursement payments that are not
made to the Partnership within 30 days of a request for reimbursement shall bear
interest at the Prime Rate from the date of such request. This indemnity
agreement shall be in addition to any liabilities that the Underwriters may
otherwise have. No Underwriter will, without the prior written consent of the
Partnership, settle or compromise or consent to the entry of judgment in any
pending or threatened action or claim or related cause of action or portion of
such cause of action in respect of which indemnification may be sought hereunder
(whether or not the Partnership is a party to such action or claim), unless such
settlement, compromise or consent includes an unconditional release of the
Partnership from all liability arising out of such action or claim (or related
cause of action or portion thereof).

The indemnity agreement in this Section 7(b) shall extend upon the same
terms and conditions to, and shall inure to the benefit of, each officer and
director of the Company and each person, if any, who controls the Partnership
within the meaning of the 1933 Act or the 1934 Act to the same extent as such
agreement applies to the Partnership.

(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; no indemnification provided for in Section 7(a) or 7(b)
shall be available to any party who shall fail to give notice as provided in
this Section 7(c) if the party to whom notice was not given was unaware of the
proceeding to which such notice would have related and was prejudiced by the
failure to give such notice, but the omission so to notify the indemnifying
party will not relieve the indemnifying party from any liability that it may
have to any indemnified party otherwise than under Section 7. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal or
other expenses subsequently incurred by such

<PAGE>

indemnified party in connection with the defense thereof other than reasonable
costs of investigation, except that if the indemnified party has been advised by
counsel in writing that there are one or more defenses available to the
indemnified party which are different from or additional to those available to
the indemnifying party, then the indemnified party shall have the right to
employ separate counsel and in that event the reasonable fees and expenses of
such separate counsel for the indemnified party shall be paid by the
indemnifying party; provided, however, that if the indemnifying party is the
Partnership, the Partnership shall only be obligated to pay the reasonable fees
and expenses of a single law firm (and any reasonably necessary local counsel)
employed by all of the indemnified parties and the persons referred to in
Section 7(a) hereof. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent, but if
settled with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment.

(d) It is agreed that any controversy arising out of the operation of the
interim reimbursement arrangements set forth in Section 7(a) and 7(b) hereof,
including the amounts of any requested reimbursement payments, the method of
determining such amounts and the basis on which such amounts shall be
apportioned among the indemnifying parties, shall be settled by arbitration
conducted pursuant to the Code of Arbitration Procedure of the National
Association of Securities Dealers, Inc. Any such arbitration must be commenced
by service of a written demand for arbitration or a written notice of intention
to arbitrate, therein electing the arbitration tribunal. In the event the party
demanding arbitration does not make such designation of an arbitration tribunal
in such demand or notice, then the party responding to said demand or notice is
authorized to do so. Any such arbitration will be limited to the operation of
the interim reimbursement provisions contained in Sections 7(a) and 7(b) hereof
and will not resolve the ultimate propriety or enforceability of the obligation
to indemnify for expenses that is created by the provisions of Sections 7(a) and
7(b).

(e) In order to provide for just and equitable contribution in
circumstances under which the indemnity provided for in this Section 7 is for
any reason judicially determined (by the entry of a final judgment or decree by
a court of competent jurisdiction and the expiration of time to appeal or the
denial of the right of appeal) to be unenforceable by the indemnified parties
although applicable in accordance with its terms, the Company and the
Partnership, on the one hand and the Underwriters on the other shall contribute
to the aggregate losses, liabilities, claims, damages and expenses of the nature
contemplated by such indemnity incurred by the Partnership or the Company and
one or more of the Underwriters, as incurred, in such proportions that (a) the
Underwriters are responsible pro rata for that portion represented by the
percentage that the underwriting discount appearing on the cover page of the
Prospectus bears to the public offering price (before deducting expenses)
appearing thereon, and (b) the Company and the Partnership are responsible for
the balance, provided, however, that no person guilty of fraudulent
misrepresentations (within the meaning of Section 11(f) of the 1933 Act) shall
be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation; provided, further, that if the allocation provided
above is not permitted by applicable law, the Company and the Partnership, on
the one hand and the Underwriters on the other shall contribute to the aggregate
losses in such proportion as is appropriate to reflect not only the relative
benefits referred to above but also the relative fault of the Company and the
Partnership, on the one hand and the Underwriters on the other in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable considerations.
Relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission to
state a material fact relates to information supplied by the Company or the
Partnership on the one hand or by the Underwriters on the other hand and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company, the Partnership and
the Underwriters agree that it would not be just and equitable if contributions
pursuant to this Section 7(e) were determined by pro rata allocation (even if
the Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to above in this Section 7(e). The amount paid or payable by a party
as a result of the losses, claims, damages or liabilities referred to above
shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending such action
or claim. Notwithstanding the provisions of this Section 7(e), no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Units underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. The Underwriters'
obligations in this Section 7(e) to contribute are several in

