FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
X Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 1997 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: 0-20737
AMERICA FIRST APARTMENT INVESTORS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 47-0797793
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
Suite 400, 1004 Farnam Street, Omaha, Nebraska 68102
(Address of principal executive offices) (Zip Code)
(402) 444-1630
(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
<PAGE> - i -
Part I. Financial Information
Item 1. Financial Statements
AMERICA FIRST APARTMENT INVESTORS, L.P.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, 1997 Dec. 31, 1996
-------------- --------------
<S> <C> <C>
Assets
Cash and temporary cash investments, at cost which
approximates market value (Note 4) $ 2,129,877 $ 2,021,860
Investment in tax-exempt mortgage bonds, at estimated fair value (Note 5) 22,806,526 31,566,526
Investment in real estate, net of accumulated depreciation (Note 6) 50,747,663 30,199,846
Interest receivable 139,245 186,320
Other assets 939,792 948,849
-------------- --------------
$ 76,763,103 $ 64,923,401
============== ==============
Liabilities and Partners' Capital
Liabilities
Accounts payable (Note 9) $ 1,629,415 $ 1,454,694
Bonds payable (Note 7) 6,120,000 2,750,000
Line of Credit (Note 8) 12,157,871 3,584,200
Distribution payable (Note 3) 329,051 329,051
-------------- --------------
20,236,337 8,117,945
-------------- --------------
Partners' Capital
General Partner 6,448 4,038
Beneficial Unit Certificate Holders
($10.84 per BUC in 1997 and $10.90 in 1996) 56,520,318 56,801,418
-------------- --------------
56,526,766 56,805,456
-------------- --------------
$ 76,763,103 $ 64,923,401
============== ==============
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE> - 1 -
AMERICA FIRST APARTMENT INVESTORS, L.P.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
For the For the For the Six For the Six
Quarter Ended Quarter Ended Months Ended Months Ended
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Income
Mortgage bond investment income $ 421,444 $ 521,648 $ 1,053,948 $ 1,116,553
Contingent interest income 290,520 - 290,520 -
Rental income 2,331,340 1,422,169 4,024,158 2,719,570
Interest income on temporary cash investments 22,878 13,507 28,866 24,570
--------------- --------------- --------------- ---------------
3,066,182 1,957,324 5,397,492 3,860,693
--------------- --------------- --------------- ---------------
Expenses
General and administrative expenses (Note 9) 269,078 305,960 539,163 535,041
Real estate operating expenses 1,139,355 750,550 1,805,379 1,467,956
Depreciation 477,322 275,451 810,211 583,543
Interest expense 381,864 30,362 547,121 30,362
--------------- --------------- --------------- ---------------
2,267,619 1,362,323 3,701,874 2,616,902
--------------- --------------- --------------- ---------------
Net income $ 798,563 $ 595,001 $ 1,695,618 $ 1,243,791
=============== =============== =============== ===============
Net income allocated to:
General Partner $ 9,854 $ 8,704 $ 22,153 $ 18,273
BUC Holders 788,709 586,297 1,673,465 1,225,518
--------------- --------------- --------------- ---------------
$ 798,563 $ 595,001 $ 1,695,618 $ 1,243,791
=============== =============== =============== ===============
Net income per BUC $ .15 $ .11 $ .32 $ .23
=============== =============== =============== ===============
Weighted average number of BUCs outstanding 5,212,167 5,245,623 5,212,167 5,245,623
=============== =============== =============== ===============
</TABLE>
AMERICA FIRST APARTMENT INVESTORS, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Beneficial Unit
Certificate Holders
General
Partner # of BUCs Amount Total
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Partners' Capital (excluding net unrealized
holding losses):
Balance at December 31, 1996 $ 4,038 5,212,167 $ 65,549,892 $ 65,553,930
Net income 22,153 - 1,673,465 1,695,618
Cash distributions paid or accrued (Note 3)
Income (19,743) - (1,144,354) (1,164,097)
Return of capital - - (810,211) (810,211)
--------------- --------------- --------------- ---------------
6,448 5,212,167 65,265,887 65,275,240
--------------- --------------- --------------- ---------------
Net unrealized holding losses:
Balance at December 31, 1996 and June 30, 1997 - - (8,748,474) (8,748,474)
--------------- --------------- --------------- ---------------
Balance at June 30, 1997 $ 6,448 5,212,167 $ 56,520,318 $ 56,526,766
=============== =============== =============== ===============
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE> - 2 -
AMERICA FIRST APARTMENT INVESTORS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Six For the Six
Months Ended Months Ended
June 30, 1997 June 30, 1996
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 1,695,618 $ 1,243,791
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation 810,211 583,543
Amortization 81,953 -
Decrease in interest receivable 47,075 13,280
Decrease (increase) in other assets 225,253 (27,700)
Increase in accounts payable 174,721 125,887
--------------- ---------------
Net cash provided by operating activities 3,034,831 1,938,801
--------------- ---------------
Cash flows from investing activities
Real estate capital improvements (166,835) (82,331)
Acquisition of real estate (12,431,193) (1,914,598)
--------------- ---------------
Net cash used in investing activities (12,598,028) (1,996,929)
--------------- ---------------
Cash flows from financing activities
Net borrowings on line of credit 8,573,671 -
Proceeds from issuance of tax-exempt refunding bonds 3,450,000 2,750,000
Distributions paid (1,974,308) (1,986,979)
Bond issuance costs paid (298,149) (138,103)
Principal paid on bonds payable (80,000) -
--------------- ---------------
Net cash provided by financing activities 9,671,214 624,918
--------------- ---------------
Net increase in cash and temporary cash investments 108,017 566,790
Cash and temporary cash investments at beginning of period 2,021,860 1,912,560
--------------- ---------------
Cash and temporary cash investments at end of period $ 2,129,877 $ 2,479,350
=============== ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 329,335 $ -
=============== ===============
Supplemental schedule of non-cash investing activities
Settlement of mortgage bond for real estate $ 8,760,000 $ -
=============== ===============
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE> - 3 -
AMERICA FIRST APARTMENT INVESTORS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
1. Organization
America First Apartment Investors, L.P. (the Partnership) was formed on March
7, 1996, under the Delaware Revised Uniform Limited Partnership Act for the
purpose of acquiring, holding, operating, selling or otherwise dealing with
multi-family residential properties and other types of commercial real estate
and interests therein. The Partnership commenced operations on August 20,
1996, when it was merged with America First Tax Exempt Mortgage Fund 2 Limited
Partnership (the Prior Partnership). Under the terms of the Merger agreement,
the Partnership was the surviving partnership and effectively took over the
operations of the Prior Partnership. Unit holders of the Prior Partnership
received one Beneficial Unit Certificate (BUC) of the Partnership for each BUC
they held in the Prior Partnership as of the record date. The Prior
Partnership was terminated under the provisions of the Prior Partnership's
Partnership Agreement. The Partnership will terminate on December 31, 2016,
unless terminated earlier under the provisions of its Partnership Agreement.
The General Partner of the Partnership is America First Capital Associates
Limited Partnership Four (AFCA 4).
2. Summary of Significant Accounting Policies
A) Financial Statement Presentation
The accompanying 1997 consolidated financial statements include the
accounts of the Partnership. Financial statements for 1996 include the
accounts of the Prior Partnership.
The consolidated financial statements include the accounts of the
Partnership and its subsidiaries. All significant intercompany
transactions and accounts have been eliminated in consolidation.
The consolidated financial statements of the Partnership are prepared
without audit on the accrual basis of accounting in accordance with
generally accepted accounting principles. The consolidated financial
statements should be read in conjunction with the consolidated and
combined financial statements and notes thereto included in the
Partnership's Annual Report on Form 10-K for the year ended December 31,
1996. In the opinion of management, all normal and recurring adjustments
necessary to present fairly the financial position at June 30, 1997, and
results of operations for all periods presented have been made.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
B) Investment in Tax-Exempt Mortgage Bonds
Investment securities are classified as held-to-maturity,
available-for-sale, or trading. Investments classified as
available-for-sale are reported at fair value with any unrealized gains or
losses excluded from earnings and reflected as a separate component of
partners' capital. Subsequent increases and decreases in the net
unrealized gain/loss on the available-for-sale securities are reflected as
adjustments to the carrying value of the portfolio and adjustments to the
component of partners' capital. The Partnership does not have investment
securities classified as held-to-maturity or trading. The carrying value
of tax-exempt mortgage bonds is periodically reviewed and adjusted when
there are significant changes in the estimated net realizable value of the
underlying collateral.
<PAGE> - 4 -
AMERICA FIRST APARTMENT INVESTORS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
Accrual of mortgage bond investment income is excluded from income when,
in the opinion of management, collection of related interest is doubtful.
This interest is recognized as income when it is received.
C) Investment in Real Estate
The Partnership's investment in real estate consists of property acquired
through foreclosure or deed in lieu of foreclosure and other real estate
acquired. Each real estate property acquired is recorded at the lower of
cost or estimated net realizable value. The carrying value of each real
estate property acquired is periodically reviewed and adjusted when there
are significant declines in the estimated net realizable value.
Depreciation of real estate is based on the estimated useful life of the
property (27-1/2 years on multifamily residential apartments or 31-1/2
years on The Exchange at Palm Bay) using the straight-line method.
Depreciation of real estate improvements on The Exchange at Palm Bay is
based on the term of the related tenant lease using the straight-line
method.
D) Income Taxes
No provision has been made for income taxes since Beneficial Unit
Certificate (BUC) Holders are required to report their share of the
Partnership's taxable income for federal and state income tax purposes.
E) Temporary Cash Investments
Temporary cash investments are invested in federally tax-exempt securities
purchased with an original maturity of three months or less.
F) Net Income per BUC
Net income per BUC has been calculated based on the weighted average
number of BUCs outstanding during each period presented.
3. Partnership Income, Expenses and Cash Distributions
The Partnership Agreement contains provisions for the distribution of Net
Operating Income, Net Sale Proceeds and Liquidation Proceeds and for the
allocation of income and expenses for tax purposes among AFCA 4 and BUC
Holders.
Cash distributions included in the financial statements represent the actual
cash distributions made during each period and the cash distributions accrued
at the end of each period.
4. Partnership Reserve Account
The Partnership maintains a reserve account which totaled $1,322,650 at June
30, 1997. The reserve account was established to maintain working capital for
the Partnership and is available to supplement distributions to investors or
for any other contingencies related to the ownership of the mortgage bonds,
real estate acquired and the operation of the Partnership, including the
acquisition of additional properties.
