<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 10-Q
QUARTERLY REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended Commission File Number 001-13243
September 30, 1997
---------------------
PAN PACIFIC RETAIL PROPERTIES, INC.
(Exact Name of Registrant as Specified in its Charter)
Maryland 33-0752457
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1631-B South Melrose Drive 92083
Vista, California (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (760) 727-1002
---------------------
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 11, 1997, 16,814,012 shares of the registrant's Common Stock,
$.01 par value, were outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1: Financial Statements
<PAGE>
PAN PACIFIC RETAIL PROPERTIES, INC. AND
PAN PACIFIC DEVELOPMENT PROPERTIES
CONSOLIDATED AND COMBINED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Pan Pacific
The Company Development Properties
------------- ----------------------
September 30, December 31,
1997 1996
------------- ----------------------
(unaudited)
<S> <C> <C>
ASSETS:
Operating properties, at cost:
Land $115,345 $ 82,792
Buildings and improvements (including related party
development and acquisition fees of $1,235 and $1,182, respectively) 266,028 173,250
Tenant improvements 32,762 32,051
-------- --------
414,135 288,093
Less accumulated depreciation and amortization (31,875) (26,857)
-------- --------
382,260 261,236
Property under development, at cost - 2,781
-------- --------
382,260 264,017
Investments in unconsolidated/uncombined partnerships 10,077 2,502
Cash and cash equivalents 6,268 8,235
Restricted cash 648 697
Accounts receivable (net of allowance for doubtful accounts
of $136 and $72, respectively) 1,607 1,074
Accrued rent receivable (net of allowance for doubtful accounts
of $755 and $666, respectively) 6,796 5,995
Notes receivable 2,990 3,457
Deferred lease commissions (including unamortized related party
amounts of $2,295 and $2,275, respectively, and net of accumulated
amortization of $3,559 and $3,368, respectively) 2,612 2,399
Prepaid expenses 4,310 3,283
Other assets 1,706 1,527
-------- --------
$419,274 $293,186
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' AND OWNER'S EQUITY:
Notes payable $90,945 $192,915
Line of credit payable 13,600 -
Advances from related party - 32,113
Accounts payable (including related party amounts of $41 and $79,
respectively) 1,921 1,279
Accrued expenses and other liabilities (including related party amounts
of $0 and $440, respectively) 3,572 3,532
-------- --------
110,038 229,839
Minority interests 1,475 1,539
Shareholders' equity:
Common stock par value $.01 per share, 100,000,000 authorized shares,
16,814,012 shares issued and outstanding at September 30, 1997 168 -
Paid in capital in excess of par value 397,580 -
Accumulated deficit (89,987) -
-------- --------
307,761 -
Owner's equity - 61,808
-------- --------
$419,274 $293,186
-------- --------
-------- --------
See accompanying notes to consolidated and combined financial statements.
</TABLE>
<PAGE>
PAN PACIFIC RETAIL PROPERTIES, INC. AND
PAN PACIFIC DEVELOPMENT PROPERTIES
CONSOLIDATED AND COMBINED
STATEMENTS OF INCOME (NOTE 1)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
-------------------------- -------------------------
1997 1996 1997 1996
-------- -------- -------- --------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
REVENUE:
Base rent $ 9,699 $ 6,996 $ 25,252 $ 20,317
Percentage rent 60 59 190 183
Recoveries from tenants 2,022 1,560 5,558 4,575
Income from unconsolidated/uncombined
partnerships 102 59 218 116
Other 222 51 718 232
-------- -------- -------- --------
12,105 8,725 31,936 25,423
-------- -------- -------- --------
EXPENSES:
Property operating 1,447 1,204 4,175 3,500
Property taxes 835 600 2,311 1,691
Property management fees 34 24 102 72
Depreciation and amortization 2,210 1,833 6,303 5,784
Interest 3,268 3,669 11,253 10,791
General and administrative 959 707 2,839 2,196
Other expenses, net 74 333 576 1,061
-------- -------- -------- --------
8,827 8,370 27,559 25,095
-------- -------- -------- --------
INCOME BEFORE INCOME TAX
EXPENSE, MINORITY INTERESTS
AND EXTRAORDINARY ITEM 3,278 355 4,377 328
Income tax expense - (50) (65) (135)
Minority interests (49) (20) (106) (22)
-------- -------- -------- --------
INCOME BEFORE
EXTRAORDINARY ITEM 3,229 285 4,206 171
Extraordinary loss on early
extinguishment of debt (1,043) - (1,043) -
-------- -------- -------- --------
NET INCOME $ 2,186 $ 285 $ 3,163 $171
-------- -------- -------- --------
-------- -------- -------- --------
Income before extraordinary
item per share $ 0.19 $ 0.02 $ 0.25 $ 0.01
Net income per share $ 0.13 $ 0.02 $ 0.19 $ 0.01
Weighted average shares outstanding 16,852,662 16,852,662 16,852,662 16,852,662
</TABLE>
See accompanying notes to consolidated and combined financial statements.
<PAGE>
PAN PACIFIC RETAIL PROPERTIES, INC. AND
PAN PACIFIC DEVELOPMENT PROPERTIES
CONSOLIDATED AND COMBINED
STATEMENTS OF CASH FLOWS (NOTE 1)
(IN THOUSANDS)
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30,
-------------------------
1997 1996
--------- --------
(unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,163 $ 171
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 6,303 5,784
Amortization of prepaid financing costs 302 182
Extraordinary loss on early extinguishment of debt 1,043 -
Income from unconsolidated/uncombined partnerships (218) (116)
Minority interests 106 22
Changes in assets and liabilities:
Decrease in restricted cash 49 808
Decrease (increase) in accounts receivable (926) 512
Increase in accrued rent receivable (801) (622)
Increase in deferred lease commissions (628) (990)
Decrease (increase) in prepaid expenses (1,337) 86
Increase in other assets (331) (332)
Decrease in accounts payable (1,184) (1,105)
Increase in accrued expenses and other liabilities 40 665
--------- -------
Net cash provided by operating activities 5,581 5,065
--------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of and additions to operating properties (100,409) (16,794)
Additions to property under development (3,245) (318)
Increase (decrease) in construction accounts payable 1,134 (501)
Contributions to unconsolidated/uncombined partnerships (7,357) -
Distributions from unconsolidated/uncombined partnerships - 216
Acquisitions of notes receivable (4,648) -
Collections of notes receivable 5,351 2,236
--------- -------
Net cash used in investing activities (109,174) (15,161)
--------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes payable proceeds 13,600 10,583
Notes payable payments (122,531) (4,676)
Advances from parent 67,393 4,075
Prepaid financing costs - (330)
Acquisition of minority interest (170) -
Payment of prepayment penalties (1,035) -
Net proceeds from issuance of capital stock 143,976 -
Refunds from loan escrow 393 -
--------- -------
Net cash provided by financing activities 101,626 9,652
--------- -------
NET DECREASE IN CASH AND CASH
EQUIVALENTS (1,967) (444)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 8,235 5,578
--------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,268 $ 5,134
--------- -------
--------- --------
</TABLE>
<PAGE>
PAN PACIFIC RETAIL PROPERTIES, INC. AND
PAN PACIFIC DEVELOPMENT PROPERTIES
CONSOLIDATED AND COMBINED STATEMENTS
OF CASH FLOWS (NOTE 1) (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30,
-------------------------
1997 1996
--------- --------
(unaudited)
<S> <C> <C>
SUPPLEMENTARY DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for mortgage interest (net of amounts capitalized of
$0 and $51, respectively) $ 11,425 $10,786
Income taxes paid $ 13 $ 137
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Transfer from property under development to operating properties $ 5,907 $ 9,327
Transfer from property under development to prepaid
financing costs $ - $ 116
Transfer from property under development to deferred lease
commissions $ 119 $ 197
Notes payable assumed upon acquisition of operating properties $ 19,042 $ -
Wrap-around note receivable and note payable assumed $ 1,519 $ -
Accrual of offering costs $ 692 $ -
Transfer of notes receivable to operating properties through
a deed in lieu of foreclosure $ 1,283 $ -
Reclassification of advances from parent to shareholders' equity $ 99,506 $ -
Interest capitalized $ - $ 304
</TABLE>
See accompanying notes to consolidated and combined financial statements.
<PAGE>
PAN PACIFIC RETAIL PROPERTIES, INC. AND
PAN PACIFIC DEVELOPMENT PROPERTIES
NOTES TO CONSOLIDATED AND
COMBINED FINANCIAL STATEMENTS
As of September 30, 1997 (unaudited) and December 31, 1996,
and for the three and nine months ended September 30, 1997 and 1996 (unaudited)
(Tabular amounts are in thousands)
1. ORGANIZATION AND BASIS OF PRESENTATION
Pan Pacific Realty Corporation was incorporated in the state of Maryland on
April 16, 1997 (inception). Pan Pacific Realty Corporation subsequently
changed its name to Pan Pacific Retail Properties, Inc. (the "Company").
The Company was formed to continue to operate and expand the shopping
center business conducted by Pan Pacific Development (U.S.) Inc. ("PPD"), a
wholly-owned subsidiary of Revenue Properties Company Limited ("Revenue
Properties"), and its subsidiaries related to the ownership of its
neighborhood and community shopping centers, its medical office building
and leasing and management activities of its portfolio ("Pan Pacific
Development Properties"). All of the accounts of PPD unrelated to these
activities have been excluded from these consolidated and combined
financial statements. The shopping center portfolio is comprised of
approximately 4,000,000 square feet and is located primarily in the western
region of the United States. The Company intends to qualify and be taxed
as a real estate investment trust ("REIT") under Sections 856 through 860
of the Internal Revenue Code commencing with its taxable year ending
December 31, 1997.
On August 13, 1997, the Company completed an initial public offering of
8,050,000 shares of common stock at $19.50 per share (including 1,050,000
shares issued as a result of the full exercise of the over-allotment option
by the underwriters on September 8, 1997) (the "Offering"). The aggregate
proceeds to the Company, net of underwriters' discount, advisory fee and
offering costs were approximately $143,284,000.
The following transactions occurred simultaneously with the completion of
the Offering (collectively, the "Formation Transactions"):
- Certain properties were transferred by PPD entities to the Company and
certain PPD entities were merged with and into the Company.
- PPD contributed cash of $26,486,000 to the Company (the "PPD
Contribution").
- The Company obtained a $150,000,000 unsecured credit facility (the
"Unsecured Credit Facility") which is expected to be used to finance
additional shopping center acquisitions and for other corporate
purposes.
