UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 [Fee Required] For the fiscal year ended December 31, 1995
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No fee Required] For the transition period from to
Commission file number: 33-1624
CERTIFICATES OF PARTICIPATION
BK I REALTY INC.
(formerly Shearson\BK Realty, Inc.)
BK II PROPERTIES INC.
(formerly Shearson\BK Properties, Inc.)
BK III RESTAURANTS INC.
(formerly Shearson\BK Restaurants, Inc.)
Exact name of registrant as specified in its charter
13-3100473
13-3143115
New York 13-3178423
State or other jurisdiction
of incorporation I.R.S. Employer Identification No.
Attn: Andre Anderson
3 World Financial Center, 29th Floor, New York, NY 10285-2900
Address of principal executive offices zip code
Registrant's telephone number, including area code: (212) 526-3237
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
No market for the limited partnership interests exists and therefore a market
value for the interests cannot be determined.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to COP holders for the year ended December 31, 1995 (Portions of
parts I, II, III and IV)
PART I
Item 1. Business.
(a) General Development of Business
Certificates of Participation ("COPs") represent an assignment from the issuing
general partners of some, but not all, of their rights to participate in the
profits, losses and gains of, and to receive distributions from Burger King
Limited Partnership I, Burger King Limited Partnership II, and Burger King
Limited Partnership III. The issuing general partners and their respective
partnerships are BK I Realty Inc. (formerly Shearson/BK Realty, Inc.) ("GP-I"),
a New York corporation and the general partner of Burger King Limited
Partnership I ("BK-I"), a New York limited partnership; BK II Properties Inc.
(formerly Shearson/BK Properties, Inc.) ("GP-II"), a New York corporation and
the general partner of Burger King Limited Partnership II ("BK-II"), a New York
limited partnership; and BK III Restaurants Inc. (formerly Shearson/BK
Restaurants, Inc.) ("GP-III"), a New York corporation and general partner of
Burger King Limited Partnership III ("BK-III"), a New York limited partnership.
(G P-I, GP-II, and GP-III are collectively referred to herein as the "General
Partners". BK-I, BK-II, and BK-III are collectively referred to herein as the
"Partnerships".) All the General Partners are affiliates of Lehman Brothers
Inc. ("Lehman") (formerly Shearson Lehman Brothers, Inc. ("Shearson"), (see
Item 10).
COPs includes an assignment from GP-I of some, but not all, of GP-I's rights to
participate in the profits, losses and gains of, and to receive distributions
from BK-I (the "BK-I COPs"). More specifically, BK-I COPs represent, in the
aggregate, an assignment to the holders of the BK-I COPs ("BK-I COPs Holders")
as defined under the terms of the partnership agreement of BK-I (the "BK-I
Partnership Agreement"), the rights of GP-I to receive (i) as distributions
from BK-I, up to an additional 4% of BK-I net cash flow from operations for
each year that the BK-I limited partners have received cash distributions equal
to 12 1/2% per annum of their BK-I remaining invested capital, and, after BK-I
Payout, as defined in the BK-I Partnership Agreement, (BK-I "Payout"), 8.89% of
BK-I net property disposition proceeds; and (ii) as allocations by BK-I, 4% of
any excess of net taxable income over BK-I net cash flow from operations; after
BK-I Payout, 10.11% of losses; and after BK-I Payout, 10.11% of gain on
disposition of BK-I's properties (collectively, the "BK-I Assigned Interest").
The BK-I Assigned Interest has been assigned in equal parts to the BK-I COPs
Holders. The unassigned portion of the rights of GP-I to receive distributions
and allocations from BK-I represents GP-I's retained interest.
COPs also includes an assignment from GP-II of some, but not all, of GP-II's
rights to participate in the profits, losses and gains of, and to receive
distributions from BK-II (the "BK-II COPs"). More specifically, BK-II COPs
represent, in the aggregate, an assignment to the holders of the BK-II COPs
("BK-II COPs Holders") as defined under the terms of the partnership agreement
of BK-II (the "BK-II Partnership Agreement"), the rights of GP-II to receive
distributions from, and allocations by, BK-II in amounts identical to those for
the BK-I Assigned Interest (collectively, the "BK-II Assigned Interest"). The
BK-II Assigned Interest has been assigned in equal parts to the BK-II COPs
Holders. The unassigned portion of the rights of GP-II to receive
distributions and allocations from BK-II represents GP-II's retained interest.
