<PAGE>   1
================================================================================


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

[X]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                  For the quarterly period ended March 31, 2001

                                       OR

[ ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

      For the transition period from                 to
                                     ---------------    ------------------



                         Commission file number 1-13089




                        U.S. Restaurant Properties, Inc.
             (Exact name of registrant as specified in its charter)

                    Maryland                                     75-2687420
  (State or other jurisdiction of incorporation               (I.R.S. Employer
                or organization)                            Identification No.)


                12240 Inwood Rd., Suite 300, Dallas, Texas 75244
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (972) 387-1487
              (Registrant's telephone number, including area code)



         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 such 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
                                    ---     ---

As of May 11, 2001, U.S. Restaurant Properties, Inc. had 17,886,156 shares of
common stock $.001 par value outstanding.


================================================================================

<PAGE>   2

                        U.S. RESTAURANT PROPERTIES, INC.



<TABLE>
<CAPTION>
PART I.           FINANCIAL INFORMATION


<S>                                                                                            <C>
         Item 1.  Financial Statements

                  Condensed Consolidated Balance Sheets as of March 31, 2001 (Unaudited)
                           and December 31, 2000................................................3

                  Condensed Consolidated Statements of Operations for the three
                           months ended March 31, 2001 and 2000 (Unaudited).....................5

                  Condensed Consolidated Statements of Other Comprehensive
                           Operations for the three months ended March 31, 2001
                           and 2000 (Unaudited).................................................6

                  Condensed Consolidated Statement of Stockholders' Equity for the
                           three months ended March 31, 2001 (Unaudited)........................7

                  Condensed Consolidated Statements of Cash Flows for the three
                           months ended March 31, 2001 and 2000 (Unaudited).....................8

                  Notes to Condensed Consolidated Financial Statements (Unaudited).............10

         Item 2.  Management's Discussion and Analysis of Financial Condition
                           and Results of Operations...........................................16

         Item 3.  Quantitative and Qualitative Disclosures About Market Risk...................20


PART II. OTHER INFORMATION

         Item 1.  Legal Proceedings............................................................21

         Item 2.  Changes in Securities and Use of Proceeds....................................21

         Item 3.  Defaults upon Senior Securities..............................................21

         Item 4.  Submission of Matters to a Vote of Security Holders..........................21

         Item 5.  Other Information............................................................21

         Item 6.  Exhibits and Reports on Form 8-K.............................................21
</TABLE>


                                       2
<PAGE>   3

                          PART I. FINANCIAL INFORMATION

Item 1.   Financial Statements

                        U.S. RESTAURANT PROPERTIES, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


<TABLE>
<CAPTION>
                                                                           MARCH 31,   DECEMBER 31,
                                                                           ---------   ------------
                                                                             2001         2000
                                                                           ---------    ---------
                                                                          (UNAUDITED)
<S>                                                                        <C>          <C>
                                       ASSETS
Property, net
             Land                                                          $ 186,799    $ 203,164
             Building and leasehold improvements                             375,591      397,080
             Machinery and equipment                                          10,940       13,602
                                                                           ---------    ---------
                                                                             573,330      613,846
             Less:  accumulated depreciation                                 (70,476)     (68,166)
                                                                           ---------    ---------
                                                                             502,854      545,680

Assets held for sale                                                          22,071           --
Construction in progress                                                       6,067        8,535
Cash and cash equivalents                                                     14,525        5,509
Restricted cash and marketable securities                                         74          742
Rent and other receivables, net
             (includes $4,934 and $4,349 allowance for doubtful accounts
             at March 31, 2001 and December 31, 2000, respectively)           12,673       14,575
Prepaid expenses and other assets                                              3,049        3,001
Investments                                                                    2,823        2,791
Notes receivable, net
             (includes $596 and $2,167 due from related parties
             and $5,115 and $4,565 allowance for doubtful accounts
             at March 31, 2001 and December 31, 2000, respectively)            9,852       11,837
Mortgage loans receivable                                                     21,067       22,620
Net investment in direct financing leases                                      2,227        2,754
Intangibles, net                                                               8,947        6,979
                                                                           ---------    ---------
     TOTAL ASSETS                                                          $ 606,229    $ 625,023
                                                                           =========    =========
</TABLE>


                             continued on next page

            See Notes to Condensed Consolidated Financial Statements.


                                       3
<PAGE>   4

                        U.S. RESTAURANT PROPERTIES, INC.
                CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                               MARCH 31,   DECEMBER 31,
                                                                               ---------   ------------
                                                                                  2001        2000
                                                                               ---------    ---------
                                                                              (UNAUDITED)
<S>                                                                            <C>         <C>
                        LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable and accrued liabilities                                       $  15,535    $  18,057
Accrued dividends and distributions                                                3,723        3,706
Unearned contingent rent                                                           1,050        1,083
Deferred gain on sale of property                                                    474          423
Line of credit                                                                        --      119,036
Interest rate swap agreement at fair value                                         2,427           --
Notes payable
             (includes $959 due to related parties at December 31, 2000)         360,720      236,637
Mortgage note payable                                                              1,000        1,007
Capitalized lease obligation                                                          16           16
                                                                               ---------    ---------
   TOTAL LIABILITIES                                                             384,945      379,965

COMMITMENTS AND CONTINGENCIES

MINORITY INTEREST                                                                 54,523       54,733

STOCKHOLDERS' EQUITY

Preferred stock, $.001 par value per share; 50,000 shares authorized, Series
             A - 3,680 shares issued and outstanding at March 31, 2001 and
             December 31, 2000 (aggregate liquidation value of $92,000)                4            4
Common stock, $.001 par value per share; 100,000 shares authorized, 17,886
             and 17,417 shares issued and outstanding at March 31, 2001 and
             December 31, 2000, respectively                                          18           17
Additional paid-in capital                                                       307,471      302,634
Excess stock, $.001 par value per share
             15,000 shares authorized, no shares issued                               --           --
Accumulated other comprehensive loss                                              (2,690)      (1,840)
Loans to shareholders for common stock                                              (300)        (300)
Distributions in excess of net income                                           (137,742)    (110,190)
                                                                               ---------    ---------
    TOTAL STOCKHOLDERS' EQUITY                                                   166,761      190,325
                                                                               ---------    ---------
    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                 $ 606,229    $ 625,023
                                                                               =========    =========
</TABLE>


            See Notes to Condensed Consolidated Financial Statements.