- A portion of the estimated net proceeds of the Offering and the PPD
Contribution were used by the Company to repay indebtedness of the
Company and to pay transaction costs, including fees and expenses
associated with the Unsecured Credit Facility.
The transfer of certain properties and the merger of certain PPD entities
with and into the Company was accounted for as a combination of
affiliated entities under common control in a manner similar to a
pooling-of-interests. Under this method, the assets and liabilities were
carried over at their historical book values and their operations have
been recorded on a combined historical basis. The pooling-of-interests
method of accounting also requires the reporting of results of
operations, for the period in which the combination occurred, as though
the entities had been combined as of either the beginning of the period
or inception. Accordingly, the results of operations for the three- and
nine-month periods ended September 30, 1997 comprise those of the
combined entities from August 13, 1997 through September 30, 1997. Prior
to the combination, the Company had no significant operations; therefore,
the combined operations for the periods prior August 13, 1997 represent
primarily the operations of Pan Pacific Development Properties. The
combination did not require any material adjustments to conform to
accounting policies of the separate entities.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) PRINCIPLES OF CONSOLIDATION AND COMBINATION
The consolidated and combined financial statements include the accounts of
the Company and Pan Pacific Development Properties (Note 1). All material
intercompany transactions and balances have been eliminated. At September
30, 1997, the Company consolidated Chino Town Square of which the Company's
ownership interest is 91.5%. The Company has recorded a minority interest
for the portion not owned by the Company. In August 1997, the Company
acquired the 10% minority interest in Tanasbourne Village.
(b) CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, highly liquid investments with an
original maturity of three months or less are considered cash equivalents.
<PAGE>
PAN PACIFIC RETAIL PROPERTIES, INC. AND
PAN PACIFIC DEVELOPMENT PROPERTIES
NOTES TO CONSOLIDATED AND
COMBINED FINANCIAL STATEMENTS
As of September 30, 1997 (unaudited) and December 31, 1996,
and for the three and nine months ended September 30, 1997 and 1996 (unaudited)
(Tabular amounts are in thousands)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(c) INCOME RECOGNITION
Rental revenue is recognized on a straight-line basis over the terms of the
leases, less a general allowance for doubtful accounts relating to accrued
rent receivable for leases which may be terminated before the end of the
contracted term.
(d) CAPITALIZATION OF COSTS
The Company capitalizes direct carrying costs such as interest, property
taxes and other related costs to property under development.
(e) DEPRECIATION AND AMORTIZATION
Depreciation on buildings and improvements is provided using a forty-year
straight-line basis. Tenant improvements and costs incurred in obtaining
leases are depreciated on a straight-line basis over the lives of the
respective leases.
Prepaid loan fees are amortized over the lives of the loans and the related
amortization expense is included as a component of interest expense.
(f) IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
The Company reviews long-lived assets and certain identifiable intangibles
for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying
amount of an asset to future net cash flows, undiscounted and without
interest, expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceed the fair value
of the assets. Assets to be disposed of are reported at the lower of the
carrying amount or fair value less costs to sell.
(g) INCOME TAXES
The Company intends to elect to be taxed as a REIT under Sections 856
through 860 of the Internal Revenue Code commencing with its taxable period
ending December 31, 1997. As a result, the Company will generally not be
subject to federal income tax on its taxable income at corporate rates to
the extent it distributes annually its taxable income to its shareholders
and complies with certain other requirements. Accordingly, subsequent to
the Offering, no provision has been made for federal income taxes in the
accompanying financial statements.
(h) CREDIT RISK
The Company predominantly operates in one industry segment, real estate
ownership, management and development. No single tenant accounts for 10%
or more of revenue. Financial instruments which potentially subject the
Company to concentrations of credit risk consist principally of temporary
cash investments and receivables. The Company places its temporary cash
investments with financial institutions which the Company believes are of
high credit quality. Concentration of credit risk with respect to
receivables is limited due to the large number of tenants comprising the
Company's customer base, and their dispersion across many geographical
areas. At September 30, 1997 and December 31, 1996, the Company had no
significant concentration of credit risk.
(i) NET INCOME PER SHARE
Net income per share is computed based on the weighted average number of
common and common equivalent shares outstanding. When dilutive, stock
options are included as share equivalents using the treasury stock method.
The weighted average number of common shares outstanding is assumed to be
16,852,662 for all periods presented.
<PAGE>
PAN PACIFIC RETAIL PROPERTIES, INC. AND
PAN PACIFIC DEVELOPMENT PROPERTIES
NOTES TO CONSOLIDATED AND
COMBINED FINANCIAL STATEMENTS
As of September 30, 1997 (unaudited) and December 31, 1996,
and for the three and nine months ended September 30, 1997 and 1996 (unaudited)
(Tabular amounts are in thousands)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(j) STOCK OPTION PLAN
The Company accounts for its stock option plan in accordance with the
provisions of Accounting Principles Board ("APB") Opinion No. 25,
ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and related interpretations. As
such, compensation expense is recorded on the date of grant only if the
current market price of the underlying stock exceeds the exercise price.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 ("SFAS No. 123"), ACCOUNTING FOR
STOCK-BASED COMPENSATION, which permits entities to recognize as expense
over the vesting period the fair value of all stock-based awards on the
date of grant. Alternatively, SFAS No. 123 allows entities to continue to
apply the provisions of APB Opinion No. 25 and provide pro forma net income
and pro forma earnings per share disclosures for employee stock option
grants made as if the fair-value-based method defined in SFAS No. 123 had
been applied. The Company has elected to continue to apply the provisions
of APB Opinion No. 25 and provide the annual pro forma disclosures required
by SFAS No. 123.
(k) USE OF ESTIMATES
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements
and the reporting of revenue and expenses during the reporting period to
prepare these financial statements in conformity with generally accepted
accounting principles. Actual results could differ from those estimates.
(l) UNAUDITED INTERIM CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
The financial statements as of September 30, 1997 and for the three and
nine months ended September 30, 1997 and 1996 are unaudited. In the
opinion of management, such financial statements reflect all adjustments
necessary for a fair presentation of the results of the respective interim
periods. All such adjustments are of a normal, recurring nature.
3. PROPERTY UNDER DEVELOPMENT
At December 31, 1996, property under development included the construction
of Laguna Village Phase II, a shopping center located in Sacramento,
California consisting of approximately 60,000 square feet. Land included
in property under development was $1,342,323 at December 31, 1996.
Laguna Village Phase II was substantially completed and transferred from
property under development to operating properties during the third quarter
of 1997. At September 30, 1997, there remained a commitment of
approximately $2,700,000 to be paid related to the construction of Laguna
Village Phase II, of which approximately $645,000 has not been completed.
Of the remaining commitment, approximately $1,100,000 is the responsibility
of PPD and approximately $1,600,000 is the responsibility of the Company.
4. NOTES PAYABLE AND LINE OF CREDIT
Future principal payments due on notes payable as of September 30, 1997,
are shown in the table below:
October 1 through December 31, 1997 $ 261
1998 1,088
1999 1,179
2000 27,145
2001 665
2002 and subsequent 60,607
--------
$ 90,945
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--------
<PAGE>
PAN PACIFIC RETAIL PROPERTIES, INC. AND
PAN PACIFIC DEVELOPMENT PROPERTIES
NOTES TO CONSOLIDATED AND
COMBINED FINANCIAL STATEMENTS
As of September 30, 1997 (unaudited) and December 31, 1996,
and for the three and nine months ended September 30, 1997 and 1996 (unaudited)
(Tabular amounts are in thousands)
4. NOTES PAYABLE AND LINE OF CREDIT (CONTINUED)
The notes payable have fixed interest rates ranging from 7.75% to 8.52%,
with a weighted average interest rate of 8.11%.
As part of the Formation Transactions, $134,217,000 of notes payable were
repaid. In connection with the early pay off of these notes, an
extraordinary item of $1,043,000 was recorded which includes prepayment
penalties, unamortized prepaid financing costs and unamortized loan
premium.
The Company also has a $150,000,000 unsecured credit facility which bears
interest at LIBOR plus 1.50% and expires in August 2000. At September 30,
1997, the amount drawn on this line of credit was $13,600,000 and the
interest rate was 7.19%. The credit facility also currently requires a
quarterly fee of .25% per annum on the unused amount of the available
commitment.
5. INVESTMENTS IN UNCONSOLIDATED/UNCOMBINED PARTNERSHIPS
The accompanying financial statements include investments in two
partnerships in which the Company does not own a controlling interest. The
Company owns 50% general partner interests in Melrose Village Plaza and
North Coast Health Center. These investments are reported using the equity
method.
Summarized combined financial information for the partnerships is presented
below:
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(unaudited)
Properties $ 19,446 $ 19,706
Other assets 828 806
-------- --------
Total assets $ 20,274 $ 20,512
-------- --------
-------- --------
Notes payable $ - $ 15,100
Other liabilities 396 568
Equity 19,878 4,844
-------- --------
$ 20,274 $ 20,512
-------- --------
-------- --------
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- -------------------------
1997 1996 1997 1996
----------- ------------ ------------- ----------
(unaudited) (unaudited)
Revenue $ 1,002 $ 976 $ 3,052 $ 3,008
Expenses 798 920 2,650 2,796
------- --------- ------- -------
Net income $ 204 $ 56 $ 402 $ 212
------- --------- ------- -------
------- --------- ------- -------
6. FUTURE LEASE REVENUE
Total future minimum lease receipts under noncancellable operating tenant
leases in effect at September 30, 1997 are as follows:
October 1 through December 31, 1997 $ 10,260
1998 40,917
1999 38,349
2000 35,225
2001 30,765
2002 and subsequent 129,862
--------
$285,378
--------
--------
<PAGE>
PAN PACIFIC RETAIL PROPERTIES, INC.
