UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) July 25, 1997
U.S. RESTAURANT PROPERTIES MASTER L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 1-9079 41-1541631
(STATE OF OTHER (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
JURISDICTION OF IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
5310 Harvest Hill Rd.
Suite 270, LB 168
Dallas, Texas 75230
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
972-387-1487
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
1
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U.S. RESTAURANT PROPERTIES MASTER L.P.
--------------------------------------
Item 2. Acquisition or disposition of assets................................ 3
Item 7. Financial Statements, Pro Forma Information and Exhibits............ 5
TW South, Inc. El Chico #209 Statement of Revenues and Certain
Expenses for the period January 16, 1996 (inception) through
December 31, 1996................................................ 7
Embers Corporations Statement of Revenues and Direct Operating
Expenses Applicable to the Acquisition of Ten Properties of
Embers Corporations by U.S. Restaurant Properties Master L.P.
for the year ended June 30, 1997................................. 10
Statement of Revenues and Certain Expenses of the Property Sold
to U.S. Restaurant Properties Master L.P. by 500 Park Avenue
Realty Corporation for the year ended December 31, 1996.......... 14
Combined Statement of Revenues and Certain Expenses of Selected
Properties Sold to U.S. Restaurant Properties Master L.P.
(Checkers Acquisition) for the year ended July 31, 1997.......... 18
Combined Statement of Revenues and Certain Expenses of the
Properties Sold to U.S. Restaurant Properties Master L.P.
by Jackson-Shaw Partners, No. 51, Ltd. for the year ended
December 31, 1996................................................ 22
Combined Statement of Revenues and Certain Expenses of Selected
Properties Sold to U.S. Restaurant Properties Master L.P.
(Harrigan's Acquisition) for the year ended June 30, 1997........ 26
Superpumper, Inc. - Belfield Location Statement of Revenues and
Certain Expenses for the year ended December 31, 1996............ 29
Pro forma Financial Information..................................... 32
2
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 25, 1997, U.S. Restaurant Properties Master L.P. (the "Registrant")
acquired one El Chico restaurant property located in Arkansas from TW South,
Inc., a Texas corporation. The acquisition was done pursuant to one purchase and
sale agreement. The purchase price equaled $1,250,000 in cash and other
capitalized costs of approximately $21,000. This acquisition was previously
reported on Form 8-K dated May 5, 1997 and filed on August 21, 1997. This
property acquisition has subsequently been audited and that audit report is
being included in this Form 8-K. The acquisition was funded by the Registrant's
line of credit.
On August 27, 1997, the Registrant acquired 10 restaurant properties located in
Minnesota, Iowa, Wisconsin, South Dakota and North Dakota for $4,000,000 in cash
and other capitalized costs of approximately $106,000. The restaurants were
acquired pursuant to one purchase and sale agreement, and were acquired from Mr.
EMS System, Inc., Hennepin Embers, Inc., Central Embers, Inc., Edina Embers,
Inc. and Midway Embers, Inc., each of which is a Minnesota corporation, referred
to collectively as (the "Embers Corporations"). In a separate transaction, the
Registrant accepted a $6,000,000 note receivable secured by first mortgages on
properties located in Minnesota, Iowa, and Wisconsin. The Registrant incurred
other capitalized costs of approximately $138,000 on the notes receivable. The
acquisition and the notes receivable were funded by the Registrant's line of
credit.
On August 28, 1997, The Registrant acquired one Wendy's restaurant property
located in Massachusetts from 500 Park Avenue Realty Corporation, a
Massachusetts corporation. The acquisition was done pursuant to one purchase and
sales agreement. The purchase price equaled $1,115,059 in cash and other
capitalized costs of approximately $22,000. The selling entity was 500 Park
Avenue Realty Corporation. The transaction was funded by the Registrant's line
of credit.
On September 5, 1997, the Registrant acquired four Checkers and one Hooters
restaurant properties located in Florida from Radiant Oil Company of Tampa,
Inc., a Florida corporation; N.C.J. Investment Company, a Florida corporation;
and Gas Kwick, Inc., a Florida corporation. The acquisition was done pursuant to
two purchase and sale agreements. The purchase price equaled $1,440,000 in cash
and other capitalized costs of approximately $47,000. The transaction was funded
by the Registrant's line of credit.
On September 17, 1997, the Registrant acquired two Ale House restaurant
properties located in Florida from Jackson-Shaw Partners, No. 51, Ltd., a Texas
limited partnership, pursuant to two purchase and sale agreements. The purchase
price equaled $3,000,000 in cash and other capitalized costs of approximately
$119,000. The transaction was funded by the Registrant's line of credit.
On October 3, 1997 the Registrant acquired three Harrigan's restaurant
properties located in New Mexico and Oklahoma from Minneapolis Teachers'
Retirement Fund Association, a Minnesota non-profit corporation, and Harri N.V.,
Inc., a Netherlands Antilles corporation pursuant to three purchase and sale
agreements. The purchase price equaled $3,787,500 in cash and other capitalized
costs of approximately $111,000. The transaction was funded by the Registrant's
line of credit.
On October 3, 1997, the Registrant acquired one truck stop and convenience store
property located in North Dakota from Superpumper, Inc., a North Dakota
corporation pursuant to one purchase and sale agreement. The purchase price
equaled $1,200,000 in cash and other capitalized costs of approximately $29,000.
The Registrant used funds from the Registrant's Line of credit.
3
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On various dates from August 1, 1997 through October 15, 1997, the Registrant
acquired 13 restaurant properties consisting of one Bruegger's Bagels, three Au
Bon Paine's, one Fresh' N Lite, one Texas Road House and seven Schlotzsky's
located in Texas, North Carolina, Colorado, Tennessee and Indiana. The
properties were acquired pursuant to eleven separate purchase and sale
agreements and were acquired from The Newcastle Group IV, L.L.C., a North
Carolina limited liability company, FGR Food Corporation, a Texas corporation,
Fresh' N Lite, Inc., a Texas corporation, Sara Jane Properties. Ltd., a Texas
limited partnership, SREI Turnkey Development, LLC, a Texas limited liability
company, and Schlotzsky's Real Estate, Inc., a Texas corporation. These
restaurant properties represent newly developed properties and properties yet to
be developed which do not have any historical operations. The purchase price for
these properties equaled $6,083,917 and other capitalized costs of approximately
$128,000. The acquisitions were funded by the Registrant's bank line of credit
and funds from operations.
In addition to the above acquisitions, one other property (the "Other Property")
was acquired on August 22, 1997. The property consisted of one Wendy's
restaurant property located in Minnesota. The property was purchased from KFC
National Management Company pursuant to one purchase and sale agreement for a
purchase price of $224,928 and approximately $6,000 in other closing costs. The
transaction was funded by the Registrant's line of credit.
None of the Sellers of the properties described above are affiliated with the
Registrant, any director or officer of the Registrant or any associate of any
such director or officer.
The purchase prices, which were negotiated with the Sellers, were determined
through internal analysis by the Registrant of historical cash flows and fair
market values of the acquired Properties.
4
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
a)(3) TW South, Inc. El Chico #209 Statement of Revenues and Certain
Expenses for the period January 16, 1996 (inception) through
December 31, 1996.
Embers Corporations Statement of Revenues and Direct Operating
Expenses Applicable to the Acquisition of Ten Properties of
Embers Corporations by U.S. Restaurant Properties Master L.P.
for the year ended June 30, 1997
Statement of Revenues and Certain Expenses of the Property Sold
to U.S. Restaurant Properties Master L.P. by 500 Park Avenue
Realty Corporation for the year ended December 31, 1996
Combined Statement of Revenues and Certain Expenses of Selected
Properties Sold to U.S. Restaurant Properties Master L.P.
(Checkers Acquisition) for the year ended July 31, 1997
Combined Statement of Revenues and Certain Expenses of the
Properties Sold to U.S. Restaurant Properties Master L.P.
by Jackson-Shaw Partners, No. 51, Ltd. for the year ended
December 31, 1996
Combined Statement of Revenues and Certain Expenses of Selected
Properties Sold to U.S. Restaurant Properties Master L.P.