On July 10, 1996, management announced its intent to utilize a portion of the
reserve account to purchase up to a total of 50,000 BUCs of the Partnership in
open market transactions. Through June 30, 1997, 33,456 BUCs had been
acquired at a cost of $294,070 (none during the quarter or six months ended
June 30, 1997).
<PAGE> - 5 -
AMERICA FIRST APARTMENT INVESTORS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
5. Investment in Tax-Exempt Mortgage Bonds
Descriptions of the tax-exempt mortgage bonds owned by the Partnership at
June 30, 1997, are as follows:
<TABLE>
<CAPTION>
Base
Number Maturity Interest Carrying
Property Name Location of Units Date Rate(1) Amount
---------------------------------- -------------------- -------- ------------- -------- -----------------
<S> <C> <C> <C> <C> <C>
Nonperforming:(2)
Jefferson Place Olathe, KS 352 12/01/10 8.5% 12,800,000
Avalon Ridge Renton, WA 356 09/01/11 8.5% 18,755,000
-----------------
31,555,000
Unrealized holding losses (8,748,474)
-----------------
Balance at June 30, 1997 (at estimated fair value) $ 22,806,526
=================
</TABLE>
(1) In addition to the base interest rate shown, the bonds bear additional
contingent interest as defined in each revenue note which, when combined
with the interest shown, is limited to a cumulative, noncompounded amount
not greater than 13% per annum. The Partnership did not receive any
contingent interest in 1997.
(2) Nonperforming bonds are bonds which are not fully current as to interest
payments. The amount of foregone interest on nonperforming bonds for 1997
was $535,840 ($311,650 for the quarter ended June 30, 1997).
<TABLE>
<S> <C>
Reconciliation of the carrying amount of the mortgage bonds is as follows:
Balance at December 31, 1996 $ 31,566,526
Settlement of mortgage bond for real estate 8,760,000(1)
-----------------
Balance at June 30, 1997 $ 22,806,526
=================
</TABLE>
(1) In accordance with the terms of the Loan Agreement underlying the
$8,760,000 in tax-exempt mortgage bonds collateralized by Jackson Park
Place (Jackson), the Partnership exercised its option to require the owner
of Jackson to prepay the tax-exempt mortgage bonds. The Partnership
entered into a Settlement Agreement with the owner of Jackson that
provided for the Partnership to acquire Jackson at appraised value on May
7, 1997. In accordance with the terms of the Loan Agreement, the
following disbursements were made: (i) $2,100,000 to America First
Participating/Preferred Equity Mortgage Fund (PREP), an affiliated fund,
representing payment of the outstanding balance of its Participating Loan
on Jackson; (ii) $69,480 to PREP representing contingent interest income
on its Participating Loan; (iii) $371,220 to AFCA 4 and $88,780 to the
general partner of PREP representing due and unpaid administrative fees;
(iv) $290,520 to the Partnership representing contingent interest income
on the tax-exempt mortgage bonds; and (v) $360,000 to the owner of
Jackson. These disbursements were funded with borrowings on the
Partnership's Line of Credit. The Partnership also incurred costs of
$17,736 in conjunction with the acquisition.
<PAGE> - 6 -
AMERICA FIRST APARTMENT INVESTORS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30 , 1997
(UNAUDITED)
6. Investment in Real Estate
During 1997, the Partnership acquired two multi-family properties, The Retreat
and Jackson Park Place. The Retreat was financed primarily from proceeds from
the Partnership's line of credit. Jackson Park Place was conveyed to the
Partnership through a deed in lieu of foreclosure (see Note 5).
The Partnership's investment in real estate is comprised of the following at
June 30, 1997:
<TABLE>
<CAPTION>
Building
Number and Carrying
Property Name Location of Units Land Improvements Amount
--------------------------------- -------------------- -------- ------------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
Covey at Fox Valley(1) Aurora, IL 216 $ 1,320,000 $ 10,028,338 $ 11,348,338
The Exchange at Palm Bay Palm Bay, FL 72,002(2) 1,296,002 3,475,895 4,771,897
The Park at Fifty Eight(3)(4) Chattanooga, TN 196 231,113 4,122,226 4,353,339
Shelby Heights (4) Bristol, TN 100 175,000 2,952,847 3,127,847
Coral Point(1) Mesa, AZ 336 2,240,000 8,960,000 11,200,000
Park at Countryside(4) Port Orange, FL 120 647,000 2,616,648 3,263,648
The Retreat Atlanta, GA 226 1,800,000 7,315,263 9,115,263
Jackson Park Place Fresno, CA 296 1,400,000 10,657,736 12,057,736
-----------------
59,238,068
Less accumulated depreciation (8,490,405)
-----------------
Balance at June 30, 1997 $ 50,747,663
=================
</TABLE>
(1) Property is encumbered as described in Note 8.
(2) Represents square feet.
(3) Property consists of Phase II (96 units acquired through foreclosure) and
Phase I (100 units purchased on May 16, 1996).
(4) Property is encumbered as described in Note 7.
7. Bonds Payable
Bonds payable were originated by the Partnership through the issuance of
tax-exempt refunding bonds. Bonds payable at June 30, 1997, consisted of the
following:
<TABLE>
<CAPTION>
Effective Final
Interest Maturity Annual Carrying
Collateral Rate Date Payment Schedule Payments Amount
- ----------------------- --------- -------- ----------------------------------- --------------------- -------------
<S> <C> <C> <C> <C> <C>
The Park at Fifty Eight 6.65% 3/1/2021 semiannual payments of range from $224,000 $ 2,670,000
principal and/or interest to $228,000
are due each March 1 and September 1
Shelby Heights and 6.10% 3/1/2022 semiannual payments of range from $266,000 3,450,000
Park at Countryside principal and/or interest to $276,000
are due each March 1 and September 1 -------------
Balance at June 30, 1997 $ 6,120,000
=============
</TABLE>
<PAGE> - 7 -
AMERICA FIRST APARTMENT INVESTORS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
8. Line of Credit
The Partnership has a $15 million revolving loan credit agreement (the Line of
Credit) with The First National Bank of Boston (the Bank). The Line of Credit
provides interim financing for the acquisition of multifamily residential
properties. It expires on December 19, 1997; however, the maturity date may
be extended one year if certain conditions are met. The Line of Credit bears
interest, which is payable monthly, at 1/2% above the Bank's base rate (9% as
of June 30, 1997). In addition, the Partnership pays a facility fee of 1/4 of
1% on the unused portion of the line which is payable quarterly in arrears.
The Line of Credit is collateralized by Covey at Fox Valley and Coral Point;
however, the Partnership may substitute other real estate owned as collateral,
subject to the approval of the Bank. The Partnership had borrowings of
$12,157,871 against the Line of Credit and had $2,842,129 of available unused
credit as of June 30, 1997. The Line of Credit contains covenants which
include, among others, restrictions on the amount of indebtedness the
Partnership may incur and minimum debt service coverage requirements.
9. Transactions with Related Parties
Substantially all of the Partnership's general and administrative expenses are
paid by AFCA 4 or an affiliate and reimbursed by the Partnership. The amount
of such expenses reimbursed to AFCA 4 during 1997 was $784,187 ($433,660 for
the quarter ended June 30, 1997). AFCA 4 or an affiliate also paid $214,195
($141,775 for the quarter ended June 30, 1997) in costs capitalized by the
Partnership during 1997 which were reimbursed by the Partnership. The
capitalized costs were incurred in connection with the offering of multifamily
housing revenue refunding bonds and the acquisition of real estate. The
reimbursed expenses are presented on a cash basis and do not reflect accruals
made at quarter end.
Pursuant to the terms of the Limited Partnership Agreement, AFCA 4 is entitled
to an administrative fee from the Partnership based on the original amount of
the mortgage bonds which were foreclosed on and the purchase price of any
additional properties acquired by the Partnership. The amount of such fees
paid to AFCA 4 during 1997 was $113,100 ($56,550 for the quarter ended June
30, 1997). AFCA 4 also received administrative fees of $371,220 in
conjunction with the Jackson Park Place Settlement Agreement described in Note
5. AFCA 4 did not receive any other administrative fees from property owners
during 1997.
Pursuant to the terms of the Limited Partnership Agreement, AFCA 4 is entitled
to receive a property acquisition fee from the Partnership in connection with
the identification, evaluation and acquisition of additional properties and
the financing thereof. The amount of such fees paid to AFCA 4 was $112,277
for the quarter and six months ended June 30, 1997.
The general partner of the property partnership which owns Jefferson Place is
principally owned by an employee of an affiliate of AFCA 4. Such employee has
a nominal interest in the affiliate. AFCA 4 and an affiliated mortgage fund
also own small interests in the general partner. The general partner has a
nominal interest in the property partnership's profits, losses and cash flow
which is subordinate to the interest of the Partnership and the mortgage
bond. The general partner did not receive cash distributions from the
partnership in 1997.
An affiliate of AFCA 4 was retained to provide property management services
for Covey at Fox Valley, The Park at Fifty Eight, Shelby Heights, Coral Point,
Jefferson Place, Avalon Ridge, Park at Countryside (beginning in January
1997), The Retreat (beginning in April 1997) and Jackson Park Place (beginning
in May 1997). The fees for services provided represent the lower of (i) costs
incurred in providing management of the property, or (ii) customary fees for
such services determined on a competitive basis and amounted to $271,228
($145,429 for the quarter ended June 30, 1997) in 1997.
<PAGE> - 8 -
AMERICA FIRST APARTMENT INVESTORS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
10. Subsequent Event
On July 30, 1997, the Partnership received proceeds of $12,200,000 through the
offering of multifamily housing revenue refunding bonds on Jefferson Place.
The bonds were rated "A-" by Standard and Poor's Rating Services, bear
interest at an effective rate of 5.88% and have a 25-year maturity. Proceeds
from the offering were primarily used to pay down the Line of Credit.
<PAGE> - 9 -
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
America First Tax Exempt Mortgage Fund 2 (the Prior Partnership) originally
acquired nine tax-exempt mortgage bonds, the proceeds of which were used to
provide construction and/or permanent financing for eight multifamily housing
properties and one commercial property. The Prior Partnership subsequently
acquired five of the properties through foreclosure or deed in lieu of
foreclosure and one tax-exempt mortgage bond was prepaid in full. During
1996, the Prior Partnership acquired Phase I of the Park at Fifty Eight
Apartments.