AND PAN PACIFIC DEVELOPMENT PROPERTIES
NOTES TO CONSOLIDATED AND
COMBINED FINANCIAL STATEMENTS
As of September 30, 1997 (unaudited) and December 31, 1996,
and for the three and nine months ended September 30, 1997 and 1996 (unaudited)
(Tabular amounts are in thousands)
7. STOCK OPTION AND INCENTIVE PLAN
In 1997, the Company established the 1997 Stock Option and Incentive Plan
(the "Plan") pursuant to which the Company's Board of Directors may grant
stock options to officers, directors and key employees. At the time of
the Offering, the Company issued to certain officers, directors and key
employees, 900,000 common stock options pursuant to the Plan. The stock
options were granted with an exercise price of $19.50, equal to the stock's
fair market value at the date of grant. The stock options have seven year
terms and will vest 33 1/3% per year over three years from the date of
grant, except the independent directors who received non-qualified options
that vested 33 1/3% immediately, with the remainder vesting ratably over two
years. In addition, 130,000 shares of common stock were awarded to certain
individuals in the Company. The stock awards will vest 33 1/3% per year
over three years from the date of award. An additional 720,000 shares of
common stock have been reserved for issuance under the Plan. No other
options or awards have been granted. As such, at September 30, 1997, there
were 900,000 common stock options outstanding, 10,000 of which were
exercisable and none had expired or were forfeited.
8. RELATED PARTY TRANSACTIONS
(a) Included in general and administrative expenses are management fees
totaling $481,000 and $585,000 for the nine months ended September 30, 1997
and 1996, respectively, which are a reimbursement by Pan Pacific
Development Properties of costs incurred by Revenue Properties for managing
the development of the properties, directing corporate strategy, and
consulting on operations. Effective August 13, 1997, at the closing of the
Offering, these fees are no longer being incurred by the Company.
(b) Pan Pacific Development Properties paid a consulting fee of $315,000 for
each of the nine months ended September 30, 1997 and 1996, respectively,
to a sole proprietorship owned by a director of Revenue Properties.
Effective August 13, 1997, at the closing of the Offering, these fees are
no longer being incurred by the Company.
(c) Pan Pacific Development Properties incurred $529,000 and $1,409,000 for the
nine months ended September 30, 1997 and 1996, respectively, for loan
guaranty fees charged by Revenue Properties. These fees are recorded as a
component of other expenses, net. Effective August 13, 1997, at the closing
of the Offering, these fees are no longer being incurred by the Company.
(d) Pursuant to the Offering, the Company issued shares of common stock in lieu
of repayment of net advances from Revenue Properties of $99,506,000 for the
nine months ending September 30, 1997. The Company received net advances
from Revenue Properties of $4,075,000 for the nine months ended September
30, 1996.
9. COMMITMENTS AND CONTINGENCIES
(a) The Company leases certain real estate and office equipment under operating
leases expiring at various dates through 2002. Rental expense was $468,793
and $463,514 for the nine months ended September 30, 1997 and 1996,
respectively.
(b) Various claims and legal proceedings arise in the ordinary course of
business. The ultimate amount of liability from all claims and actions
cannot be determined with certainty, but in the opinion of management, the
ultimate liability from all pending and threatened legal claims will not
materially affect the consolidated and combined financial statements taken
as a whole.
10. SUBSEQUENT EVENTS
(a) On September 25, 1997, the Company entered into purchase and sale
agreements to acquire three shopping centers located in the state of
Washington. This includes Clairmont Village in Everett, a 93,501 square
foot neighborhood center, Olympia West Center in Olympia, a 69,212 square
foot promotional center and Tacoma Central in Tacoma, a 134,867 net square
foot community center. The aggregate purchase price is approximately
$41,600,000. The acquisition is expected to close in November 1997.
(b) On June 30, 1997, the Company entered into a letter of intent to purchase
Stanford Ranch Crossing, a 189,834 square foot community shopping center
located in the Sacramento, California metropolitan area as was disclosed in
the Company's Offering prospectus. On September 17, 1997, the Company
entered into a contingent purchase and sale agreement for this proposed
transaction. On October 14, 1997, the Company canceled the purchase and
sale agreement thereby terminating any material obligations it had with
respect to this proposed acquisition.
<PAGE>
PAN PACIFIC RETAIL PROPERTIES, INC.
AND PAN PACIFIC DEVELOPMENT PROPERTIES
NOTES TO CONSOLIDATED AND
COMBINED FINANCIAL STATEMENTS
As of September 30, 1997 (unaudited) and December 31, 1996,
and for the three and nine months ended September 30, 1997 and 1996 (unaudited)
(Tabular amounts are in thousands)
10. SUBSEQUENT EVENTS (CONTINUED)
(c) On October 6, 1997, the Board of Directors of the Company declared the
first dividend of $0.2128 per share to be paid October 31, 1997 to
shareholders of record on October 22, 1997. The dividend was for the
prorated period from August 8, 1997 (the initial date of share trading) to
September 30, 1997.
11. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED AND COMBINED FINANCIAL
INFORMATION
The accompanying unaudited pro forma information for the three and nine
months ended September 30, 1997 are presented as if the Formation
Transactions (including the acquisition of Chico Crossroads, Monterey
Plaza, Fairmont Shopping Center, Lakewood Shopping Center, Green Valley
Town & Country and secured notes receivable), the Offering described in
Note 1 to the financial statements and the repayment of notes payable
pursuant to the Offering had all occurred on January 1, 1997. Such pro
forma information is based upon the historical financial statements of the
Company and Pan Pacific Development Properties and should be read in
connection with the financial statements and the notes thereto.
This unaudited pro forma condensed information does not purport to
represent what the actual results of operations of the Company would have
been assuming such transactions had been completed as set forth above, nor
do they purport to predict the results of operations for future periods.
Pro Forma Condensed Income Statement
(in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1997
------------------ ------------------
(unaudited) (unaudited)
<S> <C> <C>
Total revenue $ 12,272 $35,607
Income before extraordinary item $ 4,627 $12,314
Net income $ 4,627 $11,271
Income per share of common stock
and common stock equivalents before
extraordinary item $ .27 $ .73
Net income per share of common stock
and common stock equivalents $ .27 $ .67
Weighted average number of shares of
common stock outstanding 16,852,662 16,852,662
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The following discussion should be read in connection with the
consolidated and combined financial statements of Pan Pacific Retail
Properties, Inc. and Pan Pacific Development Properties (collectively, the
"Company"), and the notes thereto, appearing elsewhere in this report.
The Company receives income primarily from rental revenue (including
recoveries from tenants) from shopping center properties. As a result of the
Company's acquisition and development program, the financial data shows
increases in total revenue from period to period, largely attributable to the
acquisitions and property placed into operation during the period and the
benefit of a full period of rental and other revenue for property acquired or
placed into operation in the preceding period.
The Company believes that overhead costs will decrease as a percentage of
revenue as the Company achieves economies of scale through increases in its
portfolio's revenue base. For example, during the first nine months of 1997,
the Company owned properties comprising a weighted average gross leasable area
("GLA") of 3,374,927 square feet. Total expenses, excluding interest,
depreciation and amortization for the nine months ended September 30, 1997 were
$10,003,000 or an annualized $3.95 per square foot. By comparison, during the
first nine months of 1996, the Company owned properties comprising a weighted
average GLA of 2,857,394 square feet. Total expenses, excluding interest,
depreciation and amortization, for the nine months ended September 30, 1996 were
$8,520,000 or an annualized $3.98 per square foot.
The Company expects that the more significant part of its revenue growth in
the next several years will come from additional acquisitions and contractual
rent increases rather than from occupancy increases.
RESULTS OF OPERATIONS
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1997 TO NINE MONTHS ENDED
SEPTEMBER 30, 1996.
Total revenue increased by $6,513,000 or 25.6% to $31,936,000 for the nine
months ended September 30, 1997 as compared to $25,423,000 for the nine months
ended September 30, 1996.
Rental revenue increased by $4,942,000 or 24.1% to $25,442,000 from
$20,500,000 for the nine months ended September 30, 1997, compared to the nine
months ended September 30, 1996. The increase in rental revenue resulted
principally from the acquisition of Chico Crossroads in February 1997, Monterey
Plaza in April 1997, Fairmont Shopping Center in May 1997, Lakewood Shopping
Center in June 1997, Green Valley Town & Country in August 1997 and Rainbow
Promenade in September 1997. In addition, the inclusion in operations of Laguna
Village Phase I in May 1996 and Phase II in the third quarter of 1997 added to
this increase. Rental revenue also increased as a result of increased occupancy
levels, primarily at Canyon Ridge Plaza and Sahara Pavilion North.
Recoveries from tenants increased by $983,000 or 21.5% to $5,558,000 for
the nine months ended September 30, 1997, compared to $4,575,000, for the nine
months ended September 30, 1996. This increase resulted primarily from the
acquisition of Chico Crossroads, Monterey Plaza, Fairmont Shopping Center,
Lakewood Shopping Center, and Green Valley Town & Country in 1997. In addition,
1997 included a full period of recoveries for Laguna Village Phase I.
Recoveries from tenants were 85.7% of property operating expenses and property
taxes for the nine months ended September 30, 1997 as compared to 88.1% of the
same expenses for the same period in 1996. This percentage has decreased as a
result of the impact of leases in place at properties acquired in 1997. The
Company expects this percentage to increase over time as new leases are
initiated by Company management.
<PAGE>
Property expenses include property operating expenses, property taxes and
property management fees. For the nine months ended September 30, 1997 and 1996,
property operating expenses were $4,175,000 and $3,500,000, respectively. The
increase in property operating expenses was primarily attributable to the
properties acquired, noted above, during the nine months ended September 30,
1997. In addition, 1997 included a full period of property operating expenses
for Laguna Village Phase I. Property taxes increased by $620,000 or 36.7% for
the nine months ended September 30, 1997, compared to the nine months ended
September 30, 1996. The increase in property taxes was primarily the result of
the completion of Laguna Village Phase I in 1996 and the acquisitions of Chico
Crossroads, Monterey Plaza, Fairmont Shopping Center, Lakewood Shopping Center
and Green Valley Town & Country in 1997.
Depreciation and amortization for the nine months ended September 30, 1997
increased by $519,000 or 9.0% to $6,303,000 from $5,784,000 for the nine months
ended September 30, 1996. This was primarily due to the May 1996 completion of
Laguna Village Phase I and the acquisitions mentioned above which have occurred
in 1997.
Interest expense increased by approximately $462,000 or 4.3% for the nine
months ended September 30, 1997, compared to the nine months ended September 30,
1996, primarily as a result of debt assumed pursuant to the acquisition of
Monterey Plaza, the interest expense associated with the new unsecured credit
facility, the net impact of the December 1996 refinancing of variable rate debt
and construction loan interest related to development of Laguna Village Phase I.
This increase was partially offset by decreased interest expense relating to the
repayment of debt of approximately $134,000,000 which was paid off in mid August
1997 in connection with the Offering.