(Harrigan's Acquisition) for the year ended June 30, 1997
Superpumper, Inc. - Belfield Location Statement of Revenues and
Certain Expenses for the year ended December 31, 1996
b) Pro forma Financial Information
5
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INDEPENDENT AUDITORS' REPORT
U.S. Restaurant Properties Master L.P.
We have audited the Statement of Revenues and Certain Expenses (defined as being
operating revenues less direct operating expenses) of TW South, Inc. El Chico
#209 acquired by U.S. Restaurant Properties Master L.P. for the period January
16, 1996 (inception) through December 31, 1996. This financial statement is the
responsibility of U.S. Restaurant Properties Master L.P.. Our responsibility is
to express an opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenues and certain expenses is free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying statement of revenues and certain expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in the Form 8-K of U.S. Restaurant Properties
Master L.P.. Material amounts, described in Note 1 to the statement of revenues
and certain expenses, that would not be comparable to those resulting from the
proposed future operations of the property sold to U.S. Restaurant Properties
Master L.P. are excluded and the statement is not intended to be a complete
presentation of revenues and expenses of the restaurant.
In our opinion, such statement of revenues and certain expenses presents fairly,
in all material respects, the revenues and certain expenses, as defined above,
of TW South, Inc. El Chico #209 acquired by U.S. Restaurant Properties Master
L.P. for the period January 16, 1996 (inception) through December 31, 1996, in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Dallas, Texas
October 10, 1997
6
<PAGE>
TW SOUTH, INC. EL CHICO #209
STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE PERIOD JANUARY 16, 1996 (INCEPTION) THROUGH DECEMBER 31, 1996
SALES $ 1,781,712
DIRECT COSTS AND EXPENSES:
Cost of Food 464,242
Labor 553,605
Other Direct Operating Expenses 451,796
Management Fees 60,934
---------------
TOTAL COSTS AND EXPENSES 1,530,577
---------------
EXCESS OF STORE SALES OVER
CERTAIN DIRECT OPERATING
EXPENSES $ 251,135
===============
See Accompanying Notes to Statement of Revenues and Certain Expenses.
7
<PAGE>
TW SOUTH, INC. EL CHICO #209
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE PERIOD JANUARY 16, 1996 (INCEPTION) THROUGH DECEMBER 31, 1996
1. BASIS OF PRESENTATION
The accompanying Statement of Revenues and Certain Expenses include the
operating results of the TW South, Inc. El Chico #209 restaurant, which
property was acquired by U.S. Restaurant Properties Master L.P. ("USRP").
USRP did not purchase the restaurant operations. This statement does not
include any revenues or expenses related to any other properties owned by
TW South, Inc. In accordance with the Securities and Exchange Commission
Rule 3-14, the statement does not include expenses not comparable to the
proposed future operations of the property such as depreciation, interest,
income taxes, or any other costs that are directly associated with the
property and accordingly, it is not intended to be a complete presentation
of revenues and expenses of the restaurant.
2. SIGNIFICANT ACCOUNTING POLICIES
Sales are recorded at the time of the retail sale.
Other direct operating expenses represent kitchen and restaurant supplies,
linens, uniforms, utilities, advertising, licenses and other costs directly
associated with the restaurant operations.
The preparation of the statement in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the expected amounts of revenues and certain expenses during a
reporting period. Actual results could differ from those estimates.
3. LEASE ON PROPERTY
USRP entered into a lease with TW South, Inc. for the rental of the
restaurant property it purchased. The term of the lease is 15 years
expiring on July 31, 2012 with the option to renew the lease for one
additional term of 10 years. The annual base rent is $146,880 per year
through lease year three. On the first day of lease year four the annual
rent will be increased by four percent of the immediately preceding annual
base rent. The base rent will increase every third anniversary thereafter
including renewal option years by four percent over the immediately
preceding annual base rent. In addition to the base rent, percentage rent
is due in the amount of the excess of the product of six percent and the
gross sales for such lease year less the base rent paid pursuant to such
lease year.
8
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INDEPENDENT AUDITORS' REPORT
Board of Directors
U.S. Restaurant Properties Master L.P.
Dallas, Texas
We have audited the accompanying statement of revenues and direct operating
expenses applicable to the acquisition of ten properties of Embers Corporations
by U.S. Restaurant Properties Master L.P. for the year ended June 30, 1997. This
financial statement is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial presentation. We believe
that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenues and direct operating expenses was
prepared for the purpose of complying with rules and regulations of the
Securities and Exchange Commission and for inclusion in the current report on
Form 8-K of U.S. Restaurant Properties Master L.P. This statement is not
intended to be a complete presentation of revenues and expenses of the ten
properties of Embers Corporations acquired by U.S. Restaurant Properties Master
L.P..
In our opinion, the statement of revenues and direct operating expenses referred
to above presents fairly, in all material respects, the revenues and direct
operating expenses described in Note 1 of the ten properties of Embers
Corporations acquired by U.S. Restaurant Properties Master L.P. for the year
ended June 30, 1997, in conformity with generally accepted accounting
principles.
Schechter Dokken Kanter Andrews & Selcer Ltd.
September 15, 1997
Minneapolis, Minnesota
9
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EMBERS CORPORATIONS
STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES
APPLICABLE TO THE ACQUISITION OF
TEN PROPERTIES OF EMBERS CORPORATIONS
BY U.S. RESTAURANT PROPERTIES MASTER L.P.
YEAR ENDED JUNE 30, 1997
Revenues $ 8,706,196
-------------
Direct operating expenses:
Cost of sales 2,162,521
Wages and related expenses 4,301,609
Advertising 347,293
Real estate taxes 233,751
Restaurant expenses 1,397,403
Insurance 181,361
Other 152,872
-------------
8,776,810
-------------
Excess of direct expenses over revenues $ (70,614)
=============
See accompanying notes to financial statement.
10
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EMBERS CORPORATIONS
NOTES TO STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES
APPLICABLE TO THE ACQUISITION OF
TEN PROPERTIES OF EMBERS CORPORATIONS
BY U.S. RESTAURANT PROPERTIES MASTER L.P.
YEAR ENDED JUNE 30, 1997
1. Nature of business and basis of presentation:
Nature of business:
Embers Corporations consist of five corporations: Mr. Ems System,Inc.,
Hennepin Embers, Inc., Central Embers, Inc., Edina Embers, Inc., and
Midway Embers, Inc., all under common management and ownership and
doing business as Embers Corporations. These Companies own and operate
twenty-seven restaurants located in Minnesota, Wisconsin, Iowa,
North Dakota and South Dakota and have diversified investments in real
estate venture capital activities. U.S. Restaurant Properties Master
L.P. acquired the real estate and personal property of ten restaurants
of Embers Corporations on August 27, 1997. These properties are leased
to and operated by Embers Corporations under a lease agreement with
U.S. Restaurant Properties Master L.P. beginning August 27, 1997.
Basis of presentation:
The accompanying statements of revenues and direct operating expenses
includes only the ten Embers restaurant properties acquired by U.S.
Restaurant Properties Master L.P. The statement does not include any
revenues or expenses related to the remaining properties owned by the
Corporations or any other portion of the Companies' activities. General
and administrative expenses that are allocated are included as a direct
operating expense. The statement also does not include depreciation and
amortization, interest and income taxes.
2. Summary of significant accounting policies:
Allocation of general and administrative expenses:
General and administrative expenses are a combination of actual and
allocated expenses. Corporate expenses are allocated based upon
individual restaurant sales. Wages and related expenses include an
allocable share of owner/officer salaries which are approximately 6
percent of such expenses.
Management estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of revenues and direct
operating expenses during the reporting period. Actual results may, in
some instances, differ from previously estimated amounts.
11
<PAGE>
EMBERS CORPORATIONS
NOTES TO STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES
APPLICABLE TO THE ACQUISITION OF
TEN PROPERTIES OF EMBERS CORPORATIONS
BY U.S. RESTAURANT PROPERTIES MASTER L.P.