                                       4
<PAGE>   5

                        U.S. RESTAURANT PROPERTIES, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED
                                                              MARCH 31,
                                                          2001        2000
                                                        --------    --------
<S>                                                     <C>         <C>
Revenues:
         Rental income                                  $ 17,332    $ 18,071
         Interest income                                   1,346       1,418
         Amortization of unearned income
             on direct financing leases                       95         183
                                                        --------    --------
               Total revenues                             18,773      19,672
Expenses:
         Rent                                                154         262
         Depreciation and amortization                     6,030       6,324
         General and administrative                        3,359       2,454
         Provision for doubtful accounts                   1,148         750
         Loss on lease resolution                             --       1,367
         Interest expense                                  9,104       7,698
         Termination of management contract                   --      (1,031)
         Impairment of long-lived assets                  15,929          --
         Loss on interest rate swap agreement              1,690          --
                                                        --------    --------

               Total expenses                             37,414      17,824
                                                        --------    --------
Income (loss) before gain (loss) on sale of property,
         minority interests and extraordinary item       (18,641)      1,848
                                                        --------    --------

Gain (loss) on sale of property                               66        (340)
                                                        --------    --------

Income (loss) before minority interests
         and extraordinary item                          (18,575)      1,508
Minority interests                                        (1,004)     (1,099)
                                                        --------    --------
Net income (loss) before extraordinary item              (19,579)        409
Loss on early extinguishment of debt                        (340)         --
                                                        --------    --------
Net income (loss)                                        (19,919)        409
Dividends on preferred stock                              (1,776)     (1,776)
                                                        --------    --------
Net loss allocable to
         common stockholders                            $(21,695)   $ (1,367)
                                                        ========    ========

Basic and diluted net loss per share:
         Loss from continuing operations                $  (1.22)   $  (0.09)
         Extraordinary loss                                (0.02)         --
                                                        --------    --------
Net loss per share                                      $  (1.24)   $  (0.09)
                                                        ========    ========

Weighted average shares outstanding
         Basic and diluted                                17,532      15,388
</TABLE>


            See Notes to Condensed Consolidated Financial Statements.


                                       5
<PAGE>   6

                        U.S. RESTAURANT PROPERTIES, INC.
       CONDENSED CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE OPERATIONS
                                 (IN THOUSANDS)
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                         THREE MONTHS ENDED MARCH 31,
                                              2001        2000
                                            --------    --------
<S>                                         <C>         <C>
Net income (loss)                           $(19,919)   $    409
Cumulative effect of change in accounting
   for derivative instrument                  (1,474)         --

Reclassification adjustment related to
derivative instrument                            737          --

Other comprehensive loss -
   unrealized loss on bond investments          (113)       (188)
                                            --------    --------
Comprehensive income (loss)                 $(20,769)   $    221
                                            ========    ========
</TABLE>


                      See Notes to Condensed Consolidated Financial Statements.


                                       6
<PAGE>   7

                        U.S. RESTAURANT PROPERTIES, INC.
            CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                    FOR THE THREE MONTHS ENDED MARCH 31, 2001
                                 (IN THOUSANDS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                            ACCUMULATED
                                                                   ADDITIONAL    LOANS      DISTRIBUTIONS     OTHER
                                  PREFERRED STOCK   COMMON STOCK    PAID-IN       TO        IN EXCESS OF   COMPREHENSIVE
                                 SHARES PAR VALUE SHARES PAR VALUE  CAPITAL   SHAREHOLDERS    NET INCOME       LOSS        TOTAL
                                 ------ --------- ------ --------- ---------- ------------  -------------  -------------  --------
<S>                              <C>     <C>       <C>     <C>        <C>     <C>           <C>            <C>              <C>
Balance at January 1, 2001        3,680 $      4  17,417 $      17 $  302,634 $       (300) $    (110,190) $      (1,840) $190,325
Net loss                                                                                          (19,919)                 (19,919)
Cumulative effect of change
   in accounting for
   derivative instrument                                                                                          (1,474)   (1,474)
Proceeds from sale
   of common stock                                   469         1      4,837                                                4,838
Other comprehensive loss -
   unrealized loss on
   bond investments                                                                                                 (113)     (113)
Reclassification adjustment
   related to derivative
   instrument                                                                                                        737       737
Distributions on common stock
   and distributions declared                                                                      (5,857)                  (5,857)
Distributions on preferred stock                                                                   (1,776)                  (1,776)
                                 ------ --------- ------ --------- ---------- ------------  -------------  -------------  --------
Balance at March 31, 2001         3,680 $       4 17,886 $      18 $  307,471 $       (300) $    (137,742) $      (2,690) $166,761
                                 ====== ========= ====== ========= ========== ============  =============  =============  ========
</TABLE>


            See Notes to Condensed Consolidated Financial Statements.


                                       7

<PAGE>   8
                        U.S. RESTAURANT PROPERTIES, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                            THREE MONTHS ENDED MARCH 31,
                                                            ---------------------------
                                                                 2001        2000
                                                               --------    --------
<S>                                                            <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)                                              $(19,919)   $    409
Adjustments to reconcile net income (loss) to
         net cash from operating activities:
      Depreciation and amortization                               6,030       6,324
      Extraordinary loss on extinguishment of debt                  340          --
      Amortization of deferred financing costs                    2,032         349
      Impairment of long-lived assets                            15,929          --
      Write-off and increase in reserves on receivables           1,148         750
      Accretion of interest income                                 (168)       (137)
      Loss on interest rate swap agreement                        1,690          --
      Minority interests                                          1,004       1,099
      Loss (gain) on sale of property                               (66)        340
      Loss on sale of investments                                    --         816
      Termination of management contract                             --      (1,031)
      Decrease (increase) in rent and other receivables, net      1,065      (1,329)
      Decrease (increase) in prepaid expenses                       (48)         73
      Reduction in net investment in direct financing leases        224         380
      Decrease in accounts payable and accrued liabilities       (1,824)     (1,137)
      Decrease in unearned contingent rent                          (33)       (441)
                                                               --------    --------
                                                                 27,323       6,056
                                                               --------    --------
            Cash provided by operating activities                 7,404       6,465

CASH FLOWS FROM INVESTING ACTIVITIES:

      Proceeds from sale of property and equipment                1,754       2,321
      Purchase of property                                         (479)     (8,433)
      Purchase of machinery and equipment                            --        (315)
      Proceeds from sale of investments                              --         221
      Distributions received on investments                          22          88
      Decrease in restricted cash                                   668      12,788
      Reduction of mortgage loans receivable principal            1,553         842
      Increase in notes receivable                                 (494)     (3,607)
      Reduction of notes receivable principal                     2,004         921
                                                               --------    --------
            Cash provided by investing activities                 5,028       4,826
</TABLE>


                             continued on next page


                                       8
<PAGE>   9

                        U.S. RESTAURANT PROPERTIES, INC.
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                     THREE MONTHS ENDED MARCH 31,
                                                                     ---------------------------
                                                                           2001         2000
                                                                        ---------    ---------
<S>                                                                     <C>          <C>
CASH FLOWS FROM FINANCING ACTIVITIES:

