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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 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 1-12675
KILROY REALTY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 95-4598246
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) NUMBER)
2250 EAST IMPERIAL HIGHWAY, SUITE 1200, EL SEGUNDO, CALIFORNIA 90245
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
----------------
(310) 563-5500
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
N/A
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT)
----------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
As of November 13, 1997, 24,475,000 shares of common stock, par value $.01
per share, were outstanding.
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
PART I--FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Consolidated balance sheet of Kilroy Realty Corporation as of
September 30, 1997 (Unaudited) and Combined Balance Sheet of
the Kilroy Group (predecessor to Kilroy Realty Corporation) as
of December 31, 1996........................................... 3
Consolidated Statement of Operations of Kilroy Realty
Corporation for the period February 1, 1997 to September 30,
1997 and the Combined Statements of Operations of the Kilroy
Group for the period January 1, 1997 to January 31, 1997 and
the nine months ended September 30, 1996 (Unaudited)........... 4
Consolidated Statement of Operations of Kilroy Realty
Corporation for the three months ended September 30, 1997 and
the Combined Statement of Operations of the Kilroy Group for
the three months ended September 30, 1996 (Unaudited).......... 5
Consolidated Statement of Cash Flows of Kilroy Realty
Corporation for the nine months ended September 30, 1997 and
the Combined Statement of Cash Flows of the Kilroy Group for
the nine months ended September 30, 1996 (Unaudited)........... 6
Notes to the Kilroy Realty Corporation Consolidated and Kilroy
Group Combined financial statements............................ 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.......................................... 14
PART II--OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.............................................. 20
Item 2. CHANGES IN SECURITIES.......................................... 20
Item 3. DEFAULTS UPON SENIOR SECURITIES................................ 20
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............ 20
Item 5. OTHER INFORMATION.............................................. 20
Item 6. EXHIBITS AND REPORTS ON FORM 8-K............................... 20
</TABLE>
2
<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
KILROY REALTY CORPORATION (THE "COMPANY") AND
KILROY GROUP (PREDECESSOR TO THE COMPANY)
CONSOLIDATED BALANCE SHEET OF THE COMPANY AND
COMBINED BALANCE SHEET OF THE KILROY GROUP
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
KILROY REALTY
CORPORATION KILROY GROUP
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
RENTAL PROPERTIES (Notes 1, 2, 3 and 5):
Land.............................................. $ 124,276 $ 12,490
Buildings and improvements........................ 462,902 214,847
--------- ---------
Total rental properties......................... 587,178 227,337
Accumulated depreciation and amortization......... (117,552) (109,668)
--------- ---------
Rental properties, net.......................... 469,626 117,669
CASH AND CASH EQUIVALENTS........................... 74,890
RESTRICTED CASH..................................... 4,634
TENANT RECEIVABLES, NET............................. 3,764 3,042
INVESTMENT IN SUBSIDIARY............................ 267
ESCROW DEPOSITS..................................... 1,179
DEFERRED CHARGES AND OTHER ASSETS, NET (Note 4)..... 18,184 7,628
--------- ---------
TOTAL............................................. $ 572,544 $ 128,339
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Mortgage debt (Note 5)............................ $ 104,054 $ 223,297
Accounts payable and accrued expenses............. 9,794 7,614
Accrued dividends (Note 8)........................ 10,576
Accrued cost of option buy-out and tenant
improvement (Note 2)............................. 1,390
Rents received in advance and tenant security
deposits......................................... 10,902 9,815
--------- ---------
Total liabilities............................... 135,326 242,116
COMMITMENTS AND CONTINGENCIES (Note 6)..............
MINORITY INTEREST................................... 45,120
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value, 30,000,000 shares
authorized: none issued and outstanding..........
Common stock, $.01 par value, 150,000,000 shares
authorized: 24,475,000 shares issued and
outstanding ..................................... 245
Additional paid-in capital........................ 397,445
Distributions in excess of earnings/(deficit)..... (5,592) (113,777)
--------- ---------
Total stockholders' equity/(accumulated
deficit)....................................... 392,098 (113,777)
--------- ---------
TOTAL............................................. $ 572,544 $ 128,339
========= =========
</TABLE>
See accompanying notes to consolidated and combined financial statements.
3
<PAGE>
KILROY REALTY CORPORATION CONSOLIDATED AND KILROY GROUP COMBINED
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
KILROY KILROY
KILROY GROUP GROUP
REALTY CORPORATION JANUARY 1, NINE MONTHS
FEBRUARY 1, 1997 TO ENDED
1997 TO JANUARY 31, SEPTEMBER 30,
SEPTEMBER 30, 1997 1997 1996
------------------ ----------- -------------
<S> <C> <C> <C>
REVENUES:
Rental income................... $ 35,878 $2,760 $26,473
Tenant reimbursements........... 3,441 275 2,583
Interest income................. 2,875
Development services............ 14 580
Other income.................... 454 4 65
---------- ------ -------
Total revenues................ 42,648 3,053 29,701
---------- ------ -------
EXPENSES:
Property expenses............... 5,999 579 5,042
Real estate taxes............... 1,925 106 970
General and administrative...... 3,652 78 1,607
Ground lease.................... 670 64 579
Development expense............. 46 584
Option buy-out cost............. 3,150
Interest expense................ 6,714 1,895 16,234
Depreciation and amortization... 8,404 787 6,838
---------- ------ -------
Total expenses................ 27,364 3,555 35,004
---------- ------ -------
INCOME (LOSS) BEFORE EQUITY IN
INCOME OF SUBSIDIARY, MINORITY
INTEREST AND EXTRAORDINARY
GAINS............................ 15,284 (502) (5,303)
EQUITY IN INCOME OF UNCONSOLIDATED
SUBSIDIARY....................... 187
MINORITY INTEREST................. (2,231)
---------- ------ -------
INCOME (LOSS) BEFORE EXTRAORDINARY
GAINS............................ 13,240 (502) (5,303)
EXTRAORDINARY GAINS............... 3,204 20,095
---------- ------ -------
NET INCOME........................ $ 13,240 $2,702 $14,792
========== ====== =======
Net income per common share....... $ .82
==========
Weighted average shares
outstanding...................... 16,162,243
==========
</TABLE>
See accompanying notes to consolidated and combined financial statements.
4
<PAGE>
KILROY REALTY CORPORATION CONSOLIDATED AND KILROY GROUP COMBINED
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
KILROY REALTY
CORPORATION KILROY GROUP
THREE MONTHS THREE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
------------- -------------
<S> <C> <C>
REVENUES:
Rental income................................... $ 16,418 $ 8,879
Tenant reimbursements........................... 1,631 793
Interest income................................. 900
Development services............................ 122
Other income.................................... 158 54
---------- -------
Total revenues................................ 19,107 9,848
---------- -------
EXPENSES:
Property expenses............................... 2,724 1,757
Real estate taxes............................... 998 337
General and administrative...................... 1,477 543
Ground lease.................................... 206 189
Development expense............................. 193
Sale of air rights.............................. 3,150
Interest expense................................ 2,637 5,508
Depreciation and amortization................... 3,660 2,279
---------- -------
Total expenses................................ 11,702 13,956
---------- -------
INCOME (LOSS) BEFORE EQUITY IN INCOME OF
SUBSIDIARY AND MINORITY INTEREST................. 7,405 (4,108)
EQUITY IN INCOME OF UNCONSOLIDATED SUBSIDIARY..... 52
MINORITY INTEREST................................. (977)
---------- -------
NET INCOME (LOSS)................................. $ 6,480 $(4,108)
========== =======
Net income per common share....................... $ .34
==========
Weighted average shares outstanding............... 18,931,522
==========
</TABLE>
See accompanying notes to consolidated and combined financial statements.
5
<PAGE>
KILROY REALTY CORPORATION CONSOLIDATED AND KILROY GROUP COMBINED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1997 1996
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.............................................. $ 15,942 $ 14,792
Adjustment to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization......................... 9,191 6,838
Provision for bad debts............................... 172 920
Extraordinary gain.................................... (3,204) (20,095)
Minority interest in earnings......................... 2,231
Equity in income of unconsolidated subsidiary......... 187
Changes in assets and liabilities:
Tenant receivables.................................. (894) (310)
Deferred charges and other assets................... (9,157) 929
Accounts payable and accrued expenses............... 2,180 1,149
Accrued cost of option buy-out and tenant
improvements....................................... (1,390) 3,650
Rents received in advance and tenant security
deposits........................................... 1,087 272
--------- --------
Net cash provided by operating activities......... 16,345 8,145
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for rental properties...................... (349,212) (2,140)
Escrow deposits......................................... (1,179)
Net investment in and advances to unconsolidated
subsidiary............................................. (454)
--------- --------
Net cash used in investing activities............. (350,845) (2,140)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of stock..................... 543,764
Proceeds received from debt............................. 98,000 21,057
Principal payments on debt.............................. (219,406) (18,256)
Cash paid for loan costs................................ (3,989) (2,617)
Restricted cash......................................... (4,634)
Dividends paid.......................................... (11,125)
Deemed and actual contributions from (distributions to)
partners, net.......................................... 6,780 (6,189)
--------- --------
Net cash provided by (used in) financing
activities....................................... 409,390 (6,005)
--------- --------
Net increase in cash and cash equivalents................. 74,890
Cash and cash equivalents, beginning of period ...........
--------- --------
Cash and cash equivalents, end of period ................. $ 74,890 $ 0
========= ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest.................................. $ 10,980 $ 14,289
========= ========
NON-CASH TRANSACTIONS:
Accrual of dividend payable............................. $ 10,576
=========
Issuance of units of Kilroy Realty, L.P. to acquire
properties............................................. $ 3,979
=========
Issuance of note payable to acquire properties.......... $ 6,650
=========
</TABLE>
See accompanying notes to consolidated and combined financial statements.
6
<PAGE>
KILROY REALTY CORPORATION CONSOLIDATED AND KILROY GROUP COMBINED
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
1. ORGANIZATION, FORMATION TRANSACTIONS AND OTHER CAPITAL TRANSACTIONS
Kilroy Realty Corporation (the "Company") was incorporated in Maryland in
September 1996 and is the successor to the operations of the Kilroy Group
("KG"). KG consists of the combination of Kilroy Industries ("KI") and various
entities, the properties of which were under common control of KI and/or its
stockholders, including John B. Kilroy, Sr. and John B. Kilroy, Jr. The
Company's Chairman of the Board of Directors, and President and Chief
Executive Officer are John B. Kilroy, Sr. and John B. Kilroy, Jr.,
respectively. KI has historically provided acquisition, development,
financing, construction and leasing services with respect to the properties
held by KG. KI has also provided development services to third-party owners of
properties for a fee. The accompanying combined financial statements of KG
have been presented on a combined basis because of common ownership and
management and because the entities were the subject of a business combination
in 1997 with the Company.
On January 31, 1997, the Company completed an initial public offering of
12,500,000 shares of its $.01 par value per share, common stock. The offering
price was $23.00 per share resulting in gross proceeds of $287,500,000. On
February 7, 1997, the underwriters exercised their over-allotment option and,
accordingly, the Company issued 1,875,000 additional shares of common stock
and received gross proceeds of $43,125,000. The aggregate proceeds to the
Company, net of underwriters' discount, advisory fee and offering costs were
approximately $302,800,000. The initial public offering, including the
exercise of the over-allotment option in connection therewith, is hereinafter
referred to as the "IPO".
The following transactions occurred simultaneously with the completion of
the IPO (collectively, the "Formation Transactions"):
. The Company consummated various purchase agreements to acquire four
properties for approximately $58,000,000 in cash. The four properties had
aggregate operating revenues of approximately $9,100,000 and net
operating income (before depreciation, amortization and interest) of
approximately $6,300,000 during the year ended December 31, 1996.
. The Company became the sole general partner of Kilroy Realty, L.P. (the
"Operating Partnership"). Upon completion of the IPO, the Company
contributed substantially all of the net proceeds of the Offering in
exchange for an approximate 84.5% interest in the Operating Partnership.
The Company also contributed cash to purchase 100% of Kilroy Realty
Finance, Inc. ("Finance Inc."), which was formed to serve as the general
partner of Kilroy Realty Finance Partnership, L.P. (the "Finance
Partnership"). The Operating Partnership executed various option and
purchase agreements whereby it issued 2,652,374 units in the Operating
Partnership ("Units"), representing an approximate 15.5% partnership
interest, to the continuing investors in exchange for interest in
properties. The continuing investors included John B. Kilroy, Sr. and
John B. Kilroy, Jr., certain family members and certain entities owned by
them. The Operating Partnership contributed certain properties to the
Finance Partnership in exchange for a limited partnership interest
therein. All properties acquired by the Company are held by or through
the Operating Partnership or the Finance Partnership. Unless otherwise
indicated, all references to the Company include the Operating
Partnership, the Finance Partnership and Finance Inc.
. The Finance Partnership and the Operating Partnership borrowed
$84,000,000 and $12,000,000, respectively, under two mortgage loans.
. The Company used a portion of the IPO proceeds and the proceeds of the
new mortgage borrowings of $96,000,000 to repay approximately
$219,000,000 of indebtedness.
7
<PAGE>
KILROY REALTY CORPORATION CONSOLIDATED AND KILROY GROUP COMBINED
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
. The Operating Partnership contributed certain assets valued at
approximately $100,000 to Kilroy Services, Inc. for 100% of its non-
voting preferred common stock, representing a 5% ownership interest and a
95% economic interest in Kilroy Services, Inc. The voting common stock is
owned entirely by John B. Kilroy, Sr. and John B. Kilroy, Jr.
In June 1997, the Operating Partnership issued 165,102 limited partnership
units, with an aggregate value of approximately $3,979,000, in connection with
certain property acquisitions (See Note 3).
On August 20, 1997, the Company completed a follow-on public offering (the
"August Offering") of 10,000,000 shares of, $.01 par value per share, common
stock. The offering price was $25.50 per share resulting in gross proceeds of
$255,000,000. The aggregate proceeds to the Company, net of underwriter's
discount, advisory fee and offering costs were approximately $241,000,000. The
proceeds were used to pay outstanding indebtedness and to fund acquisitions.
As a result of the capital transactions referred to above, as of September
30, 1997, the Company owned an 89.7% general partnership interest in the
Operating Partnership. Giving effect to the transaction referenced in Note 8,
as of November 13, 1997, the Company owned an 87.8% general partnership
interest in the Operating Partnership.
The Company is engaged in the acquisition, development, ownership and
operation of office and industrial properties located in California, Washington
and Arizona. As of September 30, 1997, the Company owned 37 office properties
encompassing approximately 3,100,000 rentable square feet and 54 industrial
properties encompassing approximately 3,800,000 rentable square feet.
2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the consolidated financial
position of the Company, the Operating Partnership and the Finance Partnership
at September 30, 1997 and the results of their operations for the period from
February 1, 1997 to September 30, 1997. Subsequent to the IPO, the operating
results of the service business currently conducted by Kilroy Services, Inc.
are reflected in the accompanying financial statements on the equity method of
accounting. All significant intercompany balances and transactions have been
eliminated in the consolidated financial statements.
The combined financial statements of KG reflect a combination of real estate
properties, which were under common control of KI and/or its stockholders,
including John B. Kilroy, Sr. and John B. Kilroy, Jr., and which were
contributed to the Operating Partnership for 2,652,374 Units upon consummation
of the IPO. KG is considered the predecessor entity to the Company due to
common ownership and management; therefore, its combined financial statements
are presented for comparative purposes.
The accompanying interim financial statements have been prepared by the
Company's management in accordance with generally accepted accounting
principles and in conjunction with the rules and regulations of the Securities
and Exchange Commission. In the opinion of management, the interim financial
statements presented herein, reflect all adjustments of a normal and recurring
nature which are necessary to fairly state the interim financial statements.
The results of operations for the interim period are not necessarily indicative
of the results that may be expected for the eleven months ended December 31,
1997. These financial statements should be read in conjunction with the
Company's prospectus dated January 28, 1997 and the Kilroy Group's audited
financial statements and the notes thereto included in the Kilroy Group's
Annual Report on Form 10-K for the year ended December 31, 1996.
8
<PAGE>
KILROY REALTY CORPORATION CONSOLIDATED AND KILROY GROUP COMBINED
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The Company intends to qualify as a real estate investment trust ("REIT")
under Section 856 through 860 of the Internal Revenue Code of 1986, as amended
(the "Code") beginning with the taxable year ending December 31, 1997. As a
REIT, the Company will not generally be subject to corporate Federal income
taxes as long as it satisfies certain technical requirements of the Code
relating to composition of its income and assets, and requirements relating to
distributions of taxable income to shareholders.
SIGNIFICANT ACCOUNTING POLICIES:
Restricted cash--Restricted cash consists of cash held as collateral to
provide credit enhancement for the mortgage loans payable and cash reserves
for capital expenditures and tenant improvements.
Accrued cost of option buy-out and tenant improvements--In September 1996,
KG amended the terms of certain of their lease agreements. Such amendments
included a $500,000 allowance for tenant improvements. In addition, KG agreed
to pay $3,150,000 in consideration for the cancellation of an option to
purchase a 50% equity interest in Kilroy Airport Center at El Segundo, which
was reflected in the statement of operations as of December 31, 1996. In
November 1996, $2,260,000 of the total liability of $3,650,000, was paid by KI
and its stockholders. In January 1997, $100,000 of the amount was paid by KG
and the remaining balance was paid by the Company with the proceeds of the
Offering.
Recent Pronouncements--In February 1997, the Financial Accounting Standards
Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No.
128 Earnings Per Share. This statement establishes standards for computing and
presenting earnings per share ("EPS") and applies to entities with publicly
held common stock or potential common stock. This statement simplifies the
standards for computing EPS previously found in APB Opinion No. 15, Earnings
per Share, and makes them comparable to international EPS standards. This
statement is effective for financial statements issued for periods ending
after December 15, 1997, including interim periods. The Company has not yet
determined the impact of adopting this statement.
In June 1997, the FASB issued SFAS No. 130 Reporting for Comprehensive
Income and No. 131, Disclosures about Segments of an Enterprise and Related
Information. These statements are effective for financial statements issued
for periods beginning after December 15, 1997. The Company has not yet
determined the impact of adopting these statements.
9
<PAGE>
KILROY REALTY CORPORATION CONSOLIDATED AND KILROY GROUP COMBINED
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
3. PROPERTY ACQUISITIONS
For the nine months ended September 30, 1997, the Company completed a series
of transactions to acquire 23 office buildings and 42 industrial buildings in
California (excluding the properties acquired through the Formation
Transactions, See Note 1), as follows:
<TABLE>
<CAPTION>
NUMBER OF ACREAGE/ LOCATION OF PURCHASE PRICE
DESCRIPTION BUILDINGS SQUARE FOOTAGE PROPERTY (MILLIONS)
-------------------- --------- --------------- ------------------ --------------
<S> <C> <C> <C> <C>
Undeveloped land 15 acres Foothill Ranch, CA $ 3.2
Undeveloped land 10 acres Brea, CA 3.3
------
Total land 6.5
------
Office buildings 5 115,000 sq. ft. Anaheim, CA 8.0
Office building 1 91,000 sq. ft. Calabasas, CA 11.6
Office buildings 2 80,000 sq. ft. Torrance, CA 6.6
Office buildings 3 95,000 sq. ft. Santa Monica, CA 31.4
Office buildings 4 276,000 sq. ft. Camarillo, CA 24.2
Office building 1 67,000 sq. ft. Irvine, CA 9.8
Office buildings 2 125,000 sq. ft. Santa Ana, CA 15.6
Office building 1 31,000 sq. ft. Riverside, CA 4.4
Office building 1 22,000 sq. ft. Riverside, CA 1.8
Office building 1 61,000 sq. ft. Brea, CA 6.4
Office building 1 27,000 sq. ft. Irvine, CA 3.0
Office building 1 44,000 sq. ft. Santa Monica, CA 8.2
Industrial building 1 109,000 sq. ft. Anaheim, CA 5.3
Industrial building 1 158,000 sq. ft. Irvine, CA 12.1
Industrial buildings 7 276,000 sq. ft. Brea, CA 15.1
Industrial building 1 154,000 sq. ft. Ontario, CA 5.4
Industrial buildings 6 276,000 sq. ft. Garden Grove, CA 13.8
Industrial buildings 10 159,000 sq. ft. Irvine, CA 15.0
Industrial buildings 3 165,000 sq. ft. Diamond Bar, CA 8.6
Industrial building 1 83,000 sq. ft. Garden Grove, CA 4.5
Industrial building 1 245,000 sq. ft. Irvine, CA 14.2
Industrial building 1 64,000 sq. ft. Garden Grove, CA 3.0
Industrial buildings 7 482,000 sq. ft. Various 43.2
Industrial building 1 51,000 sq. ft. Costa Mesa, CA 4.2
Industrial building 1 144,000 sq. ft. Anaheim, CA 7.1
Industrial building 1 144,000 sq. ft. Anaheim, CA 8.1
------
Total buildings 290.6
------
Total $297.1
======
</TABLE>
These acquisitions were funded with existing working capital and proceeds
from the IPO and the August Offering. In addition, the Company issued a
promissory note in the amount of $6,650,000 in conjunction with the purchase
of one property in Santa Monica, California (see Note 5), and the Operating
Partnership issued 165,102 limited partnership units valued at approximately
$3,979,000 in conjunction with the purchase of one office building and ten
industrial buildings located in Irvine, California (See Note 1).
10
<PAGE>
KILROY REALTY CORPORATION CONSOLIDATED AND KILROY GROUP COMBINED
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
4. DEFERRED CHARGES AND OTHER ASSETS
Deferred charges and other assets are summarized as follows for the Company
at September 30, 1997 and the Kilroy Group at December 31, 1996, respectively:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(IN THOUSANDS)
<S> <C> <C>
Deferred assets:
Deferred financing costs....................... $ 3,989 $ 2,968
Deferred leasing costs......................... 14,641 11,563
------- -------
Total deferred assets.......................... 18,630 14,531
Accumulated amortization......................... (6,664) (7,728)
------- -------
Deferred assets, net............................. 11,966 6,803
Prepaid expenses and other....................... 6,218 825
------- -------
Total deferred charges and other assets, net..... $18,184 $ 7,628
======= =======
</TABLE>
5. DEBT
At September 30, 1997, mortgage debt consists of an $83,404,000 mortgage
loan (the "Permanent Loan") secured by certain of the properties, a
$14,000,000 mortgage loan (the "SeaTac Loan") secured by an office complex in
Seattle, Washington and a $6,650,000 promissory note (the "Promissory Note")
secured by an office building in Santa Monica.