<PAGE>

proportion to their respective underwriting obligations and not joint. For
purposes of this Section 7(e), each person, if any, who controls an Underwriter
within the meaning of Section 15 of the 1933 Act shall have the same rights to
contribution as such Underwriter, and each director of the Partnership, each
officer of the Partnership who signed the Registration Statement, and each
person, if any, who controls the Company or the Partnership within the meaning
of Section 15 of the 1933 Act shall have the same rights to contribution as the
Partnership.

Section 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY.
The representations, warranties, indemnities, agreements and other statements of
the Company or the Partnership or their respective officers set forth in or made
pursuant to this Agreement will remain operative and in full force and effect
regardless of any investigation made by or on behalf of the Partnership, the
Company or any Underwriter or controlling person, with respect to an
Underwriter or the Company or the Partnership, and will survive delivery of and
payment for the Units or termination of this Agreement.

Section 9. EFFECTIVE DATE OF AGREEMENT AND TERMINATION. (a) This Agreement
shall become effective immediately as to Sections 4 and 7 and, as to all other
provisions, (i) if at the time of execution of this Agreement the Registration
Statement has not become effective, at 10:00 a.m., on the first full business
day following the effectiveness of the Registration Statement, or (ii) if at the
time of execution of this Agreement the Registration Statement has been declared
effective, at 10:00 a.m. on the first full business day following the date of
execution of this Agreement; but this Agreement shall nevertheless become
effective at such earlier time after the Registration Statement becomes
effective as you may determine on and by notice to the Partnership or by release
of any of the Units for sale to the public. For the purposes of this Section 9,
the Units shall be deemed to have been so released upon the release of
publication of any newspaper advertisement relating to the Units or upon the
release by you of telegrams (i) advising the Underwriters that the Units are
released for public offering, or (ii) offering the Units for sale to securities
dealers, whichever may occur first. By giving notice, as set forth in
Section 9(b) hereof, before the time this Agreement becomes effective, you, as
Representative of the several Underwriters, or the Partnership, may prevent this
Agreement from becoming effective, without liability of any party to any other
party, except that the Partnership shall remain obligated to pay costs and
expenses to the extent provided in Section 4 hereof.

(b) You may terminate this Agreement, by notice to the Partnership, at any
time at or prior to the Closing Time (i) in accordance with the last paragraph
of Section 5 of this Agreement, or (ii) if there has been since the respective
dates as of which information is given in the Registration Statement, any
material adverse change, or any development involving a prospective material
adverse change, in or affecting the business, prospects, management, properties,
assets, results of operations or condition (financial or otherwise) of the
Company, the Partnerships or the Business Trust, whether or not arising in the
ordinary course of business, or (iii) if there has occurred or accelerated any
outbreak of hostilities or other national or international calamity or crisis or
change in economic or political conditions the effect of which on the financial
markets of the United States is such as to make it, in your judgment,
impracticable to market the Units or enforce contracts for the sale of the
Units, or (iv) if trading in any securities of the Partnership has been
suspended by the Commission or by the NASD, or if trading generally on the New
York Stock Exchange or in the over-the-counter market has been suspended, or
limitations on prices for trading (other than limitations on hours or numbers of
days of trading) have been fixed, or maximum ranges for prices for securities
have been required, by such exchange or the NASD or by order of the Commission
or any other governmental authority, or (v) if a banking moratorium has been
declared by federal or New York or Delaware authorities, or (vi) any federal or
state statute, regulation, rule or order of any court or other governmental
authority has been enacted, published, decreed or otherwise promulgated which in
your reasonable opinion materially adversely affects or will materially
adversely affect the business or operations of the Company or the Partnership,
or (vii) any action has been taken by any federal, state or local government or
agency in respect of its monetary or fiscal affairs which in your reasonable
opinion has a material adverse effect on the securities markets in the United
States.