      Proceeds from line of credit                                      $      --    $  23,808
      Payments on line of credit                                         (119,035)      (6,600)
      Distributions to minority interest                                   (1,214)      (1,771)
      Cash distributions to stockholders/partners                          (5,857)      (7,153)
      Payment of preferred stock dividends                                 (1,776)      (1,776)
      Increase in accrued dividends payable                                    17           --
      Proceeds from sale of stock                                           4,838           --
      Payments on notes/mortgage payable                                  (56,667)     (12,507)
      Proceeds from notes/mortgage payable                                180,700           --
      Financing costs and other intangibles                                (4,422)        (304)
      Payments on capitalized lease obligations                                --           (1)
      Repurchase and retirement of stock                                       --         (375)
                                                                        ---------    ---------
            Cash flows used in financing activities                        (3,416)      (6,679)
                                                                        ---------    ---------

Increase in cash and cash equivalents                                       9,016        4,612
Cash and cash equivalents at beginning of period                            5,509        9,695
                                                                        ---------    ---------
Cash and cash equivalents at end of period                              $  14,525    $  14,307
                                                                        =========    =========

SUPPLEMENTAL DISCLOSURE:
      Interest paid during the period                                   $   6,772    $   6,715
                                                                        =========    =========



NON-CASH INVESTING ACTIVITIES:
      Transfer of property from capitalized lease to property and       $     303    $      --
      equipment
      Unrealized loss on investments classified as available for sale         113          188
      Notes received on sale of property                                      878           --
      Net transfers from construction in progress to property               3,171       15,870
      Security deposit and note receivable transferred                        700           --

NON-CASH FINANCING ACTIVITIES:
      Decrease in common stock dividends accrued                        $      --    $     (15)
      Fair value of stock received in exchange for investments                 --           88
      Account receivable conversion to note                                   124           --
</TABLE>


            See Notes to Condensed Consolidated Financial Statements.


                                       9
<PAGE>   10

                        U.S. RESTAURANT PROPERTIES, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.       INTERIM UNAUDITED FINANCIAL INFORMATION

U.S. Restaurant Properties, Inc. (the "Company") is a self-administered and
self-managed real estate investment trust ("REIT"), as defined under the
Internal Revenue Code of 1986, as amended. As noted in the Company's Annual
Report on Form 10-K for the year ended December 31, 2000, the Company became the
successor entity to U.S. Restaurant Properties Master L.P. (collectively with
its subsidiaries, "USRP"). The business and operations of the Company are
conducted primarily through U.S. Restaurant Properties Operating L.P. ("OP"). At
March 31, 2001, the Company owned 99.26% of and controlled the OP. As of March
31, 2001, the Company owned 842 properties in 48 states.

The accompanying condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2000, which was filed with the Securities and Exchange Commission ("SEC").
The results of operations for the three months ended March 31, 2001 are not
necessarily indicative of the results to be expected for the year ending
December 31, 2001. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America, have been
condensed or omitted in this report on Form 10-Q pursuant to the Rules and
Regulations of the SEC. In the opinion of management, the disclosures contained
in this report are adequate to make the information presented not misleading.

Accounting measurements at interim dates inherently involve greater reliance on
estimates than at year end and the results of operations for the interim periods
shown in this report are not necessarily indicative of results to be expected
for the fiscal year. In the opinion of management, the accompanying unaudited
condensed consolidated financial statements include all adjustments (of a normal
recurring nature) necessary to present fairly the consolidated financial
position of the Company as of March 31, 2001, the consolidated results of its
operations, comprehensive operations, stockholders' equity and cash flows for
the three months ended March 31, 2001 and 2000.

The Company derives its revenues primarily from the leasing of its properties to
operators (primarily restaurants) on a "triple net" basis. Triple net leases
typically require the tenants to be responsible for property operating costs,
including property taxes, insurance, maintenance and, in most cases, the ground
rents where applicable. Accordingly, the accompanying condensed consolidated
financial statements do not include costs for property taxes and insurance which
are the responsibility of the tenants. Additionally, those amounts associated
with ground rent expense where the tenant is responsible for the ground rents
have been recorded as a reduction to rent revenues with no impact on net income.
For the three months ended March 31, 2001 and 2000, the Company has recorded
rent expense of $1,023,000 and $1,022,000, respectively, as reductions to rent
revenues.

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

Amounts in previous periods have been reclassified to conform to current period
presentation.

As disclosed in the Company's Form 10-K for December 31, 2000, the Company
revised its accounting for contingent rent on a prospective basis, effective May
21, 1998, to account for contingent rents in accordance with the initial
consensus reached in the Financial Accounting Standards Board's Emerging Issues
Task Force ("EITF") Issue No. 98-9, "Accounting for Contingent Rent in Interim
Financial Periods." As the Company has already complied with the requirements of
accounting for contingent rents, the Company believes it is in compliance with
Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements" which was effective October 1, 2000.

Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended, was effective for
the Company January 1, 2001. This standard requires that all


                                       10
<PAGE>   11
derivative financial instruments be recognized as either assets or liabilities
on the balance sheet at their fair values and that accounting for the changes in
the fair values is dependent upon the intended use of the derivatives and their
resulting designations. If the derivative is designated as a fair-value hedge,
the changes in the fair value of the derivative and the hedged item will be
recognized in earnings. If the derivative is designated as a cash flow hedge,
changes in fair value of the derivative will be recorded in other comprehensive
income and will be recorded in the statement of operations when the hedged item
affects earnings. SFAS No. 133 defines new requirements for designation and
documentation of hedging relationships as well as ongoing effectiveness
assessments in order to use hedge accounting. For a derivative that does not
qualify as a hedge, changes in fair value will be recognized in earnings.

The adoption of SFAS No. 133, as of January 1, 2001 resulted in the recognition
of a liability of $1,474,000, with a cumulative effect adjustment to other
comprehensive income of $1,474,000.

The Company had 17,886,156 and 17,416,672 shares of common stock outstanding as
of March 31, 2001 and December 31, 2000, respectively.

2.       NET LOSS PER SHARE OF COMMON STOCK

<TABLE>
                                           THREE MONTHS ENDED MARCH 31,
                                                2001       2000
                                                ----       ----
<S>                                           <C>         <C>
Net income (loss) before extraordinary item   $(19,579)   $    409

Dividends on preferred stock                    (1,776)     (1,776)
                                              --------    --------

Net loss from continuing operations
   allocable to common stockholders            (21,355)     (1,367)

Loss on early extinguishment of debt              (340)         --
                                              --------     -------
Net loss allocable to common stockholders     $(21,695)    $(1,367)
                                              ========     =======


</TABLE>

Basic loss per share is computed based upon the weighted average number of
shares of common stock outstanding. Diluted loss per share typically reflects
the dilutive effect of stock options, contingent shares, OP units, OP units and
shares on which the price is guaranteed ("Guaranteed Stock") and convertible
preferred stock. The 6,274 stock options, 134,344 OP units, 153,436 Guaranteed
Stock, and 3,679,938 shares of convertible preferred stock were anti-dilutive in
the three months ended March 31, 2001. The 815,577 stock options, 825,000
contingent shares, 1,294,587 OP units, 163,168 Guaranteed Stock and 3,679,938
shares of convertible preferred stock were anti-dilutive in the three months
ended March 31, 2000.