The Permanent Loan requires monthly principal and interest payments based on
an interest rate of 8.35%, amortizes over a 25-year period and matures in
2022, but is subject to increases in the effective interest rate beginning in
2005. The SeaTac Loan requires monthly payments of interest based on a
variable rate of LIBOR plus 1.5% (7.2% at September 30, 1997). The SeaTac Loan
matures in January 1998 with an option to extend for six months. The
Promissory Note was repaid on October 31, 1997. As of September 30, 1997 the
loans have a weighted average interest rate of 8.2%.
Scheduled principal payments for the above mortgage loans at September 30,
1997 are as follows:
<TABLE>
<S> <C>
Year Ending December 31,
1997 (3 months).............................................. $ 6,914
1998......................................................... 15,115
1999......................................................... 1,212
2000......................................................... 1,317
2001......................................................... 1,431
Thereafter................................................. 78,065
--------
Total.................................................... $104,054
========
</TABLE>
As of September 30, 1997 the Company maintained a $200,000,000 secured
revolving credit facility (the "Credit Facility") which was increased to
$250,000,000 on October 31, 1997. The Credit Facility matures on May 30, 1999,
with an option to extend for one year, and bears interest based on a variable
rate that ranges from LIBOR plus 1.38% to LIBOR plus 1.5% depending on the
Company's leverage ratios. The Credit Facility is used to finance property
acquisitions and development and for general corporate purposes. As of
September 30, 1997, there are no borrowings outstanding and the Company has
$153,000,000 available under the Credit Facility. Availability under the
Credit Facility is subject to, among other things, the value of the underlying
collateral securing it.
11
<PAGE>
KILROY REALTY CORPORATION CONSOLIDATED AND KILROY GROUP COMBINED
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Subsequent to September 30, 1997, the Company assumed $33,600,000 in
mortgage debt in connection with the purchase of certain properties. The debt
is comprised of a $11,700,000 note, a $8,000,000 note and a $13,900,000 note.
The $11,700,000 note bears interest at 8.43% and matures on November 1, 2018.
The $8,000,000 note bears interest at 8.21% and matures on October 1, 2013.
The $13,900,000 note bears interest at 8.45% and matures on December 1, 2005.
Principal and interest are payable monthly on all three notes.
The carrying value of the fixed rate Permanent Loan and the Promissory Note
at September 30, 1997 approximate fair value based on terms currently offered
to the Company. The carrying values of the variable rate SeaTac Loan also
approximates fair value at September 30, 1997.
In January 1997, KG recorded an extraordinary gain of $3,204,000 consisting
of approximately $1,283,000 of unamortized deferred financing fees written off
and a net gain on partial forgiveness of a mortgage obligation of $4,487,000.
6. COMMITMENTS AND CONTINGENCIES
Operating Leases--The Company has a noncancelable ground lease obligation on
Kilroy Airport Center Long Beach with an initial lease period expiring on July
17, 2035, classified as an operating lease. Further, the Company has
noncancelable ground lease obligations on the SeaTac Office Center expiring on
December 31, 2032, with an option to extend the leases for an additional 30
years. Rentals are subject to adjustments every five years based on changes in
the Consumer Price Index.
The minimum commitments under these leases as of September 30, 1997 are as
follows (in thousands):
<TABLE>
<S> <C>
Year Ending December 31,
1997 (3 months)............................................... $ 270
1998.......................................................... 1,099
1999.......................................................... 1,260
2000.......................................................... 1,394
2001.......................................................... 1,394
Thereafter.................................................. 46,004
-------
Total..................................................... $51,421
=======
</TABLE>
7. STOCK OPTIONS
The Company has established a stock option and incentive plan for the
purpose of attracting and retaining qualified executives and to reward them
for superior performance in achieving the Company's business goals and
enhancing stockholder value. As of September 30, 1997, 1,100,000 of the
Company's authorized options to purchase shares have been granted to
directors, officers and employees and an additional 300,000 have been reserved
for issuance under such plan. Subsequent to September 30, 1997, 95,000 options
were granted to executives and a newly appointed director of the Company. The
term of each option is ten years from the date of grant. Each option vests 33
1/3% per year over three years beginning on the first anniversary date of the
grant and is exercisable at a price per share equal to the fair market value
on the date of grant.
12
<PAGE>
KILROY REALTY CORPORATION CONSOLIDATED AND KILROY GROUP COMBINED
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
8. SUBSEQUENT EVENTS
Subsequent to September 30, 1997, the Company acquired the following
properties with proceeds from the August Offering, borrowings on the Credit
Facility, the assumption of $33,600,000 of mortgage debt and the issuance of
588,736 Operating Partnership units valued at approximately $15,284,000. Eight
of the properties were acquired from The Allen Group, a San Diego-based real
estate and investment company.
<TABLE>
<CAPTION>
DESCRIPTION ACREAGE/SQUARE FOOTAGE LOCATION OF PROPERTY PURCHASE PRICE (MILLIONS)
----------- ---------------------- -------------------- -------------------------
<S> <C> <C> <C>
Office building 141,000 sq. ft San Diego, CA $ 20.4
Office building 93,000 sq. ft San Diego, CA 11.8
Office building 130,000 sq. ft San Diego, CA 12.9
Office building 90,000 sq. ft San Diego, CA 9.6
Industrial building 165,000 sq. ft Stockton, CA 11.3
Industrial building 103,000 sq. ft Las Vegas, NV 4.4
Industrial building 107,000 sq. ft Las Vegas, NV 4.7
Industrial building 78,000 sq. ft. Temecula, CA 4.5
------
Subtotal/Properties acquired
from The Allen Group 79.6
Office building 124,000 sq. ft. Riverside, CA 22.5
Industrial building 100,000 sq. ft. Santa Ana, CA 6.0
Industrial building 291,000 sq. ft. Anaheim, CA 9.5
------
Total $117.6
======
</TABLE>
On October 10, 1997 dividends of $10,576,000 were paid to stockholders' and
unitholders' of record on September 30, 1997.
9. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The accompanying unaudited pro forma information for the nine months ended
September 30, 1997 and 1996 are presented as if the Formation Transactions,
August Offering and Acquisitions, as described in Note 1 and Note 3,
respectively, to the financial statements had occurred on January 1, 1996.
Such pro forma information is based upon the historical consolidated financial
statements of the Company and the Kilroy Group and should be read in
conjunction with the consolidated and combined financial statements and the
notes thereto.
This unaudited pro forma condensed consolidated information does not purport
to represent what the actual results of operations of the Company would have
been assuming such Formation Transactions, August Offering and Acquisitions
had been completed as set forth above, nor do they purport to predict the
results of operations for future periods.
PRO FORMA INCOME STATEMENT
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1997 1996
--------------- ---------------
<S> <C> <C>
Total revenues................................ $ 59,084 $ 58,195
=============== ===============
Net income before extraordinary items......... $ 20,811 $ 16,849
=============== ===============
Net income.................................... $ 24,015 $ 16,849
=============== ===============
Income per share of common stock.............. $ 0.98 $ 0.69
=============== ===============
Weighted average number of shares of common
stock outstanding............................ 24,475,000 24,475,000
=============== ===============
</TABLE>
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion relates to the consolidated financial statements of
Kilroy Realty Corporation (the "Company") and the combined financial
statements of the Company's predecessor, the Kilroy Group, that should be read
in conjunction with the financial statements and related notes thereto
included in the Form 10-K of the Company for the year ended December 31, 1996.
OVERVIEW AND BACKGROUND
The Company owns, operates and develops commercial and industrial real
estate, primarily in Southern California. The Company was formed in January
1997 as a self-administered real estate investment trust (a "REIT") and
succeeded to the Kilroy Group's real estate business. The Kilroy Group, the
Company's predecessor, had been engaged in the acquisition, management,
financing, construction and leasing of commercial and industrial properties.
The combined financial statements of the Kilroy Group comprise the operations,
assets and liabilities of the properties contributed to the Company in
connection with the formation transactions following the initial public
offering on January 31, 1997 (the "IPO") (see Note 1 to the Consolidated
Financial Statements for a discussion of the organization and formation of the
Company). As of September 30, 1997, the Company owned 37 office buildings and
54 industrial buildings that encompassed approximately 3,100,000 and 3,800,000
rentable square feet, respectively, and were 96.0% leased. The Company owns
all of the properties through the Operating Partnership and the Finance
Partnership.
As a result of the formation transactions in the first quarter, acquisitions
during the second and third quarters and the August Offering, the Company's
total assets increased to $572,544,000, including real estate assets of
$469,626,000, net of accumulated depreciation at September 30, 1997. The
market capitalization of the Company based on the market value of the
24,475,000 issued and outstanding shares of the Company's common stock,
2,817,476 Operating Partnership units and the $104,054,000 of debt outstanding
at September 30, 1997 was $840,951,000. The Company's total debt-to-market
capitalization ratio at September 30, 1997 was 12.4%.
Income is derived primarily from rental revenue (including tenant
reimbursements). As a result of the Company's acquisitions in the current
fiscal year, the financial data shows significant increases in total revenues
and expenses from quarter to quarter. For the foregoing reasons, management
does not believe the year to year and quarter to quarter financial data are
comparable.
The Company anticipates that the more significant part of its revenue growth
in the next one to two years will come from additional acquisitions rather
than from occupancy and market rent increases in its current portfolio.
However, the Company notes that if the Southern California office and
industrial rental market continues to improve, then rental rate increases will
become a more substantial part of its revenue growth.
RESULTS OF OPERATIONS
The Company's management believes that in order to provide meaningful
historical analysis of the financial statements, certain adjustments must be
made to the historical Kilroy Group financial statements to make accounting
periods comparable. Accordingly the results of operations for the period
January 1, 1997 to January 31, 1997 have been adjusted to reflect interest
income, general and administrative expenses, interest expense and
extraordinary gains as if the IPO had been consummated on January 1, 1997. The
following sections discuss the results of operations as adjusted.
14
<PAGE>
Adjusted Nine Months Ended September 30, 1997 compared to Nine Months Ended
September 30, 1996
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
(IN THOUSANDS)
---------------------
1997 1996
------------- -------
(AS ADJUSTED)
<S> <C> <C>
REVENUES:
Rental income..................................... $ 38,638 $26,473
Tenant reimbursements............................. 3,716 2,583
Interest income................................... 3,361 --
Development services.............................. 14 580
Other income...................................... 458 65
-------- -------
Total revenues.................................. 46,187 29,701
-------- -------
EXPENSES:
Property expenses................................. 6,578 5,042
Real estate taxes................................. 2,031 970
General and administrative........................ 4,015 1,607
Ground leases..................................... 734 579
Development expense............................... 46 584
Sale of air rights................................ -- 3,150
Interest expense.................................. 7,480 16,234
Depreciation and amortization..................... 9,191 6,838
-------- -------
Total expenses.................................. 30,075 35,004
-------- -------
ADJUSTED INCOME (LOSS) BEFORE MINORITY INTEREST..... $ 16,112 $(5,303)
======== =======
</TABLE>
Total revenues increased $16.5 million, or 55.5%, for the nine months ended
September 30, 1997 compared to the same period of 1996. Rental income
increased $12.1 million, or 46.0%, to $38.6 million for the nine months ended
September 30, 1997 compared to $26.5 million in the same period in 1996.
Rental income from office properties increased $8.5 million during the nine
months ended September 30, 1997 from the comparable period in 1996. This
improvement was due to an increase in office space under lease from 1,288,000
square feet at September 30, 1996 to 2,678,000 square feet at September 30,
1997, an increase of 1,390,000 square feet. Approximately 338,000 square feet
reflects four office properties acquired in connection with the IPO and
988,000 rentable square feet represents twenty-three office buildings
purchased during the nine months ended September 30, 1997. The remaining
increase is primarily the result of leasing activity at Kilroy Airport Center
at El Segundo and Kilroy Airport Center, Long Beach. The increase in square
footage under lease was offset by a decrease in average rent per rentable
square foot at Kilroy Airport Center at El Segundo, from $21.69 per square
foot for the nine months ended September 30, 1996 to $19.96 for the same
period in 1997 as a result of the re-negotiation and extension of a lease with
Hughes Space and Communications in November 1996. Rental income also decreased
at the SeaTac Office Center by $0.3 million for the nine months ended
September 30, 1997 compared to the same period in 1996 due to the expiration
of 48,000 rentable square feet on December 31, 1996. During the nine months
ended September 30, 1997, 40,000 square feet of this space was re-leased at a
comparable rate per square foot. Rental income from industrial properties
increased $3.6 million during the nine months ended September 30, 1997
compared to the same period in 1996. This improvement was due to an increase
in industrial space under lease from 832,000 square feet at September 30, 1996
to 3,745,000 square feet at September 30, 1997, an increase of 2,913,000
square feet. The increase was due to the purchase of three industrial
buildings in connection with the IPO with approximately 380,000 square feet
under lease at September 30, 1997, and the purchase of forty-two industrial
buildings during the nine months ended September 30, 1997 with approximately
2,471,000 square feet under lease. The remaining increase was primarily due to
the lease up of 62,000 square feet at 3340 E. La Palma Avenue. Tenant
reimbursements increased to $3.7 million in 1997 from $2.6 million for the
same period in 1996. The $1.1 million increase was primarily due
15
<PAGE>
to tenant reimbursements from the office and industrial buildings purchased in
connection with the IPO and during the nine months ended September 30, 1997.
Interest income increased $3.4 million due to interest earned on the $116.2
million of net IPO proceeds remaining after the purchase of the properties and
the repayment of debt in connection with the IPO, and the $146.0 million of
net proceeds from the August Offering remaining after the repayment of
borrowings on the Credit Facility. Other income for the nine months ended
September 30, 1997 includes a $0.1 million gain on the sale of furniture and
equipment, $0.1 million in revenues which were previously written off as
uncollectible, and $0.1 million in property management fees. Development
services are now performed by an unconsolidated subsidiary of the company.
Expenses for the nine months ended September 30, 1997 decreased by $4.9
million, or 14.1%, to $30.1 million compared to $35.0 million for the nine
months ended September 30, 1996. Property expenses and real estate taxes
increased $1.5 million and $1.1 million, respectively, primarily due to the
properties purchased in connection with the IPO and during the nine months
ended September 30, 1997. General and administrative expenses increased $2.4
million, or 150%, for the nine months ended June 30, 1997 compared to the same
period in 1996, due to increased management and administrative costs
associated with the increased portfolio size and the operations of the Company
as a public real estate investment trust. Ground lease expense increased
$0.2 million during the nine months ended September 30, 1997 over the same
period in 1996 primarily as a result of a ground lease on one of the
properties purchased in connection with the IPO. Interest expense decreased
$8.8 million, or 53.9%, to $7.4 million for the nine months ended September
30, 1997 from $16.2 million for the nine months ended September 30, 1996,
primarily as a result of the repayment of $127.4 million in debt in connection
with the IPO.
Net income was $16.1 million for the nine months ended September 30, 1997
compared to a $5.3 million loss for the same period in 1996. The net change of
$21.4 million is due primarily to an increase in rental income of $12.1
million, an increase in interest income of $3.4 million, a decrease of $3.2 in
the sale of air rights and a decrease in interest expense of $8.8 million.
These changes were partially offset by an increase in real estate taxes of
$1.5 million, an increase in general and administrative expenses of $2.4
million and an increase in depreciation and amortization of $2.4 million.
LIQUIDITY AND CAPITAL RESOURCES
The Company has a $250.0 million secured revolving credit facility (the
"Credit Facility"), which bears interest at a rate that ranges from LIBOR plus
1.38% to 1.50% depending on the Company's leverage ratios, and matures in May
1999, subject to a one year option to extend the term. The Credit Facility is
secured by certain properties of the Company and the availability of funds is
subject to, among other things, the value of those properties. Availability
under the Credit Facility was $153.0 million at September 30, 1997. There were
no borrowings outstanding at September 30, 1997.
In addition, the Operating Partnership has debt outstanding as of September
30, 1997 of $104.1 million, comprised of an $83.4 million mortgage loan, a
$14.0 million mortgage loan and a $6.7 million promissory note. The $83.4
million mortgage loan requires monthly principal and interest payments based
on an interest rate of 8.35%, amortizes over 25 years and matures in 2022. In
February 2005, the interest rate resets to the greater of 13.35% or the sum of
the interest rate for U.S. Treasury Securities maturing 15 years from the
reset date plus 5.0%. The $14.0 million mortgage loan requires monthly
payments of interest computed at a variable rate based on LIBOR plus 1.50%.
The $14 million mortgage matures in January 1998. The promissory was repaid on
October 31, 1997.
On August 20, 1997, the Company completed a follow-on public offering of
10,000,000 shares of, $.01 par value per share, common stock. The offering
price was $25.50 per share resulting in gross proceeds of $255.0 million. The
aggregate proceeds to the Company, net of underwriter's discount, advisory fee
and offering costs were approximately $241.0 million. The proceeds were used
to pay outstanding borrowings on the Credit Facility and to fund acquisitions.
Through September 30, 1997, the Company purchased 65 office and industrial
buildings for an aggregate acquisition cost of $291.0 million. The purchase
price for such properties was funded out of net proceeds from the IPO and the
August Offering, from borrowings under the Credit Facility, issuance of a
promissory note and, in part for two properties, the issuance of limited
partnership units in the Operating Partnership.
16
<PAGE>
In June 1997, the Company leased approximately 211,000 square feet of office
space at the SeaTac Office Center. In connection with the lease, the Company
agreed to make $3.25 million of tenant improvements which the Company expects
to fund from working capital or borrowings under the Credit Facility. The
Company will pay for the tenant improvements upon completion and anticipates
that the work will be completed by December 31, 1997. The Company also expects
to spend approximately $2.0 million in connection with non-recurring capital
improvements at the SeaTac Office Center and $500,000 of earthquake related
improvements at certain other properties. As of September 30, 1997 the Company
has spent approximately $240,000 on capital improvements at the SeaTac Office
Center and $103,000 on earthquake related improvements.
Subsequent to September 30, 1997, the Company purchased eleven office and
industrial buildings for an aggregate acquisition cost of $117.7 million. The
acquisitions were funded from proceeds from the August Offering and the Credit
Facility. In addition, the Operating Partnership issued 588,736 limited
partnership units valued at approximately $15.3 million and the Company
assumed $33.6 million of mortgage debt in connection with the purchases. The
debt is comprised of a $11.7 million note, a $8.0 million note and a $13.9
million note. The $11.7 million note bears interest at 8.43% and matures on
November 1, 2018. The $8.0 million note bears interest at 8.21% and matures on
October 1, 2013. The $13.9 million note bears interest at 8.45% and matures on
December 1, 2005. Principal and interest are payable monthly on all three
notes.
The Company owns approximately 60 acres of developable property and plans to
develop an aggregate of over 2.0 million rentable square feet of office or
industrial space, subject to required entitlements and other governmental
approvals. Of this amount, the Company has commenced development of
approximately 1.0 million rentable square feet of industrial space in 1997 at
a total budgeted cost of $65.0 million. The Company has also agreed to
purchase a 50% managing interest in 50 acres of land in San Diego County owned
by The Allen Group upon completion of necessary entitlements and
infrastructure. The Company will finance all development with borrowings under
the Credit Facility and working capital.
The Company makes quarterly distributions to stockholders from cash
available for distribution and, if necessary to satisfy distribution
requirements to maintain its status as a REIT, the Company may use borrowings
under its Credit Facility. All such distributions are at the discretion of the
Board of Directors. Amounts accumulated for distribution will be invested
primarily in interest-bearing accounts and short-term interest-bearing
securities, which are consistent with the Company's intention to qualify for
taxation as a REIT. Such investments may include, for example, obligations of
the Government National Mortgage Association, other governmental agency
securities, certificates of deposit and interest-bearing bank deposits.
The Company believes that it will have sufficient capital resources to
satisfy its obligations for the next twelve months. The Company expects to
meet certain of its long-term liquidity requirements, including the repayment
of long-term debt of $83.4 million (less scheduled principal repayments) in
2005, the repayment of debt of $14.0 million in January 1998 and possible
property acquisitions and development, through long-term secured and unsecured
borrowings, including the Credit Facility, and the issuance of debt securities
or additional equity securities of the Company or, possibly in connection with
acquisitions of land or improved properties, the issuance of units of the
Operating Partnership.
HISTORICAL CASH FLOWS
Historically, the Kilroy Group's principal sources of funding for operations
and capital expenditures were cash flow from operating activities and secured
debt financing.
The Company's net cash from operating activities increased $8.2 million,
from $8.1 million in 1996 to $16.3 million in 1997. There was an increase in
income before extraordinary gain of $18.0 million, from a $5.3 million loss in
1996 to income of $12.7 million in 1997. The additional operating cash flow in
1997 was used to pay for deferred charges and other assets of $9.2 million and
accrued option buy out and tenant improvements of $1.4 million.
17
<PAGE>
Net cash used in investing activities increased $348.7 million to $350.8
million for the nine months ended September 30, 1997 from $2.1 million for
1996. The increase was due to the purchase of 25 acres of land, 23 office
buildings and 42 industrial buildings for an aggregate purchase price of
$286.4 million (net of $4.0 million paid in units of the Operating Partnership
and $6.7 million of debt issued), seven buildings purchased for $58.0 million
in connection with the IPO and additional tenant improvements and capital
expenditures of $ 4.8 million.
Cash flows provided by financing activities totaled $409.4 million for the
nine months ended September 30, 1997 compared to net cash used in financing
activities of $6.0 million in the 1996 period. The increase is primarily due
to net proceeds from the IPO of $302.8 million, a net repayment of debt of
$121.4 million and net proceeds from the August Offering of $241.0 million in
the 1997 period, compared to net proceeds from debt of $2.8 million in the
1996 period. In addition, there were dividends of $11.1 million and loan costs
and restricted cash of $4.0 million and $4.6 million, respectively, in the
1997 period compared to loan costs of $2.6 million in the 1996 period. In 1997
there was a contribution from partners of $6.8 million, compared to a net
distribution of $6.2 million in 1996.