YEAR ENDED JUNE 30, 1997
2. Summary of significant accounting policies (continued):
Revenue:
Sales are recorded at the time of cash retail sale.
Advertising costs:
Advertising costs are expensed as incurred.
3. Subsequent event:
Leaseback agreement:
The Companies entered into an agreement to lease the ten properties
from U.S. Restaurants Master L.P. for a term of 20 years with an option
to renew for two additional terms of ten years. The agreement also
contains a purchase option. The option price is calculated by store
based upon the allocation price at inception plus a percentage of the
respective allocation price, ranging from 5% if purchased within the
first year and increasing one percent per year to a maximum of 15%.
Lease payments, which are paid in monthly installments, begin at
$460,000 per year and increase by 6% every three years, including the
renewal periods. The Companies are also required to pay all property
taxes insurance and repairs and maintenance. A security deposit is
required in the amount of four months base rent or a letter of credit
equal to six months base rate.
12
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INDEPENDENT AUDITORS' REPORT
U.S. Restaurant Properties Master L.P.
We have audited the accompanying statement of revenues and certain expenses of
the Property Sold to U.S. Restaurant Properties Master L.P. by 500 Park Avenue
Realty Corporation for the year ended December 31, 1996. This financial
statement is the responsibility of the management of U.S. Restaurant Properties
Master L.P.. Our responsibility is to express an opinion on this statement based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenues and certain expenses is free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying statement of revenues and certain expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in the Form 8-K of U.S. Restaurant Properties
Master L.P.. Material amounts, described in Note 1 to the statement of revenues
and certain expenses, that would not be comparable to those resulting from the
proposed future operations of the property sold to U.S. Restaurant Properties
Master L.P. are excluded and the statement is not intended to be a complete
presentation of the revenues and expenses of this property.
In our opinion, such statement of revenues and certain expenses presents fairly,
in all material respects, the revenues and certain expenses, as defined above,
of the Property Sold to U.S. Restaurant Properties Master L.P. by 500 Park
Avenue Realty Corporation for the year ended December 31, 1996, in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Dallas, Texas
October 7, 1997
13
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PROPERTY SOLD TO U.S. RESTAURANT PROPERTIES MASTER L.P.
BY 500 PARK AVENUE REALTY CORPORATION
STATEMENT OF REVENUES AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 1996
RENTAL INCOME
Minimum $ 95,264
Cost reimbursement revenue 20,197
------------
TOTAL RENTAL INCOME 115,461
DIRECT EXPENSES - REAL ESTATE TAXES 20,197
------------
NET RENTAL INCOME $ 95,264
============
See Accompanying Notes to Statement of Revenues and Certain Expenses.
14
<PAGE>
NOTES TO THE PROPERTY SOLD TO U.S. RESTAURANT PROPERTIES MASTER L.P. BY 500 PARK
AVENUE REALTY CORPORATION STATEMENT OF REVENUES AND CERTAIN EXPENSES
1. Summary Of Significant Accounting Policies
Nature Of Operations
The accompanying statement of revenues and certain expenses includes one
property acquired by U.S. Restaurant Properties Master L.P. from 500 Park
Avenue Realty Corporation, a Massachusetts corporation (the "Company"). The
statement does not include any revenues or expenses related to any other
properties owned by the Company. The property acquired is operated as a
Wendy's restaurant. The property was under renovations from December 1995
through May, 1996. A lease was signed by the current tenant effective
December 4, 1995. Rent revenues for the land are due under such lease
beginning in December 1995 and rent revenues for the building are due under
such lease after completion of the renovations of the premises for its
current use which occurred on May 7, 1996. Rental revenue for the year
ended December 31, 1996 for the ground lease and period May 7, 1996 through
December 31, 1996 for the building is included in the statement of revenues
and certain expenses. In accordance with the Securities and Exchange
Commission Rule 3-14 the statement does not include expenses not comparable
to the proposed future operations of the property such as depreciation,
interest, or any other costs that are not directly associated with the
property and accordingly, it is not intended to be a complete presentation
of revenues and expenses of the property.
2. Use Of Estimates
The preparation of this statement of revenues and certain expenses in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of revenues and certain expenses during a reporting period. Actual
results could differ from those estimates.
3. Rental Income
The property lease is a "triple net" lease which requires the lessee to pay
all property taxes, assessments, insurance, maintenance costs and other
charges related to maintenance, repair and operation of the property. The
rents for the land and the building are computed separately under the
lease. Certain information regarding the lease is set forth in the table
below.
<TABLE>
<CAPTION>
MINIMUM PERCENTAGE TERMINATION
LOCATION ANNUAL RENTAL RENTALS DATE
- ------------------ ------------------------------------------- ---------------------- ---------------------
<S> <C> <C> <C>
Worcester, MA $ 41,200 per year through 12/3/97 for None June 2011 with two
land with annual increases five-year renewal
equal to the current annual options.
rent times the annual National
Consumer Price Index. The
increase occurs in December of
each year.
85,638 per year through 5/3/97 for None June 2011 with two
building. Building rent five-year renewal
increases annually to the options.
extent that the Bank of Boston
Prime Lending Rate exceeds
9.0%. The increase will occur
in May of each year.
</TABLE>
15
<PAGE>
NOTES TO THE PROPERTY SOLD TO U.S. RESTAURANT PROPERTIES MASTER L.P. BY 500 PARK
AVENUE REALTY CORPORATION STATEMENT OF REVENUES AND CERTAIN EXPENSES
The following is a schedule of minimum rental income on the non-cancelable
lease as of December 31, 1996:
1997 $ 126,838
1998 126,838
1999 126,838
2000 126,838
2001 126,838
Thereafter 1,130,972
------------
$ 1,765,162
============
16
<PAGE>
INDEPENDENT AUDITORS' REPORT
U.S. Restaurant Properties Master L.P.
We have audited the accompanying combined statement of revenues and certain
expenses of Selected Properties Sold to U.S. Restaurant Properties Master L.P.
(Checkers Acquisition) for the year ended July 31, 1997. This financial
statement is the responsibility of the management of U.S. Restaurant Properties
Master L.P. Our responsibility is to express an opinion on this statement based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the combined statement of revenues and certain expenses
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
The accompanying combined statement of revenues and certain expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in the Form 8-K of U.S.
Restaurant Properties Master L.P.. Material amounts, described in Note 1 to the
combined statement of revenues and certain expenses, that would not be
comparable to those resulting from the proposed future operations of the
properties sold to U.S. Restaurant Properties Master L.P. are excluded and the
statement is not intended to be a complete presentation of the revenues and
expenses of these properties.
In our opinion, such combined statement of revenues and certain expenses
presents fairly, in all material respects, the combined revenues and certain
expenses, as defined above, of the Selected Properties Sold to U.S. Restaurant
Properties Master L.P. (Checkers Acquisition) for the year ended July 31, 1997,
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Dallas, Texas
October 13, 1997
17
<PAGE>
<TABLE>
<CAPTION>
SELECTED PROPERTIES SOLD TO U.S. RESTAURANT PROPERTIES MASTER L.P. (CHECKERS ACQUISITION)
COMBINED STATEMENT OF REVENUES AND CERTAIN EXPENSES
YEAR ENDED JULY 31, 1997
<S> <C>
RENTAL INCOME
Minimum $ 217,822
Cost reimbursement revenue 44,051
-----------
TOTAL RENTAL INCOME 261,873
DIRECT EXPENSE
Real estate taxes 31,377
Sales taxes 12,674
-----------
TOTAL DIRECT EXPENSE 44,051
-----------
NET RENTAL INCOME $ 217,822
===========
</TABLE>
See Accompanying Notes to Combined Statement of Revenues and Certain Expenses.
18
<PAGE>
NOTES TO THE SELECTED PROPERTIES SOLD TO U.S. RESTAURANT PROPERTIES MASTER L.P.