(c) If this Agreement is terminated pursuant to this Section 9, such
termination shall be without liability of any party to any other party, except
to the extent provided in Section 4. Notwithstanding any such termination, the
provisions of Section 7 shall remain in effect.

Section 10. DEFAULT BY ONE OR MORE OF THE UNDERWRITERS. If one or more of
the Underwriters shall fail at the Closing Time to purchase the Units that it or
they are obligated to purchase pursuant to this Agreement (the "Defaulted
Securities"), you shall have the right, within 36 hours thereafter, to make
arrangements for one or more

<PAGE>

of the non-defaulting Underwriters, or any other underwriters, to purchase all,
but not less than all, of the Defaulted Securities in such amounts as may be
agreed upon and upon the terms set forth in this Agreement; if, however, you
have not completed such arrangements within such 36-hour period, then:

(a) If the aggregate number of Firm Units which are Defaulted
Securities does not exceed 10% of the aggregate number of Firm Units to be
purchased pursuant to this Agreement, the non-defaulting Underwriters shall
be obligated to purchase the full amount thereof in the proportions that
their respective underwriting obligation proportions bear to the
underwriting obligations of all non-defaulting Underwriters, and

(b) If the aggregate number of Firm Units which are Defaulted
Securities exceeds 10% of the aggregate number of Firm Units to be
purchased pursuant to this Agreement, this Agreement shall terminate
without liability on the part of any non-defaulting Underwriter.

No action taken pursuant to this Section 10 shall relieve any defaulting
Underwriter from liability in respect of its default.

In the event of any such default that does not result in a termination of
this Agreement, either you or the Partnership shall have the right to postpone
the Closing Time for a period not exceeding seven days in order to effect any
required changes in the Registration Statement or Prospectus or in any other
documents or arrangements, and the Partnership agrees promptly to file any
amendments to the Registration Statement or supplements to the Prospectus that
may thereby be made necessary. As used in this Agreement, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section 10.

Section 11. DEFAULT BY THE PARTNERSHIP. If the Partnership shall fail at
the Closing Time to sell and deliver the aggregate number of Firm Units that it
is obligated to sell, then this Agreement shall terminate without any liability
on the part of any non-defaulting party, except to the extent provided in
Section 4 and except that the provisions of Section 7 shall remain in effect.

No action taken pursuant to this Section shall relieve the Partnership or
the Company from liability, if any, in respect to such default.

Section 12. NOTICES. All notices and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given if
delivered, mailed or transmitted by any standard form of telecommunication.
Notices to the Underwriters shall be directed c/o Morgan Keegan & Company, Inc.,
50 Front Street, Memphis, Tennessee 38103, Attention: John H. Grayson, (with a
copy sent in the same manner to Haynes and Boone, L.L.P., 3100 NationsBank
Plaza, 901 Main Street, Dallas, Texas 75202, Attention: Janice V. Sharry); and
notices to the Company and the Partnership shall be directed to them at U.S.
Restaurant Properties Master L.P., 5310 Harvest Hill Road, Suite 270, LB 168,
Dallas, Texas 75230 (with a copy sent in the same manner to Middleberg, Riddle &
Gianna, 1600 Allianz Financial Centre, 2323 Bryan Street. Dallas, Texas 75201,
Attention: Richard Wilensky).

