1
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) June 21, 1996
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. III
(Exact name of registrant as specified in its charter)
DELAWARE 33-77510C 38-3160141
- --------------------------------------------------------------------- ---------------------------------
(State or other jurisdiction of incorporation)(Commission File No.) (IRS Employer Identification No.)
24 FRANK LLOYD WRIGHT DR. , P.O. BOX 544, ANN ARBOR, MI 48106
- --------------------------------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (313) 994-5505 (800) 522-7832
- --------------------------------------------------------------------------------------------------------
Not Applicable
- --------------------------------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
This document contains 4 pages. There are no exhibits attached hereto.
2
Item 5. Acquisition of Assets
Capitalized terms not otherwise defined herein shall have the same meaning
as in the prospectus of Captec Franchise Capital Partners L.P. III (the
"Partnership") dated August 12, 1994, as supplemented to date (the
"Prospectus").
On June 6, 1996, the Partnership acquired the land and 3,333 square foot
building comprising a Boston Market restaurant located at 1729 North Olden
Ave., Ewing Twp., New Jersey (the "New Jersey Property"). The New Jersey
Property was constructed for its present use in May of 1996 and was fully
operational at the time of the purchase. The New Jersey Property was purchased
from BC Real Estate Investments, Inc., and leased back to New Jersey Rose,
L.L.C., a New Jersey limited liability company (the "Tenant"). The Tenant
operates casual dining restaurants under the primary trade name of Boston
Market. The headquarters offices of the Tenant are located at 3 Terry Drive,
Suite 103, Newton, Pennsylvania. The Partnership purchased a fee simple
interest in the New Jersey Property for a purchase price of $1,143,000 which
was negotiated by an affiliate of the Managing General Partner who considered
factors such as the potential value of the site, the financial condition and
business and operating history of the Tenant and demographic data for the area
in which the New Jersey Property is located. The purchase price for the New
Jersey Property is supported by an independent MAI appraisal. The Partnership
purchased the New Jersey Property with cash from offering proceeds. It is
anticipated that the New Jersey Property will be leveraged as provided for in
the Prospectus, however, the Partnership presently does not have a financing
commitment.
The Tenant and the Partnership have entered into a lease (the "Lease"),
which is an absolute net lease, whereby the Tenant is responsible for all
expenses related to the New Jersey Property including real estate taxes,
insurance, maintenance and repair costs. The Lease term expires on July 1,
2011 with five renewal options of five years each. The initial annual rent is
equal to ten and one-half percent (10.5%) of the purchase price and will be
payable in monthly installments on the first day of each month. Thus, based on
the purchase price of $1,143,000 the rent in the first year of the Lease is
$120,015 per year, or $10,001.25 per month. The Annual Rent shall be
increased beginning on the sixth lease year to $132,017; beginning on the
eleventh lease year to $142,275 and at the end of every five years thereafter
by ten percent of the Annual Rent payable during the lease year immediately
preceding. Beginning in the sixth year, and in addition to the Annual Rent
provided above, the Tenant shall pay Percentage Rent on an annual basis equal
to the difference between five percent of "gross sales" (as defined in the
lease) for such lease year minus the Annual Rent payable for such lease year.
The Tenant has an option to purchase and first right of refusal to
purchase the New Jersey Property. The Tenant shall have the right to purchase
the New Jersey Property on the same terms and conditions as set forth in the
offer or the Tenant may elect an alternate purchase price as follows: (a)
during the first and second lease year the purchase price shall be an amount
equal to the total rent payable for the lease year subsequent to the lease year
in which the option is exercised divided by 9.462%; (b) during the third
lease year in an amount equal to the Annual Rent for lease year 3 divided by
9.978%; (c) during the fourth lease year in an amount equal to the Annual
Rent for lease year four divided by 9.785% and in lease year five in an amount
equal to the Annual Rent for lease year five divided by 9.580%.
Tenant shall have the option to purchase the New Jersey Property any time after
the fifth year for the following option price: (a) if the Tenant exercises its
option to purchase during the sixth through eighth lease year, the option price
shall be equal to the total rent payable for the lease year subsequent to the
2
3
lease year in which the option is exercised, divided by ten percent.; (b) if
the Tenant exercises its option to purchase after the eighth lease year, the
option purchase price shall be the greater of the fair market value of the New
Jersey Property or an amount equal to the total rent payable for the lease year
subsequent to the lease year in which the option is exercised, divided by ten
percent.
An Affiliate of the Managing General Partner analyzed demographic,
geographic and market diversification data for the area in which the New Jersey
Property is located and reviewed the appraisal of the New Jersey Property and
the analysis regarding comparable properties contained therein. Based upon the
foregoing, the General Partners are unaware of any unfavorable competitive
conditions regarding the New Jersey Property. The General Partners believe
that the amount of insurance carried by the Tenant is adequate.
The current annual rent per square foot for the New Jersey Property is
$36.00. The depreciable basis of the New Jersey Property for federal tax
purposes is $763,000 and it will be depreciated using the straight line method
over 39 years, a rate of $19,564 per year. The 1996 tax rate of the township in
which the New Jersey Property is located is $2.63 per $100 of assessed value.
The realty taxes for the first six months of 1996 on the New Jersey Property
were $8,099 but the current assessed value is for the land only. It is
anticipated that there will be a new assessment to reflect the improvements to
the land (i.e., the restaurant facility).
An affiliate of the Managing General Partner has received an Acquisition
Fee from the Partnership in an amount equal to $45,720 and expects to receive
an additional fee of $11,430 from the Partnership after leveraging the
Property, as provided for in the Prospectus. These fees are being paid for
services rendered in connection with the selection, evaluation and acquisition
of the New Jersey Property, as provided for in the Partnership Agreement. In
addition, the Tenant has paid to the same affiliate a commitment fee equal to
$11,430 as provided for in the Partnership Agreement. The Tenant also paid all
of the expenses incident to the closing of the transaction contemplated by this
commitment including, without limitation, title insurance premiums, recording
fees and expenses and transfer taxes.
The Lease contains a substitution option that in the event that the Tenant
determines that the New Jersey Property is inadequate or unprofitable or is
rendered unsuitable by condemnation or casualty, the Tenant may substitute
another property having a Boston Market restaurant located thereon, of equal or
greater current value. The substitute property shall be subject to the
approval of the Partnership.
The Lease contains material default provisions that include, but are not
limited to: (i) the vacating or abandonment of the New Jersey Property by the
Tenant; (ii) the failure by the Tenant to make any payment due under the Lease;
(iii) the failure by the Tenant to observe or perform any of the covenants,
conditions, or provisions of the Lease; and (iv) the making by the Tenant of
any general arrangement or general assignment for the benefit of creditors. In
the event of a material default by the Tenant, the Lease contains remedy
provisions which are summarized as follows: (i) the Partnership may terminate
the Lease and take possession of the New Jersey Property, in which case the
Partnership would be entitled to damages incurred by reason of the material
default; (ii) the Partnership may maintain the Tenant's right to possession of
the New Jersey Property, in which case the Lease would continue to be in
effect; or (iii) the Partnership may pursue any other legal remedy available.
3
4
SIGNATURES
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.
By: Captec Franchise Capital Corporation III
Managing General Partner of
Captec Franchise Capital Partners L.P. III
By: /s/W. Ross Martin
-----------------------------------
W. Ross Martin
Chief Financial Officer and Vice President,
a duly authorized officer
Date: June 24, 1996
4