FUNDS FROM OPERATIONS
Industry analysts generally consider Funds from Operations, as defined by
NAREIT, an alternative measure of performance for an equity REIT. Funds from
Operations is defined by NAREIT to mean net income (loss) determined in
accordance with GAAP, excluding gains (or losses) from debt restructuring and
sales of property, plus depreciation and amortization (other than amortization
of deferred financing costs and depreciation of non-real estate assets), and
after adjustment for unconsolidated partnerships and joint ventures. The
Company believes that in order to facilitate a clear understanding of the
combined historical operating results of the Company, Funds from Operations
should be examined in conjunction with net income (loss) as presented in the
financial statements included elsewhere in this report. The Company computes
Funds from Operations in accordance with standards established by the Board of
Governors of NAREIT in its March 1995 White Paper, which may differ from the
methodologies used by other equity REITs and, accordingly, may not be
comparable to that published by such other REITs. Funds from Operations should
not be considered as an alternative to net income (loss), as an indication of
the Company's performance or to cash flows as a measure of liquidity or the
ability to pay dividends or make distributions.
The following table presents the Company's Funds from Operations for the
period from February 1, 1997 to September 30, 1997 and the three months ended
September 30, 1997:
<TABLE>
<CAPTION>
FEBRUARY 1, THREE MONTHS
1997 TO ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1997
------------- -------------
<S> <C> <C>
Net income................................... $13,240 $ 6,480
Add
Minority interest........................ 2,231 977
Depreciation and amortization............ 8,404 3,660
Depreciation and amortization on
unconsolidated subsidiary............... 8 3
Other.................................... 307 115
------- -------
Funds from Operations........................ $24,190 $11,235
======= =======
</TABLE>
18
<PAGE>
The following table presents the Company's Funds Available for Distribution
for the period from February 1, 1997 to September 30, 1997 and the three months
ended September 30, 1997:
<TABLE>
<CAPTION>
FEBRUARY 1, THREE MONTHS
1997 TO ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1997
------------- -------------
<S> <C> <C>
Funds from Operations........................ $24,190 $11,235
Adjustments
Amortization of deferred financing
costs................................... 625 404
Tenant improvements, leasing commissions
and recurring capital expenditures...... (806) (274)
Net effect of straight-line rents.......... (289) (214)
------- -------
Funds Available for Distribution............. $23,720 $11,151
======= =======
</TABLE>
INFLATION
The majority of the Company's tenant leases require tenants to pay most
operating expenses, including real estate taxes and insurance, and increases in
common area maintenance expenses, which reduce the Company's exposure to
increases in costs and operating expenses resulting from inflation.
19
<PAGE>
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
During the three months ended September 30, 1997, no legal proceedings were
initiated against or on behalf of the Company, the adverse determination of
which would have a material adverse effect upon the financial condition and
results of operations of the Company.
ITEM 2. CHANGES IN SECURITIES--NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES--NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS--NONE
ITEM 5. OTHER INFORMATION--NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- ----------------------------------------------------------------------
<C> <S>
3.1 Articles of Amendment and Restatement of the Registrant.(1)
3.2 Amended and Restated Bylaws of the Registrant.(1)
3.3 Form of Certificate for Common Stock of the Registrant.(1)
10.1 Amended and Restated Agreement of Limited Partnership of Kilroy
Realty, L.P.(1)
10.2 Form of Registration Rights Agreement among the Registrant and the
persons named therein.(1)
10.3 Omnibus Agreement, dated as of October 30, 1996, by and among Kilroy
Realty, L.P. and the parties named therein.(1)
10.4 Supplemental Representations, Warranties and Indemnity Agreement by
and among Kilroy Realty, L.P. and the parties named therein.(1)
10.5 Pledge Agreement by and among Kilroy Realty, L.P., John B. Kilroy,
Sr., John B. Kilroy, Jr. and Kilroy Industries.(1)
10.6 1997 Stock Option and Incentive Plan of the Registrant and Kilroy
Realty, L.P.(1)
10.7 Form of Indemnity Agreement of the Registrant and Kilroy Realty, L.P.
with certain officers and directors.(1)
10.8 Lease Agreement, dated January 24, 1989, by and between Kilroy Long
Beach Associates and the City of Long Beach for Kilroy Long Beach
Phase I.(1)
10.9 First Amendment to Lease Agreement, dated December 28, 1990, by and
between Kilroy Long Beach Associates and the City of Long Beach for
Kilroy Long Beach Phase I.(1)
10.10 Lease Agreement, dated July 17, 1985, by and between Kilroy Long Beach
Associates and the City of Long Beach for Kilroy Long Beach Phase
III.(1)
10.11 Lease Agreement, dated April 21, 1988, by and between Kilroy Long
Beach Associates and the Board of Water Commissioners of the City of
Long Beach, acting for and on behalf of the City of Long Beach, for
Long Beach Phase IV.(1)
10.12 Lease Agreement, dated December 30, 1988, by and between Kilroy Long
Beach Associates and the City of Long Beach for Kilroy Long Beach
Phase II.(1)
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- ----------------------------------------------------------------------
<C> <S>
10.13 First Amendment to Lease, dated January 24, 1989, by and between
Kilroy Long Beach Associates and the City of Long Beach for Kilroy
Long Beach Phase III.(1)
10.14 Second Amendment to Lease Agreement, dated December 28, 1990, by and
between Kilroy Long Beach Associates and the City of Long Beach for
Kilroy Long Beach Phase III.(1)
10.15 First Amendment to Lease Agreement, dated December 28, 1990, by and
between Kilroy Long Beach Associates and the City of Long Beach for
Kilroy Long Beach Phase II.(1)
10.16 Third Amendment to Lease Agreement, dated October 10, 1994, by and
between Kilroy Long Beach Associates and the City of Long Beach for
Kilroy Long Beach Phase III.(1)
10.17 Development Agreement by and between Kilroy Long Beach Associates and
the City of Long Beach.(1)
10.18 Amendment No. 1 to Development Agreement by and between Kilroy Long
Beach Associates and the City of Long Beach.(1)
10.19 Ground Lease by and between Frederick Boysen and Ted Boysen and Kilroy
Industries, dated May 15, 1969, for SeaTac Office Center.(1)
10.20 Amendment No. 1 to Ground Lease and Grant of Easement, dated April 27,
1973, among Frederick Boysen and Dorothy Boysen, Ted Boysen and Rose
Boysen and Sea/Tac Properties.(1)
10.21 Amendment No. 2 to Ground Lease and Grant of Easement, dated May 17,
1977, among Frederick Boysen and Dorothy Boysen, Ted Boysen and Rose
Boysen and Sea/Tac Properties.(1)
10.22 Airspace Lease, dated July 10, 1980, by and among the Washington State
Department of Transportation, as lessor, and Sea Tac Properties, Ltd.
and Kilroy Industries, as lessee.(1)
10.23 Lease, dated April 1, 1980, by and among Bow Lake, Inc., as lessor,
and Kilroy Industries and SeaTac Properties, Ltd., as lessees for
Sea/Tac Office Center.(1)
10.24 Amendment No. 1 to Ground Lease, dated September 17, 1990, between Bow
Lake, Inc., as lessor, and Kilroy Industries and Sea/Tac Properties,
Ltd., as lessee.(1)
10.25 Amendment No. 2 to Ground Lease, dated March 21, 1991, between Bow
Lake, Inc., as lessor, and Kilroy Industries and Sea/Tac Properties,
Ltd., as lessee.(1)
10.26 Property Management Agreement between Kilroy Realty Finance
Partnership, L.P. and Kilroy Realty, L.P.(1)
10.27 Form of Environmental Indemnity Agreement.(1)
10.28 Option Agreement by and between Kilroy Realty, L.P. and Kilroy Airport
Imperial Co.(1)
10.29 Option Agreement by and between Kilroy Realty, L.P. and Kilroy
Calabasas Associates.(1)
10.30 Employment Agreement between the Registrant and John B. Kilroy, Jr.(1)
10.31 Employment Agreement between the Registrant and Richard E. Moran
Jr.(1)
10.32 Employment Agreement between the Registrant and Jeffrey C. Hawken.(1)
10.33 Employment Agreement between the Registrant and C. Hugh Greenup.(1)
10.34 Noncompetition Agreement by and between the Registrant and John B.
Kilroy, Sr.(1)
10.35 Noncompetition Agreement by and between the Registrant and John B.
Kilroy, Jr.(1)
10.36 License Agreement by and among the Registrant and the other persons
named therein.(1)
10.37 Form of Indenture of Mortgage, Deed of Trust, Security Agreement,
Financing Statement, Fixture Filing and Assignment of Leases, Rents
and Security Deposits.(1)
10.38 Form of Mortgage Note.(1)
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- ----------------------------------------------------------------------
<C> <S>
10.39 Form of Indemnity Agreement.(1)
10.40 Form of Assignment of Leases, Rents and Security Deposits.(1)
10.41 Form of Credit Agreement.(1)
10.42 Form of Variable Interest Rate Indenture of Mortgage, Deed of Trust,
Security Agreement, Financing Statement, Fixture Filing and Assignment
of Leases and Rents.(1)
10.43 Form of Environmental Indemnity Agreement.(1)
10.44 Form of Assignment, Rents and Security Deposits.(1)
10.45 Revolving Credit Agreement, dated as of May 21, 1997, among Kilroy
Realty, L.P., Morgan Guaranty Trust Company of New York and the Banks
listed herein.(5)
10.46 Form of Mortgage, Deed of Trust, Security Agreement, Financing
Statement, Fixture Filing and Assignment of Leases and Rents.(1)
10.47 Assignment of Leases, Rents and Security Deposits.(1)
10.48 Purchase and Sale Agreement and Joint Escrow Instructions, dated April
30, 1997, by and between Mission Land Company, Mission-Vacaville, L.P.
and Kilroy Realty, L.P.(2)
10.49 Agreement of Purchase and Sale and Joint Escrow Instructions, dated
April 30, 1997, by and between Camarillo Partners and Kilroy Realty,
L.P.(2)
10.50 Purchase and Sale Agreement and Escrow Instructions, dated May 5,
1997, by and between Kilroy Realty, L.P. and Pullman Carnegie
Associates.(4)
10.51 Amendment to Purchase and Sale Agreement and Escrow Instructions,
dated June 27, 1997, by and between Pullman Carnegie Associates and
Kilroy Realty, L.P.(4)
10.52 Purchase and Sale Agreement, Contribution Agreement and Joint Escrow
Instructions, dated May 12, 1997, by and between Shidler West
Acquisition Company, LLC and Kilroy Realty, L.P.(3)
10.53 First Amendment to Purchase and Sale Agreement, Contribution Agreement
and Joint Escrow Instructions, dated June 6, 1997, between Kilroy
Realty, L.P. and Shidler West Acquisition Company, L.L.C.(3)
10.54 Second Amendment to Purchase and Sale Agreement, Contribution
Agreement and Joint Escrow Instructions, dated June 12, 1997, by and
between Shidler West Acquisition Company, LLC and Kilroy Realty,
L.P.(3)
10.55 Agreement of Purchase and Sale and Joint Escrow Instructions, dated
June 12, 1997, by and between Mazda Motor of America, Inc. and Kilroy
Realty, L.P.(4)
10.56 Amendment to Agreement of Purchase and Sale and Joint Escrow
Instructions, dated June 30, 1997, by and between Mazda Motor of
America, Inc. and Kilroy Realty, L.P.(4)
10.57 Agreement for Purchase and Sale of 2100 Colorado Avenue, Santa Monica,
California, dated June 16, 1997, by and between Santa Monica Number
Seven Associates L.P. and Kilroy Realty L.P.(4)
10.58 First Amendment to Credit Agreement dated July 1, 1997.(5)
10.59 Second Amendment to Credit Agreement and First Amendment to Variable
Interest Rate Indenture of Mortgage, Deed of Trust, Security
Agreement, Financing Statement, Fixture Filing and Assignment of
Leases and Rent dated August 13, 1997.(5)
*10.60 Purchase and Sale Agreement and Joint Escrow Instructions, dated July
10, 1997, by and between Kilroy Realty, L.P. and Mission Square
Partners.
*10.61 First Amendment to the Purchase and Sale Agreement and Joint Escrow
Instructions, dated July 10, 1997, by and between Kilroy Realty, L.P.
and Mission Square Partners, dated August 22, 1997.
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- ---------------------------------------------------------------------
<C> <S>
*10.62 Second Amendment to the Purchase and Sale Agreement and Joint Escrow
Instructions, dated July 10, 1997, by and between Kilroy Realty, L.P.
and Mission Square Partners, dated September 5, 1997.
*10.63 Third Amendment to the Purchase and Sale Agreement and Joint Escrow
Instructions, dated July 10, 1997, by and between Kilroy Realty, L.P.
and Mission Square Partners, dated September 19, 1997.
*10.64 Fourth Amendment to the Purchase and Sale Agreement and Joint Escrow
Instructions, dated July 10, 1997, by and between Kilroy Realty, L.P.
and Mission Square Partners, dated September 22, 1997.
*10.65 Fifth Amendment to the Purchase and Sale Agreement and Joint Escrow
Instructions, dated July 10, 1997, by and between Kilroy Realty, L.P.
and Mission Square Partners, dated September 23, 1997.
*10.66 Sixth Amendment to the Purchase and Sale Agreement and Joint Escrow
Instructions, dated July 10, 1997, by and between Kilroy Realty, L.P.
and Mission Square Partners, dated September 25, 1997
*10.67 Seventh Amendment to the Purchase and Sale Agreement and Joint Escrow
Instructions, dated July 10, 1997, by and between Kilroy Realty, L.P.
and Mission Square Partners, dated September 29, 1997.
*10.68 Eighth Amendment to the Purchase and Sale Agreement and Joint Escrow
Instructions, dated July 10, 1997, by and between Kilroy Realty, L.P.
and Mission Square Partners, dated October 2, 1997.
*10.69 Ninth Amendment to the Purchase and Sale Agreement and Joint Escrow
Instructions, dated July 10, 1997, by and between Kilroy Realty, L.P.
and Mission Square Partners, dated October 24, 1997.
*27.1 Financial Data Schedule.
</TABLE>
- --------
*Filed herewith.
(1) Previously filed as an exhibit to the Registration Statement on Form S-11
(No. 333-15553) as declared effective on January 28, 1997 and incorporated
herein by reference.
(2) Previously filed as Exhibit 10.11 and 10.12, respectively, to the Current
Report on Form 8-K (No. 1-12675) as filed on June 5, 1997 and incorporated
herein by reference.
(3) Previously filed as Exhibit 10.57, 10.58 and 10.59, respectively, to the
Current Report on Form 8-K (No. 1-12675) as filed on July 3, 1997 and
incorporated herein by reference.
(4) Previously filed as Exhibit 10.54, 10.59, 10.60, 10.61 and 10.62,
respectively, to the Current Report on Form 8-K (No. 1-12675) as filed on
July 15, 1997 and incorporated herein by reference.
(5) Previously filed as an exhibit to the Registration Statement on Form S-11
(No. 333-32261) as filed on July 28, 1997, as amended, and incorporated by
reference.
(b) Reports on Form 8-K.
The Company filed a Current Report on Form 8-K dated July 14, 1997 in
connection with the acquisition of six office and one industrial buildings.
The Company filed a Current Report on Form 8-K dated November 13, 1997 in
connection with the acquisition of four office buildings.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized on November 14,
1997.
Kilroy Realty Corporation
/s/ John B. Kilroy, Jr.
By: _________________________________
JOHN B. KILROY, JR.
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
/s/ Richard E. Moran, Jr.
By: _________________________________
RICHARD E. MORAN JR.
EXECUTIVE VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER
/s/ Ann Marie Whitney
By: _________________________________
ANN MARIE WHITNEY
VICE PRESIDENT AND CONTROLLER
24
<PAGE>
EXHIBIT 10.60
AGREEMENT OF PURCHASE AND SALE
AND JOINT ESCROW INSTRUCTIONS
<PAGE>
AGREEMENT OF PURCHASE AND SALE
AND JOINT ESCROW INSTRUCTIONS
------------------------------
Table of Contents
-----------------
<TABLE>
<CAPTION>
Paragraph
Number Page
- --------- ----
<S> <C>
1. Purchase and Sale........................................... 2
2. Purchase Price.............................................. 2
3. Payment of Purchase Price................................... 2
4. Escrow...................................................... 2
5. Condition of Title.......................................... 3
6. Title Policy................................................ 3
7. Conditions to Close of Escrow............................... 3
8. Deposits by Seller.......................................... 7
9. Deposits by Buyer........................................... 7
10. Costs and Expenses.......................................... 8
11. Prorations.................................................. 8
12. Disbursements and Other Actions by Escrow Holder............ 9
13. Covenants of Seller......................................... 10
14. Seller's Representations and Warranties..................... 10
15. Buyer's Representations and Warranties...................... 11
16. Remedies.................................................... 12
17. Damage or Condemnation Prior to Closing..................... 13
18. Notices..................................................... 13
19. Brokers..................................................... 14
20. Legal Fees.................................................. 14
21. Assignment.................................................. 15
22. Indemnification............................................. 15
23. Miscellaneous............................................... 15
SIGNATURES........................................................ 17
</TABLE>
EXHIBITS
- --------
Exhibit "A" - Legal Description of the Land
Exhibit "B" - Rent Roll
Exhibit "C" - Grant Deed
Exhibit "D" - Estoppel Certificate
Exhibit "E" - Personal Property
Exhibit "F" - Tenant Lease Assignment
Exhibit "G" - Intentionally Omitted
Exhibit "H" - Bill of Sale
Exhibit "I" - Transferor's Certification of Non-Foreign Status
Exhibit "J" - General Assignment Agreement
Exhibit "K" - Copy of U.S. Marshall's Lease
-i-
<PAGE>
AGREEMENT OF PURCHASE AND SALE
AND JOINT ESCROW INSTRUCTIONS
------------------------------
THIS AGREEMENT OF PURCHASE AND SALE AND JOINT ESCROW INSTRUCTIONS
("Agreement") is made and entered into as of this 10th day of July, 1997 (the
"Effective Date"), by and between KILROY REALTY, L.P., a Delaware limited
partnership ("Buyer"), and MISSION SQUARE PARTNERS, a California general
partnership ("Seller"), with respect to the following:
R E C I T A L S :
- - - - - - - -
A. Seller desires to sell and convey to Buyer the following:
1. That certain real property located in the City of Riverside,
County of Riverside, State of California, commonly known as 3750 University
Avenue, consisting of improved land, legally described on Exhibit "A" attached
-----------
hereto (the "Land"), together with one (1) office building located thereon,
associated parking areas, and all other improvements located thereon (the
"Improvements");
2. All of Seller's interest in all rights, privileges, easements and
appurtenances benefiting the Land and/or the Improvements, including, without
limitation, all mineral and water rights and all easements, rights-of-way and
other appurtenances used or connected with the beneficial use or enjoyment of
the Land and/or the Improvements (the Land, the Improvements and all such
rights, privileges, easements and appurtenances are sometimes collectively
hereinafter referred to as the "Real Property");
3. All of Seller's interest as lessor in the leases covering the Land
and the Improvements (said leases, together with any and all amendments,
modifications or supplements thereto, are hereinafter referred to collectively
as the "Leases" and are identified in the "Rent Roll" [as defined in Paragraph
7(a)(ii)(G) hereof] attached hereto as Exhibit "B");
-----------
4. All personal property, equipment, supplies and fixtures
(collectively, the "Personal Property") owned by Seller and used or useful in
the operation of the Real Property which Personal Property is listed in Exhibit
-------
"E " attached hereto; and
- ----
5. All of Seller's interest in any intangible property used in
connection with the foregoing, including, without limitation, all trademarks,
trade names (including, without limitation, the right to use the name "Mission
Square" (subject to Buyer's acknowledgment that no fictitious business name or
other filing or registration has been made by Seller in connection with its use
of such name)), goodwill, contract rights, warranties, guaranties, licenses,
permits, entitlements, governmental approvals and certificates of occupancy
which benefit the Real Property and/or the Personal Property (the "Intangible
Personal Property"). The Real Property, the Personal Property, Seller's
interest as lessor under the Leases and the Intangible Personal Property are
sometimes collectively hereinafter referred to as the "Property."
B. Seller's title to the Property is encumbered by a lien in favor of
Metropolitan Life Insurance Company ("Metropolitan") to secure a loan from
Metropolitan to Seller in the principal sum of FOURTEEN MILLION DOLLARS
($14,000,000) (the "Met Loan"). The Met Loan cannot be prepaid but may be
assumed upon satisfaction of certain conditions, including, without limitation,
payment of an assumption fee of one percent (1%) of the principal balance
("Assumption Fee").
C. Seller desires to sell the Property to Buyer and Buyer desires to
purchase the Property from Seller upon the terms and conditions hereinafter set
forth.
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Seller and Buyer agree
that the terms and conditions of this Agreement and the instructions to First
American Title Insurance Company ("Escrow Holder") with regard to the escrow
("Escrow") created pursuant hereto are as follows:
1. Purchase and Sale. Seller hereby agrees to sell the Property to
-----------------
Buyer, and Buyer hereby agrees to purchase the Property from Seller, upon the
terms and conditions herein set forth.
2. Purchase Price. The purchase price ("Purchase Price") for the
--------------
Property shall be Twenty-Two Million Five Hundred Forty-Five Thousand and No/100
Dollars ($22,545,000.00).