On August 20, 1996, the Prior Partnership merged with America First Apartment
Investors, L.P. (the Partnership). Under the terms of the merger agreement,
the Partnership was the surviving partnership and effectively took over the
operations of the Prior Partnership. Unit holders of the Prior Partnership
received one Beneficial Unit Certificate (BUC) of the New Partnership for each
BUC they held in the Prior Partnership as of the record date. The Prior
Partnership was terminated under the provisions of the Prior Partnership's
Partnership Agreement.
During 1996, the Partnership acquired Park at Countryside and during 1997 the
Partnership acquired The Retreat. In addition, Jackson Park Place was
conveyed to the Partnership during 1997 through a deed in lieu of
foreclosure. At June 30, 1997, the Partnership continued to hold two
tax-exempt mortgage bonds with a carrying value, at estimated fair value, of
$22,806,526 and eight real estate properties acquired with a depreciated cost
of $50,747,663.
The following table shows the various occupancy levels of the properties
financed or owned by the Partnership at June 30, 1997:
<TABLE>
<CAPTION>
Number Percentage
Number of Units of Units
Property Name Location of Units Occupied Occupied
- ------------------------------- ----------------------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Jackson Park Place(1) Fresno, CA 296 279 94%
Jefferson Place Olathe, KS 352 342 97%
Avalon Ridge Renton, WA 356 340 96%
Covey at Fox Valley(1) Aurora, IL 216 210 97%
The Park at Fifty Eight(3) Chattanooga, TN 196 193 98%
Shelby Heights(1) Bristol, TN 100 99 99%
Coral Point(1) Mesa, AZ 336 309 92%
Park at Countryside Port Orange, FL 120 118 98%
The Retreat Atlanta, GA 226 211 93%
---------- ---------- -----------
2,198 2,101 96%
========== ========== ===========
The Exchange at Palm Bay(1) Palm Bay, FL 72,002(2) 42,839(2) 60%
========== ========== ===========
</TABLE>
(1) Property acquired through foreclosure or deed in lieu of foreclosure.
(2) Represents square feet.
(3) Property consists of Phase II (96 units acquired through foreclosure) and
Phase I (100 units purchased on May 16, 1996).
The principal amounts of the tax-exempt mortgage bonds do not amortize over
their terms. The tax-exempt mortgage bonds provide for the payment of base
interest at a fixed rate. In addition, the Partnership may earn contingent
interest based on a participation in the net cash flow and net sale or
refinancing proceeds from the real estate collateralizing the tax-exempt
mortgage bonds. The base interest payments received on the tax-exempt
mortgage bonds and net rental income earned on properties owned represent the
principal sources of the Partnership's income and distributable cash. During
1997, the Partnership also received contingent interest of $290,520 on its
Jackson Park Place mortgage bond (see further discussion under Asset
Quality). The Partnership also earns income on temporary cash investments.
The Partnership may draw on reserves to pay operating expenses or to
supplement cash distributions to Beneficial Unit Certificate (BUC) Holders.
<PAGE> - 10 -
The Partnership has a $15 million revolving loan credit agreement (the Line of
Credit) with the First National Bank of Boston (the Bank). The Line of Credit
provides interim financing for the acquisition of multifamily residential
properties. The Line of Credit bears interest at 1/2% above the Bank's base
rate (9% as of June 30, 1997). The Line of Credit expires on December 19,
1997; however, the maturity date may be extended one year if certain
conditions are met. The Partnership had borrowings of $12,157,871 against the
Line of Credit and had $2,842,129 of available unused credit as of June 30,
1997. The Line of Credit contains covenants which include, among others,
restrictions on the amount of indebtedness the Partnership may incur and
minimum debt service coverage requirements. The Partnership intends to repay
borrowings under the Line of Credit through the refunding of existing
tax-exempt bonds that are associated with certain properties acquired in
foreclosure.
On April 10, 1997, the Partnership acquired The Retreat Apartments, a 226-unit
multifamily housing property located in Atlanta, Georgia. The property was
acquired at a total cost of $9,115,263 and was financed primarily from
proceeds from the Partnership's Line of Credit. The Partnership anticipates
obtaining permanent financing for the property through the offering of certain
of its tax-exempt mortgage bonds.
On July 30, 1997, the Partnership received proceeds of $12,200,000 through the
offering of multifamily housing revenue refunding bonds on Jefferson Place.
The bonds were rated "A-" by Standard and Poor's Rating Services, bear
interest at an effective rate of 5.88% and have a 25-year maturity. Proceeds
from the offering were primarily used to pay down the Line of Credit.
During the six months ended June 30, 1997, $531,521 of undistributed income
was placed in reserves (a net amount of $1,790 was withdrawn from reserves for
the quarter ended June 30, 1997). The total amount held in reserves at June
30, 1997, was $1,322,650. Future distributions to BUC Holders will depend
upon the amount of base and contingent interest and net rental income the
Partnership receives, the size of reserves established by the Partnership and
the extent to which withdrawals are made from reserves.
The Partnership believes that cash provided by operating activities and, if
necessary, withdrawals from the Partnership's reserves will be adequate to
meet its short-term and long-term liquidity requirements, including the
payments of distributions to BUC Holders. Under the terms of its Partnership
Agreement, the Partnership has the authority to enter into short-term and
long-term debt financing arrangements. The Partnership is not authorized to
issue additional BUCs to meet short-term and long-term liquidity requirements.
Distributions
Cash distributions paid or accrued per BUC were as follows:
<TABLE>
<CAPTION>
For the Six For the Six
Months Ended Months Ended
June 30, 1997 June 30, 1996
--------------- ---------------
<S> <C> <C>
Regular monthly distributions
Income $ .2196 $ .2638
Return of capital .1554 .1112
--------------- ---------------
$ .3750 $ .3750
=============== ===============
Distributions
Paid out of current and prior undistributed cash flow $ .3750 $ .3750
=============== ===============
</TABLE>
<PAGE> - 11 -
Asset Quality
It is the policy of the Partnership to make a periodic review of the real
estate collateralizing the Partnership's mortgage bonds and real estate
acquired and adjust, when necessary, the carrying value of the mortgage bonds
and each real estate property acquired. Mortgage bonds are classified as
available-for-sale and are therefore recorded at the estimated fair value of
the underlying collateral. Each real estate property acquired is recorded at
the lower of cost or estimated net realizable value. The carrying value of
the mortgage bonds is adjusted when there are significant changes in the
estimated net realizable value of the underlying collateral for the bonds.
The carrying value of each real estate property acquired is adjusted when
there are significant declines in the estimated net realizable value.
Internal property valuations and reviews performed during the six months ended
June 30, 1997, indicated that the mortgage bonds and real estate recorded on
the balance sheet at June 30, 1997, required no adjustments to their current
carrying amounts.
In accordance with the terms of the Loan Agreement underlying the $8,760,000
in tax-exempt mortgage bonds collateralized by Jackson Park Place (Jackson),
the Partnership exercised its option to require the owner of Jackson to prepay
the tax-exempt mortgage bonds. The Partnership entered into a Settlement
Agreement with the owner of Jackson that provided for the Partnership to
acquire Jackson at appraised value on May 7, 1997. In accordance with the
terms of the Loan Agreement, the following disbursements were made: (i)
$2,100,000 to America First Participating/Preferred Equity Mortgage Fund
(PREP), an affiliated fund, representing payment of the outstanding balance of
its Participating Loan on Jackson; (ii) $69,480 to PREP representing
contingent interest income on its Participating Loan; (iii) $371,220 to AFCA 4
and $88,780 to the general partner of PREP representing due and unpaid
administrative fees; (iv) $290,520 to the Partnership representing contingent
interest income on the tax-exempt mortgage bonds; and (v)
$360,000 to the owner of Jackson. These disbursements were funded with
borrowings on the Partnership's Line of Credit. The Partnership also incurred
costs of $17,736 in conjunction with the acquisition.
The overall status of the Partnership's other mortgage bonds and real estate
owned has generally remained constant since March 31, 1997.
Results of Operations
The tables below compare the results of operations for each period shown.
Results of operations for 1996 include the accounts of the Prior Partnership.
<TABLE>
<CAPTION>
For the For the Increase
Quarter Ended Quarter Ended (Decrease)
June 30, 1997 June 30, 1996 From 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Mortgage bond investment income $ 421,444 $ 521,648 $ (100,204)
Contingent interest income 290,520 - 290,520
Rental income 2,331,340 1,422,169 909,171
Interest income on temporary cash investments 22,878 13,507 9,371
--------------- --------------- ---------------
3,066,182 1,957,324 1,108,858
--------------- --------------- ---------------
General and administrative expenses 269,078 305,960 (36,882)
Real estate operating expenses 1,139,355 750,550 388,805
Depreciation 477,322 275,451 201,871
Interest expense 381,864 30,362 351,502
--------------- --------------- ---------------
2,267,619 1,362,323 905,296
--------------- --------------- ---------------
Net income $ 798,563 $ 595,001 $ 203,562
=============== =============== ===============
</TABLE>
<PAGE> - 12 -
<TABLE>
<CAPTION>
For the Six For the Six Increase
Months Ended Months Ended (Decrease)
June 30, 1997 June 30, 1996 From 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Mortgage bond investment income $ 1,053,948 $ 1,116,553 $ (62,605)
Contingent interest income 290,520 - 290,520
Rental income 4,024,158 2,719,570 1,304,588
Interest income on temporary cash investments 28,866 24,570 4,296
--------------- --------------- ---------------
5,397,492 3,860,693 1,536,799
--------------- --------------- ---------------
General and administrative expenses 539,163 535,041 4,122
Real estate operating expenses 1,805,379 1,467,956 337,423
Depreciation 810,211 583,543 226,668
Interest expense 547,121 30,362 516,759
--------------- --------------- ---------------
3,701,874 2,616,902 1,084,972
--------------- --------------- ---------------
Net income $ 1,695,618 $ 1,243,791 $ 451,827
=============== =============== ===============
</TABLE>
Mortgage bond investment income decreased for the quarter and six months ended
June 30, 1997, compared to the same periods in 1996. Approximately $124,000
of such decrease was due to the Jackson Park Place Settlement Agreement (see
further discussion under Asset Quality). This decrease was partially offset
by an increase in the cash flow received from Avalon Ridge of approximately
$29,000 and $53,000 for the quarter and six months ended June 30, 1997,
respectively, and a decrease of approximately $5,000 for the quarter and an
increase of approximately $8,000 for the six months in cash flow received from
Jefferson Place. The increase in cash flow received from Avalon Ridge is due
primarily to increases in average occupancy of 14% and 13% for the quarter and
six months ended June 30, 1997, respectively, compared to the same periods in
1996.