(CHECKERS ACQUISITION) COMBINED STATEMENT OF REVENUES AND CERTAIN EXPENSES
1. Summary Of Significant Accounting Policies
Nature Of Operations
The accompanying combined statement of revenues and certain expenses
includes five properties acquired by U.S. Restaurant Properties Master L.P.
from N.C.J. Investment Company, a Florida corporation, Radiant Oil Company
of Tampa, Inc., a Florida corporation, and Gas Kwick, Inc., a Florida
corporation (collectively the "Company"). The statement does not include
any revenues or expenses related to any other properties owned by the
Company. Four of the properties acquired is operated as Checkers
restaurants and one property is operated as a Hooters restaurant. In
accordance with the Securities and Exchange Commission Rule 3-14, the
statement does not include expenses not comparable to the proposed future
operations of the properties such as depreciation, interest, or any other
costs that are not directly associated with the properties and accordingly,
it is not intended to be a complete presentation of revenues and expenses
of the properties.
2. Use Of Estimates
The preparation of this statement of revenues and certain expenses in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of revenues and certain expenses during a reporting period. Actual
results could differ from those estimates.
3. Rental Income
The properties are "triple net" leases which require the lessee to pay all
property taxes, assessments, insurance, maintenance costs and other charges
related to maintenance, repair and operation of the property. Three leases
specify lease payment increases. The recognition of rental income has been
straight-lined over the lease term in accordance with generally accepted
accounting principles. Certain information regarding each of the property
leases is set forth in the table below.
<TABLE>
<CAPTION>
MINIMUM
ANNUAL PERCENTAGE TERMINATION
LOCATION RENTAL RENTALS DATE
- ----------------------- -------------------------------------------- ---------------------- ---------------------
<S> <C> <C> <C>
Lakeland, FL $79,418 per year through 3/31/98 5% of sales in March 2000 with two
80,766 per year through 3/31/99 excess of minimum five-year renewal
83,342 per year through 3/31/00 base rent options
4459 Hillsborough 29,400 per year through 6/30/98 None June 2003 with five
Tampa, FL 35,400 per year through 6/30/03 five-year renewal
options
Hudson, FL 30,000 per year through 1/31/02 None January 2002 with
five five-year
renewal options
Temple Terrace, FL 39,000 per year through 4/14/02 None April 2002 with
four five-year
renewal options
</TABLE>
19
<PAGE>
NOTES TO THE SELECTED PROPERTIES SOLD TO U.S. RESTAURANT PROPERTIES MASTER L.P.
(CHECKERS ACQUISITION) COMBINED STATEMENT OF REVENUES AND CERTAIN EXPENSES
<TABLE>
<CAPTION>
MINIMUM
ANNUAL PERCENTAGE TERMINATION
LOCATION RENTAL RENTALS DATE
- ----------------------- -------------------------------------------- ---------------------- ---------------------
<C> <C> <C> <C>
15515 Dale Mabry $36,000 per year through 3/31/99 None March 2009 with
Tampa, FL 38,400 per year through 3/31/00 five five-year
40,800 per year through 3/31/01 renewal options
43,200 per year through 3/31/02
45,600 per year through 3/31/03
48,000 per year through 3/31/04
Beginning on April 1, 2004
and continuing through the
end of the lease, rent will
increase or decrease annually
by the Consumer Price Index
for April of previous year.
Such increase or decrease will
not be more than 4% of the
then existing rent and will
never be less than $48,000
per year.
</TABLE>
The following is a schedule of minimum rental income on the non-cancelable
lease as of July 31,1997:
1998 $ 214,767
1999 222,825
2000 199,161
2001 146,000
2002 120,400
Thereafter 350,850
------------
$ 1,254,003
============
20
<PAGE>
INDEPENDENT AUDITORS' REPORT
U.S. Restaurant Properties Master L.P.
We have audited the accompanying combined statement of revenues and certain
expenses of Properties Sold to U.S. Restaurant Properties Master L.P. by
Jackson-Shaw Partners, No. 51, Ltd. for the year ended December 31, 1996. This
financial statement is the responsibility of the management of U.S. Restaurant
Properties Master L.P. Our responsibility is to express an opinion on this
statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the combined statement of revenues and certain expenses
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
The accompanying combined statement of revenues and certain expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in the Form 8-K of U.S.
Restaurant Properties Master L.P.. Material amounts, described in Note 1 to the
combined statement of revenues and certain expenses, that would not be
comparable to those resulting from the proposed future operations of the
properties sold to U.S. Restaurant Properties Master L.P. are excluded and the
statement is not intended to be a complete presentation of the revenues and
expenses of these properties.
In our opinion, such combined statement of revenues and certain expenses
presents fairly, in all material respects, the combined revenues and certain
expenses, as defined above, of Properties Sold to U.S. Restaurant Properties
Master L.P. by Jackson-Shaw Partners, No. 51, Ltd. for the year ended December
31, 1996, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Dallas, Texas
October 13, 1997
21
<PAGE>
<TABLE>
<CAPTION>
PROPERTIES SOLD TO U.S. RESTAURANT PROPERTIES MASTER L.P. BY JACKSON-SHAW PARTNERS, NO. 51, LTD.
COMBINED STATEMENT OF REVENUES AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 1996
<S> <C>
RENTAL INCOME
Minimum $ 216,841
Cost reimbursement 11,926
----------------
TOTAL RENTAL INCOME 228,767
DIRECT EXPENSES
Real estate taxes 48,616
Sales taxes 13,011
----------------
TOTAL DIRECT EXPENSES 61,627
----------------
NET RENTAL INCOME $ 167,140
================
</TABLE>
See Accompanying Notes to Combined Statement of Revenues and Certain Expenses.
22
<PAGE>
NOTES TO THE PROPERTIES SOLD TO U.S. RESTAURANT PROPERTIES MASTER L.P. BY
JACKSON-SHAW PARTNERS, NO. 51, LTD. COMBINED STATEMENT OF REVENUES AND CERTAIN
EXPENSES
1. Summary Of Significant Accounting Policies
Nature Of Operations
The accompanying combined statement of revenues and certain expenses
includes two properties acquired by U.S. Restaurant Properties Master L.P.
from Jackson-Shaw Partners, No. 51, Ltd., a Texas limited partnership (the
"Partnership"). The statement does not include any revenues or expenses
related to any other properties owned or managed by the Partnership. The
properties acquired were operated as Black Eyed Pea restaurants through the
lease termination date of July 6, 1997. In accordance with the Securities
and Exchange Commission Rule 3-14, the statement does not include expenses
not comparable to the proposed future operations of the property such as
depreciation, interest, or any other costs that are not directly associated
with the properties and accordingly, it is not intended to be a complete
presentation of revenues and expenses of the properties.
2. Use Of Estimates
The preparation of this combined statement of revenues and certain expenses
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of revenues and certain expenses during a reporting period. Actual
results could differ from those estimates.
3. Rental Income
The properties are "triple net" leases which require the lessee to pay all
property taxes, assessments, insurance, maintenance costs and other charges
related to maintenance, repair and operation of the property. Cost
reimbursement revenue includes costs reimbursed by the tenant for sales
taxes on lease revenue. Subsequent to December 31, 1996, the tenant
informed the Partnership of their intention to terminate the lease early.
At that time, the Partnership entered into new leases on the property with
a third party (see Note 5). The effective date of the early termination was
July 6, 1997. Certain information regarding the terminated property leases
is set forth in the table below.
<TABLE>
<CAPTION>
MINIMUM
ANNUAL PERCENTAGE TERMINATION
LOCATION RENTAL RENTAL DATE
- ----------------------- -------------------------------------------- ---------------------- -----------------------
<C> <C> <C> <C>
1667 Florida Mall $109,116 per year through 12/31/05 None July 6, 1997
Orlando, FL
7379 West Colonial 107,724 per year through 12/31/05 None July 6, 1997
Orlando, FL
</TABLE>
The following is a schedule of minimum rental income on the
non-cancelable lease as of December 31, 1996 (through July 6,
1997, date of early termination):
1997 $ 111,919
-----------
$ 111,919
===========
23
<PAGE>
NOTES TO THE PROPERTIES SOLD TO U.S. RESTAURANT PROPERTIES MASTER L.P. BY
JACKSON-SHAW PARTNERS, NO.51, LTD. COMBINED STATEMENT OF REVENUES AND CERTAIN
EXPENSES
4. Related Parties
The seller of the property is affiliated with the lessee whose lease
was terminated on July 6, 1997.