3. Payment of Purchase Price. The Purchase Price for the Property
-------------------------
shall be payable by Buyer as follows:
(a) Deposit. Within one (1) business day following the later of the
-------
Effective Date or Buyer's receipt of a fully executed original of this Agreement
from Seller, Buyer shall deposit or cause to be deposited with Escrow Holder in
cash, by a certified or bank cashier's check made payable to Escrow Holder, or
by a confirmed wire transfer of funds (hereinafter referred to as "Immediately
Available Funds"), the sum of Two Hundred Thousand and No/100 Dollars
($200,000.00) (the "Deposit"). Upon Escrow Holder's receipt of the Deposit,
Escrow Holder shall immediately invest it in a federally insured interest
bearing account inuring solely to the benefit of Buyer (subject to Seller's
rights in the event of Buyer's default as provided for under this Agreement)
maintained at a federally insured bank or savings and loan association
acceptable to Buyer. The Deposit and all interest accrued thereon (less Five
Hundred Dollars ($500.00) and one-half of any escrow cancellation fees)
(hereinafter the "Refundable Deposit") shall be fully refundable to Buyer if any
of the contingencies set forth in this Agreement for Buyer's benefit are not
satisfied or waived by Buyer on or before the expiration of the "Contingency
Period" (as defined in Paragraph 7(a)(ii) below). The Deposit shall be applied
to the payment of the Purchase Price upon the "Close of Escrow" (as defined in
Paragraph 4(b) below) or refunded to Buyer as above-provided or released to
Seller in accordance with the provisions of Paragraph 16(a) hereof.
(b) Assumption of Met Loan. Upon the Close of Escrow, Buyer shall
----------------------
receive a credit against the Purchase Price equal to the outstanding principal
balance of the Met Loan, (i) plus all accrued but unpaid interest and all other
amounts payable in connection with the Met Loan, including, but not limited to,
late charges and penalties, as of the Close of Escrow, but excluding the
Assumption Fee and any other charges arising out of Buyer's assumption of the
Met Loan (the "Met Fees"), and (ii) less the balance of all outstanding impounds
and other accounts then held by Metropolitan as additional security for the Met
Loan. Seller shall assign its interest in all such impounds and other accounts
to Buyer upon the Close of Escrow. Prior to signing this Agreement, Seller has
provided to Buyer the documents evidencing and securing the Met Loan (the "Met
Loan Documents"). Buyer shall complete, sign and submit all applications and
information reasonably requested by Metropolitan to process a request for
assumption of the Met Loan by buyer. All such applications and submission shall
be prepared and submitted at buyer's sole cost and expense. Seller shall
cooperate with buyer in pursuing approval provided seller shall not be
responsible for incurring or paying any out-of-pocket expenses in connection
with such cooperation. Buyer shall not be obligated to pay the met fees until
the close of escrow. At no time will seller be obligated to pay the met fees.
(c) Closing Funds. No later than the closing date, buyer shall
-------------
deposit or cause to be deposited with escrow holder, in cash, by a certified or
bank cashier's check made payable to escrow holder or by a confirmed wire
transfer of funds, the balance of the purchase price, plus or minus buyer's
share of closing costs, prorations and charges payable pursuant to this
agreement.
4. Escrow.
------
(a) Opening of Escrow. For purposes of this Agreement, the Escrow
-----------------
shall be deemed opened on the date Escrow Holder shall have received a fully
executed original or originally executed counterparts of this Agreement from
both Buyer and Seller and the Deposit (such date being referred to hereinafter
as the "Opening of Escrow"). Escrow Holder shall notify Buyer and Seller in
writing of the date Escrow is opened. Buyer and Seller agree to execute,
deliver and be bound by any reasonable or customary supplemental escrow
instructions of Escrow Holder or other instruments as may reasonably be required
by Escrow Holder in order to consummate the transaction contemplated by this
Agreement. Any such supplemental instructions shall not conflict with, amend or
supersede any portions of this Agreement. To the extent of any conflict or
inconsistency between such supplemental instructions and this Agreement, this
Agreement shall control.
-2-
<PAGE>
(b) Close of Escrow. For purposes of this Agreement, the "Close of
---------------
Escrow" shall be the date that the grant deed, the form of which is attached
hereto as Exhibit "C" (the "Grant Deed"), conveying the Real Property to Buyer,
-----------
is recorded in the Official Records of Orange County, California (the "Official
Records"). Unless extended in writing by Buyer and Seller or unless extended
pursuant to the terms and provisions of Paragraph 7(a)(ii) hereof, the Close of
Escrow shall occur on or before fourteen (14) days after the last day of the
Contingency Period (the "Closing Date"). Seller shall deliver possession of the
Property to Buyer upon the Close of Escrow, subject only to the "Approved
Condition of Title" (as defined in Paragraph 5 below).
5. Condition of Title. It shall be a condition to the Close of
------------------
Escrow for Buyer's benefit that title to the Real Property be conveyed to Buyer
by Seller by the Grant Deed subject only to the following approved condition of
title ("Approved Condition of Title"):
(a) liens securing payment of any general or special real estate
taxes, and assessments and personal property taxes not delinquent;
(b) all liens securing the Met Loan and those additional documents
required by Metropolitan to be recorded in connection with the assumption of the
Met Loan by Buyer;
(c) the lien of supplemental taxes assessed pursuant to Chapter 3.5
commencing with Section 75 of the California Revenue and Taxation Code ("Code"),
but only to the extent that such supplemental taxes are attributable to the
transaction contemplated by this Agreement. Seller shall be responsible for,
and shall indemnify, protect, defend (with counsel chosen by Buyer) and hold
harmless Buyer and the Real Property from and against any and all supplemental
taxes assessed pursuant to the Code, to the extent that such taxes relate to
events (including, without limitation, any changes in ownership and/or new
construction) occurring prior to the Close of Escrow and which are payable for
periods occurring solely prior to the Close of Escrow;
(d) matters affecting the Real Property created, directly or
indirectly, by Buyer; and
(e) exceptions which are disclosed by the Report and all the Surveys
described in Paragraph 7(a)(i) hereof and which are approved or deemed approved
by Buyer in accordance with such Paragraph 7(a)(i); and
(f) all standard exclusions to the "Title Policy" (as defined in
Paragraph 6 below);
(g) all Leases disclosed to Buyer in accordance with Paragraph
7(a)(ii) below.
Seller covenants and agrees that during the term of the Escrow, it
will not cause or expressly permit title to the Real Property to differ from the
Approved Condition of Title described in this Paragraph 5 other than for notices
of non-delinquent pending tax or assessment filed by any governmental agency.
Any liens, encumbrances, encroachments, easements, restrictions, conditions,
covenants, rights, rights-of-way or other matters affecting the Approved
Condition of Title which may appear of record or be revealed after the date of
the Report described in Paragraph 7(a)(i) below ("Additional Title Matters")
shall also be subject to Buyer's approval as a condition to the Close of Escrow
for Buyer's benefit. Buyer shall notify Seller of its approval or disapproval
of each Additional Title Matter within five (5) business days after Buyer
receives written notice of the same. Any additional Title Matters which are
caused or expressly permitted to be caused by Seller shall be eliminated or
ameliorated by Seller to Buyer's satisfaction prior to the Close of Escrow as a
condition to the Close of Escrow for Buyer's benefit.
6. Title Policy. It shall be a condition to the Close of Escrow for
------------
Buyer's benefit (which Buyer may waive in its sole and absolute discretion) that
the "Title Company" (as defined in Paragraph 7(a)(i) hereof) issue its ALTA
Extended Coverage (Form B-1970) Owner's Policy of Title Insurance ("Title
Policy") in the amount of the Purchase Price, showing title to the Real Property
vested in Buyer, subject only to the Approved Condition of Title and with title
endorsements reasonably requested by Buyer.
7. Conditions to Close of Escrow.
-----------------------------
(a) Conditions to Buyer's Obligations. The Close of Escrow and
---------------------------------
Buyer's obligation to consummate the transaction contemplated by this Agreement
are subject to the satisfaction of the following conditions (or Buyer's written
waiver thereof, it being agreed that Buyer may waive in
-3-
<PAGE>
writing any or all of such conditions) for Buyer's benefit on or prior to the
dates designated below for the satisfaction of such conditions. In the event
Buyer timely terminates this Agreement and the Escrow due to the nonsatisfaction
of any such conditions, in strict accordance with Paragraph 7(c) below, then
Buyer shall be entitled to the immediate return of the Refundable Deposit and
all interest accrued thereon:
(i) Title. Buyer shall have approved the legal description of the
-----
Land and any matters of title as disclosed by the following documents
(collectively, the "Title Documents") which are to be prepared at Buyer's sole
cost and expense: (A) a standard preliminary title report dated on or after the
date of this Agreement issued by First American Title Insurance Company (the
"Title Company") with respect to the Real Property, as such report may be
amended or supplemented from time to time to reflect additional title matters or
survey exceptions (the "Report"); (B) legible copies of all documents, whether
recorded or unrecorded, referred to in the Report; (C) a color-coded map
plotting all easements disclosed by the Report; and (D) an ALTA as-built survey
of the Real Property prepared by a licensed engineer or surveyor acceptable to
Buyer in Buyer's sole and absolute discretion (the "Survey"). Buyer agrees to
cause a copy of the Title Documents to be delivered to Seller at least five (5)
days prior to expiration of the Contingency period.
Buyer shall have until 5:00 p.m. Pacific Time on the date that is
thirty (30) days after the Effective Date (the "Title Approval Date") to give
Seller and Escrow Holder written notice ("Buyer's Title Notice") of Buyer's
disapproval or conditional approval of the legal description or any matters
shown in or disclosed by the Title Documents.
The failure of Buyer to give Buyer's Title Notice on or before the
Title Approval Date shall be deemed to constitute Buyer's approval of the
respective matters relating thereto. If Buyer disapproves or conditionally
approves any of the foregoing matters, Seller may, within five (5) days after
its receipt of Buyer's Title Notice, elect to eliminate or ameliorate to Buyer's
sole and absolute satisfaction such disapproved or conditionally approved
matters. Within such five (5) day period ("Seller's Title Notice Period"),
Seller shall give Buyer written notice (which shall hereinafter be referred to
as "Seller's Title Notice") of those disapproved or conditionally approved
matters, if any, which Seller covenants and agrees to either eliminate from the
Title Policy as exceptions to title to the Property or to ameliorate to Buyer's
sole and absolute satisfaction by the Closing Date as a condition to the Close
of Escrow for Buyer's benefit. If Seller does not elect in Seller's Title
Notice to eliminate or ameliorate any disapproved or conditionally approved
matters as provided above or fails to timely deliver Seller's Title Notice, or
if Buyer disapproves, in Buyer's sole and absolute discretion, Seller's Title
Notice, then Buyer shall have the right, by a writing delivered to Seller and
Escrow Holder within five (5) Business Days after the last day of Seller's Title
Notice Period, to (A) waive its prior disapproval, in which event said
disapproved matter(s) shall be deemed approved, or (B) terminate this Agreement
and the Escrow created pursuant hereto in accordance with Paragraph 7(c) below.
If Seller fails to timely deliver Seller's Title Notice, then Seller will be
deemed to have elected to not eliminate or ameliorate any disapproved or
conditionally approved matters set forth in Buyer's Title Notice.
Notwithstanding anything to the contrary contained in this Agreement, Buyer
hereby disapproves all liens evidencing monetary encumbrances (other than liens
for general and special non-delinquent real property taxes and assessments and
liens securing the Met Loan) and Seller agrees to cause all such liens to be
eliminated at Seller's sole cost and expense (including all prepayment penalties
and charges) prior to or concurrently with the Close of Escrow.
(ii) Review and Approval of Documents and Materials. Prior to the
----------------------------------------------
signing of this Agreement, Seller has delivered to Buyer the documents and
materials respecting the Property set forth below (the "Documents and
Materials"). From the Effective Date until 5 p.m. Pacific Time on that date
("Contingency Date") that is forty-five (45) days after the Effective Date (the
"Contingency Period"), Buyer shall have the right to review and approve or
disapprove, in its sole and absolute discretion, any or all of the Documents and
Materials and any other documents affecting or relating to the Property. Seller
shall have no liability for the quality, accuracy or completeness of any
Documents and Materials provided to Buyer which were prepared by third parties.
The failure of Buyer to disapprove any of the Documents and Materials on or
before the expiration of the Contingency Period shall be deemed to constitute
Buyer's approval thereof.
(A) Agreements. Legible copies of any maintenance contracts, service
----------
contracts, and any other contracts or agreements affecting or relating to the
leasing, ownership, operation, maintenance, construction or development of the
Property, which are (i) in Seller's possession; and (ii) require more than
thirty (30) days to terminate (collectively, the "Contracts");
(B) Personal Property Agreements. A copy of any warranties or
----------------------------
guaranties applicable to the Personal Property listed in Exhibit "E" and copies
-----------
of any and all security instruments or leases which affect or limit Seller's
interest in the Personal Property;
-4-
<PAGE>
(C) Leases. True, correct and complete copies of any and all Leases
------
and all amendments thereto, and copies of any and all documents, agreements and
other writings referenced therein affecting the Leases (including, without
limitation, lease guaranties and tenant improvement contracts), as well as
copies of any letters of intent or other correspondence, pending lease
agreements, or the like, which relate to any potential leases with respect to
the Real Property. Seller shall also deliver to Buyer any and all financial
information concerning the lessees under the Leases which are in Seller's
possession;
(D) Rent Roll. The "Rent Roll" prepared as of the second business day
---------
before Seller's execution of this Agreement and attached hereto as Exhibit "B".
-----------
During the term of this Agreement, Seller shall provide to Buyer an updated Rent
Roll and Delinquency Report (as defined below) within three (3) business days
following written request, but not more often than weekly:
(E) Schedule of Income and Expenses. A schedule reflecting all income
-------------------------------
generated by or from the property or from the use of all or any portion of the
property and reflecting any and all expenses for the ownership, operation,
maintenance and repair of the property for the full calendar years of 1995 and
1996 and for the calendar year 1997 up to and including the last day of May,
1997, which schedule shall include, without limitation, the following:
(1) annual insurance premiums for all forms of coverage;
(2) real property taxes and assessments;
(3) utility charges, management fees, maintenance and repair costs;
(4) any and all other costs and expenses incurred in connection with
the ownership, operation, maintenance and repair of the Property; and
(F) Delinquency Reports. Complete copies of all aged delinquency
-------------------
reports for the months of August, 1996 through and including May, 1997, which
sets forth the names of all Lessees that were delinquent during such time period
in the payment of any amounts owing pursuant to any of the Leases, together with
the amounts and the period of such delinquencies;
(G) Plans and Reports. Building plans, structural engineering reports
-----------------
and other materials concerning the physical condition of the Property which are
in Seller's possession.
(H) Miscellaneous. Buyer shall be provided with access to Seller's
-------------
files and documents pertaining to the Property, and its management, which Seller
has located in its offices located at 2524 Santiago Boulevard, Orange,
California 92667. Such files and documents shall be made available to Buyer
during regular business hours, upon no less than one business day's prior
notice.
(iii) Inspections and Studies. On or before the expiration of the
-----------------------
Contingency Period, Buyer shall have the right to approve or disapprove, in
Buyer's sole and absolute discretion, any aspect of the Property, including, but
not limited to the results of any and all inspections, investigations, tests and
studies, including, without limitation, investigations with regard to zoning,
building codes and other governmental regulations, architectural inspections,
engineering tests, economic feasibility studies and soils, seismic and geologic
reports, as well as toxic and environmental reports with respect to the
Property, inspections of all or any portion of the Improvements (including,
without limitation, structural, mechanical and electrical systems, roofs,
pavement, landscaping and public utilities), and any other physical inspections
and/or investigations as Buyer may elect to make or obtain. The failure of
Buyer to disapprove said results on or prior to the expiration of the
Contingency Period shall be deemed to constitute Buyer's approval thereof. As
additional consideration to Seller, if Buyer elects to terminate this Agreement,
Buyer shall deliver to Seller, within five (5) days of Buyer's election to
terminate, correct and complete copies of all reports, studies and
investigations prepared by Buyer's consultants which concern the physical
condition of the Property. Seller acknowledges that Buyer makes no
representation or warranty as to the accuracy of any information contained in
such materials. Prior to any entry upon the Property by Buyer's agents,
contractors, subcontractors or employees, Buyer shall deliver to Seller evidence
reflecting Buyer's commercial general liability insurance policy which evidences
that Buyer is carrying a commercial general liability insurance policy with a
financially responsible insurance company covering the activities of Buyer, and
Buyer's agents, contractors, subcontractors and employees on or upon the
Property and naming Seller as additional insured, with an agreement not to
cancel such coverage without at least ten (10) days' prior written notice to
Seller. Such
-5-
<PAGE>
evidence shall reflect that the insurance policy has a per occurrence limit of
at least One Million Dollars ($1,000,000).
During the term of this Escrow, upon no less than one (1) day's prior
notice to Seller identifying the proposed time of entry and naming the
consultants intending to enter, Buyer, its agents, consultants, contractors and
subcontractors shall have the right upon compliance with the insurance, prior
notice, indemnity and other provisions of this Agreement to enter upon the
Property (subject to the Leases) to conduct or make any and all inspections and
tests (including, without limitation, environmental assessments of the Real
Property) as may be necessary or desirable in Buyer's sole and absolute
discretion. Buyer hereby indemnifies and holds Seller and the Property harmless
from and against any and all costs, losses, damages, liabilities, claims and
expenses arising out of or resulting from such entry by Buyer and its agents,
consultants, contractors and subcontractors. In addition, Buyer agrees to review
and comply with all requirements arising under the Leases.
(iv) Representations, Warranties and Covenants of Seller. Seller
---------------------------------------------------
shall have duly performed each and every covenant and agreement to be performed
by Seller pursuant to this Agreement and Seller's representations, warranties
and covenants set forth in Paragraph 14 hereof shall be true and correct as of
the Closing Date.
(v) No Material Changes. At the Closing Date, there shall have been
-------------------
no material adverse changes in the physical or financial condition of the
Property from and after the Opening of Escrow.
(vi) Rent Roll. The Rent Roll, as updated to the Closing Date,
---------
certified as to its accuracy and executed by Seller, does not materially differ
from the Rent Roll delivered by Seller to Buyer pursuant to Paragraph 7(a)(ii)
hereof.
(vii) Tenant Estoppel Certificates. Buyer shall have received
----------------------------
estoppel certificates (collectively, "Estoppel Certificates" and individually,
an "Estoppel Certificate") satisfactory to Buyer, which Seller shall use its
best efforts to obtain, duly executed by tenants occupying at least ninety
percent (90%) of the rentable area of the Property, and to be dated not earlier
than thirty (30) days prior to the Closing Date. The Estoppel Certificates
shall be in the form of, and upon the terms contained in, Exhibit "D" attached
-----------
hereto, with such modifications as may be required to satisfy the requirements
of Metropolitan in connection with the Buyer's assumption of the Met Loan and
with modifications for any particular Lessee as may be reasonably requested by
Buyer no less than twenty (20) days prior to the Close of Escrow. Seller shall
deliver the original executed Estoppel Certificates to Buyer no later than five
(5) business days prior to the Closing Date. Buyer's failure to disapprove each
executed Estoppel Certificate within three (3) business days of receipt shall be
deemed to constitute Buyer's approval thereof.
(viii) Seller's Performance. Seller shall have duly and timely
--------------------
performed all obligations and made all deposits with Escrow Holder required of
Seller pursuant to the provisions of this Agreement.
(ix) Leases. As of the Close of Escrow, all of the Leases approved by
------
Buyer pursuant to Paragraph 7(a)(ii) hereof shall be in full force and effect
and shall not have been modified or amended without Buyer's prior written
consent.
(b) Conditions to Seller's Obligations. For the benefit of Seller,
----------------------------------
the Close of Escrow and Seller's obligation to sell the Property to Buyer are
subject to the satisfaction of the following conditions:
(i) Met Loan. As of the Close of Escrow, Metropolitan shall have
--------
approved and the parties shall have executed and delivered all documents and
satisfied all conditions to Metropolitan's approval of Buyer's assumption of the
Met Loan;
(ii) Buyer's Performance. Buyer shall have duly and timely performed
-------------------
all of the obligations required by the terms of this Agreement to be performed
by Buyer (or Seller's waiver thereof, it being agreed that Seller may waive such
condition) and Buyer's representations, warranties and covenants set forth in
Paragraph 14(b) hereof shall be true and accurate as of the Closing Date.
(c) Termination by Buyer on Failure of Condition. If Buyer elects to
--------------------------------------------
terminate this Agreement due to the failure of a condition set forth in this
Paragraph 7, Buyer shall have the right to terminate this Agreement and have the
Refundable Deposit, returned only if Buyer delivers a Termination Notice and
instructions to cancel the Escrow to Seller and Escrow Holder within the time
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<PAGE>
period expressly set forth for such condition in this Paragraph 7. A
"Termination Notice" shall mean a written notice from Buyer to Seller and Escrow
Holder identifying the condition disapproved, Buyer's election to terminate this
Agreement and the Escrow and Buyer's advice on when all Documents and Materials
provided by Seller or Seller's broker to Buyer and all third-party inspections
and reports received by Buyer during its investigations (collectively, "Returned
Materials") will be returned or delivered to Seller. Buyer's right to purchase
the Property shall unconditionally terminate upon delivery of a Termination
Notice. Buyer and Seller shall each execute such instructions as Escrow Holder
may reasonably require to terminate the Escrow. Seller shall direct Escrow
Holder to return the Refundable Deposit to Buyer promptly following Seller's
receipt of the Termination Notice and instructions to cancel the Escrow from
Buyer. Following mutual execution of the cancellation instructions and the
return to Buyer of the Refundable Deposit, neither party shall have any further
obligation to the other under this Agreement, except for Buyer's indemnity of
Seller with respect to Buyer's entry in accordance with Paragraph 7(a)(iii)
above, Buyer's obligation to deliver the Returned Materials to Seller, and the
parties' obligations under Paragraphs 20 and 22 of this Agreement.