The Partnership earned contingent interest income of $290,520 for the quarter
and six months ended June 30, 1997, in conjunction with the Jackson Park Place
Settlement Agreement (see further discussion under Asset Quality). No such
income was earned for the quarter and six month periods ended June 30, 1996.
Rental income increased for the quarter and six months ended June 30, 1997,
compared to the same periods in 1996. The increase for the quarter is
attributable to: (i) an increase of $817,000 due to the acquisitions of Park
at Countryside in December 1996, The Retreat in April 1997, and Jackson Park
Place in May 1997; (ii) an increase of $60,000 from The Park at Fifty Eight
due primarily to the acquisition of Phase I of this property in May 1996;
(iii) an increase of $16,000 generated by Shelby Heights due primarily to a 5%
increase in the average occupancy; and (iv) net increases of $16,000 generated
by the Partnership's other properties. The increase for the six months is
attributable to: (i) an increase of $999,000 due to the acquisitions of Park
at Countryside, The Retreat, and Jackson Park Place; (ii) an increase of
$183,000 from The Park at Fifty Eight due primarily to the acquisition of
Phase I of this property; and (iii) an increase of $123,000 due to an increase
in the average occupancy an rental rate increases at Covey at Fox Valley,
Coral Point, Shelby Heights and The Exchange at Palm Bay.
Real estate operating expenses increased for the quarter ended June 30, 1997,
compared to the same period in 1996. This increase is attributable to: (i)
an increase of $424,000 due to the acquisitions of Park at Countryside, The
Retreat, and Jackson Park Place; (ii) a net increase of $8,000 in various real
estate operating expenses; partially offset by (iii) a decrease of $43,000 in
repairs and maintenance expenses and capital improvements at Covey at Fox
Valley and The Exchange at Palm Bay. Excluding property tax refunds of
$180,000 received by Covey at Fox Valley during the quarter ended March 31,
1997, real estate operating expenses increased $517,000 for the six months
ended June 30, 1997, compared to the same period in 1996. This increase is
attributable to: (i) an increase of $506,000 due to the acquisitions of Park
at Countryside, The Retreat, and Jackson Park Place; (ii) an increase of
$68,000 at The Park at Fifty Eight due primarily to the acquisition of Phase I
of this property; (iii) a net increase of $28,000 in various real estate
operating expenses; partially offset by (iii) non-recurring leasing
commissions of $85,000 incurred during the six months ended June 30, 1996.
<PAGE> - 13 -
Depreciation expense increased for the quarter and six months ended June 30,
1997, compared to the same periods in 1996, primarily attributable to property
acquisitions made during 1996 and 1997 and to real estate capital improvements
made at the Exchange at Palm Bay during 1996 and 1997.
Interest expense increased for the quarter and six months ended June 30, 1997,
compared to the same periods in 1996. This increase consisted of $276,000 and
$389,000 of interest incurred on the Line of Credit for the quarter and six
months ended June 30, 1997, respectively, and increases of $76,000 and
$128,000 in interest incurred on bonds payable for the quarter and six months
ended June 30, 1997, respectively, compared to the same periods in 1996.
The increase in interest income on temporary cash investments for the quarter
and six months ended June 30, 1997, compared to the same periods in 1996 is
primarily due to an increase in the average interest rate earned on the
Partnership reserves during 1997.
General and administrative expenses decreased for the quarter ended June 30,
1997, compared to the same period in 1996. This decrease is due to: (i)
$75,000 in costs incurred during the quarter and six months ended June 30,
1996, in conjunction with the Partnership's merger with America First Tax
Exempt Mortgage Fund 2 Limited Partnership; partially offset by increases in :
(ii) salaries and related expenses of $31,000; and (iii) other general and
administrative expenses of $7,000.
General and administrative expenses increased for the six months ended June
30, 1997, compared to the same period in 1996, due primarily to increases in:
(i) salaries and related expenses of $68,000; (ii) other general and
administrative expenses of $11,000; partially offset by (iii) $75,000 in costs
incurred in 1996 in conjunction with the merger described above.
<PAGE> - 14 -
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4(a) Form of Certificate of Beneficial Unit Certificate
incorporated by reference to Exhibit 4.1 to Registration
Statement on Form S-4 (Commission File No. 333-2920) filed
by the Registrant on March 29, 1996).
4(b) Agreement of Limited Partnership of the Registrant
(incorporated by reference to Exhibit 4(b) to Form 8-K
(Commission File No. 0-20737) filed by the Registrant on
August 23, 1996).
10(a) $18,755,000 Washington State Housing Finance Commission
Multifamily Housing Mortgage Revenue Note (Sunpointe
Apartments Projects) Series 1987 (incorporated herein by
reference to Form 10-K dated December 31, 1987 filed
pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 by America First Tax Exempt Mortgage Fund 2
Limited Partnership (Commission File No. 0-15329)).
10(b) Lender Loan Agreement and Indenture of Trust among
Washington State Housing Finance Commission, the
Registrant and FirsTier Bank, National Association, dated
September 1, 1987 (incorporated herein by reference to Form
10-K dated December 31, 1987 filed pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934 by America
First Tax Exempt Mortgage Fund 2 Limited Partnership
(Commission File No. 0-15329)).
10(c) Construction Loan Agreement between the Registrant and
Sunpointe Associates Limited Partnership, dated September
1, 1987 (incorporated herein by reference to Form 10-K
dated December 31, 1987 filed pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 by America
First Tax Exempt Mortgage Fund 2 Limited Partnership
(Commission File No. 0-15329)).
10(d) Settlement Agreement among the Registrant and Jackson Park
Place, Artel Farms, Inc., and David A. Dyck dated April
11, 1997.
(b) Form 8-K
The registrant filed the following report on Form 8-K during
the quarter for which this report is filed.
Item Reported Financial Statements Filed Date of Report
2. Acquisition no April 10, 1997
or Disposition
of Assets
<PAGE> - 15 -
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.
Dated: August 13, 1997 AMERICA FIRST APARTMENT INVESTORS, L.P.
By America First Capital
Associates Limited
Partnership Four, General
Partner of the Registrant
By America First Companies L.L.C.,
General Partner of America First Capital
Associates Limited Partnership Four
By /s/ Michael Thesing
Michael Thesing
Vice President and Principal Financial
Officer
<PAGE> - 16 -
EXHIBIT 10(d)
SETTLEMENT AGREEMENT
<PAGE> - 17 -
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT (this "Agreement") is entered into as of April
11, 1997 among AMERICA FIRST APARTMENT INVESTORS, L.P., a Delaware limited
partnership, successor to America First Tax Exempt Mortgage Fund 2 Limited
Partnership ("Lender"), and JACKSON PARK PLACE, a California limited
partnership ("Debtor"), ARTEL FARMS, INC., a California corporation ("General
Partner"), and DAVID A. DYCK ("Dyck") (Debtor, General Partner and Dyck are
referred to collectively as the "Debtor Entities").
PRELIMINARY STATEMENT
To finance a portion of the costs related to developing the Property,
Lender purchased the Note of the Issuer, issued pursuant to the Lender Loan
Agreement. The proceeds of the Note were used to make a Project Loan to the
Debtor, which Project Loan is evidenced by the Loan Agreement is further
evidenced and secured by the Project Loan Documents.
To finance other costs relating to the development of the Property, PREP
Fund made a loan to Debtor which is evidenced and secured by the PREP Fund
Loan Documents.
Pursuant to the Intercreditor Agreement, the Project Loan Documents are
in parity in all respects with the PREP Fund Loan Documents.
Lender gave notice to Debtor by letter dated October 2, 1996, that the
Note is to be redeemed on April 15, 1997 in accordance with Article III,
Section 3.01(f) of the Lender Loan Agreement. Accordingly, Debtor shall
convey the Property and the Property Rights to Lender on the terms and
conditions set forth in this Agreement, and Lender has agreed to accept the
Property and the Property Rights in accordance herewith and Lender and Debtor
have agreed that such conveyance shall not have the effect of extinguishing or
otherwise satisfying the Note of the Issuer.
AGREEMENT
In consideration of the Preliminary Statements, the agreements set forth
herein and other consideration, the adequacy, sufficiency and receipt of which
is acknowledged, Debtor and Lender agree as follows:
ARTICLE I
DEFINITIONS
Initially capitalized terms used in the Agreement shall have the
following meanings, unless otherwise defined or the context clearly requires
otherwise:
"Advisory Agreement" means that certain Advisory Agreement dated as of
the date of this Agreement between General Partner and America First
Properties Management Company, L.L.C., a Delaware limited liability company.
"Assignment" shall mean that certain Assignment and Assumption Agreement
to be executed, acknowledged and delivered by Nominee and Debtor pursuant to
this Agreement in the form attached hereto as Exhibit B.
"Assignment Agreement" means that certain Assignment Agreement dated as
of September 1, 1987 from Issuer to Lender pursuant to which Issuer assigned
to Lender, among other things, its interest in the Lender Loan Agreement and
the Note.
"Assignment of Agreements, Permits and Licenses" means that certain
Assignment of Agreements, Permits and Licenses dated as of September 1, 1987
from Debtor, as assignor, to Lender, as assignee, as further security for the
Note.
"Assignment of Rents and Leases" means that certain Assignment of Rents
and Leases dated as of September 1, 1987 from Debtor, as assignor, to Lender,
as assignee, encumbering the Property as further security for the Note.
"Bankruptcy Code" shall mean Title 11 of the United States Code, as
amended.
<PAGE> - 18 -
"Bill of Sale" shall mean that certain General Warranty Bill of Sale to
be executed and delivered by Debtor pursuant to this Agreement in the form
attached hereto as Exhibit C.
"Business Day" shall mean any day which is not a Saturday, a Sunday or a
federal holiday.
"Cash Flow Reserve Fund" means those certain funds, if any, held in escrow
pursuant to the Cash Flow Guarantee Agreement. "Cash Flow Guarantee
Agreement" means that certain Cash Flow Guarantee Reserve Fund Escrow
Agreement dated as of September 1, 1987 among Debtor, Lender, PREP Fund and
FirsTier Bank, National Association with respect to the Note.
"Closing" shall mean the completion of the delivery, exchange and
recording, as applicable, of the items described in Section 4.2 of this
Agreement.
"Closing Date" shall mean the date on which the Closing occurs.
"Confidential Information" shall mean this Agreement, the terms and
conditions of this Agreement and the other Settlement Documents and the
transactions contemplated therein.