Finally, COPs includes an assignment from GP-III of some, but not all, of
GP-III's rights to participate in the profits, losses and gains of, and to
receive distributions from BK-III (the "BK-III COPs"). More specifically,
BK-III COPs represent, in the aggregate, an assignment to the holders of the
BK-III COPs ("BK-III COPs Holders") as defined under the terms of the
partnership agreement of BK-III (the "BK-III Partnership
Agreement")(collectively, the BK-I Partnership Agreement, the BK-II Partnership
Agreement and the BK-III Partnership Agreement are defined as the "Partnership
Agreements"), the rights of GP-III to receive (i) as distributions from BK-III,
4% of BK-III net cash flow from operations for each year and, after BK-III
Payout, as defined in the BK-III Partnership Agreement, (BK-III "Payout"), 4.7%
of BK-III net property disposition proceeds; and (ii) as allocations by BK-III,
4% of net taxable income; after BK-III Payout, 4.88% of losses; and, after
BK-III Payout, 4.88% of gain on disposition of the BK-III's properties
(collectively, the "BK-III Assigned Interest"). The BK-III Assigned Interest
has been assigned in equal parts to the BK-III COPs Holders. The unassigned
portion of the rights of BK-III represents GP-III's retained interest.
BK-I COPs Holders, BK-II COPs Holders and BK-III COPs Holders are collectively
referred to as "COPs Holders."
The Partnerships originally acquired or ground leased, the sites for, and
constructed, 32, 33, and 27, respectively, free-standing Burger King fast food
restaurants (each referred to as the "Property", collectively, the
"Properties") which are leased on a long-term net basis to franchisees of
Burger King Corporation ("Burger King"). Prior to the Partnerships'
acquisition of each Property, Burger King proposed the site for approval by
each respective General Partner. The sites are geographically diversified
throughout the United States. No further site acquisitions are anticipated.
The General Partners do not manage or operate any Property nor do they acquire
or finance the acquisition of the equipment necessary to operate the
Properties. Reference is made to Item 2 captioned "Properties" for information
concerning the Properties.
The Partnerships' principal investment objectives are to:
(1) provide regular cash distributions, a portion of which will be
"tax sheltered"; and
(2) provide realization of the long-term appreciation in the value
of the Properties, consistent in all cases with the
preservation of Partners' capital.
Burger King had the option to purchase any or all of the Properties at fair
market value, determined by an independent appraisal at any time during the
eighth through tenth years following the date of completion of the offering of
limited partnership interests in each Partnership. The offering of Interests
in BK-I, BK-II and BK-III occurred in 1982, 1983 and 1984, respectively.
Burger King did not exercise its option for any of the Properties and the
option has since expired. During late 1991 and early 1992, GP-I performed an
analysis of the various options available to BK-I regarding its Properties
which included marketing the Properties for sale, the continued ownership of
the Properties, or financing the portfolio and distributing the loan proceeds
to the partners. After a detailed analysis of each option, GP-I determined
that it would be in the best interest of the partners to market BK-I Properties
for sale. GP-I began the sale of BK-I's Properties in June 1992. Through
December 31, 1995, BK-I had sold 22 of the original 32 properties.
Upon expiration of Burger King's option, GP-II began marketing all of BK-II's
remaining Properties for sale. BK-II has agreed to sell 17 of the Properties
owned in fee simple and to assign all of its rights in 11 of the Properties
subject to ground leases to U.S. Restaurant Properties Operating L.P., a
Delaware limited partnership (the "Buyer"), pursuant to an Agreement of
Purchase and Sale, dated as of October 11, 1995, as amended as of January 9,
1996 (the "Purchase Agreement"). Pursuant to the terms of the Purchase
Agreement, the Buyer agreed to acquire the Properties for consideration in the
amount of $17,025,000 in cash (the "Purchase Price"), subject to adjustments
and prorations for base and percentage rents, as well as certain other charges
payable in respect of the Properties, and adjustments in respect of certain
closing costs. The Purchase Price is also subject to an increase of $200,000
to an aggregate of $17,225,000 if the Partnership elects to include a
restaurant located in Marietta, Georgia (the "Marietta Property") in the
Proposed Sale. GP-II is pursuing parties that may have an interest in
purchasing the Marietta Property for a price in excess of $200,000. If GP-II
is unable to locate a potential purchaser at an appropriate price, BK-II would,
in all likelihood, include the Marietta Property in the Proposed Sale. (see
Item 7)
GP-III is currently evaluating market conditions to determine when BK-III's
remaining 24 Properties should be marketed for sale. Reference is made to Item
2 captioned "Properties" for information concerning Property sales since each
Partnership's inception.
