U.S. Restaurant Properties, Inc. 2nd Quarter Results

Business Wire, July 25, 2002

Business Editors

DALLAS--(BUSINESS WIRE)--July 25, 2002

U.S. Restaurant Properties, Inc. (NYSE:USV) today reported second quarter FFO (funds from operations) of $7.5 million or $.38 cents per diluted share. FFO was $6.8 million or $.34 per diluted share in the first quarter of 2002. Cash available for distribution provided nearly $1.0 million in excess of the $.33 of common stock dividends for the quarter.

Net income allocable to common stockholders for the quarter was $382,000 or $.02 per diluted share on Real Estate revenues of $17.7 million. Retail Operations contributed $908,000 of income. Approximately 65% of retail operations income represents the amount of additional income that the Company would have otherwise realized as rental and/or interest income if these properties had been operated by third parties. The activities from the retail operations are segregated under the heading Retail Operations. USRP will continue to maintain the capability to transition the operation of any of its properties from one tenant to another. Profits from such activities reside in a taxable REIT subsidiary. During the second quarter of 2002, the Company's Hawaii properties previously classified as held for sale were reclassified to operating assets resulting in a one-time depreciation charge of approximately $690,000.

Included in FFO was non-recurring income of approximately $660,000 related to the settlement of a terminated asset sale contract, partially offset by an approximate $265,000 increase in litigation reserves and approximately $125,000 of general and administrative expenses related to tenant workouts and other non-recurring costs. G & A expense, including the previously mentioned items, increased to $2.0 million in the second quarter compared to $1.9 million in the first quarter. Interest expense for the second quarter was $4.3 million, virtually unchanged compared to the first quarter. Derivative settlement payments declined by $26,000 in the second quarter to $958,000 compared to the first quarter. Primarily as a result of recently initiated interest rate swap arrangements, derivative settlement payments are expected to decrease further by approximately $250,000 during the third quarter.

During the quarter, the Company completed a new $35 million credit facility with Bank Of America, N. A., replacing an existing $7 million credit facility. At June 30, 2002, total debt was $331.8 million and unrestricted cash and cash equivalents were $11.8 million. Presently, the Company's net debt of approximately $320 million compares favorably to the Company's equity market capitalization, including both the publicly traded preferred stock and privately owned preferred interests, which represents a debt to market capitalization rate of approximately 46%. Other than for approximately $8.1 million of debt amortization related to the $180 million Triple Net Lease Mortgage Certificate financing completed in August 2001, the Company does not have any material debt maturities in 2002.

"Our second quarter results are a further indication of the substantial progress the Company has made since addressing a number of difficult situations last year. Solid FFO results for the second quarter and first half of 2002 coupled with a new and expanded $35 million credit facility position the Company to take advantage of the many sale-leaseback opportunities that currently exist. To that end, I am pleased to announce that we expect to complete the first tranche of a $25.0 million sale-leaseback with Shoney's, Inc. before the end of this month. The weighted average initial "cap" rate will be approximately 11%," stated Mr. Robert Stetson, Chief Executive Officer. "Prior to the end of the year we expect to complete at least $50.0 million of sale-leaseback transactions with Shoney's and Captain D's. These sale-leaseback transactions plus momentum in the base business bodes well for sequential improvement in FFO in the second half of 2002," added Mr. Stetson.

U.S. Restaurant Properties, Inc. is a non-taxed financial services and real estate company dedicated to acquiring, managing and financing branded chain restaurants such as Burger King(R), Arby's(R), Chili's(R) and Pizza Hut(R) and selected service retail properties. The company currently owns 793 properties located in 48 states.

Certain statements in this release constitute "forward-looking statements" and involve risks, uncertainties and other factors which may cause the actual performance of U.S. Restaurant Properties, Inc. to be materially different from the performance expressed or implied by such statements. These risks include interest rates and other general economic conditions, income fluctuations in U.S. households and the general health of the fast food, casual dining, and service station industries, as well as the risks and uncertainties detailed in the Company's periodic reports and registration statements filed with the Securities and Exchange Commission.