"Deed" shall mean that certain General Warranty Deed to be executed,
acknowledged and delivered by Debtor pursuant to this Agreement in the form
attached hereto as Exhibit E.
"Deed of Trust" shall mean that certain Deed of Trust and Security
Agreement dated as of September 1, 1987, from Debtor to Lawyers Title
Insurance Corporation, as trustee, for the benefit of Lender, recorded on
September 22, 1987 as Document No. 87116292 in the Office of the County
Recorder, Fresno County, California.
"Deposits" shall mean all security deposits in the possession of the
Debtor Entities with respect to the Property.
"Entity" shall mean any partnership, corporation, association, joint
stock company, trust, real estate investment trust, joint venture or
unincorporated organization.
"Environmental Laws" shall mean any and all applicable federal, state,
local or municipal laws, rules, orders, regulations, statutes, ordinances,
codes, decrees or requirements of any applicable governmental authority with
appropriate jurisdiction relating to or imposing liability or standards of
conduct concerning the protection of the environment or natural resources, or
to emissions, discharges, releases or threatened releases of Hazardous
Materials into the environment, including ambient air, surface water, ground
water or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials.
"Escrow" shall mean that certain escrow established by Lender and the
Debtor Entities to facilitate the Closing.
"Escrow Account" means that certain tax and insurance escrow account held
by Lender or America First Mortgage Corp., as servicer with respect to the
Property. "Escrow Agent" shall mean Lawyers Title Insurance Corporation,
Los Angeles, California.
"Escrow Agreement" means that certain Escrow Agreement dated as of
September 1, 1987 among Issuer, Debtor, Lender, PREP Fund and FirsTier Bank,
National Association with respect to the Note.
"Escrow Instructions" shall mean Escrow Instructions in a form mutually
acceptable to Lender, the Debtor Entities and the Escrow Agent to be executed
and delivered by Lender, the Debtor Entities and the Escrow Agent to
facilitate the Closing.
"Event of Default" shall mean a breach of the terms and conditions of
this Agreement if notice of such breach from Lender to the Debtor Entities, or
the Debtor Entities to Lender, as applicable, has been given and such breach
is continuing 15 days after such notice.
"Foreclosure" shall mean any judicial foreclosure action or nonjudicial
power of sale under the Project Loan Documents.
<PAGE> - 19 -
"General Partner" means Artel Farms, Inc., a California corporation.
"Hazardous Material" shall mean any substance, material or waste, defined
or regulated as hazardous or toxic under any Environmental Law and which is in
a quantity sufficient to require compliance with any Environmental Law,
including, without limitation, asbestos, gasoline and any other petroleum
products, polychlorinated biphenyls and urea-formaldehyde insulation.
"Issuer" means the City of Fresno, California.
"Land" shall mean that certain real property located in Fresno, Fresno
County, California described more particularly in Exhibit A attached hereto
and all rights appurtenant thereto.
"Lender Indemnified Parties" shall mean Lender, Nominee and each of their
officers, directors, partners, employees, agents, representatives and
affiliates, as applicable, and the officers, directors, employees, agents,
representatives and affiliates of each of their partners and their partners,
as applicable.
"Lender Loan Agreement" means that certain Lender Loan Agreement dated as
of September 1, 1987 between the Issuer and Lender pursuant to which Lender
purchased the Note.
"Loan" shall mean that certain loan evidenced by the Note.
"Loan Agreement" shall mean that certain Loan Agreement dated as of
September 1, 1987 between Issuer and Debtor pursuant to which Issuer loaned
the proceeds of the Note to Debtor.
"Nominee" means such entity as Lender may designate prior to the Closing.
"Note" shall mean that certain $8,760,000 City of Fresno, California
Multifamily Mortgage Revenue Note (Jackson Park Place Project) Series 1987
dated as of September 1, 1987.
"Opinion" shall mean that certain legal opinion delivered by counsel to
the Debtor Entities in the form attached hereto as Exhibit F.
"Owner's Affidavit" shall mean the affidavit or affidavits delivered by
the Debtor Entities, as applicable, to Lender and the Escrow Agent as a
condition to the issuance of the Title Policy, which Owner's Affidavit shall
contain such certifications, representations and warranties as are required to
delete all standard exceptions from the Title Policy, including, without
limitation, the survey exceptions.
"Permitted Encumbrances" shall mean such liens, encumbrances and
restrictions described in Exhibit G to this Agreement.
"PREP Fund" means America First Participating/Preferred Equity Mortgage
Fund, a Nebraska general partnership.
"PREP Fund Assignment of Agreements, Permits and Licenses" means that
certain Assignment of Agreements, Permits and Licenses dated as of September
1, 1987 for Debtor, as assignor, to PREP Fund, as assignee, as further
security for the PREP Fund Note.
"PREP Fund Assignment of Rents and Leases" means that certain Assignment
of Rents and Leases dated as of September 1, 1987 from Debtor, as assignor, to
PREP Fund, as assignee, encumbering the Premises as further security for the
PREP Fund Note.
"PREP Fund Deed of Trust" means that certain Deed of Trust and Security
Agreement dated as of September 1, 1987 from Debtor, as grantor, to PREP Fund,
as beneficiary, and Lawyers Title Insurance Corporation, as trustee, recorded
on September 22, 1987 as Document No. 87116293 in the Office of the County
Recorder, Fresno, California.
"PREP Fund Loan Documents" means the PREP Fund Note, the PREP Fund Note
Purchase Agreement, the PREP Fund Assignment of Agreements, Permits and
Licenses, the PREP Fund Assignment of Rents and Leases, the PREP Fund Deed of
Trust, the PREP Fund Service Agreement, the PREP Fund UCCs and any and all
other certificates, instruments and documents delivered in connection with the
PREP Fund Loan and amendments thereto.
<PAGE> - 20 -
"PREP Fund Note" means that certain $2,100,000 Mortgage Note of Debtor in
favor of PREP Fund.
"PREP Fund Note Purchase Agreement" means that certain Note Purchase
Agreement between Debtor and PREP Fund dated as of September 1, 1987 relating
to the PREP Fund Note.
"PREP Fund Service Agreement" means that certain PREP Fund Service
Agreement dated as of September 1, 1987 between PREP Fund and America First
Mortgage Corp. as servicer, providing for the servicing of the loan evidenced
by the PREP Fund Note.
"PREP Fund UCCs" means those certain Uniform Commercial Code Financing
Statements between Debtor and PREP Fund with respect to the PREP Fund Loan.
"Project Loan Documents" shall mean the Deed of Trust, the Loan
Agreement, Assignment Agreement, the Assignment of Agreements, the Assignment
of Rents and Leases, the Cash Flow Guarantee Agreement, the Loan Agreement,
the Regulatory Agreement, the Servicing Agreement, the UCCs and any and all
other certificates, instruments and documents delivered in connection with the
Loan and amendments thereto.
"Property" shall mean the multifamily residential development known as
Jackson Park Place consisting of the Land and all improvements constructed
upon or attached to the Land, including without limitation, buildings,
structures, fixtures and other improvements of every kind and nature, whether
presently situated in, on or under the Land or hereafter constructed, erected,
installed or used in, on or under the Land.
"Property Rights" shall mean all of the (i) equipment, fixtures,
inventory, supplies, furnishings and other items of tangible or intangible
personal property owned by Debtor and situated in, on, about or used in
connection with the Property, (ii) motor vehicles used in connection with the
Property, (iii) plans, drawings, specifications, surveys, engineering reports,
technical descriptions, leasing and rental materials and forms and records
possessed by Debtor pertaining to the Property, (iv) to the extent such
transfer is not prohibited by applicable law or third-party agreement, the
telephone number(s) used in connection with the operation of the Property, and
all telephone directory advertising in connection therewith, (v) the Tenant
Leases, (vi) the Deposits and all other deposits made, received or held by
Debtor which have not been forfeited prior to the Closing Date by the parties
making such deposits, (vii) all warranties, guaranties, indemnities, claims
and permits pertaining to the Property and (viii) all funds held in the Escrow
Account and the Cash Flow Guarantee Reserve Fund.
"Regulatory Agreement" means that certain Regulatory Agreement dated as
of September 1, 1987 among Issuer, Debtor and Lender affecting the Property.
"Release" shall mean that certain Release to be executed, acknowledged
and delivered by Lender and the Debtor Entities pursuant to this Agreement in
the form attached hereto as Exhibit H.
"Rent Roll and Report" shall mean the rent roll and report dated ,
1997 certified by Debtor containing a rent roll of the Tenant Leases,
including the Deposits, an accounting of the accounts receivable and accounts
payable of the Property, and a list of each person or entity who has provided
goods or services of at least $1,000 in value to the Property during the
preceding 12 months.
"Servicing Agreement" means that certain Servicing Agreement dated as of
September 1, 1987 between Lender and America First Mortgage Corp., as
servicer, providing for the servicing of the loan evidenced by the Note.
"Settlement Documents" shall mean this Agreement and all documents,
instruments and certificates executed and/or delivered in connection with the
transactions contemplated by this Agreement.
"Tenant Leases" shall mean those certain residential tenant leases of the
Property in effect as of the Closing Date.
"Title Policy" shall mean the owner's policy of title insurance to be
issued with respect to the Property described in Article V of this Agreement.
"UCCs" shall mean those financing statements between Lender and Debtor
with respect to the Loan.
<PAGE> - 21 -
ARTICLE II
TRANSFER
Section 1.1. Transfer of Property and Property Rights; Purchase Price.
Debtor agrees to convey to Lender, or at Lender's election, Nominee, the
Property pursuant to the Deed and the Property Rights pursuant to the Bill of
Sale and the Assignment. Lender, Nominee and Debtor, as applicable, shall
execute and deliver, or cause to be executed and delivered, such other
documents and instruments, and take such actions, as are required by the terms
of Article IV. To the extent applicable, each Debtor Entity hereby renounces
any and all rights under Section 9505 of the Uniform Commercial Code, as
adopted in California, to written notice of a proposal of retention of
collateral in satisfaction of indebtedness and waives any claim or defense
based thereon.
Section 1.2. Consideration. At the Closing, Lender shall pay to Debtor
the sum of $360,000 in immediately available funds.
Section 1.3. Escrow Account and Cash Flow Guarantee Reserve Fund.