There can be no assurance that GP-I, GP-II or GP-III will be successful in
completing their respective Partnerships' marketing plans during 1996. As long
as Properties remain unsold, the Partnerships will continue to operate the
Properties and intend to make distributions to the partners in accordance with
the terms of the respective Partnership Agreements. Reference is made to Item
7 captioned "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the "Message to Investors" of the COPs 1995 Annual
Report to COPs Holders, regarding efforts to sell each Partnership's
Properties. The COPs 1995 Annual Report to COP Holders is filed as an exhibit
under Item 14 and incorporated herein by reference.
Employees
COPs has no employees.
Competition
Percentage rents received by the Partnership from leases with the franchisees
at the Properties are based on the food and beverage sales generated by the
Properties. Competition in the fast food industry has generally become more
intense as the number of chains competing for the consumer's business has
increased. For most chains, in 1996, the primary source of revenue growth is
projected to be the development of new restaurants or the acquisition of
existing restaurants. As a result, intense price competition and aggressive
marketing promotions have become essential ingredients in the effort to
increase sales from existing restaurants. Other factors which influence sales
include, but are not limited to, product quality, customer service, and the
diversity of menu offerings.
(b) Financial Information About Industry Segments
The Partnerships' businesses consist of only one segment, the investment in the
Properties. The General Partners do not engage in sales of goods or services.
(c) Narrative Description of Business
(1) See Paragraphs (a) and (b) above.
(i) through (xii)- Not Applicable.
(xi) through (xii)- Not Applicable.
(xiii) See Paragraph (a) above.
Item 2. Properties.
The following tables set forth the location of sites which the Partnerships
have acquired or ground leased as of December 31, 1995. The Partnerships own
the completed improvements in fee ownership and either have a fee ownership in
the land or a ground leasehold interest in the land as indicated. Also
included is the location of sites which the Partnerships have sold as of
December 31, 1995, the acquisition date, and the date of sale. Financial
information regarding sales includes book value, selling price and gain on the
sale.
In the event one of the Properties defaults on its rent obligations, Burger
King is required to pay to the respective Partnership the minimum rent due
under the Property's lease. If a Property remains in default for 12 months,
Burger King can either declare economic abandonment of the Property and
supervise its sale to a third party or purchase the Property from the
Partnership at a purchase price which is equal to the greater of the fair
market value of the Property or the minimum guaranteed price as set forth in
the management agreements between Burger King and the Partnerships.
BK-I Properties owned as of December 31, 1995
Atlanta, Georgia* Klamath Falls, Oregon*
Decatur, Alabama Springdale, Arkansas
Fairfield, Ohio Springfield, Massachusetts*
Greenfield, Wisconsin Statesville, North Carolina
Greenville, South Carolina Wichita, Kansas
* Subject to a ground lease.
BK-I Properties Sold as of December 31, 1995
Site Acquisition Sale Net Adjusted Gain
Location Date Date Book Value Selling Price on Sale
1. Altus, Oklahoma 11/10/82 12/30/91 $ 259,954 $ 290,164 $ 30,210
2. Grand Island,
Nebraska 05/07/82 10/01/92 218,064 686,000 467,936
3. Marion,
Virginia 11/24/82 10/01/92 119,207 229,900 110,693
4. Sunnyvale,
California 02/03/83 10/01/92 151,063 348,000 196,937
5. Greenbelt,
Maryland 10/12/82 11/23/92 127,217 478,500 351,283
6. Guilderland,
New York 05/20/82 12/23/92 440,742 853,000 412,258
7. Atlantic
Highlands,
New Jersey 04/08/83 03/04/93 129,381 158,002 28,621
8. Rohnert Park,
California 10/11/82 03/23/93 111,445 206,500 95,055
9. Dothan,
Alabama 11/11/82 03/26/93 298,067 725,000 426,933
10.Madison