General and administrative expenses amounted to $2,839,000 for the nine
months ended September 30, 1997, as compared to $2,196,000 for the nine months
ended September 30, 1996, an increase of $643,000 or 29.3%. This increase was
primarily attributable to annual salary increases and costs associated with
additional staff necessitated by the acquisitions discussed above. There was
also a decrease in capitalized internal leasing costs. Expenses for tax and
audit services were also increased as a result of new public reporting
requirements. These increases were partially offset by a decrease in the
management fee paid to Revenue Properties as that fee is no longer being charged
effective with the consummation of the initial public offering. As a percentage
of total revenue, general and administrative expenses were 8.9% and 8.6% for the
nine months ended September 30, 1997 and 1996, respectively. The Company
expects that general and administrative expenses will decrease as a percentage
of total revenue in subsequent periods due to economies of scale which the
Company anticipates should be realized as additional properties are acquired.
Other expenses, net, consist primarily of loan guaranty fees and the
expensing of due diligence costs. Other expenses for the nine months ended
September 30, 1997 amounted to $576,000, a decrease of $485,000 when compared to
$1,061,000 for the nine months ended September 30, 1996. The decrease occurred
primarily due to a decrease in loan guaranty fees which are no longer being
incurred as the debt which was guaranteed was paid off in August 1997 in
connection with the initial public offering. This decrease was partially offset
by the expensing of due diligence costs related to the possible acquisition of a
company which was not consummated.
As part of the Formation Transactions, $134,217,000 of notes payable were
repaid. In connection with the early pay off of these notes, an extraordinary
item of $1,043,000 was recorded which includes prepayment penalties, unamortized
prepaid financing costs and unamortized loan premium.
<PAGE>
The following table compares the operating data for the properties ("Same
Store Properties") that were owned and in operation for both the nine months
ended September 30, 1997 and September 30, 1996:
1997 1996
------------ ------------
Revenue:
Rental $ 21,121,000 $ 20,500,000
Recoveries from tenants 4,842,000 4,575,000
Income from unconsolidated/
uncombined partnerships 218,000 116,000
Other 385,000 232,000
------------ ------------
$ 26,566,000 $ 25,423,000
Expenses:
Property operating, property
taxes and property
management fees 5,562,000 5,263,000
------------ ------------
Operating income $ 21,004,000 $ 20,160,000
------------ ------------
------------ ------------
Operating income for the Same Store Properties for the nine months ended
September 30, 1997 increased over the same period in the prior year by $844,000.
This increase was attributable to increased rental revenue due to increased
occupancy levels primarily at Canyon Ridge Plaza, Cheyenne Commons, Sahara
Pavilion North and Tanasbourne Village. In addition, there were approximately
$90,000 of lease termination fees received at Canyon Ridge Plaza and Sahara
Pavilion North in 1997. Property operating expenses for these Same Store
Properties increased by $299,000 for the nine months ended September 30, 1997,
over the same period in the prior year due primarily to increased property tax
expense and center enhancement costs such as painting, new awnings, signage and
landscaping at Cheyenne Commons as well as increased bad debt expense at Sunset
Square.
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1997 TO THE THREE MONTHS
ENDED SEPTEMBER 30, 1996.
Total revenue increased by $3,380,000 or 38.7% to $12,105,000 for the three
months ended September 30, 1997, as compared to $8,725,000 for the three months
ended September 30, 1996.
Rental revenue increased $2,704,000 or 38.3% to $9,759,000 for the three
months ended September 30, 1997, as compared to $7,055,000 for the three months
ended September 30, 1996. The increase in rental revenue resulted primarily
from the acquisitions of Chico Crossroads in February 1997, Monterey Plaza in
April 1997, Fairmont Shopping Center in May 1997, Lakewood Shopping Center in
June 1997, Green Valley Town & Country in August 1997 and Rainbow Promenade in
September 1997. In addition, the increase was a result of the inclusion in
operations of Laguna Village Phase II in the third quarter of 1997.
Recoveries from tenants increased to $2,022,000 for the three months ended
September 30, 1997, an increase of $462,000 or 29.6%, as compared to $1,560,000
for the three months ended September 30, 1996. This increase resulted
principally from recoveries from tenants of Chico Crossroads, Monterey Plaza,
Fairmont Shopping Center, Lakewood Shopping Center and Green Valley Town &
Country. Recoveries from tenants were 88.6% of property operating expenses and
property taxes for the three months ended September 30, 1997 as compared to
86.5% of the same expenses for the same period in 1996.
Property expenses include property operating expenses, property taxes and
property management fees. Property operating expenses for the three months
ended September 30, 1997 increased to $1,447,000, an increase of $243,000 or
20.2%, from $1,204,000 for the three months ended September 30, 1996. This
increase was primarily attributable to the acquisitions of Chico Crossroads,
Monterey Plaza, Fairmont Shopping Center, Lakewood Shopping Center and Green
Valley Town & Country. Property taxes increased by $235,000 or 39.2% to
$835,000 for the three months ended September 30, 1997, compared to $600,000 for
the three months ended
<PAGE>
September 30, 1996. The increase in property taxes was primarily the result of
the acquisitions of Chico Crossroads, Monterey Plaza, Fairmont Shopping Center,
Lakewood Shopping Center and Green Valley Town & Country in 1997.
Depreciation and amortization increased by $377,000 or 20.6% to $2,210,000
from $1,833,000 primarily due to the effect of the properties acquired or placed
into operation, as noted above.
Interest expense for the three months ended September 30, 1997 decreased
by $401,000 or 10.9% to $3,268,000, as compared to $3,669,000 for the three
months ended September 30, 1996, primarily as a result of interest on debt of
approximately $134,000,000 which was paid off in August 1997 in connection
with the Offering. This decrease was partially offset by interest expense
incurred on debt assumed prior to the Offering pursuant to the acquisition of
Monterey Plaza, the commencement of operations at Laguna Village Phase I and
the net impact of the December 1996 refinancing of variable rate debt.
General and administrative expenses increased by $252,000 or 35.6% for the
three months ended September 30, 1997, compared to the three months ended
September 30, 1996, primarily due to annual salary increases and costs
associated with additional staff necessitated by the acquisitions discussed
above. There was also a decrease in capitalized internal leasing costs.
Expenses for tax and audit services were also increased as a result of new
public reporting requirements. These increases were partially offset by a
decrease in the management fee paid to Revenue Properties as that fee is no
longer being charged effective with the consummation of the initial public
offering. As a percentage of total revenue, general and administrative expenses
were 7.9% and 8.1% for the three months ended September 30, 1997 and 1996,
respectively. The Company expects that general and administrative expenses will
continue to decrease as a percentage of total revenue in subsequent periods due
to economies of scale which the Company anticipates should be realized as
additional properties are acquired.
Other expenses, net, consist primarily of loan guaranty fees. Other
expenses, net, amounted to $74,000 for the three months ended September 30,
1997, a decrease of $259,000 when compared to other expenses, net, of $333,000
for the three months ended September 30, 1996. The decrease resulted from a
decrease in loan guaranty fees which are no longer being incurred as the debt
which was guaranteed was paid off in August 1997 in connection with the initial
public offering.
The following table compares the operating data for the Same Store
Properties that were owned and in operation for both the three months ended
September 30, 1997 and September 30, 1996:
1997 1996
------------ ------------
Revenue:
Rental $ 7,257,000 $ 7,055,000
Recoveries from tenants 1,654,000 1,560,000
Income from unconsolidated/uncombined
partnerships 102,000 59,000
Other 48,000 51,000
------------ ------------
9,061,000 8,725,000
Expenses:
Property operating, property taxes
and property management fees 1,812,000 1,828,000
------------ ------------
Operating income $ 7,249,000 $ 6,897,000
------------ ------------
------------ ------------
<PAGE>
Operating income for the Same Store Properties for the three months ended
September 30, 1997 increased over the three months ended September 30, 1996 by
$352,000. This increase was primarily attributable to increased rental revenue
due to increased occupancies at Canyon Ridge Plaza, Chino Town Square, Sahara
Pavilion North and Tanasbourne Village. There was also an increase in
recoveries from tenants at Cheyenne Commons and Olympia Square due to increased
common area maintenance expenditures and at Sahara Pavilion North due to
increased occupancy. In addition, income from the unconsolidated/uncombined
partnerships increased due to a reduction in interest expense related to the
debt which was paid off at the Offering. These increases were offset by a
decrease in operating expenses for these Same Store Properties of $16,000 for
the three months ended September 30, 1997 as compared to the prior year
primarily due to decreased bad debt expense at Chino Town Square and decreased
legal costs at Tanasbourne Village.
FUNDS FROM OPERATIONS
The White Paper on Funds from Operations approved by the Board of Governors
of the National Association of Real Estate Investment Trusts ("NAREIT") in March
1995 (the "White Paper") defines Funds from Operations as net income (loss)
(computed in accordance with GAAP), excluding gains (or losses) from debt
restructuring and sales of property, plus real estate related depreciation and
amortization and after adjustments for unconsolidated partnerships and joint
ventures. Management considers Funds from Operations an appropriate measure of
performance of an equity REIT because it is predicated on cash flow analyses.
The Company computes Funds from Operations in accordance with standards
established by the White Paper. The Company's computation of Funds from
Operations may, however, differ from methodology for calculating funds from
Operations utilized by other equity REITs and, therefore, may not be comparable
to such other REITs. Funds from Operations should not be considered as an
alternative to net income (determined in accordance with GAAP) as a measure of
the Company's liquidity, nor is it indicative of funds available to fund the
Company's cash needs, including its ability to make distributions.
The following table presents the Company's Pro Forma Funds from Operations for
the three and nine months ended September 30, 1997 (see footnote 11 to the
consolidated and combined financial statements located elsewhere in this
report):
FOR THE FOR THE
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1997
------------------ ------------------
Net income $ 4,627,000 $ 11,271,000
Add:
Extraordinary item - 1,043,000
Depreciation and amortization 2,246,000 6,859,000
Depreciation on unconsolidated/
uncombined partnerships 51,000 154,000
Depreciation on non-real estate
corporate assets (49,000) (152,000)
----------- ------------
Funds from Operations 6,875,000 19,175,000
----------- ------------
----------- ------------
Number of shares of common
stock deemed outstanding 16,814,012 16,814,012
<PAGE>
CASH FLOWS
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1997 TO THE NINE MONTHS
ENDED SEPTEMBER, 1996.
Net cash provided by operating activities increased by $516,000 to
$5,581,000 for the nine months ended September 30, 1997, as compared to
$5,065,000 for the nine months ended September 30, 1996. The increase was
primarily the result of an increase in net income partially offset by increases
in accounts receivable and prepaid expenses.