3.       PROPERTY

During the three months ended March 31, 2001, the Company completed the sale and
disposal of seven properties for net cash proceeds of $1,754,000, net of closing
costs, and $878,000 of notes. The Company transferred completed construction
costs of approximately $3,171,000 on various properties from construction in
progress to land, building and equipment during the three months ended March 31,
2001.

During the three months ended March 31, 2001, the Company acquired one building
from a tenant who defaulted on a land-only lease. The building was recorded at
the carrying value of the receivable due from the tenant which was less than the
fair market value of the building.

During the three months ended March 31, 2001, BC Oil Ventures LLC, the tenant
leasing the service stations and fuel terminal in Hawaii, defaulted on their
monthly rent payments. After careful assessment of various factors relevant to
these properties, management determined it was appropriate to sell these
properties. Accordingly, the Company has classified these properties as Assets
Held for Sale in the amount of $22,071,000, and an impairment charge of
$7,743,000 was recorded to write these assets down to estimated proceeds from
the anticipated disposal of these properties net of estimated costs to sell. It
is anticipated that the sale of these properties will be completed within one
year. During the three months ended March 31, 2001 the Company recognized
$400,000 of revenue and $663,000 of operating expenses related to these
properties. In order to ensure the subtenants in these service stations receive
fuel on a regular basis, in May 2001 the Company formed a subsidiary for the
purpose of supplying the service stations with fuel.

Also during the first quarter of 2001, management analyzed service stations in
Missouri, Illinois and Texas which were late paying rent and defaulting on
certain lease terms for possible impairment. It was determined that 16 of


                                       11
<PAGE>   12
these properties had carrying values in excess of fair value. The Company
recorded an impairment charge of $7,567,000 to revalue these assets to estimated
fair value. The estimated fair value of these assets was determined by
discounting the estimated cash flows of each asset. As a result of the Company's
regular analysis of its investments to determine if circumstances indicate that
the carrying amount of an asset may not be recoverable, additional impairment
charges of $619,000 were recorded from the revaluing of eight other assets to
their estimated fair value.

4.       INVESTMENTS

The aggregate cost basis and net unrealized loss for investments classified as
available for sale at March 31, 2001 were $4,199,000 and $1,953,000,
respectively. The net unrealized loss is recorded as accumulated other
comprehensive loss of which a loss of $113,000 was recorded during the three
months ended March 31, 2001. In addition to these investments, the Company has
other investments carried at a cost basis of approximately $577,000.

5.       LINES OF CREDIT, BRIDGE LOAN AND NOTES PAYABLE

In January 2001, the Company entered into an Indenture agreement with Bank of
America for a secured bridge facility of $175,000,000. Proceeds from this bridge
facility were used to pay-off the outstanding balance of the $175,000,000
revolving credit line and the $50,000,000 unsecured term loan from Credit
Lyonnais. The Indenture bears interest at the 30 - day LIBOR plus 225 basis
points. The bridge loan will mature in six months, with one six month extension
available. As part of the agreement, the Company agreed to engage Banc of
America Securities, LLC to structure, execute and place a private placement
securitization of the assets used to collaterize the bridge loan. The Company is
currently evaluating various long-term debt alternatives, but anticipates that
the final facility will have a term of not less than five years and will bear
interest at a more favorable rate.

Simultaneously with the close of the Indenture, the Company entered into a
Credit Agreement with Bank of America for an unsecured revolving credit facility
in the amount of $7,000,000. The Credit Agreement has a term of up to two years
and bears interest in traunches of 30, 60, 90 or 180 -day LIBOR contracts plus
225 basis points. The Credit Agreement also provides that up to $2,000,000 of
the facility may be used for letters of credit. Effective January 9, 2001, Bank
of America issued a letter of credit in the amount of $1,775,000 on behalf of
the Company for the benefit of the preferred stockholders. There is a 2.25% fee
per annum on the outstanding letter of credit. At March 31, 2001 the letter of
credit for $1,775,000 was the only amount utilized under this facility.

The Company is in compliance with all covenants associated with its lines of
credit and bridge loan as of March 31, 2001.

On February 26, 1997, the Company issued $40,000,000 in privately placed debt
which consisted of $12,500,000 Series A Senior Secured Guaranteed Notes with a
8.06% interest rate, which were due January 31, 2000, and $27,500,000 Series B
Senior Secured Guaranteed Notes with a 8.30% interest rate, due January 31,
2002. In January 1998, the note holders agreed to release the collateral for
these notes. In January 2000, the Company paid the $12,500,000 Series A Senior
Secured Guaranteed Notes in full as scheduled. Effective January 9, 2001, the
Company secured the Series B Senior Notes with properties having an aggregate
net book value of approximately $38,575,000. Under the terms of the Waiver and
Second Amendment to Note Purchase Agreement, the Company was required to secure
the noteholders on the same basis and with similar collateral as that provided
to Bank of America. Additionally, because all of the required documentation and
title policies could not be delivered on or before January 9, 2001, the Company
entered into a Cash Collateral Agreement providing for the escrow of $3,000,000
in cash with State Street Bank to be delivered to the noteholders as a
prepayment of principal and related make-whole payments in the event the Company
did not deliver the required documentation by the agreed upon extended due date
of March 24, 2001. The Company delivered all of the required documentation and
title policies by the extended due date and the $3,000,000 escrow deposit was
returned to the Company.

On May 12, 1998, the Company issued $111,000,000 of seven year fixed rate senior
unsecured notes payable in a private placement. The notes bear interest at the
rate of 7.15% per annum and are due May 1, 2005. The net proceeds of the notes
were used to repay a portion of the revolving credit agreement and for general
corporate purposes. In conjunction with the notes payable agreement, the
underwriters and the Company entered into a rate lock agreement for the purpose
of setting the interest rate on these notes payable. The fee paid to lock in the
rate on these notes payable was approximately $424,000 and is being amortized
over the term of the notes as an adjustment


                                       12
<PAGE>   13

to interest expense. As a result of the Bank of America Credit Agreement and
certain guarantees required by it, the subsidiaries of the Company executed a
Subsidiary Guaranty for the benefit of these noteholders.

On November 13, 1998, the Company issued $47,500,000 in senior notes payable in
a private placement. The notes bear interest at the rate of 8.22% per annum and
are due August 1, 2003. The net proceeds were used to repay a portion of the
revolving credit agreement and for general corporate purposes. In conjunction
with the notes payable agreement, the underwriters and the Company entered into
a rate lock agreement for the purpose of setting the interest rate of these
notes payable. The fee paid to lock in the rate on these notes payable was
approximately $406,000 and is being amortized over the term of the notes as an
adjustment to interest expense. As a result of the Bank of America Credit
Agreement and certain guarantees required by it, the subsidiaries of the Company
executed a Subsidiary Guaranty for the benefit of these noteholders.