8. Deposits by Seller. At least one (1) business day prior to the
------------------
Close of Escrow, Seller shall deposit or cause to be deposited with Escrow
Holder the following documents and instruments:
(a) Grant Deed. The Grant Deed conveying the Real Property to Buyer,
----------
duly executed as appropriate by Seller, acknowledged and in recordable form in
the form attached hereto as Exhibit "C";
-----------
(b) Leases. The original Leases and lease guaranties and financial
------
information and any letters of intent, pending lease agreements, or the like,
which relate or potentially relate to any space leases of the Improvements and
which have been approved by Buyer in accordance with Paragraph 7(a) hereof;
(c) Tenant Lease Assignment. Tenant Lease Assignment ("Assignment of
-----------------------
Leases"), duly executed by Seller, in the form attached hereto as Exhibit "F",
-----------
pursuant to which Seller shall assign to Buyer all of Seller's right, title and
interest in and to the Leases;
(d) Bill of Sale. Bill of Sale ("Bill of Sale"), duly executed by
------------
Seller, in the form attached hereto as Exhibit "H", conveying all of Seller's
-----------
right, title and interest in and to the Personal Property;
(e) Rent Roll. The Rent Roll, updated as of the Close of Escrow,
---------
certified as to its accuracy and executed by Seller, together with a list of
Lessees whose rent and/or other charges is/are past due as of such date;
(f) Tenant Letter. A letter signed by Seller, addressed to each of
-------------
the Lessees under the Leases advising the Lessees of the sale herein to Buyer,
the transfer of the security deposits, if any, to Buyer and directing that all
future rent payments and other charges are to be forwarded to Buyer at an
address to be supplied by Buyer;
(g) Transferor's Certification of Non-Foreign Status. The
------------------------------------------------
Transferor's Certification of Non-Foreign Status in the form attached hereto as
Exhibit "I", duly executed by Seller ("Firpta Certificate");
- -----------
(h) Withholding Exemption Certificate. A Withholding Exemption
---------------------------------
Certificate, California Form 590, certifying that Seller is exempt from
withholding under California law due to the fact that Seller resides or has a
permanent place of business in California ("Form 590");
(i) Permits, Entitlements and the Like. Any and all building and
----------------------------------
development permits, certificates of occupancy, utility will serve letters, use
permits and other governmental approvals and/or entitlements relative to the
Property which are in Seller's possession;
(j) General Assignment. General Assignment ("General Assignment"),
------------------
duly executed by Seller, in the form attached herein as Exhibit "J", conveying
-----------
all of Seller's right, title and interest in and to the Intangible Personal
Property; and
(k) Other Instruments. Such other instruments and documents as
-----------------
are described in Paragraph 22(b) herein.
9. Deposits by Buyer. No later than the Closing Date, Buyer shall
-----------------
deposit or cause to be deposited with Escrow Holder the funds which are to be
applied towards the payment of the
-7-
<PAGE>
Purchase Price in the amounts and at the times designated in Paragraph 3 above
(as reduced by the prorations and credits hereinafter provided). In addition,
Buyer shall deposit with Escrow Holder prior to the Close of Escrow the
following documents and instruments:
(a) Met Loan Assumption Documents. The Assumption Documents duly
-----------------------------
executed and notarized by Buyer, and the Met Fees (as defined in Paragraph 3(b)
hereof);
(b) Assignment of Leases. Counterpart of the Assignment of
--------------------
Leases, duly executed by Buyer;
(c) General Assignment. Counterpart of the General Assignment,
------------------
duly executed by Buyer; and
(d) Other Instruments. Such other instruments and documents as
-----------------
are described in Paragraph 23(b) herein.
10. Costs and Expenses. The cost and expense of the CLTA portion of
------------------
the Title Policy shall be paid by Seller, and Buyer shall pay for the ALTA
portion thereof. The escrow fee of Escrow Holder shall be shared equally by
Seller and Buyer. Seller shall pay all documentary transfer taxes payable in
connection with the recordation of the Grant Deed. Buyer shall pay the Met
Fees. Buyer and Seller shall pay, respectively, the Escrow Holder's customary
charges to buyers and sellers for document drafting, recording and miscellaneous
charges. If, as a result of no fault of Buyer or Seller, Escrow fails to close,
Buyer and Seller shall share equally all of Escrow Holder's fees and charges.
11. Prorations. The following prorations between Seller and Buyer
----------
shall be made by Escrow Holder computed as of the Close of Escrow:
(a) Taxes. Real and personal property taxes and assessments on the
-----
Property shall be prorated on the basis that Seller is responsible for (i) all
such taxes for the fiscal year of the applicable taxing authorities occurring
prior to the "Current Tax Period" (as hereinafter defined) and (ii) that portion
of such taxes for the Current Tax Period determined on the basis of the number
of days which have elapsed from the first day of the Current Tax Period to the
Close of Escrow, inclusive, whether or not the same shall be payable prior to
the Close of Escrow. The phrase "Current Tax Period" refers to the fiscal year
of the applicable taxing authority in which the Close of Escrow occurs. In the
event that as of the Close of Escrow the actual tax bills for the year or years
in question are not available and the amount of taxes to be prorated as
aforesaid cannot be ascertained, then rates and assessed valuation of the
previous year, with known changes, shall be used, and when the actual amount of
taxes and assessments for the year or years in question shall be determinable,
then such taxes and assessments will be reprorated between the parties to
reflect the actual amount of such taxes and assessments.
(b) Rentals. Rentals and other payments payable by tenants,
-------
licensees, concessionaires and other persons using or occupying the Property or
any part thereof, if any, for or in connection with such use or occupancy
(including, without limitation, fixed monthly rentals, additional rentals,
percentage rentals, escalation rentals, retroactive rentals, operating cost
pass-throughs, common area maintenance charges, and other sums and charges
payable by the Lessees under the Leases [collectively, "Rentals"]) shall be
prorated as of the Close of Escrow. All Rentals owing for the calendar month in
which the Close of Escrow occurs shall be prorated between Seller and Buyer as
of the Close of Escrow, regardless of whether such Rentals have been collected
and regardless of whether the Rentals for such period are in arrears or are
payable in arrears pursuant to the lease terms as of the Close of Escrow (Seller
shall receive a credit for Rentals payable in arrears).
(i) Delinquent Rentals. Rentals are delinquent when payment thereof
is due on or prior to the Close of Escrow but has not been made by the Close of
Escrow. Delinquent rentals shall be prorated between Buyer and Seller as of the
Close of Escrow. Buyer shall have the right to collect any delinquent rentals,
but shall not have the obligation to do so. After the Close of Escrow, Seller
shall not take any action against a Lessee owing delinquent rentals. Seller
shall not be entitled to any rentals received from Lessees after the Close of
Escrow unless such Lessees are current in their rental obligations for periods
occurring from and after the Close of Escrow. Delinquent rentals collected by
the Buyer, net of the costs of collection (including attorneys' fees), shall be
applied first against any amount currently due and then to amounts most recently
overdue. For purposes hereof, "amounts currently due" shall include amounts
which would be due for a month which is to commence within ten (10) days after
receipt of such amounts. Buyer agrees that any payments due to Seller as a
result of collected delinquent rentals shall be payable upon receipt thereof.
(c) Security Deposits. Buyer shall be credited and Seller shall be
-----------------
charged with any security deposits and advanced rentals in the nature of
security deposits made by the Lessees
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<PAGE>
under the Leases, if any. Buyer shall also be credited and Seller shall be
charged for all operating cost pass-throughs paid by such tenants and held by
Seller in reserve for the benefit of the tenants for the repair and/or
improvement of the Property. Seller hereby agrees that it will not during the
term of this Escrow or upon the Close of Escrow apply any security deposits
toward any delinquent rental payments, or any other amounts, due under any
Leases which do not expire by their terms prior to the Close of Escrow.
(d) Operating Expenses. All utility service charges for electricity,
------------------
heat and air conditioning service, other utilities, elevator maintenance, common
area maintenance, taxes other than real estate taxes such as rental taxes, other
expenses incurred in operating the Property that Seller customarily pays, and
any other costs incurred in the ordinary course of business or the management
and operation of the Property, shall be prorated on an accrual basis. If such
bills are not available as of the Close of Escrow, the parties shall prorate the
same after the Closing Date, when such bills are received. Seller shall pay all
such expenses that accrue prior to the Close of Escrow, and Buyer shall pay all
such expenses accruing on the Close of Escrow and thereafter. Seller and Buyer
shall obtain billings and meter readings as of the Close of Escrow to aid in
such prorations. The parties' obligations under this Paragraph 11(d) shall
survive the Close of Escrow.
(e) Commissions. Seller shall pay in full all leasing commissions
-----------
with respect to the Leases entered into as of or prior to the Effective Date
without contribution or proration from Buyer, and Seller hereby indemnifies and
holds Buyer harmless from any claims respecting the same. Buyer shall pay in
full all leasing commissions with respect to Leases entered into after the
Effective Date without contribution or proration from Seller, and Buyer hereby
indemnifies and holds Seller harmless from any claims respecting the same. The
obligations of the parties under this Paragraph 11(e) shall survive the
recording of the Grant Deed and the Close of Escrow. Buyer hereby acknowledges
and agrees that Buyer has consented to that certain proposed lease with the U.S.
Marshal's Office (the "U.S. Marshal's Lease") a copy of which is attached hereto
as Exhibit "K" and agrees to pay any reasonable brokerage commissions owed by
-----------
Seller in connection with that lease.
(f) Tenant Improvements. All tenant improvements (including labor and
-------------------
materials) which are performed or contracted for by Seller at or prior to the
Effective Date will be paid by the Seller, without contribution or proration
from Buyer, and Seller hereby indemnifies and holds Buyer and the Property
harmless from any claims respecting same. All tenant improvements (including
labor and material) which are to be performed by Seller under any Lease executed
after the Effective Date will be paid for by Buyer, without contribution or
proration from Seller, provided that this Agreement is consummated and Buyer
acquires the Property from Seller, and Buyer hereby indemnifies and holds Seller
harmless from any Claims respecting the same. The obligations of the parties
under this Paragraph 11(f) shall survive the recording of the Grant Deed and the
Close of Escrow. Buyer agrees to pay for the cost of any tenant improvements
required under the U.S. Marshall's Lease in an amount not to exceed One Thousand
Seven Hundred and Fifty Dollars ($1,750.00).
At least three (3) business day prior to the Close of Escrow, the parties shall
agree upon all of the prorations to be made and submit a statement to Escrow
Holder setting forth the same. In the event that any prorations, apportionments
or computations made under this Paragraph 11 shall require final adjustment,
then the parties shall make the appropriate adjustments promptly when accurate
information becomes available and either party hereto shall be entitled to an
adjustment to correct the same. Any corrected adjustment or proration shall be
paid in cash to the party entitled thereto.
12. Disbursements and Other Actions by Escrow Holder. Upon the Close
------------------------------------------------
of Escrow, Escrow Holder shall promptly undertake all of the following in the
following manner:
(a) Prorations. Prorate all matters referenced in Paragraph 11(a),
----------
(b), (c) and (d) to the extent such prorations can be made as of the Close of
Escrow, based upon the statement delivered into Escrow signed by the parties;
(b) Recording. Cause the Grant Deed (with documentary transfer tax
---------
information to be affixed after recording) and any other documents which the
parties hereto may mutually direct, to be recorded in the Official Records in
the order directed by the parties;
(c) Funds. Disburse from funds deposited by Buyer with Escrow Holder
-----
towards payment of all items (including, without limitation, the Purchase Price
and the Met Fees) chargeable to the account of Buyer pursuant hereto in payment
of such costs and disburse the balance of such funds, if any, to Buyer;
(d) Documents to Seller. Deliver to Seller counterparts of the
-------------------
Assignment of Leases and the General Assignment executed by Buyer;
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<PAGE>
(e) Documents to Buyer. Deliver to Buyer originals of the Leases, the
------------------
Bill of Sale, the Firpta Certificate, the Form 590, and counterparts of the
Assignment of Leases and the General Assignment appropriately executed by
Seller, the approved form of letter described in Paragraph 8(h) above addressed
to the Lessees advising them of this transaction and any other documents which
are to be delivered to Buyer hereunder, and, when issued, the Title Policy; and
(f) Title Policy. Direct the Title Company to issue the Title
------------
Policy to Buyer.
13. Covenants of Seller. Seller hereby covenants with Buyer, as
-------------------
follows:
(a) From and after the date of this Agreement, Seller shall not,
without the prior written consent of Buyer, which consent Buyer may withhold in
its sole and absolute discretion, enter into any lease, rental agreement,
maintenance contract, service contract, listing agreement or any other contract
affecting or relating to the Property or any portion thereof which will survive
the Close of Escrow or will otherwise affect the use, operation or enjoyment of
the Property after the Close of Escrow. Buyer shall respond to any such request
for its consent within three (3) business days after receipt of such request
from Seller, and if Buyer fails to respond within three (3) business days, Buyer
shall be deemed to have given its approval. Subject to the limitation set forth
in Paragraph 11(f) hereof, Buyer acknowledges that it has approved the U.S.
Marshal's Lease;
(b) All insurance policies carried by Seller with respect to the
Property and in effect as of the date of this Agreement shall remain
continuously in full force and effect from the date of this Agreement through
the day upon which the Close of Escrow occurs;
(c) From and after the date of this Agreement, Seller shall not amend,
modify, alter or supplement any Lease which is approved by Buyer pursuant to
Paragraph 7(a) hereof;
(d) From the date of this Agreement until the Close of Escrow, Seller
shall (i) continue to operate and manage the Property in the same manner as
prior to signing the Agreement and shall maintain the Property in good
condition, repair and working order, and (ii) perform when due, and otherwise
comply with, all of Seller's obligations and duties under the Leases. None of
the Personal Property shall be removed from the Real Property, unless replaced
by unencumbered personal property of equal or greater utility and value. All
Personal Property and Intangible Personal Property shall be conveyed to Buyer by
Seller at the Close of Escrow free from any liens, encumbrances or security
interests of any kind or nature;
(e) After the date of this Agreement, Seller shall not alienate, lien,
encumber or otherwise transfer all or any portion of the Property (other than to
Buyer at the Close of Escrow) except as provided in Paragraph 13(a) above;
(f) Seller shall promptly notify Buyer of any change in any condition
with respect to the Property or of any event or circumstance which makes any
representation or warranty of Seller to Buyer under this Agreement materially
untrue or misleading, and of any covenant of Seller under this Agreement which
Seller will be incapable of performing or less likely to perform.
14. Seller's Representations and Warranties. In consideration of
---------------------------------------
Buyer entering into this Agreement and as an inducement to Buyer to purchase the
Property, Seller makes the following covenants, representations and warranties,
each of which is material and is being relied upon by Buyer (and the continued
truth and accuracy of which shall constitute a condition precedent to Buyer's
obligations hereunder). To the "actual knowledge" of Seller, as used in this
Paragraph 14, means the actual, current knowledge of Thomas C. Parker as of the
date of this Agreement without investigation or inquiry.
(a) Representations Regarding Seller's Authority.
--------------------------------------------
(i) Seller has the legal power, right and authority to enter into this
Agreement and the instruments referenced herein, and to consummate the
transaction contemplated hereby;
(ii) All requisite action (corporate, trust, partnership or otherwise)
has been taken by Seller in connection with the entering into this Agreement,
the instruments referenced herein, and the consummation of the transaction
contemplated hereby. No consent of any partner, shareholder, trustee, trustor,
beneficiary, creditor, investor, judicial or administrative body, governmental
authority or other party is required; and
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<PAGE>
(iii) The individuals executing this Agreement and the instruments
referenced herein on behalf of Seller and the partners of Seller, if any, have
the legal power, right, and actual authority to bind Seller to the terms and
conditions hereof and thereof.
(b) Threatened Actions. To seller's actual knowledge, there are no
------------------
pending or threatened actions, suits, arbitrations, claims or proceedings, at
law, in equity or otherwise, affecting, all or any portion of the Property or in
which Seller is a party by reason of Seller's ownership of the Property;
(c) Compliance with Law. Seller has not received notice of any
-------------------
alleged violation of any applicable laws, ordinances, rules, requirements,
regulations, building codes and environmental rules from any governmental
agency, body or subdivision thereof bearing on the Property or the construction
of the Improvements;
(d) Contracts. To Seller's actual knowledge, there are no maintenance
---------
contracts, service contracts or agreements or any other contracts (whether oral
or written) affecting or relating to the Real Property which will survive the
Close of Escrow. At the Close of Escrow, there will be no outstanding contracts
entered into by Seller for the construction or repair of any Improvements which
have not been fully paid for, and Seller shall cause to be discharged all
mechanics' and materialmen's liens arising from any labor or materials furnished
to the Real Property by or at the request of Seller prior to the Close of
Escrow;
(e) No Other Documents. The documents delivered by Seller to Buyer
------------------
pursuant to Paragraph 7(a)(ii) above and the documents made available to Buyer
for inspection at Seller's offices are all of the material documents known by
Seller to exist relative to the leasing, use, ownership and maintenance of the
Property;
(f) Hazardous Wastes. To Seller's actual knowledge, there is no
----------------
asbestos or materials containing asbestos incorporated into any of the
Improvements and the Property is not in violation of any federal, state or local
law, ordinance or regulation relating to Hazardous Materials including, but not
limited to, soil and groundwater conditions. For purposes of this subparagraph,
the term Hazardous Materials shall include, but not be limited to, asbestos,
petroleum and any petroleum by-products, urea formaldehyde, foam insulation,
polychlorinated biphenyls, and any other substance which is a "Hazardous
Substance" under California Health and Safety Code Section 25316 and in the
regulations adopted and publications promulgated pursuant to said statute and
any amendments thereto;
(g) Structural, Mechanical and Electrical Defects. To Seller's actual
---------------------------------------------
knowledge and except for items expressly disclosed in the Documents and
Materials, there are no physical or mechanical defects or deficiencies in the
condition of the Real Property, including, but not limited to, the roofs,
exterior walls or structural components of the Improvements and the heating, air
conditioning, plumbing, ventilating, utility, sprinkler and other mechanical and
electrical systems, apparatus and appliances located on the Real Property or in
the Improvements and all such items are in good operating condition and repair;
(h) FIRPTA; California Withholding. Seller is not a foreign person
------------------------------
within the meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986,
and Seller will furnish the Firpta Certificate to Buyer prior to the Close of
Escrow in accordance with the terms and provisions of Paragraph 8(i) hereof.
Seller is a resident of or has a permanent place of business in California and
no withholding of any portion of the Purchase Price is necessary under
California law relative to Seller being a non-resident of California;
(i) Hart-Scott-Rodino. For purposes of the Hart-Scott-Rodino
-----------------
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder, neither Seller, nor any entity which controls Seller
(i.e., the "ultimate parent entity" of Seller), has total assets or annual net
- -----
sales of $100 million or more;
(j) Representations and Warranties at Closing. Seller shall promptly
-----------------------------------------
notify Buyer of any change in any condition with respect to the Property or of
any event or circumstance which makes any representation or warranty of Seller
to Buyer under this Agreement materially untrue or misleading. Subject to the
terms of Paragraph 23(a) of this Agreement, the representations and warranties
of Seller set forth in this Agreement shall be deemed to be remade and restated
by Seller on and as of the Close of Escrow but shall be modified to the extent
that Seller has provided written notice to Buyer of any changes.
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<PAGE>
15. Buyer's Representations and Warranties. In consideration of
--------------------------------------
Seller entering into this Agreement and as an inducement to Seller to sell the
Property to Buyer, Buyer makes the following covenants, representations and
warranties, each of which is material and is being relied upon by Seller.
(a) Representation Regarding Buyer's Authority
------------------------------------------
(i) Buyer has the legal power, right and authority to enter into this
Agreement and the instruments referenced herein, and to consummate the
transaction contemplated hereby;
(ii) All requisite action (corporate, trust, partnership or otherwise)
has been taken by Buyer in connection with the entering into this Agreement, the
instruments referenced herein, and the consummation of the transaction
contemplated hereby. No consent of any partner, shareholder, trustee, trustor,
beneficiary, creditor, investor, judicial or administrative body, governmental
authority or other party is required; and
(iii) The individuals executing this Agreement and the instruments
referenced herein on behalf of Buyer and the partners of Buyer, if any, have the
legal power, right, and actual authority to bind Buyer to the terms and
conditions hereof and thereof.
(b) Disclaimer. Prior to entering into this Agreement and during
----------
the Due Diligence Period, Buyer shall have had ample opportunity to review
all information concerning the Property and to conduct such other
independent investigations as Buyer requires to determine that it is
prepared to complete purchase of the Property on the terms and conditions
herein stated. Buyer acknowledges that the Documents and Materials
provided by Seller which are prepared by third party consultants are (a)
provided without representation or warranty by Seller as to quality,
accuracy or completeness; and (b) are provided by Seller to Buyer as a
convenience only, and Buyer shall conduct such independent investigations,
studies and reports as Buyer may reasonably require in deciding whether to
purchase the Property. Buyer acknowledges that, except as specifically set
forth in this Agreement, Seller, its officers, agents, employees and
representatives are making no representations or warranties as to the
physical condition of the Property or Improvements or in connection with
any matter, report or information relating to the Property's condition,
value, fitness, use, income or expense projections or zoning upon which
Buyer has relied either directly or indirectly. Further, except as
specifically set forth in this Agreement, Seller makes no representation or
warranty as to any operative or proposed governmental laws and regulations
(including, but not limited to, ADA, zoning, environmental and land use
laws and regulations) to which the Property may be subject. Buyer
acknowledges that the purchase of the Property will be on the basis of
Buyer's own investigation of (i) the physical condition of the Property,
including subsurface conditions, and the Improvements, and (ii) the
operative or proposed governmental laws and regulations affecting or
applicable to the Property. Buyer acknowledges that, except as expressly
set forth in this Agreement, it is purchasing the Property "AS-IS, WITH ALL
FAULTS" and Buyer is not relying upon any statements, representations or
warranties by Seller or any of its agents or representatives regarding the
Property's suitability for Buyer's intended purpose.