Net cash used in investing activities increased by $94,013,000 to
$109,174,000 for the nine months ended September 30, 1997, compared to
$15,161,000 for the nine months ended September 30, 1996. The increase was
primarily the result of additions to properties for the acquisitions of Chico
Crossroads, Monterey Plaza, Fairmont Shopping Center, Lakewood Shopping Center,
Green Valley Town & Country and Rainbow Promenade. The increase was also
attributable to additions to property under development, contributions to
unconsolidated partnerships and the acquisition of notes receivable, offset by
collections of notes receivable. In the comparable period in 1996, the use of
cash for investing activities was primarily for the purpose of acquiring the
remaining ownership interests in Laurentian Center.
Net cash provided by financing activities increased by $91,974,000 to
$101,626,000 for the nine months ended September 30, 1997, compared to
$9,652,000 for the nine months ended September 30, 1996. The increase resulted
from the net proceeds received from the Offering including the full exercise of
the underwriter's over-allotment option and increases in advances from Revenue
Properties for the acquisitions noted above. These increases were partially
offset by notes payable payments reflecting the paydown of a significant amount
of portfolio debt in connection with the Offering.
LIQUIDITY AND CAPITAL RESOURCES
The Company believes the Offering and the Formation Transactions that
were completed in August 1997 improved its financial position through changes
to its capital structure, principally the substantial reduction in its
overall debt and its debt-to-equity ratio. In connection with the Formation
Transactions, the Company repaid all of its existing floating rate mortgage
debt. As a result, the total principal amount of outstanding secured debt
after the Formation Transactions and the acquisition of Green Valley Town &
Country was reduced by approximately $146,000,000. This will result in a
significant reduction in interest expense as a percentage of total revenue
(18.0% on a pro forma basis as compared to 35.2% for the actual nine months
ended September 30, 1997). Thus, cash from operations required to fund debt
service requirements will decrease substantially.
The total market capitalization of the Company, based on the market
closing price at September 30, 1997 of $20.375 per share, and the debt
outstanding at September 30, 1997 was approximately $447,100,000 including
total debt of approximately $104,500,000 (exclusive of accounts payable and
accrued expenses). As a result, the Company's debt to total market
capitalization ratio was approximately 23.4%. The Company believes that its
low leverage capital structure combined with its Unsecured Credit Facility
enhances the Company's ability to take advantage of acquisition opportunities
as well as to provide funds for general corporate purposes.
The Company has approximately $136,400,000 available under the
$150,000,000 Unsecured Credit Facility. The initial borrowing under the
credit facility of $13,600,000 occurred when the Rainbow Promenade asset was
acquired on September 9, 1997 for approximately $31,300,000. The balance of
the purchase price was funded with available cash provided by operations and
the net proceeds from the full exercise of the underwriter's over-allotment
option. Borrowings under the Unsecured Credit Facility bear interest at
LIBOR plus 1.5%, which at September 30, 1997 was 7.19%. The Company
anticipates that the Unsecured Credit Facility will continue to be used
primarily to acquire additional properties and for general corporate purposes.
<PAGE>
The Company's mortgage indebtedness outstanding at September 30, 1997
requires balloon payments of $26,438,000, $4,004,000 and $52,748,000 in 2000,
2004 and 2007, respectively. It is likely that the Company will not have
sufficient funds on hand to repay these balloon amounts at maturity. Therefore,
the Company expects to refinance such debt either through additional debt
financings secured by individual properties or groups of properties, by
unsecured private or public debt offerings or by additional equity offerings.
The Company expects to make distributions from cash available for
distributions, which the Company believes will exceed historical cash available
for distributions due to the reduction in debt service resulting from the
repayment of indebtedness, described above. Amounts accumulated for
distribution will be invested by the Company primarily in short-term investments
such as collateralized securities of the United States government or its
agencies, high-grade commercial paper and bank deposits or will be used to pay
down outstanding balances on the Unsecured Credit Facility, if any. On October
6, 1997, the Board of Directors of the Company declared the first dividend of
$0.2128 per share to be paid October 31, 1997 to shareholders of record on
October 22, 1997. The dividend was for the prorated period from August 8, 1997
to September 30, 1997.
The Company expects to meet its short-term liquidity requirements generally
through its current working capital and net cash provided by operations. The
Company believes that its net cash provided by operations will be sufficient to
allow the Company to make the distributions necessary to enable the Company to
continue to qualify as a REIT. The Company also believes that the foregoing
sources of liquidity will be sufficient to fund its short-term liquidity needs
for the foreseeable future.
The Company expects to meet certain long-term liquidity requirements such
as property acquisition and development, scheduled debt maturities, renovations,
expansions and other non-recurring capital improvements through long-term
secured and unsecured indebtedness and the issuance of additional equity or debt
securities. The Company also expects to use funds available under the Unsecured
Credit Facility to finance acquisition and development activities and capital
improvements on an interim basis.
INFLATION
Substantially all of the leases provide for the recovery of real estate
taxes and operating expenses incurred by the Company. In addition, many of the
leases provide for fixed base rent increases or indexed escalations (based on
the consumer price index or other measures) and percentage rent. The Company
believes that inflationary increases in expenses will be substantially offset by
the expense reimbursements, contractual rent increases and percentage rent
described above.
The Unsecured Credit Facility bears interest at a variable rate, which will
be influenced by changes in short-term interest rates, and will be sensitive to
inflation.
IMPACT OF ACCOUNTING PRONOUNCEMENTS ISSUED BUT NOT ADOPTED BY THE COMPANY
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS No.
128"), which establishes standards for computing and presenting earnings per
share ("EPS") and applies to entities with publicly held common stock. SFAS No.
128 simplifies the standards for computing earnings per share previously found
in APB Opinion No. 15, "Earnings Per Share," and makes them comparable to
international EPS standards. It replaces the presentation of primary EPS with a
presentation of basic EPS.
In February 1997, Statement of Financial Accounting Standards No. 129,
"Disclosure of Information about Capital Structure" ("SFAS No. 129"), was
issued. This statement establishes standards for disclosing information about
an entity's capital structure and is effective for periods ending after December
15, 1997.
<PAGE>
In June 1997, Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS No. 130"), was issued and is effective
for fiscal years beginning after December 15, 1997. This statement requires
companies to classify items of other comprehensive income by their nature in an
income statement and display the accumulated balance of other comprehensive
income separately from retained earnings and additional paid-in capital in the
equity section of a statement of financial position.
In June 1997, Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS No.
131"), was issued and is effective for fiscal years beginning after December 15,
1997. This statement establishes standards for segment reporting in the
financial statements.
The Company anticipates that the adoption of SFAS Nos. 128, 129, 130 and
131 will not result in disclosures that will be materially different from those
presently require.
PART II - OTHER INFORMATION
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT NO. DESCRIPTION
----------- -----------
3.1 Articles of Amendment and Restatement of the Company (previously
filed as Exhibit 3.1 to the Company's Registration Statement on
Form S-11 (Registration No. 333-28715) and incorporated herein by
reference)
3.2 Amended and Restated Bylaws of the Company (previously filed as
Exhibit 3.2 to the Company's Registration Statement on Form S-11
(Registration No. 333-28715) and incorporated herein by
reference)
4.1 Form of Certificate of Common Stock (previously filed as Exhibit
4.1 to the Company's Registration Statement on Form S-11
(Registration No. 333-28715) and incorporated herein by
reference)
10.1 The 1997 Stock Option and Incentive Plan of Pan Pacific Retail
Properties, Inc. (previously filed as Exhibit 10.1 to the
Company's Registration Statement on Form S-11 (Registration
No. 333-28715) and incorporated herein by reference)
10.2 Form of Officers and Directors Indemnification Agreement
(previously filed as Exhibit 10.2 to the Company's Registration
Statement on Form S-11 (Registration No. 333-28715) and
incorporated herein by reference)
10.3 Form of Employment Agreement between the Company and
Mr. Stuart A. Tanz (previously filed as Exhibit 10.3 to the
Company's Registration Statement on Form S-11 (Registration
No. 333-28715) and incorporated herein by reference)
10.4 Form of Employment Agreement between the Company and
Mr. David L. Adlard (previously filed as Exhibit 10.4 to the
Company's Registration Statement on Form S-11 (Registration
No. 333-28715) and incorporated herein by reference)
10.5 Form of Employment Agreement between the Company and
Mr. Jeffrey S. Stauffer (previously filed as Exhibit 10.5 to the
Company's Registration Statement on Form S-11 (Registration
No. 333-28715) and incorporated herein by reference)
10.6 Form of Miscellaneous Rights Agreement (previously filed as
Exhibit 10.6 to the Company's Registration Statement on Form S-11
(Registration No. 333-28715) and incorporated herein by reference)
10.7 Form of Non-Competition Agreement (previously filed as
Exhibit 10.7 to the Company's Registration Statement on Form S-11
(Registration No. 333-28715) and incorporated herein by reference)
10.8 Purchase and Sale Agreement for Rainbow Promenade (previously
filed as Exhibit 10.9 to the Company's filing of Form 10-Q for the
quarter ended June 30, 1997 and incorporated herein by reference)
<PAGE>
10.9 Purchase and Sale Agreement for Claremont Village Shopping Center
10.10 Purchase and Sale Agreement for Olympia West Plaza Shopping
Center
10.11 Purchase and Sale Agreement for Tacoma Central Shopping Center
27. Financial Data Schedule (electronically filed with the Securities
and Exchange Commission only)
(b) Reports on Form 8-K
A Form 8-K was filed on September 23, 1997 for purposes of
reporting the acquisition of the Rainbow Promenade Shopping
Center that occurred on September 9, 1997. No financial
statements or pro forma financial information was filed as
it was impracticable to do so at the time. An amended 8-K
which will include financial statements and pro forma financial
information will be filed on or before November 21, 1997.
<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 11, 1997.
PAN PACIFIC RETAIL PROPERTIES, INC.