5. Subsequent Events
On April 28, 1997 Jackson-Shaw Partners No. 51, Ltd. entered into new
lease agreements on the above property locations with a third party which
became effective beginning September 1, 1997 and October 1, 1997,
respectively. The new property leases are "triple net" leases which
requires the lessee to pay all property taxes, assessments, insurance,
maintenance costs and other charges related to maintenance, repair and
operation of the properties. The properties are operating as Ale House
restaurants. Certain information regarding the property leases is set forth
in the table below.
<TABLE>
<CAPTION>
MINIMUM
ANNUAL PERCENTAGE TERMINATION
LOCATION RENTAL RENTAL DATE
- ----------------------- -------------------------------------------- ---------------------- -----------------------
<C> <C> <C> <C>
1667 Florida Mall $180,000 per year through 8/31/02 with None August 2007 with
Orlando, FL annual increases in rent three-five year
beginning on the first day of renewal options
lease year six based on the
Consumer Price Index.
7379 West Colonial 180,000 per year through 9/30/02 with None September 2007 with
Orlando, FL annual increases in rent three-five year
beginning on the first day of renewal options
lease year six based on the
Consumer Price Index.
</TABLE>
The following is a schedule of minimum rental income on the
non-cancelable leases:
1997 $ 105,000
1998 360,000
1999 360,000
2000 360,000
2001 360,000
Thereafter 2,055,000
------------
$ 3,600,000
============
24
<PAGE>
INDEPENDENT AUDITORS' REPORT
U.S. Restaurant Properties Master L.P.
We have audited the accompanying combined statement of revenues and certain
expenses of Selected Properties Sold to U.S. Restaurant Properties Master L.P.
(Harrigan's Acquistion) for the year ended June 30, 1997. This financial
statement is the responsibility of the management of U.S. Restaurant Properties
Master L.P. Our responsibility is to express an opinion on this statement based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the combined statement of revenues and certain expenses
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
The accompanying combined statement of revenues and certain expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in the Form 8-K of U.S.
Restaurant Properties Master L.P.. Material amounts, described in Note 1 to the
combined statement of revenues and certain expenses, that would not be
comparable to those resulting from the proposed future operations of the
properties sold to U.S. Restaurant Properties Master L.P. are excluded and the
statement is not intended to be a complete presentation of the revenues and
expenses of these properties.
In our opinion, such combined statement of revenues and certain expenses
presents fairly, in all material respects, the combined revenues and certain
expenses, as defined above, of Selected Properties Sold to U.S. Restaurant
Properties Master L.P. (Harrigan's Acquistion) for the year ended June 30, 1997,
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Dallas, Texas
October 14, 1997
25
<PAGE>
<TABLE>
<CAPTION>
PROPERTIES SOLD TO U.S. RESTAURANT PROPERTIES MASTER L.P. BY (HARRIGAN'S ACQUISITION)
COMBINED STATEMENT OF REVENUES AND CERTAIN EXPENSES
YEAR ENDED JUNE 30, 1997
<S> <C>
RENTAL INCOME
Minimum $ 357,099
Percentage 74,746
---------------
TOTAL RENTAL INCOME 431,845
DIRECT EXPENSES -
---------------
NET RENTAL INCOME $ 431,845
===============
</TABLE>
See Accompanying Notes to Combined Statement of Revenues and Certain Expenses.
26
<PAGE>
NOTES TO THE PROPERTIES SOLD TO U.S. RESTAURANT PROPERTIES MASTER L.P
(HARRIGAN'S ACQUISITION) COMBINED STATEMENT OF REVENUES AND CERTAIN EXPENSES
1. Summary Of Significant Accounting Policies
Nature Of Operations
The accompanying combined statement of revenues and certain expenses
includes three properties acquired by U.S. Restaurant Properties Master
L.P. from Minnesota Teachers' Retirement Fund association, a Minnesota
non-profit corporation and Harri N.V., Inc., a Netherlands Antilles
corporation. Collectively the above entities are referred to as the
"Company". The statement does not include any revenues or expenses related
to any other properties owned or managed by the Company. The properties
acquired are operated as Harrigan's restaurants. In accordance with the
Securities and Exchange Commission Rule 3-14, the combined statement does
not include expenses not comparable to the proposed future operations of
the property such as depreciation, interest, or any other costs that are
not directly associated with the properties and accordingly, it is not
intended to be a complete presentation of revenues and expenses of the
properties.
2. Use Of Estimates
The preparation of this combined statement of revenues and certain expenses
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of revenues and certain expenses during a reporting period. Actual
results could differ from those estimates.
3. Rental Income
The properties are "triple net" leases which require the lessee to pay all
property taxes, assessments, insurance, maintenance costs and other charges
related to maintenance, repair and operation of the property. Certain
information regarding the property leases is set forth in the table below.
<TABLE>
<CAPTION>
MINIMUM PERCENTAGE TERMINATION
LOCATION ANNUAL RENTAL RENTAL DATE
- ----------------------- -------------------------------------------- ---------------------- -----------------------
<S> <C> <C> <C>
Albuquerque, NM $ 102,588 per year through 5/31/02 7% of sales in May 2002 with
excess of two-five year renewal
$1,374,285.70 options
2125 W. Memorial 119,611 per year through 12/31/05 7% of sales less December 2005 with
Oklahoma City, OK minimum rent two-five year renewal
options
2203 SW 74th St 134,900 per year through 12/31/05 7% of sales less December 2005 with
Oklahoma City, OK minimum rent two-five year renewal
options
</TABLE>
The following is a schedule of minimum rental income on the
non-cancelable leases as of June 30, 1997:
1998 $ 357,100
1999 357,100
2000 357,100
2001 357,100
2002 348,550
Thereafter 890,790
-------------
$ 2,667,740
=============
27
<PAGE>
INDEPENDENT AUDITORS' REPORT
U.S. Restaurant Properties Master L.P.
We have audited the statement of revenues and certain expenses (defined as being
operating revenues less direct operating expenses) of Superpumper, Inc -
Belfield Location for the year ended December 31, 1996. This financial statement
is the responsibility of the Company's management. Our responsibility is to
express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenues and certain expenses was prepared for the
purpose of complying with rules and regulations of the Securities and Exchange
Commission for inclusion in the Form 8-K of U.S. Restaurant Properties Master
L.P.. As described in Note 1 to the accompanying statement of revenues and
certain expenses, such statement is not intended to be a complete presentation
of revenues and expenses of the store.
In our opinion, such statement of revenues and certain expenses presents fairly,
in all material respects, the revenues and certain expenses, as defined above,
of the Belfield location of Superpumper, Inc. for the year ended December 31,
1996 in conformity with generally accepted accounting principles.
BRADY, MARTZ & ASSOCIATES, P.C.
October 10, 1997
<PAGE>
SUPERPUMPER, INC - BELFIELD LOCATION
STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
SALES $ 4,109,297
DIRECT COSTS AND EXPENSES:
Cost of Merchandise 3,568,131
Labor 204,165
Other Direct Operating Expenses 233,551
---------------
TOTAL COSTS AND EXPENSES $ 4,005,847
---------------
EXCESS OF STORE SALES OVER
CERTAIN DIRECT OPERATING EXPENSES $ 103,450
===============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
29
<PAGE>
SUPERPUMPER, INC - BELFIELD LOCATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1 - BASIS OF PRESENTATION
The accompanying statement of revenues and certain expenses
include the operating results of the Belfield location of
Superpumper, Inc., which property was acquired by U.S. Restaurant
Properties Master L.P. ("USRP"). SPF Energy owns 100% of both
Superpumper, Inc. and Farstad Oil, Inc. The Belfield location is a
truck stop and convenience store in Belfield, North Dakota. Its
primary source of revenue is fuel sales. This statement does not
include any revenues or expenses related to any other properties
owned by Superpumper, Inc. In accordance with the Securities and
Exchange Commission Rule 3.14, the statement does not include
expenses not comparable to the proposed future operations of the
business such as depreciation, interest, or any other costs that
are not directly associated with the property.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Sales are recorded at the time of the retail sale.