16. Remedies.
--------
(a) LIQUIDATED DAMAGES. IF BUYER BREACHES A MATERIAL OBLIGATION UNDER
------------------
THIS AGREEMENT AND THE CLOSE OF ESCROW FAILS TO OCCUR BY REASON OF SUCH BREACH,
THE DAMAGES THAT SELLER WILL INCUR BY REASON THEREOF ARE AND WILL BE IMPRACTICAL
AND EXTREMELY DIFFICULT TO ESTABLISH. BUYER AND SELLER, IN A REASONABLE EFFORT
TO ASCERTAIN WHAT SELLER'S DAMAGES WOULD BE IN THE EVENT OF SUCH A DEFAULT BY
BUYER, HAVE AGREED BY PLACING THEIR INITIALS BELOW, THAT THE DEPOSIT SHALL BE
DEEMED TO CONSTITUTE A REASONABLE ESTIMATE OF SELLER'S DAMAGES UNDER THE
PROVISIONS OF CALIFORNIA CIVIL CODE (S) 1671. IN THE EVENT OF SUCH BREACH BY
BUYER, THE DEPOSIT SHALL BE DELIVERED TO SELLER WITHOUT THE NECESSITY OF AN
INSTRUCTION BY BUYER, AND RETAINED BY SELLER AS LIQUIDATED DAMAGES, WHICH
DAMAGES SHALL BE SELLER'S SOLE AND EXCLUSIVE REMEDY AT LAW OR IN EQUITY IN THE
EVENT OF AND FOR SUCH DEFAULT BY BUYER.
WITHOUT LIMITING THE FOREGOING PROVISIONS OF THIS PARAGRAPH, SELLER
WAIVES ANY AND ALL RIGHTS WHICH SELLER OTHERWISE WOULD HAVE HAD UNDER CALIFORNIA
CIVIL CODE SECTION 3389 TO SPECIFICALLY ENFORCE THIS AGREEMENT. SUBJECT TO THE
TERMS OF PARAGRAPH 7(C) OF THIS AGREEMENT, IF THE CLOSE OF ESCROW FAILS TO OCCUR
FOR ANY REASON OTHER
-12-
<PAGE>
THAN BUYER'S DEFAULT UNDER THIS AGREEMENT, THEN ESCROW HOLDER SHALL RETURN TO
BUYER THE DEPOSIT, TOGETHER WITH ALL INTEREST ACCRUED THEREON. SELLER AND BUYER
ACKNOWLEDGE THAT THEY HAVE READ AND UNDERSTAND THE PROVISIONS OF THIS PARAGRAPH
16 AND BY THEIR INITIALS IMMEDIATELY BELOW AGREE TO BE BOUND BY ITS TERMS.
Seller's Initials Buyer's Initials
T.C.P J.C.H.
----------------- ----------------
(b) Buyer's Remedies. Buyer and Seller hereby agree that, if the sale
----------------
contemplated by this Agreement is not completed as herein provided by reason of
any default of Seller hereunder, then in addition to the return of the Deposit
and all interest accrued thereon, Buyer shall be entitled to pursue any remedy
available under this Agreement or available at law or in equity, including,
without limitation, the right to specifically enforce this Agreement.
(c) Termination of Escrow. Notwithstanding anything in this Agreement
---------------------
to the contrary, if either party hereto wrongfully refuses to cause Escrow
Holder to cancel the Escrow, the other party shall be entitled to recover all
costs and expenses, including actual attorneys' fees incurred by the party
seeking to enforce its rights under this Paragraph 16. Further, Seller shall be
entitled to recover all costs and expenses, including actual attorneys' fees and
consequential damages, if any, which may be incurred by Seller, after the
closing date by reason of the cloud on title to the property which results
directly from Buyer's wrongful failure to cancel the Escrow and this Agreement..
In addition, the terms of this Paragraph 16 shall not apply to nor limit the
liability of Buyer under Section 7(a)(iii) of this Agreement.
17. Damage or Condemnation Prior to Closing. Seller shall promptly
---------------------------------------
notify Buyer of any casualty to the Property or any condemnation proceeding
commenced prior to the Close of Escrow. If any such damage or proceeding
relates to or may result in the loss of any material portion of the Property,
Seller or Buyer may, in their sole and absolute discretion, elect either to:
(i) terminate this Agreement, in which event all funds deposited into Escrow by
Buyer shall be returned to Buyer and neither party shall have any further rights
or obligations hereunder, or (ii) continue the Agreement in effect, in which
event upon the Close of Escrow, Buyer shall be entitled to any compensation,
awards, or other payments or relief resulting from such casualty or condemnation
proceeding relating to the Property and there shall be no adjustment to the
Purchase Price.
18. Notices. All notices or other communications required or
-------
permitted hereunder shall be in writing, and shall be personally delivered, sent
by overnight mail (Federal Express or the like) or sent by registered or
certified mail, postage prepaid, return receipt requested, telegraphed,
delivered or sent by telex, telecopy, facsimile, fax or cable and shall be
deemed received upon the earlier of (i) if personally delivered, the date of
delivery to the address of the person to receive such notice, (ii) if sent by
overnight mail, the business day following its deposit in such overnight mail
facility, (iii) if mailed, four (4) business days after the date of posting by
the United States post office, or (iv) if given by telex, telecopy, facsimile or
fax, when sent. Any notice, request, demand, direction or other communication
sent by cable, telex, telecopy, facsimile or fax must be confirmed within forty-
eight (48) hours by letter mailed or delivered in accordance with the foregoing.
To Buyer: Kilroy Realty, L.P.
c/o Kilroy Realty Corporation
2250 East Imperial Highway, Suite 1200
El Segundo, California 90245
Attention: Jeff C. Hawken
Phone No. (213) 772-1193
Fax No. (310) 322-5981
With a copy to: Allen, Matkins, Leck, Gamble & Mallory LLP
18400 Von Karman, Suite 400
Irvine, California 92612
Attention: R. Michael Joyce, Esq.
Phone No. (714) 553-1313
Fax No. (714) 553-8354
-13-
<PAGE>
To Seller: The Betty L. Hutton Title Holding Company
101 West Anapamu, Suite C
Santa Barbara, California 93101
Attention: Thomas C. Parker
Phone No. (805) 957-4740
Fax No. (805) 957-4743
With a copy to: Rutan & Tucker, LLP
611 Anton Boulevard, Suite 1400
Costa Mesa, California 92628-1950
Attention: Marcia A. Forsyth, Esq.
Phone No. (714) 641-5000
Fax No. (714) 546-9035
To Escrow Holder: First American Title Insurance Company
114 East Fifth Street
Santa Ana, California 92701
Attention: Judy Moore
Phone No. (714) 647-4466
Fax No. (714) 647-2235
Notice of change of address shall be given by written notice in the manner
detailed in this Paragraph. Rejection or other refusal to accept or the
inability to deliver because of changed address of which no notice was given
shall be deemed to constitute receipt of the notice, demand, request or
communication sent.
19. Brokers. Upon the Close of Escrow, Seller shall pay a real
-------
estate brokerage commission to Voit Commercial Brokerage with respect to this
transaction in accordance with Seller's separate agreement with said broker and
Seller hereby agrees to indemnify, protect, defend (with counsel chosen by
Buyer) and hold Buyer free and harmless from and against any and all commissions
or other claims such broker may assert in connection with the parties entering
into, or consummating the transactions contemplated by, this Agreement. If any
additional claims for broker's or finders' fees or commissions for the
consummation of this Agreement arise, then Buyer hereby agrees to indemnify,
protect, save harmless and defend Seller from and against such claims if they
are based upon any statement, representation or agreement made by Buyer, and
Seller hereby agrees to indemnify, protect, save harmless and defend Buyer from
and against such claims if they are based upon any statement, representation or
agreement made by Seller.
20. Legal Fees. In the event of the bringing of any action or suit
----------
by a party hereto against another party hereunder by reason of any breach of any
of the covenants or agreements or any inaccuracies in any of the representations
and warranties on the part of the other party arising out of this Agreement,
then in that event, the prevailing party in such action or dispute, whether by
final judgment or out of court settlement, shall be entitled to have and recover
of and from the other party all costs and expenses of suit, including actual
attorneys' fees. Any judgment or order entered in any final judgment shall
contain a specific provision providing for the recovery of all costs and
expenses of suit, including actual attorneys' fees (collectively "Costs")
incurred in enforcing, perfecting and executing such judgment. For the purposes
of this paragraph, Costs shall include, without limitation, attorneys' fees,
costs and expenses incurred in (i) postjudgment motions, (ii) contempt
proceeding, (iii) garnishment, levy, and debtor and third party examination,
(iv) discovery, and (v) bankruptcy litigation.
-14-
<PAGE>
21. Assignment. Seller may not assign, transfer or convey its rights
----------
or obligations under this Agreement without the prior written consent of Buyer,
and then only if Seller's assignee assumes in writing all of Seller's
obligations hereunder; provided, however, Seller shall in no event be released
from its obligations hereunder by reason of such assignment. Buyer, without
being relieved of liability hereunder and without obtaining Seller's consent,
shall have the right to assign its rights and obligations hereunder or to
nominate another person or entity in whom title to the Property shall vest
provided that Metropolitan has issued written approval of the assumption of the
Met Loan by the proposed assignee, and the proposed assignee has assumed in
writing, for the benefit of Seller, all of Buyer's obligations hereunder.
22. Indemnification. Seller hereby agrees to indemnify, protect,
---------------
defend (with counsel chosen by Buyer) and hold harmless Buyer, from and against
any and all obligations, liabilities, claims, liens, encumbrances, losses,
damages, costs and expenses, including without limitation, attorneys' fees,
incurred by Buyer relating to the Property and arising or accruing from acts,
occurrences or matters that take place on or before the Close of Escrow.
23. Miscellaneous.
-------------
(a) Survival of Covenants. The covenants, representations and
---------------------
warranties of both Buyer and Seller set forth in this Agreement, except for
Seller's representation contained in Subparagraph 14(g) hereof, shall survive
the recordation of the Grant Deed and the Close of Escrow for a period of twelve
(12) months. Seller's representation contained in Subparagraph 13(g) hereof
shall be deemed to have merged into the Grant Deed as of the Close of Escrow.
(b) Required Actions of Buyer and Seller. Buyer and Seller agree to
------------------------------------
execute such instruments and documents as may be reasonably required in order to
consummate the purchase and sale herein contemplated.
(c) Computation of Time Periods. If the date upon which the
---------------------------
Contingency Period expires, the Closing Date or any other date or time period
provided for in this Agreement is or ends on a Saturday, Sunday or federal,
state or legal holiday, then such date shall automatically be extended until 5
p.m. Pacific Time of the next day which is not a Saturday, Sunday or federal,
state or legal holiday.
(d) Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed an original, but all of which,
together, shall constitute but one and the same instrument. In addition,
executed counterparts may be delivered by facsimile transmission with the same
force and effect as delivery of an original executed counterpart.
(e) Captions. Any captions to, or headings of, the paragraphs or
--------
subparagraphs of this Agreement are solely for the convenience of the parties
hereto, are not a part of this Agreement, and shall not be used for the
interpretation or determination of the validity of this Agreement or any
provision hereof.
(f) No Obligations to Third Parties. Except as otherwise expressly
-------------------------------
provided herein, the execution and delivery of this Agreement shall not be
deemed to confer any rights upon, nor obligate any of the parties hereto, to any
person or entity other than the parties hereto.
(g) Exhibits. The Exhibits attached hereto are hereby
--------
incorporated herein by this reference for all purposes.
(h) Amendment to this Agreement. The terms of this Agreement may not
---------------------------
be modified or amended except by an instrument in writing executed by each of
the parties hereto.
(i) Waiver. The waiver or failure to enforce any provision of this
------
Agreement shall not operate as a waiver of any future breach of any such
provision or any other provision hereof.
(j) Applicable Law. This Agreement shall be governed by and construed
--------------
in accordance with the laws of the State of California.
(k) Fees and Other Expenses. Except as otherwise provided herein,
-----------------------
each of the parties hereto shall pay its own fees and expenses in connection
with this Agreement.
-15-
<PAGE>
(l) Entire Agreement. This Agreement supersedes any prior agreements,
----------------
negotiations and communications, oral or written, and contains the entire
agreement between Buyer and Seller as to the subject matter hereof. No
subsequent agreement, representation, or promise made by either party hereto, or
by or to an employee, officer, agent or representative of either party hereto
shall be of any effect unless it is in writing and executed by the party to be
bound thereby.
(m) Successors and Assigns. Subject to the restrictions set forth in
----------------------
Paragraph 21 hereof, this Agreement shall be binding upon and shall inure to the
benefit of the successors and assigns of the parties hereto.
(n) Construction. The parties hereto hereby acknowledge and agree
------------
that (i) each party hereto is of equal bargaining strength, (ii) each such party
has actively participated in the drafting, preparation and negotiation of this
Agreement, (iii) each such party has consulted with such party's own,
independent counsel, and such other professional advisors as such party has
deemed appropriate, relative to any and all matters contemplated under this
Agreement, (iv) each such party and such party's counsel and advisors have
reviewed this Agreement, (v) each such party has agreed to enter into this
Agreement following such review and the rendering of such advice, and (vi) any
rule of construction to the effect that ambiguities are to be resolved against
the drafting parties shall not apply in the interpretation of this Agreement, or
any portions hereof, or any amendments hereto.
24. Election to Postpone Closing. If the Close of Escrow would
----------------------------
otherwise occur between the first (1st) and tenth (10th) day of any calendar
month, Seller may elect, in its reasonable discretion, to postpone the Close of
Escrow to the eleventh (11th) day of such month in order to provide Seller with
an opportunity to collect all Rentals that were due within such ten-day period.
Seller may make such election by providing written notice thereof to Buyer no
later than seven (7) business days prior to the then scheduled Closing Date.
-16-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
"Buyer" KILROY REALTY, L.P.,
a Delaware limited partnership
By: /s/ Jeffrey C. Hawken
--------------------------------------------
Name: Jeffrey C. Hawken
---------------------------------------
Title: Exec. Vice-President and
Chief Operating Officer
--------------------------------------
"Seller" MISSION SQUARE PARTNERSHIP, a California
general partnership
By: The Betty L. Hutton Title Holding Company,
Inc., (formerly known as The Betty L. Hutton
Company),
its general partner
By: /s/ Thomas C. Parker
--------------------------------------------
Name: Thomas C. Parker
---------------------------------------
Title: Chief Executive Officer
--------------------------------------
By: BB&K Mission Square Partners, a California
general partnership,
its general partner
By: /s/ Gregory L. Hardke
--------------------------------------------
Name: Gregory L. Hardke
---------------------------------------
Title: Managing Partner
--------------------------------------
By: /s/ John D. Wahlin
--------------------------------------------
Name: John D. Wahlin
---------------------------------------
Title: Managing Partner
--------------------------------------
Acceptance by Escrow Holder:
- ---------------------------
First American Title Insurance Company hereby acknowledges that it has
received a fully executed original or original executed counterparts of the
foregoing Agreement of Purchase and Sale and Joint Escrow Instructions and
agrees to act as Escrow Holder thereunder and to be bound by and strictly
perform the terms thereof as such terms apply to Escrow Holder.
Dated:__________________, 1997 FIRST AMERICAN TITLE INSURANCE COMPANY
By:__________________________________________
Its Authorized Agent
-17-
<PAGE>
LEGAL DESCRIPTION OF THE LAND
-----------------------------
[To Be Supplied by Seller]
EXHIBIT "A"
-----------
<PAGE>
RENT ROLL
---------
[To Be Supplied by Seller]
EXHIBIT "B"
-----------
<PAGE>
WHEN RECORDED MAIL TO AND
MAIL TAX STATEMENTS TO:
KILROY REALTY, L.P.
c/o Kilroy Realty Corporation
2250 East Imperial Highway, Suite 1200
El Segundo, California 90245
================================================================================
(Above Space for Recorder's Use Only)
GRANT DEED
----------
The undersigned grantor declares:
Documentary Transfer Tax not shown pursuant
to Section 11932 of the Revenue and
Taxation Code, as amended
County of ___________________
FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,
__________________________________________, a ________________________, hereby
GRANTS to ____________________________________________, a ___________________,
that certain real property in the City of _______________, County of
______________, State of California, which is more particularly described on
Exhibit "1" which is attached hereto.
- -----------
IN WITNESS WHEREOF, the parties hereto have caused this Grant Deed to
be executed as of the _____ day of _____________, 199__.
_________________________________________________
_________________________________________________
By:______________________________________________
Print Name:___________________________________
Print Title:__________________________________
By:______________________________________________
Print Name:___________________________________
Print Title:__________________________________
[ATTACH APPROPRIATE ACKNOWLEDGMENTS]
EXHIBIT "C"
-----------
<PAGE>
DESCRIPTION OF REAL PROPERTY CONVEYED
-------------------------------------
[To Be Supplied]
EXHIBIT "l"
-----------
<PAGE>
Document No. _______________________
Recorded ____________________, 199___
STATEMENT OF TAX DUE AND REQUEST THAT TAX DECLARATION NOT BE MADE A
PART OF THE PERMANENT RECORD IN THE OFFICE OF THE COUNTY RECORDER
(PURSUANT TO SECTION 11932 OF THE CALIFORNIA REVENUE AND TAXATION
CODE)
TO: Recorder
County of _________________
Request is hereby made in accordance with the provisions of the
Documentary Transfer Tax Act that the amount of the tax due not be shown on the
original document which names:
Grantor: ______________________________, a __________________________________
Grantee: ______________________________, a __________________________________
The property described in the accompanying document is located in the
City of _____________, County of ___________________.
The amount of tax due on the accompanying document is $________________.
________ Computed on full value of property conveyed.
________ Or Computed on full value, less liens and encumbrances remaining at
the time of sale.
_______________________________________________
(Signature of Declarant or Agent)
_______________________________________________
(Firm Name)
Note: After the permanent record is made, this form will be affixed to the
conveying document and returned with it.
<PAGE>
TENANT:__________________________
DATE OF LEASE:___________________
AMENDED:_________________________
PREMISES:________________________
ESTOPPEL CERTIFICATE
--------------------
To:
_______________________
_______________________
_______________________
_______________________
Re: Lease dated _________________, 19__ between
________________________________________________
and_____________________________________________
The undersigned hereby certifies to _________________________
("Buyer") as follows:
1. The undersigned is the "Tenant" under the above-referenced lease
("Lease") covering the above-referenced Premises ("Premises"). A true, correct
and complete copy of the Lease (including all addenda, riders, amendments,
modifications and supplements thereto) is attached as Exhibit "1".
-----------
2. The Lease constitutes the entire agreement between landlord under
the Lease ("Landlord") and Tenant with respect to the Premises and the Lease has
not been modified, changed, altered or amended in any respect except as set
forth above.
3. The term of the Lease commenced on _______________, 19__, and,
including any presently exercised option or renewal term, will expire on
____________________. Tenant has accepted possession of the Premises and is the
actual occupant in possession and has not sublet, assigned or hypothecated all
or any portion of Tenant's leasehold interest. All improvements to be
constructed on the Property by Landlord have been completed and accepted by
Tenant and any tenant construction allowances have been paid in full.
4. As of the date of this Estoppel Certificate, there exists no
breach or default, nor state of facts which, with notice, the passage of time,
or both, would result in a breach or default on the part of either Tenant or
Landlord. To the best of Tenant's knowledge, no claim, controversy, dispute,
quarrel or disagreement exists between Tenant and Landlord.
5. Tenant is currently obligated to pay annual rental of
$____________ in monthly installments of $___________ per month and monthly
installments of annual rental have been paid through _________________, 19__.
Tenant is obligated to pay monthly installments of common area maintenance
charges in the amount of $____________. No other rent has been paid in advance
and Tenant has no claim or defense against Landlord under the Lease and is
asserting no offsets or credits against either the rent or Landlord. Tenant has
no claim against Landlord for any security deposit or other deposits except
$___________ which was paid pursuant to the Lease.
6. Tenant has no option or preferential right to purchase all or any
part of the Premises (or the real property of which the Premises are a part) nor
any right or interest with respect to the Premises other than as Tenant under
the Lease.
7. Tenant has no option, right of first offer or right of first
refusal to lease or occupy any other space within the property of which the
Premises are a part, except ___________________________ [IF NONE, LEAVE BLANK].
Tenant has no right to renew or extend the terms of the Lease except ___________
________________________________[IF NONE, LEAVE BLANK].
8. Tenant has no preferential right to parking spaces or storage area
except __________________________________________________________________ [IF
NONE, LEAVE BLANK].
EXHIBIT "D"
-----------
<PAGE>
9. Tenant has made no agreement with Landlord or any agent,
representative or employee of Landlord concerning free rent, partial rent,
rebate of rental payments or any other type of rental or other concession except
as expressly set forth in the Lease.
10. There has not been filed by or against Tenant a petition in
bankruptcy, voluntary or otherwise, any assignment for the benefit of
creditors, any petition seeking reorganization or arrangement under the
bankruptcy laws of the United States, or any state thereof, or any other action
brought under said bankruptcy laws with respect to Tenant.
11. All insurance required of Tenant by the Lease has been provided
by Tenant and all premiums have been paid.
12. The Premises contains approximately __________ square feet of
rentable area.
This Estoppel Certificate is made to Buyer in connection with the
prospective purchase by Buyer, or Buyer's assignee, of the property containing
the Premises. This Estoppel Certificate may be relied on by Buyer and any other
party who acquires an interest in the Premises in connection with such purchase
or any person or entity which may finance such purchase.
Dated this _____ day of _________________, 19__.
_________________________________________________
By:______________________________________________
Its:__________________________________________
"TENANT"
[Attach Lease as Exhibit "1"]
-----------
D-2
<PAGE>
PERSONAL PROPERTY
EXHIBIT "E"
-----------
<PAGE>
TENANT LEASE ASSIGNMENT
-----------------------
THIS TENANT LEASE ASSIGNMENT ("Assignment") is made this ____ day of
_______________, 19__ by and between _______________________________________, a
__________________ ("Assignor"), and ________________________________________, a
__________________ ("Assignee").
W I T N E S S E T H:
- - - - - - - - - -
A. Assignor and Assignee entered into that certain Agreement of
Purchase and Sale and Joint Escrow Instructions, dated as of _________________,
19__ ("Agreement"), respecting the sale of the "Property" (as defined in the
Agreement).