In April 1999, the OP entered into a credit agreement with Credit Lyonnais for
an unsecured term loan of $50,000,000. This credit facility was scheduled to
mature in April 2002. On January 9, 2001, the Company paid the outstanding
balance under this facility with proceeds from a bridge loan issued by Bank of
America. In connection with this pay-off, the Company wrote-off $340,000 worth
of unamortized loan origination fees associated with this facility in January
2001.

Effective July 3, 2000, the Company entered into an interest rate swap with
Credit Lyonnais for a notional amount of $50,000,000 on which the Company pays a
fixed rate of 7.05% and receives a variable rate based upon LIBOR. The interest
rate swap agreement terminates in May 2003 but may be terminated earlier subject
to certain restrictions. The agreement calls for the net interest expense or
income to be paid or received quarterly. This swap was secured by six properties
with an aggregate net book value of $3,198,000 on February 23, 2001. The
adoption of SFAS No. 133 as of January 1, 2001 resulted in the recognition of a
liability of $1,474,000 with a cumulative effect adjustment to other
comprehensive income of $1,474,000. The interest rate swap was entered into to
hedge the variable rate interest payments related to the Company's term loan
with Credit Lyonnais. As previously discussed, during January 2001, the Company
repaid the Credit Lyonnais term loan in full with proceeds from a six month
bridge loan. The bridge loan bears interest at the 30-day LIBOR plus 225 basis
points. The unrealized loss on the interest rate swap included in other
comprehensive income upon adoption of SFAS No. 133 will be reclassified to
earnings over the period of the bridge loan. Such reclassification adjustment
totaled $737,000 during the quarter. As the Company did not redesignate this
interest rate swap as a hedge subsequent to the repayment of the Credit Lyonnais
term loan, all changes in the fair value of the interest rate swap agreement
subsequent to the Credit Lyonnais repayment will be recognized in earnings
immediately. As of March 31, 2001, the fair value of the interest rate swap was
a liability of $2,427,000 and is recorded as such in the accompanying condensed
consolidated balance sheets. Also during the quarter ended March 31, 2001, the
Company recorded a charge to operations in the amount of $953,000 relating to
the change in fair market value of the interest rate swap.

In conjunction with the Merger between the Company and QSV on December 29, 2000,
the Company assumed a note receivable from Mr. Stetson in the amount of $959,000
due on January 22, 2001 with an interest rate of 10.00% as well as a note
payable to Mr. Darrel L. Rolph, who was then a Director of the Company for
$959,000 due on January 22, 2001 with an interest rate of 10.00%. Both the note
receivable and note payable were paid in full on the scheduled due date.

The Company is in compliance with all covenants associated with its debt and
credit facilities as of March 31, 2001.

6.       RELATED PARTY TRANSACTIONS

In connection with Mr. Robert Stetson's resignation as Chief Executive Officer
and President of the Company, the Company entered into a Settlement Agreement
and Consulting Agreement with Mr. Stetson as of October 6, 1999. Pursuant to the
terms of the Settlement Agreement, the Company agreed to provide Mr. Stetson one
or more loans, up to the aggregate of $800,000, for the sole purpose of
acquiring shares of the Company's common stock from time to time in the open
market. In March 2000, the Company advanced $400,000 to Mr. Stetson for the
purchase of the common stock of the Company. The promissory note provides for an
interest rate of 7.0% per annum and quarterly payments of interest only through
December 2005, with a final payment of principal and interest due in March,
2006. Pursuant to the note agreement, Mr. Stetson has pledged the common stock
purchased with the note proceeds as collateral for the loans.

Effective September 22, 2000, the Company and Mr. Stetson entered into an
Amendment to the Settlement Agreement providing for two changes to the original
Settlement Agreement which were consummated in October 2000. First, Mr. Stetson
executed a second promissory note in the amount of $300,000 in exchange for
which he


                                       13
<PAGE>   14
received 35,037 restricted shares of USRP common stock (calculated based on a
value of $8.5625 per share). Second, the Company advanced Mr. Stetson $75,000
under a third promissory note to be used for the sole purpose of acquiring
shares of the Company's common stock in the open market. Both notes bear
interest at 7.0% per annum and provide for quarterly payments of interest only
through July 2006, with a final payment of principal and interest due in October
2006, and are secured by the restricted common stock and stock purchased with
the note proceeds.

On December 20, 2000, USRP/HCI Partnership 1, L.P., a subsidiary of the Company,
("HJV") made an advance to the preferred interest holder in the amount of
$700,000. Under the terms of the Advance Agreement dated December 1, 2000, the
$700,000 advance bears interest at an annual interest rate of 9.0%. At March 31,
2001, the unpaid balance under this advance was $100,000.

In conjunction with the Merger between the Company and QSV, the Company assumed
a note receivable from Mr. Stetson in the amount of $959,000 due on January 22,
2001 with an interest rate of 10.00% as well as a note payable to Mr. Darrel L.
Rolph, who was then a Director of the Company, for $959,000 due on January 22,
2001 with an interest rate of 10.00%. Both the note receivable and note payable
were paid in full on the scheduled due date.

In connection with their resignations, Messrs. Margolin, Rolph and Rolph entered
into Noncompetition and Release Agreements with the Company pursuant to which
each of them agreed not to (a) submit or cause the submission of any proposals
or nominations of candidates for election as directors of the Company or (b)
solicit proxies from any of the Company's stockholders, in each case prior to
December 31, 2003. Additionally, Mr. Margolin agreed not to directly or
indirectly own manage, control, participate in, invest in or provide consulting
services to any entity or business organization that engages in or owns, invests
in, manages or controls any venture engaged in the ownership, management,
acquisition or development of restaurant, gasoline and convenience store
properties similar to those of the Company and its affiliates for a one-year
period ending March 9, 2002. As consideration under such agreement and in
connection with the termination of Mr. Margolin's Employment Agreement with the
Company, the Company paid Mr. Margolin $800,000 in severance compensation which
was expensed during the quarter ended March 31, 2001. Similarly, each of the
Rolphs agreed not to directly or indirectly compete with the Company, other than
through the restaurant operations of the Rolphs in existence as of the initial
closing of the Lone Star Transaction.

7.       STOCKHOLDERS' EQUITY AND MINORITY INTERESTS

On January 17, 2001, the Company entered into an agreement with two affiliates
of Lone Star Fund III (U.S.), L.P. ("Lone Star") providing for the sale of
1,877,935 shares of Common Stock at a price of $10.65 per share, for aggregate
consideration of $20,000,000 (the "Lone Star Transaction"). The Lone Star
Transaction will involve two or more closings: an initial closing, on March 9,
2001, at which Lone Star paid $5,000,000 in exchange for 469,484 shares; and one
or more subsequent closings, to occur on or before September 5, 2001, at which
up to an additional 1,408,451 shares will be purchased. After completion of the
entire Lone Star Transaction and including Lone Star's purchase of 1,856,330
shares from Fred H. Margolin, Darrel L. Rolph, David K. Rolph and their
affiliates, Lone Star will be a beneficial holder of approximately 19.33% of the
Company's presently outstanding common stock.