Other direct operating expenses represent supplies, uniforms,
utilities, advertising, licenses and other costs directly
associated with the store operations.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the expected amounts of
revenues and certain expenses during the reporting period. Actual
results could differ from those estimates.
NOTE 3 - LEASE ON PROPERTY
USRP entered into a lease with Superpumper, Inc. for the rental of
the property it purchased. The term of the lease is 20 years
expiring on October 2, 2017 with the option to renew the lease for
two additional terms of five years each. The annual base rent is
$141,000 per year through lease year five. On the first day of
lease year six the annual rent will be increased by ten percent of
the immediately preceding annual base rent. The base rent will
increase every fifth anniversary thereafter including renewal
option years by ten percent over the immediately preceding annual
base rent.
30
<PAGE>
NOTE 4 - ENVIRONMENTAL ISSUES
Like other petroleum distributors, the Company's operations are
subject to extensive and rapidly changing federal and state
environmental regulations governing air emissions, waste water
discharges, and solid and hazardous waste management activities.
The Company's policy is to accrue environmental and related
clean-up costs of a non-capital nature when it is probable that a
liability has been incurred and that the amount can be reasonably
estimated. Management believes that no such matters will have a
material impact on the Company's financial position or results of
future operations and no liabilities have been accrued at December
31, 1996
31
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following June 30, 1997 unaudited Pro Forma Consolidated Balance
Sheet of U.S. Restaurant Properties Master L.P. (the "Partnership") consists of
the Partnership's June 30, 1997 historical balance sheet adjusted on a pro forma
basis to reflect as of June 30, 1997: (a) the purchase of 78 properties for
$52,190,000 and notes and accounts receivable of $190,000 acquired between July
1, and October 15, 1997; (b) the loan of $6,000,000 to Embers Corporations; (c)
the sale of three properties for $2,042,000 between July 1, and October 15,
1997; and (d) the additional borrowings required to purchase the properties
acquired. The unaudited Pro Forma Consolidated Balance Sheet is not necessarily
indicative of what the actual financial position of the Partnership would have
been at June 30, 1997 had all of these transactions occurred as of such date and
it does not purport to represent the future financial position of the
Partnership.
The unaudited Pro Forma Condensed Consolidated Statement of Income for
the year ended December 31, 1996 is presented as if the following had occurred
as of January 1, 1996: (a) the purchase of 368 properties for $224,171,000
including the fair value of 838,633 Units valued at $21,699,000 completed since
December 31, 1995; (b) the acquisition of 25 newly constructed and undeveloped
properties for $17,816,000, between January 1 and October 15, 1997; (c) the sale
of four properties for $3,217,000 between January 1, and October 15, 1997; (d)
the issuance of 1,800,000 units in June 1996 with net proceeds of $40,203,000;
(e) the issuance of 956,554 units in five separate transactions to individual
investors with net proceeds of $25,000,000 and; (f) the additional borrowings of
$162,427,000 required to purchase the properties acquired. 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 six months ended June 30, 1997 is presented as if the following had occurred
as of January 1, 1997: (a) the purchase of 184 properties for $118,835,000
including the fair value of 453,797 Units valued at $13,797,000 completed since
December 31, 1996; (b) the acquisition of 25 newly constructed and undeveloped
properties for $17,816,000, between January 1 and October 15, 1997; (c) the sale
of four properties for $3,217,000 between January 1, and October 15, 1997; (d)
the issuance of 956,554 units in five separate transactions to individual
investors with net proceeds of $25,000,000 and; (e) the additional borrowings of
$103,872,000 required to purchase the properties acquired. The unaudited Pro
Forma Condensed Consolidated Statement of Income is not necessarily indicative
of what the actual results of operations of the Partnership would have been
assuming the transactions described above had been completed as of January 1,
1997, nor do they purport to represent the results of operations for future
periods.
32
<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.
PRO FORMA CONSOLIDATED BALANCE SHEET
June 30, 1997
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Operating Newly
Property Constructed
Historical Acquisitions (a) Acquisitions (b) Sales (c) Pro Forma
------------ -------------- -------------- --------- -----------
<S> <C> <C> <C> <C> <C>
Cash and equivalents $ 1,777 $ - $ - $ - $ 1,777
Receivables, net 2,340 14 2,354
Deferred rent receivable 1,137 1,137
Purchase deposits and escrows 1,090 (434) (47) 609
Prepaid expenses 924 12 936
Notes receivable 1,321 6,176 689 8,186
Notes receivable - related parties 3,411 3,411
Net investment in direct financing leases 15,679 (191) 15,488
Land 78,679 13,138 3,458 (795) 94,480
Buildings and leasehold improvements, net 139,298 32,840 2,445 (596) 173,987
Machinery and equipment, net 3,743 309 4,052
Intangibles, net 12,116 138 (46) 12,208
------------ -------------- -------------- --------- -----------
$ 261,515 $ 51,884 $ 6,165 $ (939) $ 318,625
============ ============== ============== ========== ===========
Accounts payable $ 3,173 $ 579 $ 46 $ - $ 3,798
Deferred rent payable 88 88
Deferred gain on sale of property 590 213 803
Lines of credit 92,313 36,078 6,119 (1,152) 133,358
Notes payable 40,000 40,000
Capitalized lease obligations 263 263
General Partner's capital 1,093 1,093
Limited Partner's capital 123,995 15,227 139,222
------------ ------------ -------------- ---------- -----------
$ 261,515 $ 51,884 $ 6,165 $ (939) $ 318,625
============ ============ ============== ========== ===========
</TABLE>
See Notes to Pro Forma Consolidated Balance Sheet.
33
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(a) Reflects pro forma adjustments for acquisitions completed since June 30,
1997 which consist of the purchase of 65 operating properties and the
borrowings required to complete the purchase of these properties as
follows:
<TABLE>
<CAPTION>
Number of
Properties Operating
--------------- ---------------
<S> <C> <C>
Midon Acquisition 17 $ 13,449
QSR Acquisition 16 7,904
Embers 10 4,106
Taco Cabana 5 5,657
Checkers Acquisition 5 1,487
Harrigan's Acquisition 3 3,898
BCL II, L.P. 2 1,559
Jackson-Shaw 2 3,119
Ribbit Holdings 1 931
El Chico 1 1,271
500 Park Ave Realty 1 1,137
Superpumper 1 1,229
Other Property 1 231
--- ---------------
65 45,978
===
Plus notes ($6,176) and other ($14) 6,190
receivable
---------------
$ 52,168
---------------
Add prepaid assets 12
Add intangibles 138
Less June 30, 1997 purchase deposits
relating to acquisitions (434)
Less tenant security deposit and escrow (579)
received
Less value of 335,218 units issued for
property (10,477)
Less proceeds from sale of stock (4,750)
---------------
Increase in line of credit and notes
payable $ 36,078
===============
Costs of the acquisitions are allocated
as follows:
Land $ 13,138
Buildings and leasehold improvements 32,840
---------------
$ 45,978
===============
</TABLE>
The respective purchase price for the properties has been allocated between land
and buildings and leasehold improvements, on a preliminary basis. Final
determination of the proper allocation between these accounts will be made prior
to finalizing the financial statements for the year ended December 31, 1997.
Management does not expect material adjustments to occur.