Heights,
Virginia 02/23/83 07/01/94 274,271 369,218 94,947
11.Pearl,
Mississippi 06/29/82 08/01/94 257,672 427,108 169,436
12.Falmouth,
Massachusetts 09/24/82 08/01/9 289,187 568,353 279,166
13.Tucson,
Arizona 10/07/82 08/01/94 74,146 161,163 87,017
14.W. Springfield,
Massachusetts 10/18/82 08/01/94 104,977 151,391 46,414
15.Jackson,
Mississippi 02/06/85 08/01/94 332,299 503,149 170,850
16.Kansas City,
Missouri 01/10/83 12/02/94 290,626 536,691 246,065
17.Salem,
Massachusetts 09/23/82 12/09/94 335,664 590,264 254,600
18.Pasco,
Washington 06/01/82 12/15/94 271,444 618,487 347,043
19.West Allis,
Wisconsin 10/07/82 12/15/94 366,838 711,987 345,149
20.Washington,
North Carolina 08/20/82 03/08/95 180,837 619,944 439,107
21.Big Spring,
Texas 07/01/84 03/31/95 130,499 455,898 325,399
22.Carlsbad,
New Mexico 05/12/84 03/31/95 240,175 728,684 488,509
BK-II Properties owned as of December 31, 1995
Ceres, California Orange, California*
Columbus, Mississippi Pelham, Alabama
Corpus Christi, Texas Phoenix, Arizona
Erlanger, Kentucky* Plano, Texas*
Garland, Texas Redlands, California
Glendale, Arizona* Riverdale, Georgia
Greenville, Mississippi Rocky Mt., North Carolina
Greenville, North Carolina South Bend, Indiana
Hot Springs, Arkansas Springfield, Massachusetts*
Kansas City, Kansas* St. Peters, Missouri
Marietta, Georgia Statesboro, Georgia*
Marietta/Johnson, Georgia Tucson, Arizona*
Milan, Tennessee Vernon, Connecticut*
Mt. Clemens, Michigan* Wilmington, North Carolina*
Nederland, Texas
* Subject to a ground lease.
BK-II Properties Sold as of December 31, 1995
Site Acquisition Sale Net Adjusted Gain
Location Date Date Book Value Selling Price on Sale
1. Westminster,
Colorado 7/06/83 08/21/89 $401,261 $446,034 $ 44,773
2. Mt. Pleasant,
Wisconsin 3/11/83 10/31/90 293,113 754,394 461,281
3. Downey,
California 4/15/83 02/25/93 87,952 132,059 44,107
4. Ferguson,
Missouri 7/02/84 06/30/95 101,873 151,691 49,818
BK-III Properties owned as of December 31, 1995
Albuquerque, New Mexico* Gary, Indiana
Atlanta, Georgia Gallatin, Tennessee
Brooklyn Park, Maryland* Largo, Florida
Chattanooga, Tennessee Memphis, Tennessee
Cleburne, Texas Montgomery, Alabama*
Columbus, Indiana Mounds View, Minnesota
Covina, California Nashville, Tennessee
Delhi Township, Ohio* North Augusta, South Carolina
Edison, New Jersey San Bernardino, California*
Fayetteville, North Carolina* Shelbyville, Tennessee
Federal Heights, Colorado* Sulphur Springs, Texas
Frankfort, Kentucky Wilson, North Carolina
* Subject to a ground lease.
BK-III Properties Sold as of December 31, 1995
Site Acquisition Sale Net Adjusted Gain
Location Date Date Book Value Selling Price on Sale
1. Woodstock,
Georgia 7/19/84 4/12/91 $304,047 $380,059 $ 76,012
2. Kansas City,
Missouri 5/05/86 2/10/93 336,807 398,189 61,382
3. Waterford
Township,
Michigan 3/21/86 3/08/93 430,678 531,809 101,131
Item 3. Legal Proceedings.
There are no pending legal proceedings to which the Partnerships' are a party
or to which any of their assets are subject.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5. Market for the Registrant's Units and Related Security Holder Matters.
(a) Market Information
No public market for the COPs units (the "Units") presently
exists. Each Unit consists of one BK-I COPs, one BK-II COPs
and one BK-III COPs.
(b) Holders
The number of COPs Holders as of December 31, 1995 was 608.
(c) Distributions
The following table illustrates the per Unit quarterly cash
distributions paid to COPs Holders during the past two years.
Quarter Declared 1995 1994
First Quarter $ 11.70 (1) $ 6.72
Second Quarter 5.31 (2) 4.83
Third Quarter 5.46 10.41 (3)
Fourth Quarter 37.92 51.88 (4)
Total Cash
Distributions $ 60.39 $ 73.84
(1) Includes a $5.05 distribution of proceeds received from Property
sales paid on April 28, 1995.
(2) Includes a $0.39 distribution of proceeds received from a Property
sale paid on August 1, 1995.
(3) Includes a $5.49 distribution of proceeds received from Property
sales paid on October 28, 1994.
(4) Includes a $5.53 distribution of proceeds received from Property
sales paid on January 30, 1995.