The Company and each of Messrs. Margolin, Rolph and Rolph entered into a
Registration Rights Agreement, dated March 9, 2001, permitting the holders
thereto to request a shelf registration on Form S-3 to be filed with the
Securities and Exchange Commission ("SEC") by the Company. Additionally, as a
component of the Lone Star Transaction, the Company and Lone Star entered into a
Registration Rights Agreement, dated March 9, 2001, granting Lone Star the
ability to request a shelf registration on Form S-3.

DISTRIBUTIONS TO COMMON AND PREFERRED STOCKHOLDERS

During the three months ended March 31, 2001, the Company declared dividends of
$5,857,000 to its common stockholders and the minority interest OP unitholders
and $1,776,000 to its preferred stockholders (or $0.4825 per quarter per share
of preferred stock).

MINORITY INTERESTS

As reported in the Company's Annual Report on Form 10-K for the year ended
December 31, 2000, each OP unit represents a minority interest in the OP of the
Company. Each OP unit participates in any income (loss) of the OP based on the
percent ownership in the OP and receives a cash dividend in an amount equivalent
to a share of common stock.


                                       14
<PAGE>   15
Each OP unit may be exchanged at any time by the holder thereof for one share of
common stock of the Company. With each exchange of outstanding OP units for
common stock, the Company's percentage ownership interest in the OP, directly or
indirectly, will increase. As of March 31, 2001 there were 134,344 OP units
outstanding.

During 1999, the Company issued $55,000,000 of 8.5% preferred interest in HJV to
a third party for net proceeds of $52,793,000. Under the terms of this
transaction, the preferred interest holder receives annual distributions equal
to $4,675,000 payable monthly from the cash flows of HJV. Income is allocated to
the preferred interest holder equal to their distribution. The Company may be
required from time to time to exchange properties that do not meet specified
criteria as defined in the partnership agreement.

The OP units outstanding at March 31, 2001 and December 31, 2000 of 134,344 and
the preferred partnership interests represent the minority interests of the
Company.

Minority interest in the OP and the preferred partnership consists of the
following at March 31, 2001 (in thousands):

<TABLE>
<S>                                                            <C>
Balance at January 1, 2001                                     $  54,733
Distributions paid and accrued in the period                      (1,214)
Income allocated to minority interest                              1,004
                                                               ---------
Balance at March 31, 2001                                      $  54,523
                                                               =========
</TABLE>


                                       15
<PAGE>   16

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

RESULTS OF OPERATIONS

The Company derives its revenue primarily from the leasing of its properties
(primarily restaurants) to operators on a "triple net" basis. Triple net leases
typically require the tenants to be responsible for property operating costs,
including property taxes, insurance, maintenance, and in most cases, the ground
rents where applicable. Approximately 50% of the Company's leases provide for a
base rent plus a percentage of the sales in excess of a threshold amount. As a
result, portions of the Company's revenues are a function of the number of
properties in operation and their level of sales. Sales at individual properties
are influenced by local market conditions, the efforts of specific operators,
marketing, new product programs, support of the franchisor and the general state
of the economy.

The following discussion considers the specific impact of such factors on the
results of operations of the Company for the following periods.

Comparison of the three months ended March 31, 2001 to the three months ended
March 31, 2000

Revenues, including income earned on direct financing leases, in the three
months ended March 31, 2001 totaled $18,773,000, down 4.6% from the $19,672,000
recorded for the three months ended March 31, 2000. The decrease in revenues is
primarily due to sales of properties during 2000, offset by development
properties being completed and leased. For the three months ended March 31,
2001, approximately 6.7% of the Company's rental revenues resulted from
percentage rents (rents determined as a percentage of tenant sales), compared
with 8.3% for the three months ended March 31, 2000. Also included in revenues
is interest income relating to notes and mortgage receivables from tenants and
related parties. Interest income was $1,346,000 for the three months ended March
31, 2001, compared with $1,418,000 for the three months ended March 31, 2000.

Rent expense, associated with ground leases paid by the Company, for the three
months ended March 31, 2001 totaled $154,000, a decrease of 41.2% when compared
to the three months ended March 31, 2000. This decrease is primarily due to
property dispositions and non-renewal of ground leases. Depreciation and
amortization expenses in the three months ended March 31, 2001 totaled
$6,030,000, down 4.7% from the $6,324,000 for the three months ended March 31,
2000. The decrease in depreciation and amortization expense relates to the
properties sold in 2000, partially offset by the depreciation and amortization
expense related to the development projects completed.

General and administrative expenses for the three months ended March 31, 2001
totaled $3,359,000, an increase of 36.9% when compared to the three months ended
March 31, 2000. This increase is primarily due to an $813,000 severance package
to Fred Margolin, the Company's former CEO, $211,000 of costs associated with
the conversion of the Company's property management/accounting software system,
$247,000 of costs associated with alternative financing for the Company and
legal costs associated with tenant litigation matters, partially offset by
reduced payroll and related costs associated with a decrease in the Company's
infrastructure.

Provisions for doubtful accounts for the three months ended March 31, 2001
totaled $1,148,000 compared to $750,000 for the three months ended March 31,
2000. Provisions during the three months ended March 31, 2001 included $434,000
associated with notes receivable, $216,000 associated with straight-line rent,
and $498,000 associated with accounts receivable.

Interest expense for the three months ended March 31, 2001 totaled $9,104,000,
an increase of 18.3% when compared to the three months ended March 31, 2000.
This increase is primarily due to the amortization of approximately $1,700,000
of initial costs of collateralizing the $175,000,000 bridge loan provided by
Bank of America on January 9, 2001.

As of December 29, 2000, all of the 825,000 contingent shares of Common Stock
relating to the termination of the management contract with QSV had been earned
and issued. As the liability has been settled in full, no amounts were recorded
in the three months ended March 31, 2001. For the three months ended March 31,
2000, a non-cash accounting credit of $1,031,000 was recorded. This credit
represented the increase in market value of a share of common stock at March 31,
2000 compared to December 31, 1999 on the maximum total of 825,000 contingent OP
units.