By: /s/ Stuart A. Tanz
Stuart A. Tanz
President and Chief Executive Officer
By : /s/ David L. Adlard
David L. Adlard
Executive Vice President and
Chief Financial Officer
By : /s/ Laurie A. Sneve
Laurie A. Sneve, CPA
Vice President and Controller
<PAGE>
PURCHASE AND SALE AGREEMENT
September 24, 1997
Subject to the terms and conditions contained herein, PAN PACIFIC RETAIL
PROPERTIES, INC., a Maryland corporation ("Buyer"), agrees to purchase, and
MGMAB LIMITED PARTNERSHIP, a Washington limited partnership ("Seller"),
agrees to sell the following, all of which are collectively referred to as
the "Property":
A. All of Seller's right, title and interest in and to that certain
real property commonly known as Claremont Village Shopping Center, legally
described on Exhibit A hereto; and all of the Seller's right, title and
interest in and to all rights, privileges, improvements and easements
appurtenant to said real property;
B. All leased equipment, signs and fixtures, if any, and all personal
property owned by Seller which is located on or in or used exclusively in
connection with the Property (the "Personal Property"); and
C. All intangible personal property now or hereafter owned by Seller
and used in the ownership, use or operation of the Property, including,
without limitation, the Seller's interest in and to all tenant leases,
subleases and tenancies, any service contracts and other agreements, records
relating to the Property and rights relating to the ownership, use and
operation of the Property, and all of Seller's right, title and interest in
trade names, trademarks, and service marks, if any, designating or describing
the Property.
The terms and conditions of the sale are as follows:
1. PURCHASE PRICE AND TERMS. The purchase price for the Property shall
be TEN MILLION SEVEN HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS
($10,750,000.00), and shall be paid as follows:
(a) The Buyer shall pay Seller the entire purchase price in cash or
immediately available funds, including the earnest money deposit earmarked
for this transaction, at Closing.
(b) PRICE ADJUSTMENT. The purchase price is based on the
assumption that three leases will be signed by Seller with new tenants of a
quality and financial standing commensurate with existing tenants of the
Property prior to Closing for a term of at least five (5) years at an average
rental rate (including free rent and rent escalations) of not less than
$11.00 per square foot for the 11,817 square foot space,
Real Estate Purchase and Sale Agreement - 1
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and for terms of at least three (3) years at average rental rates of $12.00
per square foot for the 1,302 square foot space and the 1,296 square foot
space. All costs associated with the leases including, but not limited to
improvements, tenant improvements, advertising and leasing commissions, shall
be paid by Seller. Any such lease shall not be entered into by Seller except
with the written consent of Buyer, which consent shall not be unreasonably
withheld or delayed. If any of these new leases is for an average rental
rate other than as specified above, the purchase price of the property shall
be increased or decreased accordingly on the basis of the following
calculation. The annual rent for the space will be calculated on the basis
of the rental rates specified above. Any difference between this annual rent
and the actual average annual rent agreed to by the new tenant will be
multiplied by a factor of ten, and if the actual average rental rate is
greater than the rental rate specified above, this product will be added to
the purchase price, and if the actual average rental rate is less than the
rental rate specified above, the product will be deducted from the purchase
price. If any of the new leases has not been entered into by Closing, the
purchase price shall be adjusted as provided in paragraph 1(c) below.
(c) EXECUTION OF LEASE. In the event that Seller has not leased
either or both of the other two currently vacant spaces by Closing, the
purchase price shall be reduced as follows: the 1,302 square foot space --
$25,000 if vacant, and the 1,296 square foot space -- $5,000 if vacant.
Further, Seller shall enter into a lease between Seller, as tenant, and
Buyer, as landlord, at Closing, for the unleased space. The lease will be
for a term of one (1) year at the rental rate specified for the space in
paragraph 1(b) above. The lease shall provide that if, within one (1) year
after Closing, the space is leased by Buyer or Seller to a new tenant on the
same lease terms as those provided in paragraph 1(b) of this Agreement, or on
other terms acceptable to Buyer, the lease between Buyer and Seller shall
terminate as of the effective date of the new lease. The lease between Buyer
and Seller shall also provide that as consideration for the purchase price
reduction all of the costs of leasing the space to a new tenant which are
allocated to Seller under paragraph 1(b) shall be paid for and shall instead
be the obligation of Buyer with respect to any lease of said space entered
into with a new tenant after Closing.
2. EARNEST MONEY DEPOSIT.
(a) INITIAL DEPOSIT. As a condition of Mutual Acceptance (as defined
in paragraph 5(e) below), Buyer shall deposit the sum of TWO HUNDRED FIFTY
THOUSAND AND NO/100
Real Estate Purchase and Sale Agreement - 2
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DOLLARS ($250,000.00) with First American Title Insurance Company, 13010 N.E.
20th Street, #A, Bellevue, WA 98005 (the "Closing Agent"), with instructions
to First American to deposit the funds into an insured interest bearing trust
account. Of this deposit, $62,500.00 shall be earmarked and held by the
Closing Agent as the initial earnest money deposit for this transaction, and
the balance of the deposit shall be earmarked as the earnest money deposit
for the purchases of the Other Properties (as defined below). All accrued
interest shall be credited at Closing to Buyer, whose social security or tax
I.D. number is ________________________. If this transaction fails to close,
the interest shall be paid to the same party entitled to be paid the earnest
money. If Buyer does not give Seller the Notice of Waiver of Certain
Contingencies and make the Additional Deposit with the Closing Agent within
the time and in the manner provided for in paragraphs 2(b) and 5(d), this
Agreement shall be deemed terminated, the entire earnest money deposit shall
be returned to Buyer, and Buyer and Seller shall have no further obligations
hereunder.
(b) ADDITIONAL DEPOSIT. If Buyer gives Seller the Notice of Waiver
of Certain Contingencies, Buyer shall simultaneously deposit an additional
$750,000 with the Closing Agent in immediately available funds as an
additional earnest money deposit. The entire $1,000,000 deposited with the
Closing Agent shall thereafter be held as an earnest money deposit, which
shall be credited to Buyer, with interest at Closing. Except as otherwise
provided in paragraphs 3, 4, 5 and 6 of this Agreement, if this transaction
does not close thereafter, the earnest money deposit shall be disbursed by
the Closing Agent as provided in paragraph 21.
(c) EARMARKING. When the $1,000,000 mentioned in paragraph 2(b)
has been deposited as earnest money, the sum of $250,000.00 shall be
earmarked and held by the Closing Agent as the earnest money deposit for this
transaction, and the balance of the funds shall be earmarked as the earnest
money for the purchase of the Other Properties (as defined in paragraph 5(e)).
3. NO FINANCING CONTINGENCY. Buyer's obligation to close is not
conditioned upon Buyer obtaining financing for any portion of the purchase
price.
4. TITLE REVIEW. Within ten (10) calendar days of the date of Mutual
Acceptance, Seller shall deliver or cause to be delivered to Buyer, an ALTA
preliminary commitment for title insurance issued by First American Title
Insurance Company on the Property and copies of all of the documents noted as
title exceptions in the commitment. Buyer shall have twenty (20) calendar
days after the receipt of the commitment within which to notify Seller in
writing of Buyer's disapproval of any of the exceptions, encumbrances or
defects shown in the commit-
Real Estate Purchase and Sale Agreement - 3
<PAGE>
ment. Failure of Buyer to provide written notice of disapproval of any
encumbrances or defects within the aforementioned time limit shall be deemed
notice of approval.
If Buyer objects to any exceptions, Seller shall, within ten (10)
calendar days after receipt of Buyer's objections, deliver to Buyer written
notice that either (a) Seller will, at Seller's expense, attempt to remove
the exceptions to which Buyer has objected before the Closing Date or (b)
Seller is unwilling or unable to eliminate said exceptions. If Seller fails
to so notify Buyer or is unwilling or unable to remove any such exception by
the Closing Date, Buyer may elect to terminate this Agreement and receive
back the entire earnest money, in which event Buyer and Seller shall have no
further obligations under this Agreement; or, alternatively, Buyer may elect
to purchase the Property subject to such exceptions.
5. INSPECTION CONTINGENCIES. Buyer's obligation to purchase the
Property is conditioned and contingent upon Buyer's satisfaction with the
following:
(a) BOOKS, RECORDS AND AGREEMENTS. Seller agrees to provide Buyer
with the items listed below for Buyer's review and evaluation as soon as
practicable after Mutual Acceptance:
(i) All rental agreements, leases, and all subleases,
assignments, amendments and modifications thereto, and all service contracts,
warranties, and other written agreements or notices which relate to the
Property;
(ii) Annual operating statements of the Property for the most
recent three (3) full calendar years, as well as tenants' sales reports in
Seller's possession or available to Seller and common area maintenance costs
and collections for the same period;
(iii) Copies of all CC&R's affecting the Property;
(iv) A complete and current rent roll, including a schedule of
all tenant deposits and fees;
(v) The tax bills and assessment notices for the most recent
tax year;
(vi) Copies of all Certificates of Occupancy that are in
Seller's possession;
(vii) Copies of any surveys, environmental audits, soil
studies, engineering studies, "as-built" plans, permits, and any and all
other reports pertaining to the land
Real Estate Purchase and Sale Agreement - 4
<PAGE>
or buildings constructed on the Property in Seller's possession; and
(viii) Copies of any Tenant financial statements within
Seller's possession.
(ix) A schedule of all personal property;
(x) Copies of Seller's certificate of limited partnership and a
good standing certificate;
(xi) A schedule of filed, threatened, or potential litigation
regarding the Property; and
(xii) An aged receivables report for payments owed by Tenants
and the leases current as of the date of Mutual Acceptance.
After the commencement of the Inspection Period (as defined below), Buyer
may request copies of any other reports, studies or other documents relating
to the Property which are in Seller's possession or reasonably available to
Seller at little or no cost. Upon such request, Seller shall promptly
provide Buyer with copies of the requested documents or permit Buyer access
to Seller's records so as to review and copy the documents.
(b) PHYSICAL INSPECTION. During the Inspection Period Seller shall
permit Buyer or its agents, at Buyer's sole expense and risk, to enter upon
the Property, as reasonably necessary and subject to the rights of tenants,
to make inspections and investigations concerning the structural condition of
the improvements, all mechanical, electrical and plumbing systems, hazardous
materials (limited to a Phase I audit only without further consent of Seller,
which consent shall not be unreasonably withheld or delayed), pest
infestation, soils conditions, the roof and other matters pertaining to the
condition of the Property. Buyer shall comply with all laws and regulations,
including, without limitation, obtaining any necessary permits for any
inspection of the Property. Any damage to the Property made by Buyer or any
authorized person acting for or on behalf of Buyer shall be promptly repaired
by Buyer, and Buyer shall put the Property back in the same condition as
before the inspection or entry. Buyer agrees to indemnify and hold Seller
harmless from all liens, costs, and expenses, including attorney's and
expert's fees, arising from or relating to Buyer's entry onto and inspection
of the Property.