Effective as of the Closing, all funds currently held in the Escrow Account
and Cash Flow Guarantee Reserve Fund shall be the exclusive property of, and
shall be transferred in immediately available funds to, Lender. The Debtor
Entities agree to execute documents deemed reasonably necessary by Lender
directing that such funds be delivered and released to Lender, and the Debtor
Entities shall take such further actions deemed reasonably necessary by Lender
to cause the funds held in such escrows to be delivered to Lender.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
The representations, warranties and covenants contained in this Article
are being made to induce Lender to enter into this Agreement and the
transactions contemplated herein, and Lender has relied, and will continue to
rely, upon such representations, warranties and covenants. The
representations, warranties and covenants contained in this Article are true
and correct as of the date of this Agreement and the Closing Date and shall
survive the Closing and the delivery and/or recording of any document
contemplated by this Agreement. Each of the Debtor Entities represent,
warrant and covenant, as the context requires, as follows:
(a) Litigation. No action, suit, proceeding or investigation is
pending or threatened against the Property, the Property Rights or any of
the Debtor Entities.
(b) Financial Condition. No bankruptcy, insolvency, reorganization
or liquidation proceeding is now pending or, to the best of their
knowledge, threatened in writing against any of the Debtor Entities.
(c) No Conflict. Neither the execution, delivery nor performance of
this Agreement will conflict with, or result in a breach of the terms,
conditions or provisions of, or constitute a default under any agreement
or instrument to which the Debtor Entities are now a party or by which
the Debtor Entities may be bound.
(d) Consents and Approvals. No consents, approvals or
authorizations are required for the execution, delivery or performance of
this Agreement by the Debtor Entities or for the Debtor Entities'
compliance with the terms and provisions of this Agreement.
(e) Licenses, Permits, Etc. The Debtor Entities have provided
Lender with true, correct and complete copies of all licenses and permits
which are required to own and operate the Property and have delivered to
Lender all other documents, instruments, approvals, certificates, plans
and specifications, records and reports with respect to the Property in
the possession of the Debtor Entities a list of which is attached as
Exhibit I.
(f) Warranties of Title. Debtor is the holder of the fee simple
interest in the Property and the sole owner of the Property Rights. The
Property and the Property Rights are free and clear of any and all liens,
interests, leases, executory contracts, recorded or unrecorded easements,
obligations, options and encumbrances, except for the Permitted
Encumbrances.
<PAGE> - 22 -
(g) Authority. Each of the Debtor Entities has the full right,
power and authority to execute, deliver and perform this Agreement and
the Settlement Documents and to consummate the transactions contemplated
thereby, and the parties executing this Agreement on behalf of Debtor are
fully authorized and directed to execute the same to legally and validly
bind the Debtor Entities. Each of Debtor's partners and their respective
partnership interests are listed on the attached Exhibit J, and each of
General Partner's shareholders and their respective ownership interests
are listed on the attached Exhibit K.
(h) Compliance With Laws. All licenses, permits and approvals
necessary to own and operate the Property and the Property Rights are in
full force and effect and there are no violations thereof or of any
federal, state or local laws or regulations. Debtor has complied with
all applicable laws, statutes, rules, regulations, regulatory agreements
and ordinances in its ownership, leasing, use and operation of the
Property.
(i) Enforceability. This Agreement and the Settlement Documents
have been duly authorized, executed and delivered and constitute the
legal, valid and binding obligations of the Debtor Entities, enforceable
against them in accordance with their respective terms.
(j) Access; Zoning; Utilities. There are adequate ingress and
egress rights from and to the Property on public roadways, and such
ingress and egress rights run with the Property. The Debtor Entities are
not aware of any current or future limitation of ingress or egress to the
Property. The Property is properly zoned for its use as a multifamily
residence, and Debtor is aware of no violations of applicable zoning
ordinances. The Property is served by adequate utilities for its use as
a multifamily residence.
(k) Tax-exempt Status of the Note; Preservation. Debtor
acknowledges that the interest on the Note is intended to be excluded
from gross income for income tax purposes and represents and warrants
that at all times subsequent to the issuance of the Note Debtor has
abided by all covenants of the Regulatory Agreement and has not taken or
omitted to take any action with respect to the Project or the use of the
proceeds of the Note that would adversely affect such exclusion. Debtor
acknowledges and agrees that neither this Agreement nor any transaction
contemplated by this Agreement shal constitute an extinguishment or other
satisfaction of the Note, which Note the Lender intends to continue to
hold and treat as unpaid and outstanding for all purposes after
completion of the transactions contemplated by this Agreement.
(l) Acknowledgement of Terms. Each of the Debtor Entities has
thoroughly read and reviewed the terms and provisions of this Agreement
and the other Settlement Documents, and the terms and provisions are
clearly understood and have been fully and unconditionally consented to
by each of the Debtor Entities; each of the Debtor Entities has had a
full and complete opportunity for advice of counsel of their own
selection in regard to understanding the terms, meaning and effect of
this Agreement and the other Settlement Documents; each of the Debtor
Entities has freely and voluntarily executed this Agreement and the other
Settlement Documents with full knowledge of the consequences thereof and
without duress; no Debtor Entity has relied on representations, either
written or oral, express or implied, made to them by any party except as
expressly set forth in this Agreement and the other Settlement Documents;
and each of the Debtor Entities has received actual, adequate and new
consideration hereunder.
(m) Obligations and Liabilities. The Debtor Entities have delivered
the Rent Roll and Report to Lender. The Rent Roll and Report contained a
true, complete and correct list of all Tenant Leases, all creditors of
Debtor and/or the Property and the sums due such creditors as of the date
of the Rent Roll and Report. The Rent Roll and Report will be brought
current and will be true, correct and complete as of the Closing Date.
Except for certain monetary defaults under the Project Loan Documents and
the accounts payable described in the Rent Roll and Report, there are no
outstanding liabilities and/or monetary obligations of Debtor or the
Property, including, without limitation, real property taxes and
assessments, personal property taxes, state and federal employee
withholding taxes, state and local gross receipts and occupancy taxes,
fees and assessments and operating expenses and costs, and other fees and
charges which may constitute or become a lien against the Debtor Entities
or any of their assets, including, without limitation, the Property.
<PAGE> - 23 -
(n) Environmental Compliance; Environmental Indemnification. The
Property is not in violation of any applicable Environmental Laws and is
not subject to any remedial action or plan specifically ordered or issued
for the Property under any Environmental Laws and no notice has been
received from any governmental or quasi-governmental agency that the
Property is subject to any existing, pending or threatened investigation
or inquiry by any governmental authority. Furthermore, there are no
Hazardous Materials located at, on or about the Property other than in de
minimis quantities, but only then to the extent the presence of such
materials is reasonably required to carry out the operations of a
multifamily residence (e.g., cleaning fluids; paint). At no time during
the ownership of the Property by Debtor has the Property been in
violation of any Environmental Laws, nor has a release of any Hazardous
Material occurred at, on or about the Property during the ownership of
the Property by the Debtor Entities. No portion of the Property is
located within 2000 feet of a significant disposal of "hazardous waste"
within the meaning of Section 25221 of the California Health and Safety
Code.
(o) Bulk Sale. The transactions contemplated by this Agreement are
not subject to the bulk sale requirements, if any, of the Uniform
Commercial Code of the State of California.
(p) Improvements. No improvements have been constructed on the
Property since the closing of the Loan other than as disclosed on the
attached Exhibit L.
The Debtor Entities, jointly and severally, hereby indemnify and hold
harmless the Lender Indemnified Parties from any claim, loss, liability,
damage, demand, cause of action, cost, expense or fee (including, without
limitation, attorneys' fees and expenses, accountants' fees and expenses or
fees and expenses of other associated professionals) that may be paid,
suffered or incurred by, or asserted against, the Lender Indemnified Parties
resulting from a breach of the representations, warranties and covenants set
forth in this Section and any other representations and warranties contained
in the Settlement Documents.
ARTICLE IV
ESCROW AND CLOSING
Section 4.1. Escrow Closing. The transfer of the Property and the
Property Rights from Debtor to Lender or Nominee shall be accomplished through
the Escrow, but in no event later than May 15, 1997. The Closing shall be
deemed to have occurred only upon the delivery, exchange and recording, as
applicable, of all of the items described in Section 4.2 of this Agreement.
Section 4.2. Deliveries. The Debtor Entities, Lender and Nominee, as
applicable, shall deliver or cause to be delivered to each other or the Escrow
Agent, as applicable, each of the following:
(i) the Deed, duly executed and acknowledged by Debtor;
(ii) the Bill of Sale, duly executed and acknowledged by Debtor;
(iii) the Assignment, duly executed and acknowledged by Debtor and
Lender or Nominee;
(iv) such evidence or documents as may be reasonably required by
Lender evidencing the status-and capacity of the Debtor Entities and the
authority of the person or persons who are executing the various
documents on behalf of the Debtor Entities, as applicable, in connection
with the transaction contemplated by this Agreement;
(v) an affidavit or statement, duly executed and acknowledged by
Debtor, necessary to exempt the transfer of the Property from the
withholding requirements of the Internal Revenue Code of 1986, as amended;
(vi) the Owner's Affidavit, duly executed and acknowledged by Debtor;
(vii) the Opinion executed by counsel to the Debtor Entities;
(viii) the amount of the Debtor Entities' portion of the prorations
and costs described in Sections 4.4 and 4.5 of this Agreement in
immediately available funds, to the extent such prorations and costs are
determinable as of Closing;
<PAGE> - 24 -
(ix) the Rent Roll and Report certified by Debtor as true, correct
and complete as of the Closing Date;
(x) the Advisory Agreement, duly executed and acknowledged by
General Partner and/or Debtor and America First Properties Management
Company, L.L.C.;
(xi) such documents, instruments and instructions as may be
reasonably required by Lender to provide for the release of the funds
held in the Escrow Account and the Cash Flow Guarantee Reserve Fund;
(xii) such other documents, certificates or other items contemplated
by this Agreement or as Lender or Escrow Agent may reasonably request in
order to consummate the transactions contemplated by this Agreement;
(xiii) such terminations of the existing property management
agreements for the Property and service, management and leasing
agreements for the Property as Lender shall require, duly executed and
acknowledged by all applicable parties;
(xiv) the Release;
(xv) $360,000 in immediately available funds as contemplated by
Section 1.2; and
(xvi) the Deposits and all other deposits held by Debtor shall be
delivered by Debtor.
Section 4.3. Escrow Instructions. Simultaneously with the execution of
this Agreement, Lender and the Debtor Entities are executing and delivering to
Escrow Agent the Escrow Instructions. It is the intention of Lender and the
Debtor Entities that the provisions of the Escrow Instructions be consistent
with the provisions of this Agreement. To the extent that there exists a
conflict between the provisions of this Agreement and the Escrow Instructions,
or any subsequent instructions supplied by any of the parties hereto, such
conflict shall be resolved in favor of this Agreement unless otherwise
expressly agreed to in writing by all parties hereto.