Section 13. PARTIES. This Agreement is made solely for the benefit of and
is binding upon the Underwriters, the Partnership and the Partnership and, to
the extent provided in Section 7, any person controlling the Company, the
Partnership, or any of the Underwriters, the officers and directors of the
Partnership, and their respective executors, administrators, successors and
assigns and subject to the provisions of Section 10, no other person shall
acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" shall not include any purchaser, as such purchaser,
from any of the several Underwriters of the Units.

All of the obligations of the Underwriters hereunder are several and not
joint.

Section 14. GOVERNING LAW AND TIME. This Agreement shall be governed by
the laws of the State of Texas. Specified time of the day refers to United
States Central Time. Time shall be of the essence of this Agreement.

<PAGE>

Section 15. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and when a counterpart has been executed by each party, all such
counterparts taken together shall constitute one and the same agreement.

<PAGE>

If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us a counterpart hereof, whereupon this instrument
will become a binding agreement among the Partnership, the Company and the
several Underwriters in accordance with its terms. It is understood that your
acceptance of this letter on behalf of the Underwriters is pursuant to the
authorities set forth in a form of Agreement among Underwriters, the form of
which shall be submitted to the Partnership or the Company for examination, upon
request, but without warranty on your part as to the authority of the signers
thereof.

Very truly yours,

U.S. RESTAURANT PROPERTIES MASTER L.P.

By: U.S. RESTAURANT PROPERTIES, INC.,
Managing General Partner

By: ________________________________________
Name: Robert J. Stetson
Title: President and Chief Executive Officer

U.S. RESTAURANT PROPERTIES, INC.

By: _____________________________________________
Name: Robert J. Stetson
Title: President and Chief Executive Officer

Confirmed and accepted as of the date first above written:

MORGAN KEEGAN & COMPANY, INC.
EVEREN Securities, Inc.

By: Morgan Keegan & Company, Inc.

By: _______________________________________
Name: John H. Grayson
Title: Senior Vice President

<PAGE>

SCHEDULE A

Number of
Firm Units
to be Purchased
---------------
Underwriter
- -----------

Morgan Keegan & Company, Inc.. . . . . . . . . . . . 415,000
EVEREN Securities, Inc.. . . . . . . . . . . . . . . 415,000

Southwest Securities, Inc. . . . . . . . . . . . . . 180,000

Dean Witter Reynolds Inc.. . . . . . . . . . . . . . 50,000
Lehman Brothers Inc. . . . . . . . . . . . . . . . . 50,000
Montgomery Securities. . . . . . . . . . . . . . . . 50,000
Prudential Securities Incorporated . . . . . . . . . 50,000
Salomon Brothers Inc.. . . . . . . . . . . . . . . . 50,000
Smith Barney Inc.. . . . . . . . . . . . . . . . . . 50,000

Advest Inc.. . . . . . . . . . . . . . . . . . . . . 35,000
J.C. Bradford & Co.. . . . . . . . . . . . . . . . . 35,000
Crowell, Weedon & Co.. . . . . . . . . . . . . . . . 35,000
Equitable Securities Corporation . . . . . . . . . . 35,000
Interstate/Johnson Lane Corporation. . . . . . . . . 35,000
Legg Mason Wood Walker, Incorporated . . . . . . . . 35,000
McDonald & Company Securities, Inc.. . . . . . . . . 35,000
Piper Jaffray Inc. . . . . . . . . . . . . . . . . . 35,000
Principal Financial Securities, Inc. . . . . . . . . 35,000
Rauscher Pierce Refsnes, Inc.. . . . . . . . . . . . 35,000
Raymond James & Associates, Inc. . . . . . . . . . . 35,000
Stephens Inc.. . . . . . . . . . . . . . . . . . . . 35,000
Tucker Anthony Incorporated. . . . . . . . . . . . . 35,000
Wheat First Butcher Singer . . . . . . . . . . . . . 35,000

TOTAL. . . . . . . . . . . . . . . . . . . . . . . . 1,800,000
---------
---------

<PAGE>

U.S. RESTAURANT PROPERTIES MASTER L.P.