Reference is also made to the "Message to Investors" of COPs
1995 Annual Report to COPs Holders, which is filed as an
exhibit under Item 14, for additional information concerning
cash distributions paid by the Partnership.
Item 6. Selected Financial Data.
The information set forth below should be read in conjunction with the
Partnership's Financial Statements and notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations," also
included elsewhere herein.
GP-I
1995 1994 1993 1992 1991
Equity in earnings
of BK-I $ 49,322 $ 89,234 $ 78,707 $105,527 $ 98,191
Net income 34,190 59,579 53,140 68,549 64,601
Net income attributable
to COPs Unitholders 27,352 47,663 42,512 54,839 51,681
Net income per Unit(1)(2) 8.87 15.45 13.78 17.78 16.76
Total Assets
at year end (62,210) (15,052) (11,408) 37,777 38,126
GP-II
1995 1994 1993 1992 1991
Equity in earnings
of BK-II $ 94,130 $ 97,210 $ 94,704 $ 89,576 $ 93,863
Net income 62,415 64,073 62,724 59,788 62,271
Net income attributable
to COPs Unitholders 49,932 51,258 50,179 47,830 49,817
Net income per Unit(1)(2) 16.19 16.62 16.27 15.51 16.15
Total Assets
at year end 23,371 28,304 21,033 25,596 23,507
GP-III
1995 1994 1993 1992 1991
Equity in earnings
of BK-III $ 80,307 $ 84,786 $ 83,386 $ 88,879 $ 91,823
Net income 54,119 56,858 56,002 59,362 61,163
Net income attributable
to COPs Unitholders 43,295 45,486 44,802 47,490 48,930
Net income per Unit(1)(2) 14.04 14.75 14.53 15.40 15.87
Total Assets
at year end (2,424) 2,945 211 14,915 10,595
(1) Net income per COPs Unit represents 80% of the net income of
GP-I, GP-II and GP-III, respectively, divided by the total number of
COPs' units outstanding.
(2) 3,084 COP Units outstanding.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources
The General Partners do not engage in the sale of goods or services. Their
only assets are the investments in the Partnerships.
The Partnerships' prospectuses specify that Burger King had the option to
purchase any or all of the restaurants at fair market value, determined by an
independent appraisal, at any time during the eighth through tenth years
following the date of completion of the offering of limited partnership
interests in each Partnership. The offering of interests in BK-I, BK-II and
BK-III occurred in 1982, 1983 and 1984, respectively. As of December 31, 1994,
Burger King's options to purchase the Properties had expired.
On September 23, 1994, BK-I notified the Wisconsin Department of Natural
Resources (the "WDNR") that petroleum and chlorinated compounds were discovered
at its Greenfield, Wisconsin Property (the "Greenfield Property"). The WDNR
has indicated that under Wisconsin state law, BK-I is responsible for
remediating the site. On May 26, 1995, BK-I proposed site-specific soil
clean-up standards ("Clean-up Standards") on the Greenfield Property for the
WDNR's approval. To date, BK-I has not received a response from the WDNR to
the proposal. Until the WDNR approves the Clean-up Standards and the costs of
the remediation can be assessed, it is extremely difficult to move forward with
the sale of BK-I's remaining 10 restaurant Properties. In accordance with
BK-I's Partnership Agreement, BK-I has set aside $300,000 from net cash flow
from operations to fund potential environmental remediation costs in connection
with the Greenfield Property. GP-I currently anticipates that the cost of the
environmental remediation should be recovered from the proceeds to be received
from the eventual sale of the Greenfield Property. Until all of BK-I's
Properties are sold, BK-I will continue to operate its Properties, and it is
intended that cash flow from operations will be distributed to the partners in
accordance with the terms of the BK-I Partnership Agreement.
BK-II has agreed to sell 17 of the Partnership's Properties owned in fee simple
and to assign all of its rights in 11 of the Partnership's Properties subject
to ground leases to the Buyer, pursuant to the Purchase Agreement. Pursuant to
the terms of the Purchase Agreement, the Buyer agreed to acquire the Properties
for the Purchase Price, subject to adjustments and prorations for base and
percentage rents as well as certain other charges payable in respect of the
Leased Properties and adjustments in respect of certain closing costs. The
Purchase Price is also subject to an increase of $200,000 to an aggregate of
$17,225,000 if the Partnership elects to include the Marietta Property in the
Proposed Sale. GP-II is pursuing parties that may have an interest in
purchasing the Marietta Property for a price in excess of $200,000. If GP-II
is unable to locate a potential purchaser at an appropriate price, BK-II would,
in all likelihood, include the Marietta Property in the Proposed Sale.