Section 4.4. Prorations; Liabilities. (a) All revenues and operating
expenses of the Property actually received or incurred, as applicable, by
Debtor as of the Closing Date shall be prorated as of the Closing Date, with
Lender receiving only the benefit and burden of such revenues and operating
expenses attributable to the period of time from and after the Closing Date.
Subject to Section 4.4(b), revenues and operating expenses of the Property
attributable to the period of time prior to the Closing Date but received or
paid by Lender subsequent to the Closing Date shall be promptly remitted by
Lender to the Debtor Entities, or the Debtor Entities shall promptly reimburse
Lender, as applicable; provided, however, Lender shall have no obligation to
collect such revenues or to pay such operating expenses to the extent they
were not reasonably incurred by the Debtor Entities in the operation of the
Property. Debtor covenants to promptly apply any such revenues remitted to it
by Lender to pay Debtor's accounts payable with respect to the Property as
contemplated by Section 4.4(c).
(b) Lender and the Debtor Entities agree to make the post-Closing revenue
and operating expense adjustments contemplated by Section 4.4(a) within 75
days of the Closing Date, by which date the Debtor Entities will have
satisfied all liabilities and obligations relating to such adjustments;
provided, however, to the extent additional adjustments are required
subsequent to such time period, Lender and the Debtor Entities agree to
promptly make such adjustments upon the reasonable request of the other.
(c) Liabilities and monetary obligations of the Debtor Entities with
respect to the Property attributable to the period of time prior to the
Closing Date are the sole responsibility of the Debtor Entities and shall be
satisfied by the Debtor Entities within 75 days of the Closing Date.
(d) The Debtor Entities, jointly and severally, shall indemnify and hold
the Lender Indemnified Parties harmless from and against any and all claims,
losses, liabilities, damages, demands, causes of action, costs, expenses or
fees (including, without limitation, attorneys' fees and expenses,
accountants' fees and expenses or fees and expenses of other associated
professionals) that may be paid, suffered or incurred by, or asserted against,
the Lender Indemnified Parties resulting from the failure of the Debtor
Entities to satisfy their obligations as set forth in this Section 4.4.
<PAGE> - 25 -
Section 4.5. Costs. All real and personal property taxes and
assessments for calendar year 1997 with respect to the Property shall be
prorated between Debtor and Lender as of the Closing Date. All real and
personal property taxes and assessments for calendar year 1998 and subsequent
years with respect to the Property shall be paid by Lender. Lender shall be
responsible for the payment of all costs and expenses incurred by them in
connection with the transactions contemplated by this Agreement, including,
but not limited to, appraisal fees, environmental consultant fees, title
insurance, escrow fees and premiums, recording fees, transfer taxes and fees,
and documentary stamp taxes and fees. Each party shall be responsible for the
payment of its attorneys fees.
ARTICLE V
CONDITIONS PRECEDENT TO CLOSING
In addition to any other covenants and agreements contained in this
Agreement with respect to the Closing, it shall be a condition to the Closing
that:
(a) No environmental or structural studies or inspections conducted
by Lender with respect to the Property prior to the Closing Date shall
have revealed any condition which, in the opinion of Lender, in its
reasonable determination, has or would have a material adverse impact on
the value of the Property;
(b) The Property and the Property Rights shall be conveyed to Lender
free and clear of all liens, encumbrances, restrictions and security
interests of any nature whatsoever, except the Permitted Encumbrances;
(c) The Escrow Agent shall unconditionally commit to issue to Lender
simultaneously with the Closing (i) the Title Policy insuring Lender's
fee simple title in and to the Property, subject only to the Permitted
Encumbrances, containing extended coverage over all standard exceptions
and such endorsements as Lender may reasonably require, and (ii)
endorsements to the existing lender's title insurance policies issued in
connection with the Deed of Trust bringing such policies current to the
Closing Date and providing for such other affirmative coverage as Lender
may reasonably require. If required by the Escrow Agent as a condition
to the issuance of such policies, the Debtor Entities shall execute and
deliver such affidavits as may be required confirming that fee simple
title to the Properties has been conveyed by the Deed;
(d) The Property shall not have suffered any unrestored damage
which, in the reasonable judgment of Lender, would impair Lender's
ability to operate the Property;
(e) No eminent domain proceeding shall be pending or threatened in
writing with respect to the Property;
(f) None of the Debtor Entities shall be the subject of any
bankruptcy or reorganization proceeding; and
(g) All representations and warranties of the Debtor Entities shall
be true, correct and complete as of the Closing Date and no Event of
Default shall have occurred hereunder.
ARTICLE VI
DEFAULT AND REMEDIES
Upon an Event of Default, the non-defaulting party shall have the right
to seek and enforce all rights and remedies under this Agreement available at
law or in equity, including, without limitation, the right to seek equitable
relief and/or money damages.
ARTICLE VII
TRANSACTION CHARACTERIZATIONS
Section 7.1. Relationship Between the Parties. The execution and
performance of this Agreement and the Settlement Documents shall not be
construed as the formation of a partnership or joint venture between Lender
and the Debtor Entities or any one of them, under any circumstance whatsoever.
<PAGE> - 26 -
Section 7.2. Conveyance Absolute; Foreclosure. (a) Lender and Debtor
intend that the conveyance of the Property and the Property Rights is an
absolute conveyance in effect as well as form, and the instruments of
conveyance are not intended to serve or operate as a mortgage, security
agreement, trust conveyance or security of any kind. Furthermore, the Deed is
not being delivered as a preference against any creditors of the Debtor
Entities. Lender and Debtor intend that the acceptance by Lender or Nominee
of the Deed shall not create or cause a merger of Lender's interest as
beneficiary under the Deed of Trust and the interest Lender or Nominee derives
from the Deed.
(b) The Debtor Entities covenant and agree to take such actions and to
execute such documents, certificates, affidavits, stipulations and instruments
as may be reasonably required by Lender in the event Lender elects subsequent
to the Closing to exercise its rights of Foreclosure (either judicial or
nonjudicial) under the Project Loan Documents. Debtor intends that the lien
of the Deed of Trust shall continue after the delivery of the Deed. The
Debtor Entities covenant and agree not to interfere with or oppose Lender in
the Foreclosure and waive and agree not to seek injunctive or any other
equitable relief or to assert any defense, counterclaim or setoff in or to the
Foreclosure. The Debtor Entities hereby waive any rights of redemption,
valuation, appraisement, stay of execution, marshalling or any other rights
available to debtors or obligors generally in connection with the Foreclosure
and agree to execute any waivers of such rights in connection with the
Foreclosure as may be reasonably requested by Lender. The Debtor Entities (i)
irrevocably appoint Dyck as the Debtor Entities agent to accept and
acknowledge on behalf of the Debtor Entities service of any and all process
solely for the Foreclosure and for no other purpose; provided, however, if
Dyck shall not reside in or be located in the State of California at the time
for such service of process, the Debtor Entities designate the Secretary of
State of California as their agent to accept and acknowledge on behalf of the
Debtor Entities such service of process and (ii) agree and consent that any
such service of process shall be of the same force and validity as if service
were made upon the Debtor Entities according to the laws governing the
validity and requirements of such service in such state.
Section 7.3. Effect of the Settlement Documents. (a) Lender and the
Debtor Entities stipulate and agree not to challenge the validity,
enforceability or characterization of this Agreement or the transactions
contemplated by this Agreement as absolute conveyances and further stipulate
and agree that nothing contained in the Settlement Documents creates a joint
venture, a partnership, equitable mortgage, financing device or arrangement,
security interest or the like. Lender and the Debtor Entities agree further
to support the intent of the parties that this Agreement and the transaction
contemplated by the Settlement Documents provide for an absolute conveyance
and do not create a joint venture, partnership, equitable mortgage, financing
device or arrangement, security interest or the like, if, and to the extent
that, any challenge occurs.
(b) If, in any bankruptcy or insolvency proceeding of any of the Debtor
Entities or in the context of any other proceeding or litigation, there is a
recharacterization, modification, alteration or setting aside of the
conveyance or transfer of the Property, (ii) Lender's receipt of all or any
portion of the proceeds of the Escrow Account or any other amounts previously
paid to, or applied by, Lender against the obligations of any of the Debtor
Entities, or (iii) any other conveyances, transfers, assignments or
transactions contemplated by the Settlement Documents, Lender may, at its
election and in its sole and absolute discretion, rescind this Agreement and
the other Settlement Documents and the transactions contemplated by this
Agreement and the other Settlement Documents, and, upon such rescission, the
rights, obligations and responsibilities of the Debtor Entities and Lender
under the Project Loan Documents shall be reinstated and once again be in full
force and effect as if the Closing had never occurred. It is the express
intention of Lender and the Debtor Entities that, in the event of such
rescission, the Settlement Documents shall not be construed or interpreted, in
any manner or event whatsoever, to limit or otherwise modify or alter any
rights, obligations or remedies of Lender or the Debtor Entities under the
Project Loan Documents. Furthermore, in the event of such rescission, Lender
and the Debtor Entities shall execute, acknowledge and record such
instruments, documents and certificates as may be reasonably required by the
other to reinstate the Project Loan Documents with the same force and effect
which existed immediately prior to the Closing Date.
<PAGE> - 27 -
Section 7.4 Waiver of Vendor's Lien. Each Debtor Entity hereby expressly
waives any right that it may now have or hereafter acquire under Section 3046
of the California Civil Code or otherwise to a vendor's lien against the
Property.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.1. Notice. Any notice, request, demand, instruction or other
communication (collectively referred to as "notices") to be given to any party
hereunder shall be in writing and shall be deemed to be given upon (i)
receipt, if hand delivered, (ii) confirmation, if delivered by facsimile
transmission, (iii) the next business day, if delivered by express delivery
service or overnight courier service, or (iv) the fifth business day following
the day of deposit of such notice in registered or certified U.S. mail, return
receipt requested, postage prepaid. Notices shall be provided to the parties
and addresses (or facsimile numbers, as applicable) specified below:
If to Lender: c/o America First Companies
399 Park Avenue
New York, NY 10022
Attention: Mr. Joseph N. Grego
Telephone: (212) 935-8760
Telecopy: (212) 935-8765
With a copy to: Mark R. Nethers, Esq.
Kutak Rock
Sixteenth Floor
3300 North Central Avenue
Phoenix, AZ 85012
Telephone: (602) 285-1700
Telecopy: (602) 285-1868
If to Debtor: Jackson Park Place
c/o Artel Farms, Inc.