                                       16
<PAGE>   17
During the three months ended March 31, 2001, the Company recorded an asset
impairment charge of $15,929,000. During the three months ended March 31, 2001,
BC Oil Ventures LLC, the tenant leasing the service stations and fuel terminal
in Hawaii, defaulted on its monthly rent payments. After careful assessment of
various factors relevant to these properties, management determined it was
appropriate to sell these properties. Accordingly, the Company has classified
these properties as Assets Held for Sale, and an impairment charge of $7,743,000
was recorded to write these assets down to their estimated proceeds from the
anticipated disposal of these properties net of estimated costs to sell. Also
during this period, management analyzed service stations in Missouri, Illinois
and Texas which were late paying rent and defaulting on certain lease terms for
possible impairment. It was determined that 16 of these properties had carrying
values in excess of fair value. The Company recorded an impairment charge of
$7,567,000 to revalue these assets to estimated fair value. The estimated fair
value of these assets was determined by discounting the estimated cash flows of
each asset. As a result of the Company's regular analysis of its investments to
determine if circumstances indicate that the carrying amount of an asset may not
be recoverable, additional impairment charges of $619,000 were recorded from the
revaluing of eight other assets to their estimated fair value.

Loss on an interest rate swap agreement for the three months ended March 31,
2001 totaled $1,690,000. The adoption of SFAS No. 133, as of January 1, 2001
resulted in the recognition of a liability of $1,474,000, with a cumulative
effect adjustment to other comprehensive income of $1,474,000. The interest rate
swap agreement was entered into in 2000 to hedge the variable rate interest
payments related to the Company's previous term loan with Credit Lyonnais.
During January 2001, the Company repaid the Credit Lyonnais term loan in full
with proceeds from a six month bridge loan. The bridge loan bears interest at
the 30-day LIBOR plus 225 basis points. The unrealized loss on the interest rate
swap included in other comprehensive income upon adoption of SFAS No. 133 will
be reclassified to earnings over the period of the bridge loan. As the Company
did not redesignate this interest rate swap as a hedge subsequent to the
repayment of the Credit Lyonnais term loan, all changes in the fair value of the
interest rate swap agreement subsequent to the Credit Lyonnais repayment will be
recognized in earnings immediately. Of the $1,690,000 recorded, $737,000
represents reclassification of the January 1, 2001 adjustment from other
comprehensive income and $953,000 represents the change in the fair value of the
interest rate swap.

The gain on sale of properties of $66,000 for the three months ended March 31,
2001 relates to the sale of seven properties for cash of $1,754,000, net of
closing costs and notes of $878,000. The loss on sale of properties of $340,000
for the three months ended March 31, 2000 relates to the sale of one property
for cash of $2,321,000 net of closing costs and the non-renewal of ground
leases.

Minority interest in net income was $1,004,000 for the three months ended March
31, 2001 compared to $1,099,000 for the three months ended March 31, 2000. For
both the three months ended March 31, 2001 and 2000, the amounts relate
primarily to the Company's minority interest in HJV which was formed in October
1999.

Loss on early extinguishment of debt was $340,000 for the three months ended
March 31, 2001. On January 9, 2001, the Company paid the outstanding balance
under the Credit Lyonnais facility with proceeds from a bridge loan issued by
Bank of America. In connection with this pay-off, the Company wrote-off $340,000
worth of unamortized loan origination fees associated with this facility.

LIQUIDITY AND CAPITAL RESOURCES

The Company's principal source of cash to meet its short-term cash requirements
is rental revenues generated by the Company's properties. Cash generated by the
portfolio in excess of operating and dividend payment needs is used to reduce
amounts outstanding under the Company's credit agreements. As of March 31, 2001,
the Company has no letters of intent for acquisitions. The terms of the
Company's leases ("triple net leases") generally require that the tenant is
responsible for maintenance and improvements to the pertinent property. Thus,
the Company is generally not required to expend funds for remodels and
renovations. However, the Company expects to spend approximately $680,000 during
the remainder of the year ending December 31, 2001 to renovate and remodel
currently owned properties. As of March 31, 2001, the Company had seven
properties in various stages of development and had commitments of approximately
$1,761,000 representing construction contract costs not yet incurred.

During the three months ended March 31, 2001, the Company declared dividends of
$5,857,000 to its common stockholders and the minority interest OP unitholders
and $1,776,000 to its preferred stockholders (or $0.4825 per quarter per share
of preferred stock).


                                       17
<PAGE>   18

In January 2001, the Company entered into an Indenture agreement with Bank of
America for a secured bridge facility of $175,000,000. Proceeds from this bridge
facility were used to pay-off the outstanding balance of the $175,000,000
revolving credit line and the $50,000,000 unsecured term loan from Credit
Lyonnais. The Indenture bears interest at the 30 day LIBOR plus 225 basis
points. The bridge loan will mature in six months, with one six month extension
available. As part of the agreement, the Company agreed to engage Banc of
America Securities, LLC to structure, execute and place a private placement
securitization of the assets used to collaterize the bridge loan. The Company is
currently evaluating various long-term debt alternatives, but anticipates that
the final facility will have a term of not less than five years and will bear
interest at a more favorable rate.

Simultaneously with the close of the Indenture, the Company entered into a
Credit Agreement with Bank of America for an unsecured revolving credit facility
in the amount of $7,000,000. The Credit Agreement has a term of up to two years
and bears interest in traunches of 30, 60, 90, or 180 -day LIBOR contracts plus
225 basis points. The Credit Agreement also provides that up to $2,000,000 of
the facility may be used for letters of credit. Effective January 9, 2001, Bank
of America issued a letter of credit in the amount of $1,775,000 on behalf of
the Company for the benefit of the preferred stockholders. There is a 2.25% fee
per annum on the outstanding letter of credit.

The Company is in compliance with all covenants associated with its notes
payable, lines of credit and bridge loan as of March 31, 2001.

On January 17, 2001, the Company entered into an agreement with two affiliates
of Lone Star providing for the sale of 1,877,935 shares of Common Stock at a
price of $10.65 per share, for aggregate consideration of $20,000,000. The Lone
Star transaction will involve two or more closings: an initial closing, on March
9, 2001, at which Lone Star paid $5,000,000 in exchange for 469,484 shares; and
one or more subsequent closings, to occur on or before September 5, 2001, at
which up to an additional 1,408,451 shares will be purchased.

Management believes that cash flow from operations, along with the Company's
ability to raise additional equity through joint ventures and anticipated sales
of properties, additional proceeds from the sale of the remaining shares of
common stock to Lone Star and the anticipated private placement securitization
of the assets used to collaterize the bridge loan will provide the Company with
sufficient liquidity to meet its short-term and long-term capital needs.
However, there can be no assurances that the terms at which existing debt is
refinanced will be as favorable to the Company as under the existing facilities.