(a Delaware limited partnership)

1,800,000 Units

AGREEMENT AMONG UNDERWRITERS

DATED: JUNE ____, 1996

<PAGE>

U.S. RESTAURANT PROPERTIES MASTER L.P.

UNITS OF BENEFICIAL INTERESTS

SELECTED DEALER AGREEMENT

June __, 1996

Ladies and Gentlemen:

We have severally agreed to purchase from U.S. Restaurant Properties Master
L.P., a Delaware limited partnership (the "Partnership"), 1,800,000 Units of
beneficial interest, of the Partnership (the "Firm Units"). In addition, the
Partnership proposes to grant us, upon the terms stated in the Underwriting
Agreement, the right to purchase up to 270,000 additional Units (the "Option
Units"), identical to the Firm Units, for the sole purpose of covering over-
allotments in connection with the sale of the Firm Units. The Firm Units and
the Option Units, if purchased, are collectively referred to herein as the
"Units." The Units are described in the enclosed Prospectus, the receipt of
which you hereby acknowledge.

1. OFFERING TO SELECTED DEALERS. We are severally offering part of the
Units for sale to certain dealers (the "Selected Dealers"), as principals,
subject to the terms and conditions stated herein and in the Prospectus, at the
public offering price of $________ per Unit, less a concession of $________
(such concession hereinafter referred to as the "Selected Dealers' Concession").
Sales of the Units to you pursuant to such offering will be evidenced by our
written confirmation and will be on such terms and conditions set forth therein
and in the Prospectus. In purchasing Units, you will rely upon no statement
whatsoever, written or oral, other than statements in the Prospectus.

2. REOFFERING BY SELECTED DEALERS. We are advising you by telegram of
the method and terms of the offering. Acceptances of any reserved Units
received at the office of Morgan Keegan & Company, Inc., 50 Front Street,
Memphis, Tennessee 38103, after the time specified therefor in the telegram and
any order for additional Units will be subject to rejection in whole or in part.
Subscription books may be closed by us at any time in our discretion without
notice and the right is reserved to reject any subscription in whole or in part,
but notification of allotments against and rejections of subscriptions will be
made as promptly as practicable.

We are advising you in such telegram of the release by us of the Units for
public offering and of the public offering price of the Units. Upon receipt of
such advice, the Units thereafter purchased by you hereunder are to be offered
by you to the public at the public offering price, subject to the terms thereof.
You agree that in selling Units purchased hereunder you will comply with the
applicable requirements of the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended. Except as herein otherwise
provided, Units shall not be offered or sold by you below the public offering
price before the termination of this Agreement, except that a concession from
such public offering price of not in excess of $_______ of the public offering
price may be allowed to dealers who are members in good standing of the National
Association of Securities Dealers, Inc. (the "NASD") or foreign dealers, not
eligible for membership in the NASD, who agreed, when making sales of Units to
purchasers outside the United States, to comply with the Interpretations with
Respect to Free-Riding and Withholding of the NASD.

It is assumed that Units sold by you will be effectively placed for
investment. If we contract for or purchase in the open market or otherwise for
our account any Units sold to you and not effectively placed for investment, we
may charge you the Selected Dealers' Concession originally allowed you on the
Units so repurchased, and you agree to pay such amount to us on demand. Units
so delivered to us against any such repurchase need not be the identical Units
originally purchased by you.

You will advise us upon request of Units purchased by you remaining unsold,
and we shall have the right to repurchase such unsold Units on demand at the
public offering price less all or part of the Selected Dealers' Concession.

<PAGE>

3. PAYMENT AND DELIVERY. Payment for Units purchased by you shall be
made by you on such dates and at such places as we advise you, by certified or
bank cashiers' check payable to the order of Morgan Keegan & Company, Inc. in
such clearing house funds as we advise, against delivery of such Units.
Delivery instructions must be in our hands at the offices of Morgan Keegan &
Company, Inc., 50 Front Street, Memphis, Tennessee 38103, at such times as we
request. Notwithstanding such provisions, payment for and delivery of Units
purchased by you hereunder will be made through the facilities of the Depository
Trust Company, if you are a member, unless you have otherwise notified us prior
to the date specified in our telegrams to you, or if you are not a member,
settlement may be made through a correspondent who is a member pursuant to the
instructions which you will send to us prior to such specified date.