Pursuant to the BK-II Partnership Agreement, the unitholders of BK-II ("BK-II
Unitholders") have the right to vote (assuming certain conditions described in
the BK-II Partnership Agreement are met) only upon certain matters, and BK-II
Unitholders voting a majority in interest may, without the concurrence of
GP-II, cause, among other things, the disapproval of any sale of all or
substantially all of the assets of BK-II in a single sale. The Proposed Sale
would constitute a sale of all or substantially all of the BK-II's assets.
Accordingly, BK-II Unitholders have the right to disapprove the Proposed Sale.
A proxy statement was mailed to the BK-II Unitholders on March 25, 1996 (the
"Proxy") describing the terms of the Proposed Sale and presenting the BK-II
Unitholders with the opportunity to call a meeting to consider whether to
disapprove of the Proposed Sale. In order to effect a vote to disapprove the
Proposed Sale, BK-II Unitholders holding 10% or more in interest of the
outstanding limited partnership units of BK-II (the "BK-II Units") must submit
written requests for a meeting of BK-II Unitholders pursuant to the BK-II
Partnership Agreement. While GP-II may call a meeting of the BK-II Unitholders
for any purpose, GP-II believes that the Proposed Sale is in the best interest
of the BK-II Unitholders and has, therefore, determined not to call a meeting
for the purpose of considering the disapproval of the Proposed Sale. However,
if BK-II receives written requests from BK-II Unitholders holding 10% or more
in interest of the BK-II Units on or before April 30, 1996, GP-II will be
required to call a meeting of the BK-II Unitholders to consider the disapproval
of the Proposed Sale. If a meeting of the BK-II Unitholders is called, and the
Proposed Sale is disapproved by a majority in interest of the BK-II
Unitholders, the Purchase Agreement will be terminated pursuant to its terms,
and BK-II will continue to operate the Properties and distribute the cash flow
from operations to the partners of BK-II in accordance with the BK-II
Partnership Agreement. If, however, a meeting of BK-II Unitholders is called,
and BK-II Unitholders holding less than a majority in interest vote to
disapprove the Proposed Sale, the Proposed Sale will be consummated pursuant to
the terms and subject to the conditions set forth in the Purchase Agreement.
BK-III is currently analyzing market conditions to determine when BK-III's
remaining Properties should be marketed for sale. Until BK-III's remaining
Properties are sold, BK-III intends to continue operating the Properties and
distributing cash flow from operations to the partners of BK-III in accordance
with the terms of the BK-III Partnership Agreement.
At December 31, 1995, GP-I's investment in BK-I was $(62,210) and GP-III's
investment in BK-III was $(2,424), reflecting distributions in excess of equity
in earnings plus the initial investments. GP-II's investment in BK-II was
$23,371 at December 31, 1995, compared to $28,304 at December 31, 1994. The
decrease in GP-II's investment in BK-II was a result of cash distributions in
excess of the allocation of equity in earnings during 1995.
Results of Operations
The results of operations for the 1995, 1994, and 1993 fiscal years are
primarily attributable to the investments in BK-I, BK-II and BK-III.
For the years ended December 31, 1995, 1994 and 1993, GP-I's net income was
$34,190, $59,579 and $53,140, respectively. For the years ended December 31,
1995, 1994 and 1993, GP-II's net income was $62,415, $64,073 and $62,724,
respectively. For the years ended December 31, 1995, 1994 and 1993, GP-III's
net income was $54,119, $56,858 and $56,002, respectively. The net income
fluctuated each year primarily as a result of the sales of Properties, reduced
levels of depreciation expense, reduced rental income as a result of the sale
of Properties, and increases and decreases in percentage rents received from
the franchisees operating each of the Properties. During 1995, BK-I sold three
Properties, realizing a total gain of $1,253,015. During 1995, BK-II sold one
Property, realizing a total gain of $49,818. BK-III did not sell any
Properties during 1995. During 1994, BK-I sold 10 Properties, realizing a
total gain of $2,040,687. BK-II and BK-III did not sell any properties during
19 94. During 1993, BK-I sold three Properties realizing a total gain of
$550,609; BK-II sold one Property realizing a total gain of $44,107; and BK-III
sold two Properties realizing a total gain of $162,513.
Item 8. Financial Statements and Supplementary Data.
Incorporated by reference to COPs 1995 Annual Report to COPs Holders, included
as an exhibit under Item 14.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None
PART III
Item 10. Directors and Executive Officers of the Registrant.