FUNDS FROM OPERATIONS (FFO)

The Company believes that it computes FFO in accordance with the standards
established by the National Association of Real Estate Investment Trusts
("NAREIT") in their National Policy Bulletin dated November 8, 1999, which may
differ from the methodology for calculating FFO utilized by other equity REITs,
and, accordingly, may not be comparable to such other REITs. The Company's FFO
is computed as net income (loss) available to common stockholders (computed in
accordance with accounting principles generally accepted in the United States of
America), plus real estate related depreciation and amortization, gains (or
losses) from sales of property, impairment of long-lived assets, extraordinary
items and income/loss allocable to minority interest holders. The Company
believes FFO is helpful to investors as a measure of the performance of an
equity REIT because, along with the Company's statements of financial condition,
results of operations and cash flows, it provides investors with an
understanding of the ability of the Company to incur and service debt and make
capital expenditures. In evaluating FFO and the trends it depicts, investors
should consider the major factors affecting FFO. Growth in FFO will result from
increases in revenue or decreases in related operating expenses. Conversely, FFO
will decline if revenues decline or related operating expenses increase. FFO
does not represent amounts available for management's discretionary use because
of needed capital replacement or expansion, debt service obligation, or other
commitments and uncertainties. FFO should not be considered as an alternative to
net income (determined in accordance with accounting principles generally
accepted in the United States of America), as an indication of the Company's
financial performance, to cash flows from operating activities (determined in
accordance with accounting principles generally accepted in the United State of
America) or as a measure of the Company's liquidity, nor is it indicative of
funds available to fund the Company's cash needs, including its ability to make
distributions.


                                       18
<PAGE>   19

The following table sets forth, for the three months ended March 31, 2001 and
2000, the calculation of funds from operations.

<TABLE>
<CAPTION>
                                              Three Months Ended
                                                 March 31,
                                            --------------------
                                              2001        2000
                                            --------    --------
<S>                                         <C>         <C>
(in thousands)
Net loss allocable to common stockholders   $(21,695)   $ (1,367)

Depreciation and amortization                  5,999       6,288
Loss (gain) on sale of property                  (66)        340
Impairment of long-lived assets               15,929          --
Extraordinary loss                               340          --
Income allocable to minority interest           (165)        (70)
                                            --------    --------
Funds from operations                       $    342    $  5,191
                                            ========    ========
</TABLE>

INFLATION

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

SEASONALITY

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

RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS INCLUDED IN THIS FORM 10-Q

Certain statements contained in this Form 10-Q, including without limitation
statements regarding the objectives of management for future operations and
statements containing the words "believe," "may," "will," "estimate,"
"continue," "anticipate," "intend," "expect" and similar expressions, are
forward-looking statements within the meaning of the federal securities laws.
Such forward-looking statements are subject to known and unknown risks,
uncertainties and assumptions which may cause the company's actual results,
performance or achievements to differ materially from those anticipated or
implied by the forward-looking statements. The Company disclaims any obligation
to update any such statements or publicly announce any updates or revisions to
any of the forward-looking statements contained herein to reflect any change in
the company's expectation with regard thereto or any change in events,
conditions, circumstances or assumptions underlying such statements. Reference
is hereby made to the disclosures contained in the Company's filings with the
Securities and Exchange Commission, including, but not limited to, the
disclosures under the heading "Risk Factors" in "Item 1. Business" of the
Company's Annual Report on Form 10-K filed with the Securities and Exchange
Commission on April 2, 2001.


                                       19
<PAGE>   20

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company has limited exposure to financial market risks, including changes in
interest rates and other relevant market prices, except as noted below. The
Company does not have any foreign operations and thus is not exposed to foreign
currency fluctuations.

An increase or decrease in interest rates would affect interest costs relating
to the Company's variable rate credit facility. At March 31, 2001 there was
$175,000,000 of variable rate debt outstanding on this facility. The facility
bears interest at the 30 day LIBOR plus 225 basis points. Based on the
$175,000,000 of variable rate debt outstanding at March 31, 2001, a 10% increase
or decrease would result in an increase or decrease in interest charges relating
to these facilities of approximately $1,270,000 for a full year.

The Company has entered into an interest rate swap effective July 3, 2000 with a
notional amount of $50,000,000. The Company will pay a fixed rate of 7.05% and
receive a variable rate based upon LIBOR under this swap agreement. At March
31, 2001 the fair market value of this interest rate swap was $2,427,000.


                                       20
<PAGE>   21

                           PART II. OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

         None

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

         On January 17, 2001, the Company entered into an agreement with two
affiliates of Lone Star Fund providing for the sale of 1,877,935 shares of
Common Stock at a price of $10.65 per share, for aggregate consideration of
$20,000,000. The Lone Star transaction will involve two or more closings: an
initial closing, on March 9, 2001, at which Lone Star paid $5,000,000 in
exchange for 469,484 shares; and one or more subsequent closings, to occur on or
before September 5, 2001, at which up to an additional 1,408,451 shares will be
purchased.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         None

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         None

ITEM 5.  OTHER INFORMATION

         None

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

a)       Exhibits

1)       Exhibit 10.1 - January 9, 2001 Indenture Agreement - $175,000,000
2)       Exhibit 10.2 - Schedule of $175,000,000 Triple Net Lease Mortgage Notes
3)       Exhibit 10.3 - January 9, 2001 Contribution Agreement - $175,000,000
4)       Exhibit 10.4 - Environmental Indemnity Agreement
5)       Exhibit 10.5 - Bank of America Note Purchase Agreement
6)       Exhibit 10.6 - Property Management Agreement
7)       Exhibit 10.7 - $175,000,000 Guaranty Agreement
8)       Exhibit 11.1 - Earnings per Share Computation
9)       Exhibit 12.1 - Ratio of Earnings to Combined Fixed Charges and
                        Preferred Stock Dividends

b)       Reports of Form 8-K

         The following reports on Form 8-K were filed during the first quarter
of 2001:

                  1)       Current Report on Form 8-K filed was file on
March 30, 2001 describing the Lone Star transaction and other events.


                                       21
<PAGE>   22

                                    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.



                                        U.S. Restaurant Properties, Inc.



Dated:  May 15, 2001      By:   /s/ David West
                              -------------------------------------------
                                    David West
                                    Chairman of the Board of Directors,
                                    Interim Chief Executive Officer and
                                    Director
                                    (Principal Executive Officer)
                                    (Principal Financial Officer)


                                       22
<PAGE>   23


                                INDEX TO EXHIBITS


<TABLE>
<CAPTION>
                  EXHIBIT
                  NUMBER                DESCRIPTION
                  --------              -----------

<S>                                   <C>
                     10.1             January 9, 2001 Indenture Agreement -
                                      $175,000,000

                     10.2             Schedule of $175,000,000 Triple Net Lease
                                      Mortgage Notes

                     10.3             January 9, 2001 Contribution Agreement -
                                      $175,000,000

                     10.4             Environmental Indemnity Agreement

                     10.5             Bank of America Note Purchase Agreement

                     10.6             Property Management Agreement

                     10.7             $175,000,000 Guaranty Agreement

                     11.1             Earnings per Share Computation

                     12.1             Ratio of Earnings to Combined Fixed Charges
                                      and Preferred Stock Dividends
</TABLE>