1690 East Fir Street
Suite 113
Fresno, CA 93720
Attention: Mr. David A. Dyck
Telephone: (209) 299-2981
Telecopy: (209) 299-6958
If to Debtor
by Regular Mail: Jackson Park Place
c/o Artel Farms, Inc.
P.O. Box 25759
Fresno, CA 93759
Attention: Mr. David A. Dyck
If to Escrow Agent: Lawyers Title Insurance Corporation
Suite 250
800 East Colorado Boulevard
Los Angeles, CA 91101-2132
Attention: Glen Trowbridge
Los Angeles National Division
Telephone: (818) 792-8400
Telecopy: (818) 304-0414
The addresses and addressees for the purpose of this Section may be
changed by any party by giving written notice of such change to the other
parties.
Section 8.2. Non-Business Day. For purposes of determining the time for
performance of various obligations under this Agreement, if the day for
performing any obligation or delivering or receiving any notice is other than
a Business Day, then the date for such performance, delivery or receipt shall
be extended until the next succeeding day which is a Business Day.
<PAGE> - 28 -
Section 8.3. Assignment; Binding. Lender may assign its rights and
obligations under this Agreement, provided any such assignee assumes all of
the obligations of Lender under this Agreement, but such assignment shall not
relieve Lender of any of its liabilities and obligations under this
Agreement. No other party hereto may assign any of its rights or obligations
under this Agreement. It is the intent of Lender and the Debtor Entities that
(i) the rights and obligations set out in this Agreement shall be binding upon
and inure to the benefit of the parties hereto and any permitted assignee or
successor, including, without limitation, any United States trustee, any
debtor-in-possession or any trustee appointed from a private panel, and (ii)
no party to this Agreement shall have any greater rights should such party
become a debtor or debtor-in-possession than such party currently has. The
preceding expression of intent is a material inducement to Lender entering
into this Agreement. This Section is not intended to prevent the dissolution
of Debtor as contemplated by Section 8.15.
Section 8.4. Indemnification and Hold Harmless. The Debtor Entities,
jointly and severally, agree to indemnify and hold the Lender Indemnified
Parties harmless from and against any and all claims, demands, losses, costs,
expenses (including, without limitation, attorneys' fees and expenses,
accountants' fees and expenses and expenses and fees of other associated
professionals), damages, causes of action or liabilities that may be paid,
incurred or suffered by, or asserted against, the Lender Indemnified Parties,
the Property or the Property Rights resulting from any liability or obligation
of the Debtor Entities with respect to events or conditions affecting the
Property or the Property Rights arising or accruing prior to the Closing Date,
or relating to the period of time prior to the Closing Date. The foregoing
indemnity shall survive the Closing. The Debtor Entities acknowledge that
Lender would not have agreed to execute this Agreement except in reliance on
the foregoing indemnity.
Section 8.5. Governing Law; Interpretation. THIS AGREEMENT SHALL BE
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA WITHOUT GIVING EFFECT TO ITS CONFLICT OF LAWS PRINCIPLES. Where
required for proper interpretation, words in the singular shall include the
plural, the masculine gender shall include the neuter and the feminine, and
vice versa. The description headings of the articles and sections of this
Agreement are for convenience only and shall not control or affect the meaning
or construction of any of the provisions hereof.
Section 8.6. Amendments. This Agreement may not be modified or amended,
except by an agreement in writing signed by the parties hereto. The parties
may waive any of the conditions contained herein or any of the obligations of
the other parties hereunder, but any such waiver shall be effective only if it
is in writing and signed by the party waiving such condition or obligation.
Section 8.7. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original.
Section 8.8. Entire Agreement. This Agreement, including the Exhibits
hereto and the items to be furnished in accordance herewith, supersede all
prior agreements and constitute the entire agreement among the parties
pertaining to the subject matter hereof. No representation, warranty,
covenant, agreement or condition with respect to the subject matter hereof not
expressed in this Agreement shall be binding upon the parties hereto or shall
affect or be effective to interpret, change or restrict the provisions of this
Agreement.
Section 8.9. Further Assurances. Each of the parties hereto agrees to
take such further action and to execute such further instruments as may be
reasonably required by any of the other parties in order to consummate the
transactions contemplated by this Agreement and to carry out the intentions
expressed in this Agreement, including, without limitation, cooperating with
respect to and assisting in any judicial proceeding commenced against Lender
and/or the Debtor Entities regarding the nature of the transactions
contemplated by this Agreement.
Section 8.10. No Real Estate Commissions. Lender and the Debtor
Entities represent and warrant to the other that they have not employed or
retained a real estate broker, agent or other finder with respect to the
transactions contemplated in this Agreement, and each of the Lender and the
Debtor Entities jointly and severally agree to indemnify and hold the other
harmless from and against the payment of any real estate or broker's fee or
commission claimed as a result of actions by the indemnitor in connection with
the transactions contemplated by this Agreement.
<PAGE> - 29 -
Section 8.11. Right of Inspection. The Debtor Entities agree to allow
Lender access to the Property and all of the books and records of the Debtor
Entities with respect to the operations of the Property for the purpose of
conducting such inspections and analyses of the Property as Lender shall
reasonably require during normal business hours and without interruption to
the operations of the Debtor Entities.
Section 8.12. Bankruptcy. As a material inducement to Lender executing
this Agreement, each of the Debtor Entities hereby agree that in the event
they shall (i) file with any bankruptcy court of competent jurisdiction or be
the subject of any petition under the Bankruptcy Code, (ii) file or be the
subject of any petition seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future federal or state act or law relating to bankruptcy, insolvency or other
relief for debtors, (iii) have sought or consented to or acquiesced in the
appointment of any trustee, receiver, conservator or liquidator or (iv) be the
subject of any order, judgment or decree entered by any court of competent
jurisdiction approving a petition filed against such party for any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future federal or state act
or law relating to bankruptcy, insolvency or relief for debtors, subject to
court approval, Lender shall thereupon be entitled and each Debtor Entity
irrevocably consents to relief from any automatic stay imposed by Section 362
of the Bankruptcy Code, or otherwise, on or against the exercise of the rights
and remedies otherwise available to Lender as provided in the Project Loan
Documents, this Agreement or as otherwise provided by law, and each Debtor
Entity hereby irrevocably waives its right to object to such relief.
Section 8.13. Severability. If any court of competent jurisdiction
should find any provision of this Agreement to be unenforceable, the
unenforceable provision of this Agreement shall be stricken from this
Agreement and this Agreement shall be enforced in accordance with the
remaining provisions.
Section 8.14. Confidentiality. Lender and the Debtor Entities shall
keep the Confidential Information in strict confidence and shall not disclose
such Confidential Information other than (a) to such of their respective (i)
partners, officers, directors, employees, attorneys, accountants and agents
and the officers, directors, employees, attorneys, accountants and agents of
such partners, (ii) current or potential creditors, lenders, partners or
affiliates and (iii) rating agencies with a bona fide need to know, or (b) in
response to a subpoena or court order to disclose such Confidential
Information, provided that, before such Confidential Information is so
disclosed, the party subpoenaed or ordered to disclose such Confidential
Information shall first give the other parties to this Agreement notice of
such subpoena or order and such other parties shall have had an opportunity to
intervene in the matter. Any Confidential Information disclosed by Lender or
the Debtor Entities shall be labeled as confidential (if such disclosure is in
writing) or identified as confidential (if such disclosure is oral) and shall
contain an express prohibition against reproducing such Confidential
Information or further disclosing such Confidential Information.
Section 8.15. Dissolution of Debtor. Following the satisfaction of the
respective liabilities and monetary obligations of Debtor as contemplated by
this Agreement, but in no event later than the 120th day after the Closing
Date, the Debtor Entities shall cause Debtor to be dissolved and the affairs
of such partnership to be wound up; provided, however, (i) to the extent such
actions cannot be completed within such time frame, but the Debtor Entities
are proceeding diligently and in good faith to complete such actions, or (ii)
if the Debtor Entities have a legitimate reason not to dissolve Debtor within
such time frame, the Debtor Entities may request prior to the 120th day after
the Closing Date an extension of the deadline for completing such actions, and
Lender shall not unreasonably withhold its consent to such request. The
Debtor Entities covenant that Debtor will not conduct any business activities
or incur any indebtedness from and after the Closing or engage in any other
activities other than as contemplated by the preceding sentence.
Section 8.16. Waiver of Jury Trial. DEBTOR ENTITIES AND LENDER HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT THEY MAY HAVE TO A
TRIAL BY JURY WITH RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY ACTION,
PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY ANY OF THE PARTIES HERETO AGAINST
THE OTHER OR ITS SUCCESSORS WITH RESPECT TO ANY MATTER ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR ANY DOCUMENT CONTEMPLATED HEREIN OR RELATED
HERETO. THIS WAIVER BY THE PARTIES HERETO OF ANY RIGHT EITHER MAY HAVE TO A
TRIAL BY JURY HAS BEEN NEGOTIATED AND IS AN ESSENTIAL ASPECT OF THEIR
BARGAIN.
<PAGE> - 30 -
The parties have executed this Agreement as of the date first set forth
above.
AMERICA FIRST APARTMENT INVESTORS,
L.P., a Delaware limited partnership
By: AMERICA FIRST CAPITAL ASSOCIATES
LIMITED PARTNERSHIP FOUR, a Delaware
limited partnership, its general
partner
By: AMERICA FIRST COMPANIES, L.L.C., a
Delaware limited liability company,
its general partner
By /s/ Michael Thesing
Printed Name Michael Thesing
Title Vice President
JACKSON PARK PLACE, a California limited
partnership
By: Artel Farms, Inc., a California
corporation, its general partner
By /s/ David A. Dyck
Printed Name David A. Dyck
Its President
ARTEL FARMS, INC., a California
corporation
By /s/ David A. Dyck
Printed Name David A. Dyck
Its President
/s/ David A. Dyck
David A. Dyck
<PAGE> - 31 -
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,129,877
<SECURITIES> 22,806,526
<RECEIVABLES> 139,245
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,269,122
<PP&E> 59,238,068
<DEPRECIATION> 8,490,405
<TOTAL-ASSETS> 76,763,103
<CURRENT-LIABILITIES> 14,116,337
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 56,526,766
<TOTAL-LIABILITY-AND-EQUITY> 76,763,103
<SALES> 0
<TOTAL-REVENUES> 5,397,492
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,701,874
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,695,618
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,695,618
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,695,618
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