The above payment shall be made by you at the public offering price, or if
we so advise you, at a net price equal to the public offering price less the
Selected Dealers' Concession. If payment is made by you at the public offering
price, the Selected Dealers' Concession payable to you hereunder shall be paid
promptly after the termination of this Agreement (or on such earlier date as we
may determine), except that the Selected Dealers' Concession may be withheld and
canceled, at our discretion, as to Units which we have repurchased as set forth
in the third paragraph of Section 2 hereof.

4. POSITION OF SELECTED DEALERS AND UNDERWRITERS. You represent that you
are a member in good standing of the NASD or that you are a foreign bank, dealer
or institution, not eligible for membership in the NASD, who agrees not to offer
or sell any Units in the United States of America, its territories or
possessions or to persons who are citizens thereof or residents therein. In
making sales of Units, if you are such a member, you agree to comply with all
applicable rules of the NASD, including without limitation, the NASD's
Interpretation with Respect to Free-Riding and Withholding and Section 24 of
Article III of the NASD's Rules of Fair Practice, or, if you are a foreign bank,
dealer or institution, you agree to comply with such Interpretations and
Sections 8, 24, 25 (insofar as Section 25 applies to a non-member broker or
dealer in a foreign country) and 36 of such Article III as though you were such
a member, and with Section 25 of Article III as it applies to a non-member
broker or dealer in a foreign country. You also confirm that you have complied
with the prospectus delivery requirements of Rule 15c2-8 under the Securities
Exchange Act of 1934, as amended, in accordance with your prior oral undertaking
to do so.

You are not authorized to give any information or make any representations
other than as contained in the Prospectus, or to act as agent for any
Underwriter or us. Nothing contained herein shall constitute the Selected
Dealers an association, unincorporated business or other separate entity or
partners with us or with each other, but you shall be liable for your
proportionate share of any tax, liability or expense based on any claims to the
contrary. Nor shall we be under any liability to you, except for obligations
expressly assumed by us in this Agreement, and no obligation on our part shall
be implied or inferred herefrom.

5. BLUE SKY MATTERS. Upon application by us, we will inform you as to
the jurisdictions in which we believe the Units have been qualified for sale
under, or are exempt from the requirements of, the respective laws of such
jurisdictions, but we assume no responsibility or obligation as to your right to
sell Shares in any jurisdiction.

6. NOTICES. All communications from you to us shall be addressed to
Morgan Keegan & Company, Inc., 50 Front Street, Memphis, Tennessee 38103. Any
notice from us to you shall be deemed to have been duly given if mailed or
telegraphed to you at the address to which this letter is mailed.

7. TERMINATION. This Agreement shall terminate thirty (30) days after
the date hereof unless extended by us for a period or periods of not exceeding
an additional thirty (30) days in the aggregate and, whether extended or not,
may be terminated by us at any time. Such termination shall not affect your
obligation to pay for any Units purchased by you or any of the provisions of
Section 4 hereof.

<PAGE>

Please confirm your agreement hereto by signing the duplicate copy of this
Agreement enclosed herewith and returning it to us at the address set forth in
Section 6 above.

Very truly yours,

MORGAN KEEGAN & COMPANY, INC.
EVEREN SECURITIES, INC.
SOUTHWEST SECURITIES, INC.

By: Morgan Keegan & Company, Inc.

By: _________________________________
Title: Managing Director

<PAGE>

MORGAN KEEGAN & COMPANY, INC.
EVEREN SECURITIES, INC.
SOUTHWEST SECURITIES, INC.
c/o Morgan Keegan & Company, Inc.
50 Front Street
Memphis, Tennessee 38103

Ladies and Gentlemen:

We hereby confirm our order for _______ Units of U.S. Restaurant Properties
Master L.P. specified in our order and under the terms and conditions contained
in your written confirmation of our purchase and the foregoing Agreement.