B. Under the Agreement, Assignor is obligated to assign to Assignee
any and all of Assignor's right, title and interest in and to all leases,
licenses, rental agreements or occupancy agreements relative to the real
property ("Real Property") described in Exhibit "1" attached hereto, together
-----------
with all rents, issues and profits thereunder (collectively, the "Tenant
Leases") and all security deposits, prepaid rentals, cleaning fees and other
deposits, plus any interest accrued thereon (which is payable to the tenant),
paid by tenants of the Real Property to Assignor or any other person ("Tenant
Deposits"), which Tenant Leases and Tenant Deposits are set forth on Exhibit "2"
-----------
attached hereto.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Assignor hereby assigns, sells, transfers, sets over and delivers
unto Assignee all of Assignor's estate, right, title and interest in and to the
Tenant Leases and the Tenant Deposits and Assignee hereby accepts such
assignment.
2. Assignor covenants, warrants and represents to Assignee that, (i)
except as shown on Exhibit "2", the Tenant Leases have not been modified,
-----------
amended or altered in writing or otherwise, and no concessions, abatements or
adjustments have been granted to tenants under the Tenant Leases, and (ii)
Assignor has not assigned to any other person or entity the Tenant Leases or
Tenant Deposits and Assignor shall indemnify, protect, defend (with counsel
chosen by Assignee) and hold harmless Assignee from and against any and all such
claims of prior assignment. Such covenants, warranties and representations
shall survive the execution and delivery of this Assignment.
3. Assignee hereby assumes the performance of all of the terms,
covenants and conditions imposed upon Assignor as landlord under the Tenant
Leases accruing or arising on or after the "Close of Escrow" (as defined in the
Agreement).
4. Assignor hereby agrees to indemnify, protect, defend (with counsel
chosen by Assignee) and hold harmless Assignee, Assignee's agents and Assignee's
and their successors and assigns from and against any and all claims, losses,
liabilities and expenses, including reasonable attorneys' fees, suffered or
incurred by Assignee by reason of any breach by Assignor prior to the Close of
Escrow, of any of Assignor's obligations under the Tenant Leases or with respect
to the Tenant Deposits.
5. Assignee hereby agrees to indemnify, protect, defend (with counsel
chosen by Assignor) and hold harmless Assignor, Assignor's agents and Assignor's
and their successors and assigns from and against any and all claims, losses,
liabilities and expenses, including reasonable attorneys' fees, suffered or
incurred by Assignor by reason of any breach by Assignee from and after the
Close of Escrow, of any of Assignee's obligations under the Tenant Leases or
with respect to the Tenant Deposits.
6. In the event of the bringing of any action or suit by a party
hereto against another party hereunder by reason of any breach of any of the
covenants, conditions, agreements or provisions on the part of the other party
arising out of this Assignment, then in that event the prevailing party shall be
entitled to have and recover of and from the other party all costs and expenses
of the action or suit, including reasonable attorneys' fees.
7. This Assignment may be executed in counterparts, each of which
shall be deemed an original, but all of which, together, shall constitute one
and the same instrument.
EXHIBIT "F"
-----------
<PAGE>
8. This Assignment shall be binding upon and inure to the benefit of
the successors, assignees, personal representatives, heirs and legatees of all
the respective parties hereto.
9. This Assignment shall be governed by, interpreted under, and
construed and enforceable in accordance with, the laws of the State of
California.
IN WITNESS WHEREOF, Assignor and Assignee have executed and delivered
this Assignment as of the day and year first written above.
"Assignor" ___________________________________________
___________________________________________
___________________________________________
"Assignee" ___________________________________________
___________________________________________
By:________________________________________
Its:____________________________________
[Attach Real Property Description as Exhibit "1"
-----------
and Schedule of Leases and Security Deposits as Exhibit "2"]
-----------
F-2
<PAGE>
ASSIGNMENT
OF
CONTRACTS AND ASSUMPTION AGREEMENT
----------------------------------
THIS ASSIGNMENT OF CONTRACTS AND ASSUMPTION AGREEMENT ("Assignment"),
is made as of the ____ day of _______________, 19__ by and between
_______________________________________, a __________________ ("Assignor"), and
________________________________________, a __________________ ("Assignee").
W I T N E S S E T H:
- - - - - - - - - -
A. Assignor and Assignee entered into that certain Agreement of
Purchase and Sale and Joint Escrow Instructions, dated ________________, 19__,
("Agreement"), for the purchase and sale of certain real property ("Property")
more particularly described in the Agreement.
B. This Assignment is being made pursuant to the terms of the
Agreement for the purpose of assigning to Assignee all of Assignor's right,
title and interest in and to those certain contracts, warranties and guaranties,
together with all supplements, amendments and modifications thereto approved by
Buyer pursuant to the Agreement (collectively, the "Contracts"). The Contracts
are more particularly described in Exhibit "1" attached hereto.
-----------
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Assignor hereby grants, assigns, transfers, conveys and delivers
to Assignee the Contracts and all of Assignor's right, title, interest, benefits
and privileges thereunder, and Assignee hereby accepts such Assignment.
2. Assignee hereby agrees to indemnify, protect, defend (with counsel
chosen by Assignor) and hold harmless Assignor, Assignor's agents and Assignor's
and their successors and assigns from and against any and all claims, losses,
liabilities and expenses, including reasonable attorneys' fees, suffered or
incurred by Assignor by reason of any breach by Assignee from and after the
Close of Escrow (as defined in the Agreement) of any of Assignee's obligations
under the Contracts.
3. Assignor hereby agrees to indemnify, protect, defend (with counsel
chosen by Assignee) and hold harmless Assignee, Assignee's agents and Assignee's
and their successors and assigns from and against any and all claims, losses,
liabilities and expenses, including reasonable attorneys' fees, suffered or
incurred by Assignee by reason of any breach by Assignor prior to the Close of
Escrow of any of Assignor's obligations under the Contracts.
4. By acceptance of this Assignment, Assignee hereby assumes and
agrees to perform and to be bound by all of the terms, covenants, conditions and
obligations imposed upon or assumed by Assignor under the Contracts. Said
assumption shall have application only to those obligations under the Contracts
first accruing or arising on or after the Close of Escrow and shall have no
application to obligations accruing or arising prior to said date.
5. This Assignment may be executed in counterparts, each of which
shall be deemed an original, but all of which, together, shall constitute one
and the same instrument.
6. This Assignment shall be binding upon and inure to the benefit of
the successors, assigns, personal representatives, heirs and legatees of the
respective parties hereto.
7. In the event of the bringing of any action or suit by a party
hereto against another party hereunder by reason of any breach of any of the
covenants, conditions, agreements or provisions on the part of the other party
arising out of this Assignment, then in that event the prevailing party shall be
entitled to have and recover of and from the other party all costs and expenses
of the action or suit, including reasonable attorneys' fees.
EXHIBIT "G"
-----------
<PAGE>
8. This Assignment shall be governed by, interpreted under, and
construed in accordance with the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
"Assignor" _________________________________________________
_________________________________________________
_________________________________________________
"Assignee" _________________________________________________
_________________________________________________
By:______________________________________________
Its:__________________________________________
[Attach Schedule of Contracts
as Exhibit "1"]
-----------
G-2
<PAGE>
BILL OF SALE
------------
THIS BILL OF SALE ("Bill of Sale") is made this _____ day of
_____________, 19__ by MISSION SQUARE PARTNERS, a California general partnership
("Seller"), in favor of KILROY REALTY, L.P., a Delaware limited partnership
("Buyer").
W I T N E S S E T H:
- - - - - - - - - -
A. Seller and Buyer entered into that certain Agreement of Purchase
and Sale and Joint Escrow Instructions dated as of ______________________, 19__
("Agreement") respecting the sale of certain "Property" (as defined in the
Agreement).
B. Under the Agreement, Seller is obligated to transfer to Buyer any
and all of Seller's right, title and interest in and to all equipment,
appliances, tools, machinery, supplies, building materials and other personal
property of every kind and character owned by Seller and attached to,
appurtenant to, located in or used in connection with the operation of the
"Improvements" (as defined in the Agreement) (collectively, the "Personal
Property").
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Seller does hereby absolutely and
unconditionally give, grant, bargain, sell, transfer, set over, assign, convey,
release, confirm and deliver to Buyer all of the Personal Property, including,
without limitation, those certain items of personal property described on
Exhibit "1" attached hereto.
- -----------
1. Seller hereby represents and warrants to Buyer that: (i) the
Personal Property has been paid for and is not subject to any liens,
encumbrances or claims of any kind, such warranty and representation shall
survive the execution and delivery of this Bill of Sale and Buyer's subsequent
transfer of any of the Personal Property.
2. Seller warrants, and hereby covenants, at Seller's sole cost and
expense, to defend Buyer's title to the Personal Property against all lawful
claims and demands of all persons or entities whomsoever which may now exist or
which may have accrued as of the "Close of Escrow" (as defined in the
Agreement). Seller hereby agrees to indemnify, protect, defend (with counsel
chosen by Buyer) and hold Buyer free and harmless from and against any and all
liabilities, obligations, damages, causes of action, judgments, costs and
expenses (including reasonable attorneys' fees) which Buyer may incur or suffer
in connection with any breach by Seller of the preceding warranty and covenant.
3. This Bill of Sale shall be binding upon and inure to the benefit
of the successors, assigns, personal representatives, heirs and legatees of
Buyer and Seller.
EXHIBIT "H"
-----------
<PAGE>
4. This Bill of Sale shall be governed by, interpreted under, and
construed and enforceable in accordance with, the laws of the State of
California.
IN WITNESS WHEREOF, Seller has executed and delivered this Bill of
Sale as of the date first written above.
"Seller" MISSION SQUARE PARTNERSHIP, a California general
partnership
By: The Betty L. Hutton Title Holding Company,
Inc., (formerly known as The Betty L. Hutton
Company),
its general partner
By:________________________________________
Name:___________________________________
Title:__________________________________
By: BB&K Mission Square Partners, a California
general partnership,
its general partner
By:________________________________________
Name:___________________________________
Title:__________________________________
By:________________________________________
Name:___________________________________
Title:__________________________________
[Attach Description of Personal Property
as Exhibit "1"]
-----------
H-2
<PAGE>
TRANSFEROR'S CERTIFICATION OF NON-FOREIGN STATUS
------------------------------------------------
To inform ___________________________________________, a _____________
(the "Transferee") that withholding of tax under Section 1445 of the Internal
Revenue Code of 1986, as amended ("Code") will not be required upon the transfer
by _________________________________________, a ______________________
("Transferor") of certain interests in real property to the Transferee, the
undersigned hereby certifies the following on behalf of the Transferor:
1. The Transferor is not a foreign corporation, foreign partnership,
foreign trust, foreign estate or foreign person (as those terms are defined in
the Code and the Income Tax Regulations promulgated thereunder); and
2. The Transferor's U.S. employer or tax (social security)
identification number is ________________________.
The Transferor understands that this Certification may be disclosed to
the Internal Revenue Service by the Transferee and that any false statement
contained herein could be punished by fine, imprisonment, or both.
Under penalty of perjury I declare that I have examined this
Certification and to the best of my knowledge and belief it is true, correct and
complete, and I further declare that I have authority to sign this document on
behalf of the Transferor.
"TRANSFEROR" ____________________________________________
____________________________________________
____________________________________________
Dated: ___________________, 19__
EXHIBIT "I"
-----------
<PAGE>
GENERAL ASSIGNMENT AGREEMENT
----------------------------
THIS GENERAL ASSIGNMENT AGREEMENT ("Assignment"), is made as of the
_____ day of _______________, 199__, by and among _____________________________,
a _____________________ ("Assignor") and ______________________________
("Assignee").
W I T N E S S E T H :
- - - - - - - - - -
Assignor is the owner of that certain land (the "Land") located in the
City of ______________, County of ______________, State of California more
particularly described in Exhibit "A" attached hereto, and all rights,
-----------
privileges and easements appurtenant to the Land (the "Appurtenances"), and all
buildings and other improvements thereon (the "Improvements"). The Land, the
Appurtenances and the Improvements are hereinafter referred to collectively as
the "Real Property." The Real Property is being conveyed by Assignor to
Assignee pursuant to a grant, bargain and sale deed ("Grant Deed") of on or
about even date herewith, pursuant to that certain Agreement of Purchase and
Sale and Joint Escrow Instructions dated ______________, 1997 (the "Agreement").
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Assignor hereby grants, assigns, transfers, conveys and delivers
to Assignee all of Assignor's right, title, interest, benefits and privileges in
and to the following described property (collectively, the "Rights"):
(a) All construction, engineering, consulting, architectural and other
similar contracts, and any and all amendments and modifications thereto,
concerning the design or construction of any or all of the Real Property and all
warranties with respect thereto (including all statutory, express and implied
warranties);
(b) All architectural drawings, plans, specifications, soils tests,
appraisals, engineering reports and similar materials relating to any or all of
the Real Property;
(c) All payment and performance bonds or guaranties and any and all
modifications and extensions thereof relating to the Real Property;
(d) All governmental entitlements (including, but not limited to, all
environmental impact reports, negative declarations, map approvals, conditional
use permits, building permits and certificates of occupancy for the
Improvements), permissions, environmental clearances, authority to subdivide the
Land, rights, licenses and permits which relate to all or any of the Real
Property;
(e) All general intangibles relating to the development or use of the
Real Property, including, without limitation, all names under which or by which
the Real Property or any portion thereof may at any time be operated or known,
all rights to carry on business under any such names or any variant thereof, and
all trademarks and goodwill in any way relating to the Real Property;
(f) All refunds and payments of any kind relating to the construction,
operation, occupancy, use and/or disposition of any or all of the Real Property;
(g) All proceeds and claims arising on account of any damage to or
taking of the Real Property or any part thereof, and all causes of action and
recoveries for any loss or diminution in the value of the Real Property; and
(h) All of Assignor's interest in all impounds, accounts [,letters of
credit] and other security held by Metropolitan Life Insurance Company in
connection with the Met Loan.
2. Assignee hereby accepts the grant, assignment, transfer,
conveyance and delivery of the Rights set forth in Paragraph 1 hereof, effective
as of the recordation of the Grant Deed.
3. All rights are conveyed without representation or warranty,
subject to all proprietary interests that may exist with the parties preparing
the Rights, and subject to all conditions imposed upon issuance of the Rights.
EXHIBIT "J"
-----------
<PAGE>
4. This Assignment shall be binding upon and inure to the benefit of
the successors, assigns, personal representatives, heirs and legatees of the
respective parties hereto.
5. In the event of the bringing of any action or suit by a party
hereto against another party hereunder by reason of any breach of any of the
covenants, conditions, agreements or provisions on the part of the other party
arising out of this Assignment, then in that event the prevailing party shall be
entitled to have and recover of and from the other party all costs and expenses
of the action or suit, including reasonable attorneys' fees.
6. This Assignment shall be governed by, interpreted under, and
enforced and construed in accordance with the laws of the State of California.
7. This Assignment may be executed in multiple counterparts, each of
which shall be deemed an original, but all of which together shall constitute
but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this instrument
as of the date first hereinabove written.
"Assignor" ___________________________________________
___________________________________________
___________________________________________
"Assignee" ___________________________________________
a _________________________________________
By:________________________________________
Its:____________________________________
J-2
<PAGE>
LEGAL DESCRIPTION OF THE PROPERTY
---------------------------------
[To Be Provided]
EXHIBIT "A" to
--------------
EXHIBIT "J"
-----------
<PAGE>
COPY OF U.S. MARSHALL'S LEASE
-----------------------------
[To Be Provided by Seller]
EXHIBIT "K"
-----------
<PAGE>
EXHIBIT 10.61
FIRST AMENDMENT TO AGREEMENT FOR
PURCHASE AND SALE AND JOINT ESCROW INSTRUCTIONS
-----------------------------------------------
This First Amendment to Agreement of Purchase and Sale and Joint
Escrow Instructions (this "First Amendment") is made as of August 22, 1997 by
and between Kilroy Realty, L.P., a Delaware limited partnership ("Buyer") and
Mission Square Partners, a California general partnership ("Seller") with
respect to the following:
R E C I T A L S :
- - - - - - - -
A. Seller and Buyer entered into that certain Agreement of Purchase
and Sale and Joint Escrow Instructions (the "Agreement") providing for the sale
of 3750 University Avenue, Riverside, California;
B. The Agreement provides that if Buyer acquires the Property, it
will, if permitted, assume that certain loan (the "Debt") from Metropolitan Life
Insurance Company ("Met").
C. Buyer and Seller anticipate that additional time will be required
to complete Buyer's review of the Property including obtaining Met's consent to
Buyer's assumption of the Debt;
D. Seller and Buyer desire to amend the Agreement to provide for such
extension.
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Seller and Buyer hereby agree as
follows:
A G R E E M E N T :
- - - - - - - - -
1. Notwithstanding anything in the Agreement to the contrary, the
Contingency Date provided for in the Agreement is hereby extended to September
5, 1997. However, if Buyer has not received documents, acceptable to Buyer in
its sole discretion, providing for Met's consent to Buyer's assumption of the
Debt (the "Met Consent") by September 5, 1997, then the Contingency Date only
with respect to Buyer's assumption of the Debt shall automatically be extended
to September 25, 1997. Accordingly, if Buyer has not obtained the Met Consent on
or before September 25, 1997, then Buyer shall have the right to terminate this
Agreement by providing Seller with a Termination Notice no later than 5:00 p.m.
Pacific Time on September 25, 1997.
2. Notwithstanding anything in the Agreement to the contrary, the Closing
Date shall be deemed to be the earlier of (a) September 30, 1997 or (b) three
(3) Business Days after Buyer receives the Met Consent.
<PAGE>
3. Except as set forth in this First Amendment, the provisions of the
Agreement remain unmodified and in full force and effect. If any provision of
this First Amendment conflicts with any provision of the Agreement, the
provisions of this First Amendment shall prevail.
4. Any capitalized terms which are not defined in this First Amendment
shall have the meaning provided for in the Agreement.
-2-
<PAGE>
5. This First amendment may be signed in counterparts, including facsimile
counterparts, which, when signed by both Buyer and Seller, shall constitute a
binding agreement.
IN WITNESS WHEREOF, the parties have executed this first amendment as
of the date first written above.
"Buyer" KILROY REALTY, L.P.,
a Delaware limited partnership
By: /s/ Jeffrey C. Hawken
---------------------------------------------
Name: Jeffrey C. Hawken
----------------------------------------
Title: E.V.P. and C.O.O.
---------------------------------------
"Seller" MISSION SQUARE PARTNERS,
a California general partnership
By: The Betty L. Hutton Title Holding Company,
Inc., (formerly known as the Betty L. Hutton
Company),
its general partner
By: /s/ Thomas C. Parker
-----------------------------------------
Name: Thomas C. Parker
------------------------------------
Title: C.E.O.
-----------------------------------
By: BB&K Mission Square Partners, a California
general partnership,
its general partner
By:
-----------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Acknowledgment by Escrow Holder:
- -------------------------------
First American Title Insurance Company hereby acknowledges the terms
of this First Amendment.
Dated: 8/26, 1997 FIRST AMERICAN TITLE INSURANCE COMPANY
By: /s/ J.M. Moore, A.V.P.
---------------------------------------------
Its Authorized Agent
-3-
<PAGE>
EXHIBIT 10.62
SECOND AMENDMENT TO AGREEMENT FOR
PURCHASE AND SALE AND JOINT ESCROW INSTRUCTIONS
-----------------------------------------------
This Second Amendment to Agreement of Purchase and Sale and Joint
Escrow Instructions (this "Second Amendment") is made as of September 5, 1997 by
and between Kilroy Realty, L.P., a Delaware limited partnership ("Buyer") and
Mission Square Partners, a California general partnership ("Seller") with
respect to the following:
R E C I T A L S :
- - - - - - - -
A. Seller and Buyer entered into that certain Agreement of Purchase
and Sale and Joint Escrow Instructions providing for the sale of 3750 University
Avenue, Riverside, California as amended by that certain First Amendment to the
same dated as of August 22, 1997 (collectively, the "Agreement");
B. Buyer and Seller anticipate that additional time will be required
to complete Buyer's review of the Property;
C. Seller and Buyer desire to amend the Agreement to provide for such
additional time.
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Seller and Buyer hereby agree as
follows:
A G R E E M E N T :
- - - - - - - - -
1. Notwithstanding anything in the Agreement to the contrary, (a) the
Contingency Date provided for in the Agreement is hereby extended to September
19, 1997 and (b) the Closing Date shall not be prior to September 22, 1997.
2. Except as set forth in this Second Amendment, the provisions of
the Agreement remain unmodified and in full force and effect. If any provision
of this Second Amendment conflicts with any provision of the Agreement, the
provisions of this Second Amendment shall prevail.
3. Any capitalized terms which are not defined in this Second
Amendment shall have the meaning provided for in the Agreement.
<PAGE>
4. This Second Amendment may be signed in counterparts, including
facsimile counterparts, which, when signed by both Buyer and Seller, shall
constitute a binding agreement.
IN WITNESS WHEREOF, the parties have executed this Second Amendment as
of the date first written above.
"Buyer" KILROY REALTY, L.P.,
a Delaware limited partnership
By: /s/ Jeffrey C. Hawken
------------------------------
Name: Jeffrey C. Hawken
-------------------------
Title: E.V.P. and C.O.O.
------------------------
-2-
<PAGE>
"Seller" MISSION SQUARE PARTNERS,
a California general partnership
By: The Betty L. Hutton Title Holding Company,
Inc., (formerly known as The Betty L. Hutton
Company),
its general partner
By: /s/ Thomas C. Parker
------------------------------
Name: Thomas C. Parker
-------------------------
Title: C.E.O.
------------------------
By: BB&K Mission Square Partners, a California
general partnership,
its general partner
By:
------------------------------
Name:
-------------------------
Title:
------------------------
Acknowledgment by Escrow Holder:
- -------------------------------
First American Title Insurance Company hereby acknowledges the terms
of this Second Amendment.