(c) FEASIBILITY. During the Inspection Period, Buyer, or its agents,
may investigate whether any federal, state or local laws which may apply to the
Property, such as the Americans with Disabilities Act or laws or regulations
Real Estate Purchase and Sale Agreement - 5
<PAGE>
regarding sensitive areas, zoning, building codes, energy codes, energy
conservation and the like affect the feasibility of the Property for Buyer's
intended use, and shall be provided reasonable access to the Property and to
Seller's records regarding the Property for purposes of this review.
(d) INSPECTION PERIOD. Seller shall use best efforts to provide
Buyer with all documents and things specified in paragraphs 5(a)(i)-(xii) as
soon as reasonably practicable after Mutual Acceptance. Buyer shall have
forty-five (45) calendar days following receipt of all documents and things
specified in paragraphs 5(a)(i)-(xii) within which to investigate all of the
documents, things and conditions specified in paragraphs 5(a), (b) and (c),
or any other matter pertaining to the Property which may be of concern to
Buyer (the "Inspection Period"). If Buyer decides to waive the contingencies
set forth in paragraphs 5(a), (b) and (c) and intends to close the purchase
and sale of the Property as specified in this Agreement, Buyer shall indicate
its decision to do so by giving Seller written notice (the Notice of Waiver
of Certain Contingencies) and simultaneously depositing the additional
earnest money deposit with the Closing Agent as provided in paragraph 2(b) on
or before the last day of the Inspection Period. If Buyer fails to either
give Seller the Notice of Waiver of Certain Contingencies or to deposit the
additional earnest money deposit with the Closing Agent within the time
specified, this Agreement shall be deemed terminated, Buyer's entire earnest
money deposit shall be returned to Buyer, and Buyer and Seller shall have no
further obligations hereunder.
(e) INSPECTION OF OTHER PROPERTIES. At the same time as this
Agreement is signed, Buyer will be entering into purchase and sale agreements
to purchase Olympia West Plaza Shopping Center in Thurston County,
Washington, and Tacoma Central Shopping Center in Pierce County, Washington,
collectively, the "Other Properties." Mutual Acceptance of this Agreement
will occur only when:
(i) Seller and Buyer have signed this Agreement;
(ii) Buyer has entered into written agreements with regard to
the purchase and sale of the Other Properties;
(iii) Buyer has deposited the initial earnest money deposit
with the Closing Agent as provided in paragraph 2(a) hereof. Each of the
purchase and sale agreements for the Other Properties will also have an
inspection period of forty-five (45) calendar days which will commence when
the seller of each of the Other Properties has delivered documents such as
those described in paragraph 5(a) hereof to Buyer. If
Real Estate Purchase and Sale Agreement - 6
<PAGE>
those documents are delivered by the respective sellers on a date after the
date Seller has delivered its documents under paragraph 5(a) of this
Agreement, the Inspection Period under this Agreement shall be extended by
the same number of days. Furthermore, Closing under this Agreement is
contingent upon Buyer waiving all contingencies under the purchase and sale
agreements for the Other Properties within the Inspection Period under this
Agreement, as it may be extended.
6. ADDITIONAL CONDITIONS TO CLOSING.
(a) TENANT ESTOPPEL CERTIFICATES. Buyer's obligation to purchase
the Property is conditioned upon Seller obtaining and delivering to Buyer at
or before Closing estoppel certificates from each tenant at the Property
occupying more than 3,000 square feet of space and seventy-five percent (75%)
of all other Tenants occupying space on the Property. The estoppel
certificates shall state:
(i) The date of commencement and the scheduled date of
termination of the Lease;
(ii) The amount of advance rentals or rent deposits paid to
the Seller;
(iii) The amount of monthly (or other periodic) rent paid to
Seller;
(iv) That the Lease is in full force and effect and that
there have been no modifications or amendments thereto, or, if there have
been any modifications, subleases, assignments or amendments, an explanation
of the same;
(v) Square footage (if set forth in the Lease); and
(vi) That there is no default under the terms of the Lease by
Lessor or Lessee.
In the event such estoppel certificates are not delivered to Buyer prior
to Closing, Buyer may terminate this Agreement, in which event all earnest
money, additional earnest money and accrued interest shall be paid to Buyer,
and Buyer and Seller shall have no further obligations under this Agreement.
(b) SIMULTANEOUS CLOSINGS. Both parties' obligations to close this
transaction are conditioned upon the closing of this transaction and the
closing of the purchase and sale of both of the Other Properties by Buyer
occurring simultaneously. If for any reason the purchase of either of the
Other Properties by Buyer does not close on the Closing Date specified
herein, this transaction shall not close. If the other transaction did not
close because of the fault of
Real Estate Purchase and Sale Agreement - 7
<PAGE>
either Buyer or Seller, the other party shall have all of its remedies under
this Agreement as a non-defaulting party. If the other transaction does not
close for any reason other than the fault of Buyer or the default of Seller,
this transaction shall terminate, Buyer's entire earnest money deposit shall
be returned to Buyer, and Buyer and Seller shall have no further obligations
hereunder.
7. CLOSING. First American Title Insurance Company, as Closing Agent,
shall conduct the Closing of the transaction. Immediately upon Mutual
Acceptance, the parties hereto shall deposit with the Closing Agent this
Agreement, and the earnest money deposit and within a reasonable time prior
to Closing shall deposit such instruments and funds as are necessary to close
the escrow and consummate the purchase and sale of the Property in the manner
set forth in this Agreement. "Date of Closing," "Closing Date" or "Closing"
shall mean the date upon which the deeds and documents given hereunder are
filed of record and the sale proceeds are available to Seller, and shall be
no more than fifteen (15) calendar days after the last day of the Inspection
Period, but in any event no later than December 1, 1997, assuming
substantially all documents and things specified in paragraphs 5(a)(i)-(xii)
are delivered to Buyer on or before September 26, 1997. Time is of the
essence in the performance of this Agreement.
8. COSTS AND PRORATIONS. The Seller shall be responsible for the
payment in full at Closing of any monetary encumbrances not to be assumed by
Buyer. Ad valorem real estate taxes and personal property taxes for the year
of Closing, rents, maintenance and service agreements, insurance, interest,
lender's tax and insurance reserves, water and other utilities, and all other
operating costs and revenues shall be prorated as of the Date of Closing.
Special assessment liens which are not recoverable from tenants shall be paid
by Seller at Closing. Buyer and Seller shall each pay one-half (1/2) of the
escrow fees. Seller shall pay the excise tax charged in connection with the
conveyance of the Property, together with the recording fee of any deed.
Buyer shall pay any use tax due in connection with the purchase of personal
property. Seller shall deliver to Buyer at Closing all deposits and prepaid
rent made under any leases assumed by Buyer.
9. RENT AND CAM.
(a) RENT AND CAM COLLECTION. Rents and common area maintenance
charges ("CAM charges") actually collected prior to Closing will be prorated as
of Closing. Any rents, taxes and CAM charges owed by tenants for any period
prior to Closing and unpaid at Closing shall remain the property of Seller,
provided, however, that except as provided in paragraph 9(b), Buyer shall
diligently attempt to collect such arrears for Seller's account for a period of
sixty (60) days
Real Estate Purchase and Sale Agreement - 8
<PAGE>
after Closing. Buyer shall not be required to terminate a tenancy or evict a
tenant in order to collect rent owed to Seller. Rent, taxes and CAM charges
collected by Buyer after Closing from tenants who were in arrears on their
pre-closing obligations shall be applied first to payments owed to the Seller
for the pre-closing period, and the remainder paid to the Buyer.
(b) PERCENTAGE RENT. As soon after December 31, 1997 as possible
under the terms of the leases in question, Buyer and Seller shall calculate
the total percentage rent due for 1997 from tenants at the Property.
Percentage rent due in 1997 shall be prorated between Buyer and Seller on the
basis of the number of days in 1997 that each party owned the Property.
Within fifteen (15) days after collection of the 1997 percentage rent, Buyer
shall pay Seller its prorata share, taking into account any percentage rent
already paid to Seller for 1997.
(c) CAM RECONCILIATION. If it is not possible to accurately
reconcile CAM expenses for the Property and CAM collections from tenants at
the Property as of the Closing Date, Seller will prepare a good faith
estimated reconciliation as of Closing, and the parties will close on that
basis. The parties will thereafter prepare a final post-Closing
reconciliation of CAM expenses and collections as soon after Closing as
practicable. The amount by which CAM collections exceed CAM expenses for the
period prior to Closing shall be paid to Buyer, and the amount by which CAM
expenses exceed CAM collections for such period shall be paid to Seller. Any
payments due from Buyer or Seller as a result of the post-Closing
reconciliation shall be paid within fifteen (15) days of the reconciliation.
10. OPERATIONS; POSSESSION. Subject to paragraph 15 hereof, Seller
shall deliver the Property in substantially the same condition at Closing as
it was in at the time the inspection contingencies in paragraph 5 were
removed, ordinary wear and tear excepted. During the Inspection Period and
prior to Closing, Seller shall not enter into or modify any leases or
agreements affecting the Property without Buyer's written consent, which
consent shall not be unreasonably withheld or delayed. Buyer shall be
entitled to possession of the Property on the Date of Closing, subject to
existing tenancies.
11. TITLE INSURANCE AND TITLE. At Closing Seller shall pay for and
deliver to Buyer an ALTA standard form owner's policy of title insurance
naming Buyer as the insured, issued by First American Title Insurance Company
in an amount equal to the purchase price and containing no exceptions or
encumbrances other than those approved by Buyer pursuant to paragraph 4 and
this paragraph 11. If Buyer wishes to obtain extended coverage, Buyer shall
pay any additional premium for such extended coverage, and shall also pay the
cost of any
Real Estate Purchase and Sale Agreement - 9
<PAGE>
survey which may be required by the title insurance company as a condition of
such coverage. At Closing Seller shall convey to Buyer good, marketable
title to the Property, free of all liens, encumbrances or defects except as
expressly approved or accepted by Buyer pursuant to paragraph 4 and this
paragraph 11. Title shall be conveyed by statutory warranty deed.
12. PERSONAL PROPERTY. This offer includes all appliances, furniture,
fixtures, and equipment now on the Property owned by Seller and used in the
operation of the Property, as well as all plans, permits, certificates,
studies and similar documents and rights in Seller's possession or available
to Seller at little or no cost. Title to the personal property shall be
transferred by bill of sale in the form attached hereto as Exhibit B, free
and clear of encumbrances except those approved by Buyer in paragraph 4 or
paragraph 11. Buyer and Seller shall attempt to agree as to that portion of
the Purchase Price attributable to the value of such personal property as of
the Closing Date, and if they are unable to agree, the value of the personal
property shall be the personal property tax assessment value.