On July 31, 1993, Shearson sold certain of its domestic retail brokerage and
asset management businesses to Smith Barney, Harris Upham & Co. Incorporated
("Smith Barney"). Subsequent to this sale, Shearson changed its name to Lehman
Brothers Inc. The transaction did not affect the ownership of the Partnerships
or the General Partners. However, the assets acquired by Smith Barney included
the name "Shearson." Consequently, effective January 24, 1994, Shearson/BK
Realty, Inc., Shearson/BK Properties, Inc. and Shearson/BK Restaurants, Inc.
changed their names to delete any reference to "Shearson."
COPs has no officers or directors. The General Partners of the Partnerships
manage and control the affairs of the Partnerships and have general
responsibility and authority in all matters affecting its business. Certain
officers and the director of the General Partners are now serving (or in the
past have served) as officers or directors of entities which act as general
partners of a number of real estate limited partnerships which have sought
protection under the provisions of the Federal Bankruptcy Code. The
partnerships which have filed bankruptcy petitions own real estate which has
been adversely affected by the economic conditions in the market in which that
real estate is located and, consequently, the partnerships sought the
protection of the bankruptcy laws to protect the partnerships' assets from loss
through foreclosure.
The director and executive officers of the General Partners as of December 31,
1995, are set forth below. There are no family relationships between or among
any officer and any other officer or director.
Name Age Office
Rocco F. Andriola 37 Director, President and Chief Financial
Officer
Kenneth Boyle 32 Vice President
Mark J. Marcucci 33 Vice President
Timothy E. Needham 27 Vice President
The foregoing director has been elected to serve as director until the next
annual meeting of the General Partners.
Rocco F. Andriola is a Senior Vice President of Lehman in its Diversified Asset
Group. Since joining Lehman in 1986, Mr. Andriola has been involved in a wide
range of restructuring and asset management activities involving real estate
and other direct investment transactions. From 1986-89, Mr. Andriola served as
a Vice President in the Corporate Transactions Group of Shearson Lehman
Brothers' office of the general counsel. Prior to joining Lehman, Mr. Andriola
practiced corporate and securities law at Donovan Leisure Newton & Irvine in
New York. Mr. Andriola received a B.A. degree from Fordham University, a J.D.
degree from New York University School of Law, and an LL.M degree in Corporate
Law from New York University's Graduate School of Law.
Kenneth Boyle is a Vice President of Lehman in its Diversified Asset Group.
Mr. Boyle joined Lehman in January 1991. Mr. Boyle is a Certified Public
Accountant and was employed by the accounting firm of KPMG Peat Marwick LLP
from 1985 to 1990. Mr. Boyle graduated from the State University of New York
at Binghamton with a B.S. degree in Accounting.
Mark J. Marcucci is a Vice President of Lehman Brothers in its Diversified
Asset Group. Since joining Lehman Brothers in 1988, Mr. Marcucci's
responsibilities have been concentrated in the restructuring, asset management,
leasing, financing, refinancing and disposition of commercial office and
residential real estate. Prior to joining Lehman Brothers, Mr. Marcucci was
employed in a corporate lending capacity at Republic National Bank of New York.
Mr. Marcucci received a B.B.A. degree in Finance from Hofstra University and a
Master of Science in Real Estate degree from New York University. In addition,
Mr. Marcucci holds both Series 7 and Series 63 securities licenses.
Timothy E. Needham is an Associate of Lehman Brothers and assists in the
management of commercial real estate in the Diversified Asset Group. Mr.
Needham joined Lehman Brothers in September 1995. Prior to joining Lehman
Brothers, Mr. Needham was a consultant with KPMG Peat Marwick LLP in the
Banking and Investment Services Group from 1994-1995. Mr. Needham received his
M.B.A. from the American Graduate School of International Management in
December 1993. Previous to entering graduate school, Mr. Needham worked in
Tokyo for approximately one year doing market research for a Japanese firm. In
addition, Mr. Needham is a candidate for the designation of Chartered Financial
Analyst.
Item 11. Executive Compensation.
Officers and the director of the General Partners are employees of Lehman
Brothers and are not compensated by the Partnerships or the General Partners
for services rendered in connection with the Partnerships.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
(a) Security ownership of certain beneficial owners
The Registrant knows of no person who beneficially owns more
than 5% of the Units.