Dated:_______________, 1997 FIRST AMERICAN TITLE INSURANCE COMPANY
By:
----------------------------------
Its Authorized Agent
-3-
<PAGE>
EXHIBIT 10.63
THIRD AMENDMENT TO AGREEMENT FOR
PURCHASE AND SALE AND JOINT ESCROW INSTRUCTIONS
-----------------------------------------------
This Third Amendment to Agreement of Purchase and Sale and Joint
Escrow Instructions (this "Third Amendment") is made as of September 19, 1997 by
and between Kilroy Realty, L.P., a Delaware limited partnership ("Buyer") and
Mission Square Partners, a California general partnership ("Seller") with
respect to the following:
R E C I T A L S :
- - - - - - - -
A. Seller and Buyer entered into that certain Agreement of Purchase
and Sale and Joint Escrow Instructions providing for the sale of 3750 University
Avenue, Riverside, California as amended by that certain First Amendment and
that certain Second Amendment to the same (collectively, the "Agreement");
B. Buyer and Seller anticipate that additional time will be required
to complete Buyer's review of the Property;
C. Seller and Buyer desire to amend the Agreement to provide for such
additional time.
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Seller and Buyer hereby agree as
follows:
A G R E E M E N T :
- - - - - - - - -
1. Notwithstanding anything in the agreement to the contrary, the
contingency date provided for in the Agreement is hereby extended to September
22, 1997.
2. Seller acknowledges that, as provided for in the First Amendment
to the Agreement, Buyer shall have until September 25, 1997 to terminate the
Agreement if it has not obtained the Met Consent on or before such date.
3. Except as set forth in this Third Amendment, the provisions of the
Agreement remain unmodified and in full force and effect. If any provision of
this Third Amendment conflicts with any provision of the Agreement, the
provisions of this Third Amendment shall prevail.
4. Any capitalized terms which are not defined in this Third
Amendment shall have the meaning provided for in the Agreement.
<PAGE>
5. This Third Amendment may be signed in counterparts, including
facsimile counterparts, which, when signed by both Buyer and Seller, shall
constitute a binding agreement.
IN WITNESS WHEREOF, the parties have executed this Third Amendment as
of the date first written above.
"Buyer" KILROY REALTY, L.P.,
a Delaware limited partnership
By: /s/ Nadine K. Kirk
----------------------------------------------
Name: Nadine K. Kirk
-----------------------------------------
Title: V.P. - Legal
----------------------------------------
"Seller" MISSION SQUARE PARTNERS,
a California general partnership
By: The Betty L. Hutton Title Holding Company,
Inc., (formerly known as The Betty L. Hutton
Company),
its general partner
By: /s/ Thomas C. Parker
----------------------------------------------
Name: Thomas C. Parker
-----------------------------------------
Title: C.E.O.
----------------------------------------
By: BB&K Mission Square Partners, a California
general partnership,
its general partner
By: /s/ Christopher L. Carpenter
------------------------------------------
Name: Christopher L. Carpenter
-------------------------------------
Title: Partner
------------------------------------
Acknowledgment by Escrow Holder:
- -------------------------------
First American Title Insurance Company hereby acknowledges the terms
of this Third Amendment.
Dated:__________________, 1997 FIRST AMERICAN TITLE INSURANCE COMPANY
By:_________________________________________
Its Authorized Agent
-2-
<PAGE>
EXHIBIT 10.64
FOURTH AMENDMENT TO AGREEMENT FOR
PURCHASE AND SALE AND JOINT ESCROW INSTRUCTIONS
-----------------------------------------------
This Fourth Amendment to Agreement of Purchase and Sale and Joint
Escrow Instructions (this "Fourth Amendment") is made as of September 22, 1997
by and between Kilroy Realty, L.P., a Delaware limited partnership ("Buyer") and
Mission Square Partners, a California general partnership ("Seller") with
respect to the following:
R E C I T A L S :
- - - - - - - -
A. Seller and Buyer entered into that certain Agreement of Purchase
and Sale and Joint Escrow Instructions providing for the sale of 3750 University
Avenue, Riverside, California as amended by that certain First Amendment, that
certain Second Amendment and that certain Third Amendment to the same
(collectively, the "Agreement");
B. Buyer and Seller anticipate that additional time will be required
to complete Buyer's review of the Property;
C. Seller and Buyer desire to amend the Agreement to provide for such
additional time.
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Seller and Buyer hereby agree as
follows:
A G R E E M E N T :
- - - - - - - - -
1. Notwithstanding anything in the Agreement to the contrary, the
Contingency Date provided for in the Agreement is hereby extended to September
23, 1997.
2. Except as set forth in this Fourth Amendment, the provisions of
the Agreement remain unmodified and in full force and effect. If any provision
of this Fourth Amendment conflicts with any provision of the Agreement, the
provisions of this Fourth Amendment shall prevail.
3. Any capitalized terms which are not defined in this Fourth
Amendment shall have the meaning provided for in the Agreement.
<PAGE>
4. This Fourth Amendment may be signed in counterparts, including
facsimile counterparts, which, when signed by both Buyer and Seller, shall
constitute a binding agreement.
IN WITNESS WHEREOF, the parties have executed this Fourth Amendment as
of the date first written above.
"Buyer" KILROY REALTY, L.P.,
a Delaware limited partnership
By: /s/ Tyler Rose
--------------------------------
Name: Tyler Rose
---------------------------
Title: S.V.P. and Treasurer
--------------------------
-2-
<PAGE>
"Seller" MISSION SQUARE PARTNERS,
a California general partnership
By: The Betty L. Hutton Title Holding Company,
Inc., (formerly known as The Betty L. Hutton
Company),
its general partner
By: /s/ Thomas C. Parker
----------------------------------------
Name: Thomas C. Parker
-----------------------------------
Title: C.E.O.
----------------------------------
By: BB&K Mission Square Partners, a California
general partnership,
its general partner
By:
----------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Acknowledgment by Escrow Holder:
- -------------------------------
First American Title Insurance Company hereby acknowledges the terms
of this Fourth Amendment.
Dated:___________, 1997 FIRST AMERICAN TITLE INSURANCE COMPANY
By:
--------------------------------------------
Its Authorized Agent
-3-
<PAGE>
EXHIBIT 10.65
FIFTH AMENDMENT TO AGREEMENT FOR
PURCHASE AND SALE AND JOINT ESCROW INSTRUCTIONS
-----------------------------------------------
This Fifth Amendment to Agreement of Purchase and Sale and Joint
Escrow Instructions (this "Fifth Amendment") is made as of September 23, 1997 by
and between Kilroy Realty, L.P., a Delaware limited partnership ("Buyer") and
Mission Square Partners, a California general partnership ("Seller") with
respect to the following:
R E C I T A L S :
- - - - - - - -
A. Seller and Buyer entered into that certain Agreement of Purchase
and Sale and Joint Escrow Instructions providing for the sale of 3750 University
Avenue, Riverside, California as amended by certain amendments to the same
(collectively, the "Agreement");
B. Buyer and Seller have discussed reducing the Purchase Price by Six
Hundred Thousand Dollars ($600,000.00);
C. Buyer and Seller anticipate that additional time will be required
to complete Buyer's review of the Property and to agree upon the terms of the
Purchase Price reduction;
D. Seller and Buyer desire to amend the Agreement to provide for such
additional time.
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Seller and Buyer hereby agree as
follows:
A G R E E M E N T :
- - - - - - - - -
1. Notwithstanding anything in the Agreement to the contrary, the
Contingency Date provided for in the Agreement is hereby extended to September
25, 1997.
2. Except as set forth in this Fifth Amendment, the provisions of the
Agreement remain unmodified and in full force and effect. If any provision of
this Fifth Amendment conflicts with any provision of the Agreement, the
provisions of this Fifth Amendment shall prevail.
3. Any capitalized terms which are not defined in this Fifth
Amendment shall have the meaning provided for in the Agreement.
<PAGE>
4. This Fifth Amendment may be signed in counterparts, including
facsimile counterparts, which, when signed by both Buyer and Seller, shall
constitute a binding agreement.
IN WITNESS WHEREOF, the parties have executed this Fifth Amendment as
of the date first written above.
"Buyer" KILROY REALTY, L.P.,
a Delaware limited partnership
By: /s/ Tyler Rose
--------------------------------------------
Name: Tyler Rose
--------------------------------------
Title: S.V.P. and Treasurer
-------------------------------------
"Seller" MISSION SQUARE PARTNERS,
a California general partnership
By: The Betty L. Hutton Title Holding Company,
Inc., (formerly known as The Betty L. Hutton
Company),
its general partner
By: /s/ Thomas C. Parker
----------------------------------------
Name: Thomas C. Parker
-----------------------------------
Title: C.E.O.
----------------------------------
By: BB&K Mission Square Partners, a California
general partnership,
its general partner
By:
----------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Acknowledgment by Escrow Holder:
- -------------------------------
First American Title Insurance Company hereby acknowledges the terms
of this Fifth Amendment.
Dated:___________, 1997 FIRST AMERICAN TITLE INSURANCE COMPANY
By:
--------------------------------------------
Its Authorized Agent
-2-
<PAGE>
EXHIBIT 10.66
SIXTH AMENDMENT TO AGREEMENT FOR
PURCHASE AND SALE AND JOINT ESCROW INSTRUCTIONS
-----------------------------------------------
This Sixth Amendment to Agreement of Purchase and Sale and Joint
Escrow Instructions (this "Sixth Amendment") is made as of September 25, 1997 by
and between Kilroy Realty, L.P., a Delaware limited partnership ("Buyer") and
Mission Square Partners, a California general partnership ("Seller") with
respect to the following:
R E C I T A L S :
- - - - - - - -
A. Seller and Buyer entered into that certain Agreement of Purchase
and Sale and Joint Escrow Instructions providing for the sale of 3750 University
Avenue, Riverside, California as amended by certain amendments to the same
(collectively, the "Agreement");
B. Buyer and Seller have discussed reducing the Purchase Price by Six
Hundred Thousand Dollars ($600,000.00), but the parties have not come to a final
agreement regarding the same;
C. Buyer and Seller anticipate that additional time will be required
to complete Buyer's review of the Property and to agree upon the terms of the
Purchase Price reduction;
D. Seller and Buyer desire to amend the Agreement to provide for such
additional time.
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Seller and Buyer hereby agree as
follows:
A G R E E M E N T :
- - - - - - - - -
1. Notwithstanding anything in the Agreement to the contrary, the
Contingency Date, including, but not limited to, for the purpose of Buyer
obtaining the Met Consent, provided for in the Agreement is hereby extended to
October 3, 1997.
2. Notwithstanding anything in the Agreement to the contrary, the
Closing Date shall be deemed to be the earlier of (a) October 7, 1997 or (b)
three (3) Business Days after Buyer receives the Met Consent.
3. Except as set forth in this Sixth Amendment, the provisions of the
Agreement remain unmodified and in full force and effect. if any provision of
this Sixth Amendment conflicts with any provision of the Agreement, the
provisions of this Sixth Amendment shall prevail.
4. Any capitalized terms which are not defined in this Sixth
Amendment shall have the meaning provided for in the Agreement.
<PAGE>
5. This Sixth Amendment may be signed in counterparts, including
facsimile counterparts, which, when signed by both Buyer and Seller, shall
constitute a binding agreement.
IN WITNESS WHEREOF, the parties have executed this Sixth Amendment as
of the date first written above.
"Buyer" KILROY REALTY, L.P.,
A Delaware limited partnership
By: /s/ Tyler Rose
-------------------------------------------
Name: Tyler Rose
-------------------------------------
Title: S.V.P. and Treasurer
------------------------------------
"Seller" MISSION SQUARE PARTNERS,
A California general partnership
By: The Betty L. Hutton Title Holding Company,
Inc., (formerly known as The Betty L. Hutton
Company),
its general partner
By:/s/ Thomas C. Parker
----------------------------------------
Name: Thomas C. Parker
----------------------------------
Title: C.E.O.
---------------------------------
By: BB&K Mission Square Partners, a California
general partnership,
its general partner
By:/s/ Christopher L. Carpenter
----------------------------------------
Name: Christopher L. Carpenter
----------------------------------
Title: General Partner
---------------------------------
Acknowledgment by Escrow Holder:
- -------------------------------
First American Title Insurance Company hereby acknowledges the terms
of this Sixth Amendment.
Dated:____________, 1997 FIRST AMERICAN TITLE INSURANCE COMPANY
By:
--------------------------------------------
Its Authorized Agent
-2-
<PAGE>
EXHIBIT 10.67
SEVENTH AMENDMENT TO AGREEMENT FOR
PURCHASE AND SALE AND JOINT ESCROW INSTRUCTIONS
-----------------------------------------------
This Seventh Amendment to Agreement of Purchase and Sale and Joint
Escrow Instructions (this "Seventh Amendment") is made as of September 29, 1997
by and between Kilroy Realty, L.P., a Delaware limited partnership ("Buyer") and
Mission Square Partners, a California general partnership ("Seller") with
respect to the following:
R E C I T A L S :
- - - - - - - -
A. Seller and Buyer entered into that certain Agreement of Purchase
and Sale and Joint Escrow Instructions providing for the sale of 3750 University
Avenue, Riverside, California as amended by certain amendments to the same
(collectively, the "Agreement");
B. Based upon Buyer's due diligence review of the Property, Buyer and
Seller have agreed to reduce the Purchase Price by Six Hundred Thousand Dollars
($600,000.00);
C. Seller and Buyer desire to amend the Agreement to provide for such
reduction in the Purchase Price.
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Seller and Buyer hereby agree as
follows:
A G R E E M E N T :
- - - - - - - - -
1. Notwithstanding anything in the Agreement to the contrary, the
Purchase Price provided for in the Agreement is hereby reduced by Six Hundred
Thousand Dollars ($600,00.00) to Twenty-One Million Nine Hundred Forty-Five
Thousand Dollars ($21,945,000.00).
2. Except as set forth in this Seventh Amendment, the provisions of
the Agreement remain unmodified and in full force and effect. if any provision
of this Seventh Amendment conflicts with any provision of the Agreement, the
provisions of this Seventh Amendment shall prevail.
3. Any capitalized terms which are not defined in this Seventh
Amendment shall have the meaning provided for in the Agreement.
<PAGE>
4. This Seventh Amendment may be signed in counterparts, including
facsimile counterparts, which, when signed by both Buyer and Seller, shall
constitute a binding agreement.
IN WITNESS WHEREOF, the parties have executed this Seventh Amendment
as of the date first written above.
"Buyer" KILROY REALTY, L.P.,
a Delaware limited partnership
By: /s/ Tyler Rose
---------------------------------
Name: Tyler Rose
----------------------------
Title: S.V.P. and Treasurer
---------------------------
"Seller" MISSION SQUARE PARTNERS,
a California general partnership
By: The Betty L. Hutton Title Holding Company,
Inc., (formerly known as The Betty L. Hutton
Company),
its general partner
By: /s/ Thomas C. Parker
-----------------------------
Name: Thomas C. Parker
------------------------
Title: C.E.O.
-----------------------
By: BB&K Mission Square Partners, a California
general partnership,
its general partner
By: /s/ Christopher L. Carpenter
-----------------------------
Name: Christopher L. Carpenter
------------------------
Title: General Partner
-----------------------
-2-
<PAGE>
Acknowledgment by Escrow Holder:
- -------------------------------
First American Title Insurance Company hereby acknowledges the terms
of this Seventh Amendment.
Dated:________________, 1997 FIRST AMERICAN TITLE INSURANCE COMPANY
By:
-----------------------------
Its Authorized Agent
-3-
<PAGE>
EXHIBIT 10.68
EIGHTH AMENDMENT TO AGREEMENT FOR
PURCHASE AND SALE AND JOINT ESCROW INSTRUCTIONS
-----------------------------------------------
This Eighth Amendment to Agreement of Purchase and Sale and Joint
Escrow Instructions (this "Eighth Amendment") is made as of October 2, 1997 by
and between Kilroy Realty, L.P., a Delaware limited partnership ("Buyer") and
Mission Square Partners, a California general partnership ("Seller") with
respect to the following:
R E C I T A L S :
- - - - - - - -
A. Seller and Buyer entered into that certain Agreement of Purchase
and Sale and Joint Escrow Instructions providing for the sale of 3750 University
Avenue, Riverside, California as amended by certain amendments to the same
(collectively, the "Agreement");
B. Buyer and Seller anticipate that additional time will be required
to complete Buyer's review of the Property;
C. Seller and Buyer desire to amend the Agreement to provide for such
additional time.
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Seller and Buyer hereby agree as
follows:
A G R E E M E N T :
- - - - - - - - -
1. Notwithstanding anything in the Agreement to the contrary, the
Contingency Date, including, but not limited to, for the purpose of Buyer
obtaining the Met Consent, provided for in the Agreement is hereby extended to
October 24, 1997.
2. Notwithstanding anything in the Agreement to the contrary, the
Closing Date is hereby amended such that it is to occur on October 31, 1997.
3. Except as set forth in this Eighth Amendment, the provisions of
the Agreement remain unmodified and in full force and effect. if any provision
of this Eighth Amendment conflicts with any provision of the Agreement, the
provisions of this Eighth Amendment shall prevail.
4. Any capitalized terms which are not defined in this Eighth
Amendment shall have the meaning provided for in the Agreement.
5. This Eighth Amendment may be signed in counterparts, including
facsimile counterparts, which, when signed by both Buyer and Seller, shall
constitute a binding agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Eighth Amendment as
of the date first written above.
"Buyer" KILROY REALTY, L.P.,
a Delaware limited partnership
By: /s/ Jeffrey C. Hawken
-----------------------------
Name: Jeffrey C. Hawken
------------------------
Title: E.V.P. and C.O.O.
-----------------------
"Seller" MISSION SQUARE PARTNERS,
a California general partnership
By: The Betty L. Hutton Title Holding Company,
Inc., (formerly known as The Betty L. Hutton
Company),
its general partner
By: /s/ Arlene R. Craig
-------------------------
Name: Arlene R. Craig
--------------------
Title: President
-------------------
By: BB&K Mission Square Partners, a California
general partnership,
its general partner
By:
-------------------------
Name:
--------------------
Title:
-------------------
Acknowledgment by Escrow Holder:
- -------------------------------
First American Title Insurance Company hereby acknowledges the terms
of this Eighth Amendment.
Dated:______________, 1997 FIRST AMERICAN TITLE INSURANCE COMPANY
By:
--------------------------
Its Authorized Agent
-2-
<PAGE>
EXHIBIT 10.69
NINTH AMENDMENT TO AGREEMENT FOR
PURCHASE AND SALE AND JOINT ESCROW INSTRUCTIONS
-----------------------------------------------
This Ninth Amendment to Agreement of Purchase and Sale and Joint
Escrow Instructions (this "Ninth Amendment") is made as of October 24, 1997 by
and between Kilroy Realty, L.P., a Delaware limited partnership ("Buyer") and
Mission Square Partners, a California general partnership ("Seller") with
respect to the following:
R E C I T A L S :
- - - - - - - -
A. Seller and Buyer entered into that certain Agreement of Purchase
and Sale and Joint Escrow Instructions providing for the sale of 3750 University
Avenue, Riverside, California as amended by certain amendments to the same
(collectively, the "Agreement");
B. Buyer and Seller anticipate that additional time will be required
to complete Buyer's review of the Property;
C. Seller and Buyer desire to amend the Agreement to provide for such
additional time.
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Seller and Buyer hereby agree as
follows:
A G R E E M E N T :
- - - - - - - - -
1. Notwithstanding anything in the Agreement to the contrary, the
Contingency Date, including, but not limited to, for the purpose of Buyer
obtaining the Met Consent, provided for in the Agreement is hereby extended to
October 28, 1997.
2. Except as set forth in this Ninth Amendment, the provisions of the
Agreement remain unmodified and in full force and effect. If any provision of
this Ninth Amendment conflicts with any provision of the Agreement, the
provisions of this Ninth Amendment shall prevail.
3. Any capitalized terms which are not defined in this Ninth
Amendment shall have the meaning provided for in the Agreement.
<PAGE>
4. This Ninth Amendment may be signed in counterparts, including
facsimile counterparts, which, when signed by both Buyer and Seller, shall
constitute a binding agreement.
IN WITNESS WHEREOF, the parties have executed this Ninth Amendment as
of the date first written above.
"Buyer" KILROY REALTY, L.P.,
a Delaware limited partnership
By: /s/ Jeffrey C. Hawken
------------------------------------------
Name: Jeffrey C. Hawken
-------------------------------------
Title: E.V.P. and C.O.O.
------------------------------------
"Seller" MISSION SQUARE PARTNERS,
a California general partnership
By: The Betty L. Hutton Title Holding Company,
Inc., (formerly known as the Betty L. Hutton
Company),
its general partner
By:/s/ Thomas C. Parker
---------------------------------------
Name: Thomas C. Parker
----------------------------------
Title: C.E.O.
---------------------------------
By: BB&K Mission Square Partners, a California
general partnership,
its general partner
By:/s/ Christopher L. Carpenter
---------------------------------------
Name: Christopher L. Carpenter
----------------------------------
Title: General Partner
---------------------------------
Acknowledgment by Escrow Holder:
- -------------------------------
First American Title Insurance Company hereby acknowledges the terms
of this Ninth Amendment.
Dated:___________, 1997 FIRST AMERICAN TITLE INSURANCE COMPANY
By:
-------------------------------------------
Its authorized agent
-2-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> SEP-30-1997 SEP-30-1996
<CASH> 74,890 0
<SECURITIES> 0 0
<RECEIVABLES> 4,010 4,670
<ALLOWANCES> (246) (1,628)
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 587,178 227,337
<DEPRECIATION> (117,552) (109,668)
<TOTAL-ASSETS> 572,544 128,339
<CURRENT-LIABILITIES> 0 0
<BONDS> 0 0
0 0
0 0
<COMMON> 245 0
<OTHER-SE> 391,853 128,339
<TOTAL-LIABILITY-AND-EQUITY> 572,544 128,339
<SALES> 0 0
<TOTAL-REVENUES> 45,701 29,701
<CGS> 0 0
<TOTAL-COSTS> 22,310 18,770
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 8,609 16,234
<INCOME-PRETAX> 14,782 (5,303)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 14,782 (5,303)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 3,204 20,095
<CHANGES> 0 0
<NET-INCOME> 15,942<F1> 14,792
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
<FN>
<F1>NET INCOME IS AFTER EQUITY IN INCOME OF UNCONSOLIDATED SUBSIDIARY OF $187
AND MINORITY INTEREST OF ($2,231).
</FN>
</TABLE>