34
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET (CONTINUED)
(b) Reflects pro forma adjustments for acquisitions completed since June 30,
1997 which consist of the purchase of eight newly constructed and five
undeveloped properties and the borrowings required to complete the purchase
of these properties as follows:
<TABLE>
<CAPTION>
Number of Newly
Properties Constructed
--------------- ---------------
<S> <C> <C>
Schlotzsky's 7 $ 3,457
Other Properties 6 2,755
--- ---------------
13
===
6,212
Less June 30, 1997 purchase deposits
relating to acquisitions (47)
Less tenant security deposit and escrow
received (46)
---------------
Increase in line of credit and notes
payable $ 6,119
===============
Costs of the acquisitions are allocated
as follows:
Land $ 3,458
Buildings and leasehold improvements 2,445
Machinery and equipment 309
---------------
$ 6,212
===============
</TABLE>
The respective purchase price for the properties has been allocated between land
and buildings and leasehold improvements, on a preliminary basis. Final
determination of the proper allocation between these accounts will be made prior
to finalizing the financial statements for the year ended December 31, 1997.
Management does not expect material adjustments to occur.
(c) Reflects pro forma adjustments for restaurant properties sold since June
30, 1997 which consist of the sale of three operating properties and the
borrowings required to complete the purchase of these properties as
follows:
<TABLE>
<CAPTION>
Number of
Properties Sales
------------- ---------------
<S> <C> <C>
Burger King 2 $ (867)
Other Property 1 (524)
--- ---------------
3
===
(1,391)
Add note receivable on sale 689
Less DFL portion of sale (191)
Less intangibles (46)
Less deferred gain on sale (213)
---------------
Decrease in line of credit $ (1,152)
===============
Costs of the sales are allocated
as follows:
Land $ (795)
Buildings and leasehold improvements (596)
---------------
$ (1,391)
===============
</TABLE>
35
<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(Unaudited)
(In thousands, except per unit data)
<TABLE>
<CAPTION>
Jan - July 1997 Embers 500 Park
Historical Acquisitions Acquisitions Sales El Chico Embers Mortgage Ave Realty
------------ -------------- ---------------- --------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TOTAL REVENUES $ 18,324 $ 7,365 (a) $ 13,952 (b) $(270) (c) $ 159 (d) $ 538 (e) $ 652 (f) $ 127 (g)
EXPENSES
Rent 2,080 232 (a) 211 (b) - - - - -
Depreciation and
amortization 3,978 1,855 (n) 4,463 (n) (37) (n) 46 (n) 154 (n) 9 (n) 43 (n)
Taxes, general and
administrative 2,461 684 (o) 1,121 (o) - (o) 13 (o) 40 (o) 60 (o) 11 (o)
Interest expense, net 2,364 3,038 (p) - - - - - -
----------- ----------- ------------ ------ -------- ------ ------ --------
TOTAL EXPENSES 10,883 5,809 5,795 (37) 59 194 69 54
Gain on sale of
equipment 32 - - - - - - -
----------- ----------- ------------ ------ -------- ------ ------ --------
NET INCOME $ 7,473 $ 1,556 $ 8,157 $(233) $ 100 $ 344 $ 583 $ 73
=========== =========== ============ ====== ======== ====== ====== ========
Net income allocable to
unitholders $ 7,325 $ 1,525 $ 7,995 $(228) $ 98 $ 337 $ 571 $ 72
=========== =========== ============ ====== ======== ====== ====== ========
Average number of
outstanding units 6,107 676
===========
NET INCOME PER UNIT $ 1.20
===========
</TABLE>
See Notes to Pro Forma Consolidated Statement of Income
continued on next page
36
<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (continued)
FOR THE YEAR ENDED DECEMBER 31, 1996
(Unaudited)
(In thousands, except per unit data)
<TABLE>
<CAPTION>
Newly
Checkers Harrigan's Constructed Other Pro Forma
Acquisition Jackson-Shaw Superpumper Acquisition Properties Properties Adjustment Pro Forma
------------ ------------ ----------- ----------- ----------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TOTAL REVENUES $ 226 (h) $ 360 (i) $ 164 (j) $ 432 (k) $ 592 (l) $ 30 (m) $ - $ 42,651
EXPENSES
Rent - - - - - - - 2,523
Depreciation and
amortization 9 (n) 96 (n) 46 (n) 146 (n) 153 (n) 9 (n) - 10,970
Taxes, general and
administrative 14 (o) 30 (o) 12 (o) 38 (o) 61 (o) 2 (o) - 4,547
Interest expense, net - - - - - - 7,128 (p) 12,530
--------- --------- -------- -------- -------- ------- --------- ----------
TOTAL EXPENSES 23 126 58 184 214 11 7,128 30,570
Gain on sale of
equipment - - - - - - - 32
--------- --------- -------- -------- -------- ------- --------- ----------
NET INCOME $ 203 $ 234 $ 106 $ 248 $ 378 $ 19 $(7,128) $ 12,113
========= ========= ======== ======== ======== ======= ========= ==========
Net income allocable to
unitholders $ 199 $ 229 $ 104 $ 243 $ 371 $ 19 $(6,987) $ 11,873
========= ========= ======== ======== ======== ======= ========= ==========
Average number of
outstanding units 8,453
==========
NET INCOME PER UNIT $ 1.40
==========
</TABLE>
See Notes to Pro Forma Consolidated Statement of Income.
37
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(a) Reflects pro forma adjustments to operations relating to the period between
January 1, 1996 and the date of acquisition for the 1996 acquisitions,
comprised of 184 properties acquired on various dates from January 1,
1996 through December 31, 1996.
(b) Reflects pro forma adjustment to operations relating to base and percentage
rent for the 1997 acquisitions comprised of 172 properties acquired on
various dates from January 1, 1997 through July 31, 1997.
(c) Reflects pro forma adjustment to operations based on historical financial
information on four properties sold.
(d) Reflects pro forma adjustments to operations relating to base and
percentage rent of the newly executed lease for the TW South, Inc. El Chico
acquisition comprised of one property acquired on July 25, 1997.
(e) Reflects pro forma adjustments to operations relating to base rent based on
the newly executed lease for the Embers Corporations acquisition comprised
of ten properties acquired on August 27, 1997.
(f) Reflects pro forma adjustments to operations relating to the notes
receivable secured by the first mortgage on certain other Embers
Corporations properties funded on August 27, 1997.
(g) Reflects pro forma adjustments to operations relating to base rent based on
historical financial information for the 500 Park Avenue Realty Corporation
acquisition comprised of one property acquired on August 28, 1997. See
statement of revenues and certain expenses included herein.
(h) Reflects pro forma adjustments to operations relating to the base and
percent rent based on historical financial information for the Checkers
Acquisition comprised of five properties acquired on September 5, 1997. See
combined statement of revenues and certain expenses included herein.
(i) Reflects pro forma adjustments to operations relating to base rent of the
newly executed leases for the Jackson-Shaw Partners, No. 51, Ltd.
acquisition comprised of two properties acquired on September 17, 1997.
See combined statement of revenues and certain expenses included herein.
(j) Reflects pro forma adjustments to operations relating to base of the newly
executed lease for the Superpumper, Inc. - Belfield Location acquisition
comprised of one property acquired on October 3, 1997.
(k) Reflects pro forma adjustments to operations relating to base and
percentage rent based on historical financial information for the
Harrigan's acquisition comprised of three properties acquired on October 3,
1997. See combined statement of revenues and certain expenses included
herein.
(l) Reflects pro forma adjustments to operations based on executed lease
information for the newly constructed and undeveloped acquisitions
comprised of 13 properties acquired on various dates from August 1, 1997
through October 15, 1997.
(m) Reflects pro forma adjustments to operations relating to base rent based
on historical financial information for one other property acquired on
August 22, 1997.
(n) Reflects pro forma increase in depreciation expense related to the purchase
price of the respective properties. Depreciation is computed using the
straight-line method over the estimated useful lives of building, leasehold
improvements, machinery and equipment which range from 10 to 20 years.
38
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(o) Reflects pro forma increase in general and administrative expense
attributable to the increase in fees due to the managing general partner.