(b) Security ownership of management
GP-I, GP-II, and GP-III, under the terms of the Partnership
Agreements of BK-I, BK-II and BK-III, respectively, manage the
affairs of BK-I, BK-II, and BK-III, respectively. The General
Partners retained 20% of their allocations of distribution and
disposition proceeds (profit, loss) from BK-I, BK-II, and
BK-III. Neither the director nor the officers of the General
Partners own any Units.
(c) Changes in control
None.
Item 13. Certain Relationships and Related Transactions.
(a) Transactions with Management and Others
Reference is made to Note 6 of the Notes to Financial
Statements for each General Partner as part of COPs 1995 Annual
Report to COPs Holders, filed as an exhibit under Item 14.
(b) Certain Business Relationships
There have been no business transactions between the director
and officers of the General Partners and the Partnerships.
(c) Indebtedness of Management
No management person is indebted in any amount to the
Partnerships.
(d) Transactions with Promoters
There have been no transactions with promoters.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) (1) Financial Statements and Supplementary Data:
GP-I:
Independent Auditors' Report
Financial Statements:
Balance Sheets at December 31, 1995 and 1994
Statements of Operations for the years ended December 31, 1995, 1994 and 1993
Statements of Changes in Stockholder's Deficit for the years
ended December 31, 1995, 1994 and 1993
Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993
Notes to Financial Statements
GP-II:
Independent Auditors' Report
Financial Statements:
Balance Sheets at December 31, 1995 and 1994
Statements of Operations for the years ended December 31, 1995, 1994 and 1993
Statements of Changes in Stockholder's Deficit for the years
ended December 31, 1995, 1994 and 1993
Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993
Notes to Financial Statements
GP-III:
Independent Auditors' Report
Financial Statements:
Balance Sheets at December 31, 1995 and 1994
Statements of Operations for the years ended December 31, 1995, 1994 and 1993
Statements of Changes in Stockholder's Deficit for the years
ended December 31, 1995, 1994 and 1993
Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993
Notes to Financial Statements
The financial statements for GP-I, GP-II and GP-III are incorporated by
reference to COPs' Annual Report to COPs Holders for the year ended December
31, 1995.
(2) Financial Statement Schedules:
No other schedules are presented because the information is not
applicable or is included in the financial statements or notes
thereto.
(3) Exhibits:
3.1 BK-I:
Independent Auditors' Report
Financial Statements:
Balance Sheets at December 31, 1995 and 1994
Statements of Operations for the years ended December 31, 1995, 1994 and 1993
Statements of Partners' Capital (Deficit) for the years
ended December 31, 1995, 1994 and 1993
Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993
Notes to Financial Statements
3.2 BK-II:
Independent Auditors' Report
Financial Statements:
Balance Sheets at December 31, 1995 and 1994
Statements of Operations for the years ended December 31, 1995, 1994 and 1993
Statements of Partners' Capital (Deficit) for the years
ended December 31, 1995, 1994 and 1993
Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993
Notes to Financial Statements
3.3 BK-III:
Independent Auditors' Report
Financial Statements:
Balance Sheets at December 31, 1995 and 1994
Statements of Operations for the years ended December 31, 1995, 1994 and 1993
Statements of Partners' Capital (Deficit) for the years
ended December 31, 1995, 1994 and 1993
Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993
Notes to Financial Statements
13.1 Annual Report to COPs Holders for the year ended December
31, 1995.
27.1 Financial Data Schedule for BK I Realty Inc.
27.2 Financial Data Schedule for BK II Properties Inc.
27.3 Financial Data Schedule for BK III Restaurants Inc.
(b) Reports on Form 8-K:
(1) There have been no reports filed on Form 8-K during the
last quarter of the period covered by this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated: March 29, 1996
CERTIFICATES OF PARTICIPATION
BK I REALTY, INC.
BK II PROPERTIES, INC.
BK III RESTAURANTS, INC.
BY: BK I Realty, Inc.
BK II Properties, Inc.
BK III Restaurants, Inc.
Registrant
BY: /s/Rocco F. Andriola
Name: Rocco F. Andriola
Title: Director, President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
BK I REALTY, INC.
BK II PROPERTIES, INC.
BK III RESTAURANTS, INC.
Registrant
Date: March 29, 1996
BY: /s/Rocco F. Andriola
Rocco F. Andriola
Director, President and
Chief Financial Officer
Date: March 29, 1996
BY: /s/Kenneth Boyle
Kenneth Boyle
Vice President
Date: March 29, 1996
BY: /s/Mark J. Marcucci
Mark J. Marcucci
Vice President
Date: March 29, 1996
BY: /s/Timothy Needham
Timothy Needham
Vice President