We hereby confirm our agreement to the terms and conditions stated in the
foregoing Agreement. We acknowledge receipt of the Prospectus relating to the
Units and we further state that in entering this order we have relied upon the
Prospectus and not any other statement whatsoever, whether written or oral. We
confirm that we are a member in good standing of the NASD or that we are a
foreign bank, dealer or institution, not eligible for membership in the NASD,
which agrees not to offer or sell any Units in the United States of America, its
territories or possessions or to persons who are citizens thereof or residents
therein. Further, we agree that in making sales of Units, if we are such a
member, we will comply with all applicable rules of the NASD, including, without
limitation, the NASD's Interpretation with Respect to Free-Riding and
Withholding and Sections 8, 24 and 36 of Article III as though we were such a
member, and with Section 25 of Article III as it applies to non-member brokers
or dealers in a foreign country.

_________________________________
(Print or Type Name of Firm)

By: _____________________________

Dated: _____________, 1996

<PAGE>

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

AMENDMENT NO. ONE
DATED AS OF JUNE 1, 1996

LOAN AGREEMENT
DATED AS OF APRIL 29, 1996

U.S. RESTAURANT PROPERTIES BUSINESS TRUST I,
AS "BORROWER"

AND

MORGAN KEEGAN MORTGAGE COMPANY INC.,
AS "LENDER"

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

<PAGE>

This Amendment No. One (this "Amendment") to that certain Loan Agreement
dated as of April 29, 1996 (the "Original Agreement"), is entered into
effective as of June 1, 1996, by and between U.S. Restaurant Properties
Business Trust I, a Delaware business trust, as Borrower under the Original
Agreement (the "Borrower"), and Morgan Keegan Mortgage Company Inc., a
Tennessee corporation, as Lender (the "Lender") under the Original Agreement.

RECITALS:

WHEREAS, the Lender and the Borrower entered into the Original Agreement
for purposes of providing for a $20,000,000 real estate secured credit
facility; and

WHEREAS, pursuant to and in accordance with Section 8.1(a) of the
Original Agreement, the Lender and the Borrower desire to amend the Original
Agreement in the manner hereinafter set forth;

AGREEMENT:

NOW, THEREFORE, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:

Section 1. DELETION OF SECTION 2.4. Section 2.4 of the Original
Agreement is hereby deleted in its entirety and hereafter shall be of no
force or effect.

Section 2. RATIFICATION OF ORIGINAL AGREEMENT. As amended by this
Amendment, the Original Agreement is in all respects approved, ratified and
confirmed and, as amended by this Amendment, shall continue hereafter in full
force and effect.

IN WITNESS WHEREOF, this Amendment is executed to be effective for all
purposes as of June 1, 1996.

U.S. RESTAURANT PROPERTIES
BUSINESS TRUST I

By: /s/ Robert J. Stetson
---------------------------------
Robert J. Stetson, Managing
Trustee

By: /s/ Fred Margolin
---------------------------------
Fred Margolin, Managing Trustee

-1-

<PAGE>

MORGAN KEEGAN MORTGAGE
COMPANY INC.

By: /s/ R. Davis Howe
---------------------------------
R. Davis Howe, Managing Director

-2-

<PAGE>

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Registration Statement relating to
1,800,000 limited partner units of U.S. Restaurant Properties Master L.P. on
Amendment No. 2 to Form S-3 of our report dated February 17, 1996 appearing
in the Prospectus, which is a part of such Registration Statement, and our
report dated February 17, 1996 included in the Annual Report on Form 10-K of
U.S. Restaurant Properties Master L.P. for the year ended December 31, 1995
incorporated by reference in the Registration Statement, and to the reference
to us under the heading "Experts" in such Prospectus.

DELOITTE & TOUCHE LLP

Dallas, Texas
June 12, 1996