Such increase is comprised of 1% of the contracted purchase price for the
respective properties and 25% of the cash flow received with respect to
such additional properties in excess of the cash flow representing a 12%
rate of return.
(p) Reflects the pro forma adjustment to interest expense as a result of the
purchase of the respective properties. Pro forma interest expense is based
on the increase in debt outstanding and borrowings for payment of
distributions on units issued on a pro forma basis using interest rates
based on the Partnership's credit arrangements which are as follows:
<TABLE>
<CAPTION>
Principal Interest Rate
<S> <C> <C>
Series A Senior Secured Guaranteed Notes $ 12,500,000 8.06%
Series B Senior Secured Guaranteed Notes 27,500,000 8.30%
Line of credit 109,373,000 7.20%
Line of credit 26,200,000 8.03%
</TABLE>
39
<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(Unaudited)
(In thousands, except per unit data)
<TABLE>
<CAPTION>
Jan-July 1997 Embers 500 Park
Historical Acquisitions Sales El Chico Embers Mortgage Ave Realty
----------- ------------- ----------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
TOTAL REVENUES $ 14,544 $ 4,947 (a) $ (135) (b) $ 79 (c) $ 269 (d) $ 326 (e) $ 63 (f)
EXPENSES
Rent 1,189 105 (a) - - - - -
Depreciation and
amortization 3,366 1,598 (m) (19) (m) 23 (m) 77 (m) 5 (m) 21 (m)
Taxes, general and
administrative 1,987 401 (n) - (n) 6 (n) 20 (n) 30 (n) 6 (n)
Interest expense, net 3,425 - - - - - -
----------- --------- ------- ------ ------- ------- -------
TOTAL EXPENSES 9,967 2,104 (19) 29 97 35 27
----------- --------- ------- ------ ------- ------- -------
Income before unusual
items 4,577 2,843 (116) 50 172 291 36
Gain on sale of
property 266 - - - - - -
REIT conversion costs (744) - - - - - -
----------- --------- ------- ------ ------- ------- -------
NET INCOME $ 4,099 $ 2,843 $(116) $ 50 $ 172 $ 291 $ 36
=========== ========= ======= ====== ======= ======= =======
Net income allocable to
unitholders $ 4,018 $ 2,787 $(114) $ 49 $ 168 $ 285 $ 35
=========== ========= ======= ====== ======= ======= =======
Average number of
outstanding units 7,409 676
===========
NET INCOME PER UNIT $ 0.54
===========
</TABLE>
See Notes to Pro Forma Consolidated Statement of Income.
continued on next page
40
<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (continued)
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(Unaudited)
(In thousands, except per unit data)
<TABLE>
<CAPTION>
Newly
Checkers Harrigan's Constructed Other Pro Forma
Acquisition Jackson-Shaw Superpumper Acquisition Properties Property Adjustment Pro Forma
------------ ------------ ----------- ----------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TOTAL REVENUES $ 113 (g) $ 180 (h) $ 82 (i) $ 216 (j) $ 296 (k) $ 15 (l) $ - $ 20,995
EXPENSES
Rent - - - - - - - 1,294
Depreciation and
amortization 5 (m) 48 (m) 23 (m) 73 (m) 77 (m) 4 (m) - 5,301
Taxes, general and
administrative 7 (n) 15 (n) 6 (n) 19 (n) 30 (n) 1 (n) - 2,528
Interest expense, net - - - - - - 2,840 (o) 6,265
-------- -------- ------- ------- ------- ------- --------- -----------
TOTAL EXPENSES 12 63 29 92 107 5 2,840 15,388
-------- -------- ------- ------- ------- ------- -------- -----------
Income before unusual
items 101 117 53 124 189 10 (2,840) 5,607
Gain on sale of
property - - - - - - - 266
REIT conversion costs - - - - - - - (744)
-------- -------- ------- ------- ------- ------- --------- -----------
NET INCOME $ 101 $ 117 $ 53 $ 124 $ 189 $ 10 $(2,840) $ 5,129
======== ======== ======= ======= ======= ======= ========= ===========
Net income allocable to
unit holders $ 99 $ 115 $ 52 $ 122 $ 185 $ 10 $(2,784) $ 5,027
======== ======== ======= ======= ======= ======= ========= ===========
Average number of
outstanding units 8,513
===========
NET INCOME PER UNIT $ 0.59
===========
</TABLE>
See Notes to Pro Forma Consolidated Statement of Income.
41
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(a) Reflects pro forma adjustment to operations relating to the period between
January 1, 1997 and the date of acquisition for base and percentage rent
for the 1997 acquisitions comprised of 172 properties acquired on various
dates from January 1, 1997 through July 31, 1997.
(b) Reflects pro forma adjustments to operations relating to the sale of four
properties.
(c) Reflects pro forma adjustments to operations relating to base and
percentage rent on the newly executed lease for the TW South, Inc. El Chico
acquisition comprised of one property acquired on July 25, 1997.
(d) Reflects pro forma adjustments to operations relating to base rent based on
the newly executed lease for the Embers Corporations acquisition comprised
of ten properties acquired on August 27, 1997.
(e) Reflects pro forma adjustments to operations relating to the notes
receivable secured by the first mortgage on certain other Embers
Corporations properties funded on August 27, 1997.
(f) Reflects pro forma adjustments to operations relating to base rent based on
historical financial information for the 500 Park Avenue Realty Corporation
acquisition comprised of one property acquired on August 28, 1997. See
statement of revenues and certain expenses included herein.
(g) Reflects pro forma adjustments to operations relating to the base and
percent rent based on historical financial information for the Checkers
Acquisition comprised of five properties acquired on September 5, 1997. See
combined statement of revenues and certain expenses included herein.
(h) Reflects pro forma adjustments to operations relating to base rent of the
newly executed leases for the Jackson-Shaw Partners, No. 51, Ltd.
acquisition comprised of two properties acquired on September 17, 1997.
See combined statement of revenues and certain expenses included herein.
(i) Reflects pro forma adjustments to operations relating to base of the newly
executed lease for the Superpumper, Inc. - Belfield Location acquisition
comprised of one property acquired on October 3, 1997.
(j) Reflects pro forma adjustments to operations relating to base and
percentage rent based on historical financial information for the
Harrigan's acquisition comprised of three properties acquired on October 3,
1997. See combined statement of revenues and certain expenses included
herein.
(k) Reflects pro forma adjustments to operations based on executed lease
information for the newly constructed and undeveloped acquisitions
comprised of 13 properties acquired on various dates from August 1, 1997
through October 15, 1997.
(l) Reflects pro forma adjustments to operations relating to base rent based
on historical financial information for one other property acquired on
August 22, 1997.
(m) Reflects pro forma increase in depreciation expense related to the purchase
price of the respective properties. Depreciation is computed using the
straight-line method over the estimated useful lives of building, leasehold
improvements, machinery and equipment which range from 10 to 20 years.
(n) Reflects pro forma increase in general and administrative expense
attributable to the increase in fees due to the managing general partner.
Such increase is comprised of 1% of the contracted purchase price for the
respective properties and 25% of the cash flow received with respect to
such additional properties in excess of the cash flow representing a 12%
rate of return.
42
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(o) Reflects the pro forma adjustment to interest expense as a result of the
purchase of the respective properties. Pro forma interest expense is based
on the increase in debt outstanding and borrowings for payment of
distributions on units issued on a pro forma basis using interest rates
based on the Partnership's credit arrangements which are as follows:
<TABLE>
<CAPTION>
Principal Interest Rate
<S> <C> <C>
Series A Senior Secured Guaranteed Notes $ 12,500,000 8.06%
Series B Senior Secured Guaranteed Notes 27,500,000 8.30%
Line of credit 109,373,000 7.20%
Line of credit 26,200,000 8.03%
</TABLE>
43
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: October 15, 1997 U.S. RESTAURANT PROPERTIES MASTER L.P.
By: QSV PROPERTIES, INC.
its Managing General Partner
By: /s/ ROBERT J. STETSON
-------------------------------------
Robert J. Stetson
President, Chief Executive Officer
44