13. ASSUMPTION OF LEASES AND CONTRACTS. At Closing, Buyer shall assume
all of Seller's obligations under the terms of each lease, contract and
agreement which Buyer was given copies of under the terms of subparagraph
5(a) above, by executing the Assumption Agreement attached hereto as Exhibit
C.
14. FIRPTA-TAX WITHHOLDING. If Seller is not a "foreign person" within
the meaning of the Foreign Investment in Real Property Tax Act, Seller agrees
to sign a certification to this effect at Closing. If Seller is a foreign
person and this transaction is not otherwise exempt from FIRPTA, the Closing
Agent shall withhold from the sales proceeds the required amount and pay it
to the Internal Revenue Service.
15. RISK OF LOSS. In the event of material loss of or damage to the
Property, or a portion thereof, prior to the Closing Date through casualty,
taking by eminent domain or otherwise, Buyer may terminate this Agreement and
all Escrow Deposits shall be refunded, or Buyer may elect to purchase the
Property in the condition existing at the Date of Closing. If Buyer elects
to purchase the Property, Seller shall assign to Buyer at Closing all
insurance proceeds and awards payable on account of the loss or damage as
Buyer's sole compensation for the loss or damage. Seller shall not in any
event be liable to restore the Property.
16. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby represents
and warrants to and covenants with Buyer as
Real Estate Purchase and Sale Agreement - 10
<PAGE>
follows, which representations and warranties shall survive Closing:
(a) ORGANIZATION. Seller is duly organized and validly existing
and in good standing under the laws of the State of Washington;
(b) OWNERSHIP. Seller is the legal and equitable owner of the
Property, with full right to convey the same, and Seller has not granted any
option or right of first refusal or first opportunity to any party to acquire
any interest in any of the Property;
(c) BINDING OBLIGATIONS. This Agreement and all documents executed
by Seller which are to be delivered to Buyer at Closing are, and at the time
of Closing will be, legal, valid and binding obligations of Seller
enforceable against Seller in accordance with their respective terms; will be
sufficient to convey title; and will not violate any provisions of any
agreement or judicial order to which Seller or the Property is subject.
(d) HAZARDOUS SUBSTANCES. Except for substances stored, used or
disposed of in the normal course of business in accordance with all
applicable laws, regulations and ordinances, and except as disclosed to Buyer
in writing by Seller prior to the end of the Inspection Period, Seller has no
knowledge of (i) the presence, now or at any prior time, of any hazardous
substances located on the Property; (ii) the presence, now or at any prior
time, of any underground tank or vault on the Property; (iii) the use of the
Property for storage of oils, petroleum byproducts or other hazardous
materials; (iv) spills of any hazardous substance on the Property or from any
adjacent property onto the Property; (v) the use of asbestos or other
hazardous substances in the construction of any improvements located on the
Property; or (vi) any notice of any violation or claimed violation of any
law, rule or regulation relating to hazardous substances. As used herein,
"Seller's knowledge" means the actual knowledge of the officers of Seller's
general partners and Seller's property manager for the Property, Susan Benton.
"Hazardous substances" shall mean and include any chemical, compound,
material, mixture, waste, or substance that is now or hereafter defined or
listed in, or otherwise classified pursuant to, any environmental laws as a
"hazardous substance," "hazardous material," "hazardous waste," "extremely
hazardous waste," "infectious waste," "toxic substance," "toxic pollutant" or
any other formulation intended to define, list, or classify substances by reason
of deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, or toxicity including any petroleum, natural gas, natural gas
liquids, liquefied natural gas, or synthetic gas
Real Estate Purchase and Sale Agreement - 11
<PAGE>
usable for fuel (or mixture of natural gas and such synthetic gas).
"Hazardous substances" shall include, without limitation, any hazardous or
toxic substance, material or waste or any chemical, compound, or mixture
which is (i) asbestos, (ii) motor oil, gasoline, petroleum, or any petroleum
by-product, (iii) designated as a "hazardous substance" pursuant to Section
1317 of the Federal Water Pollution Control Act (33 U.S.C. Section 1251, ET
SEQ.), (iv) defined as a "hazardous waste" pursuant to Section 6903 of the
Federal Resource Conservation and Recovery Act, (42 U.S.C. Section 6901, ET
SEQ., (v) defined as "hazardous substances" pursuant to Section 9601 of the
Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. Section 9601, ET SEQ.,), or (vi) listed in the United States
Department of Transportation Table (49 CFR 172.101) or by the Environmental
Protection Agency as hazardous substances (40 CFR part 302); or in any and
all amendments thereto in effect as of the Closing Date; or such chemicals,
compounds, mixtures, substances, materials or wastes otherwise regulated
under any applicable local, state or federal environmental laws.
(e) DISCLAIMER. Seller makes no representations or warranties
regarding the Property or this transaction except as may be expressly set
forth in this Agreement. Seller shall not in any way be liable for or with
respect to the condition of the personal property, the Property or any
building, structures, or improvements thereon, their compliance with any
applicable building, zoning, land use or fire laws or regulations, or the
suitability of the Property for Buyer's intended use or for any use
whatsoever. Except as otherwise provided in this Agreement, Buyer is
purchasing the Property and the personal property "AS IS" and assumes the
responsibility and risks of all defects and conditions, including such
defects and conditions, if any, that cannot be observed by casual inspection.
Buyer has had or will have the opportunity prior to Closing to inspect the
Property and the personal property and will be relying entirely thereon and
on any consultant Buyer may retain.
(f) GOVERNMENTAL COMPLIANCE. Except as otherwise disclosed to
Buyer in writing, to Seller's knowledge (as defined in paragraph 16(d)
above), without any duty to investigate further, the Property and its current
use comply with all laws, rules and regulations related to sensitive areas,
zoning, building codes, energy codes, and energy conservation rules and
regulations. Seller has not received any written notices and neither the
officers of Seller's general partners nor Susan Benton, Seller's property
manager, have received any oral notices that the Property or its current use
are in violation of the Americans with Disabilities Act, or other federal,
state or local laws which apply to the Property or its use, other than
violations which have been cured.
Real Estate Purchase and Sale Agreement - 12
<PAGE>
17. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby represents
and warrants to and covenants with Seller as follows, which representations
and warranties shall survive Closing:
(a) ORGANIZATION. Buyer is duly organized and validly existing and
in good standing under the laws of the state of its incorporation and is duly
authorized to transact business in the State of Washington;
(b) BINDING OBLIGATIONS. This Agreement and all documents executed
by Buyer which are to be delivered to Seller at Closing are, and at the time
of Closing will be, legal, valid and binding obligations of Buyer enforceable
against Buyer in accordance with their respective terms; and will not violate
any provisions of any agreement or judicial order to which Buyer is subject.
18. AGENCY DISCLOSURE. At the signing of this Agreement, Terranomics
Retail Services represented Seller only, and Buyer was not represented by a
real estate broker. Each party signing this Agreement confirms that prior
oral and/or written disclosure of agency and a copy of the pamphlet "The Law
of Real Estate Agency" was provided to it in this transaction. Seller has
agreed to pay Terranomics a commission of $215,000.00 pursuant to the terms
of a separate agreement and it shall be Seller's sole responsibility to pay
the commission.
19. ASSIGNMENT. Buyer may not assign this Agreement, or Buyer's rights
hereunder, without Seller's prior written consent, which consent shall not be
unreasonably withheld. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their permitted successors and assigns.
20. LIKE-KIND EXCHANGE. Either party may elect to sell/buy the Property
as part of a like-kind exchange under IRC Section 1031, by giving written
notice to the other party at least twenty (20) days prior to the Closing
Date, provided that: The non-exchanging party shall not incur any costs or
additional obligations as a result of the exchange; the exchange shall not
increase or decrease the amounts to be paid or received under the terms of
this Agreement; the closing on the exchange property shall occur
contemporaneously with the Closing provided for in this Agreement; and the
electing party shall indemnify and hold the other party harmless from any and
all liabilities, claims, losses or actions, including attorney's fees, which
the other party incurs or to which it may be exposed as a result of its
participation in the contemplated exchange. This Agreement is not subject to
or contingent upon the electing party's ability to effectuate an exchange.
In the event any desired exchange should fail to occur, for what-
Real Estate Purchase and Sale Agreement - 13
<PAGE>
ever reason, the sale of the Property shall nonetheless be consummated as
provided herein.
21. DEFAULT. In the event the Buyer fails, without legal excuse, to
complete purchase of the Property, the entire $1,000,000 earnest money
deposit made by Buyer shall be forfeited to the Seller as the sole and
exclusive remedy available to the Seller for such failure. The failure of
this transaction to close because of Buyer's breach of its agreement to
purchase one of the Other Properties shall be a breach of this Agreement.
The parties understand and acknowledge that the Seller shall not have any
other remedies which would otherwise be available to Seller at law or in
equity as a result of such failure of the Buyer, and that the amount
forfeited will be paid to Seller regardless of whether the Seller incurs any
actual damages.
22. DEFAULT BY SELLER. After the Conditions are timely waived or
satisfied, if Seller neglects or refuses to timely close this transaction,
then Buyer (in Buyer's sole discretion) shall be entitled to the immediate
return of the earnest money deposit, additional earnest money deposit, and
all accrued interest, and shall also have the following options:
(a) Buyer may seek damages;
(b) Buyer may terminate this Agreement, and this Agreement will
become null, void, and of no further force or effect;
(c) Buyer may seek specific performance of this Agreement; or
(d) Buyer may seek any other remedy provided under applicable law.
The remedies given to Buyer are not exclusive but shall be cumulative with
and in addition to all remedies now or hereafter, at law or equity.
23. NOTICES. Any communication, notice, or demand of any kind
whatsoever that either party may be required or may desire to give to or
serve upon the other shall be in writing, addressed to the parties at the
addresses set forth below, and delivered by personal service, by Federal
Express or other reputable overnight delivery service, by facsimile
transmission, or by registered or certified mail, postage prepaid, return
receipt requested. Any such notice shall be deemed delivered as follows:
(a) if personally delivered, the date of delivery to the address of the
person to receive such notice; (b) if sent by Federal Express or other
reputable overnight delivery service, the date of delivery to the address of
the person to receive such notice; (c) if sent by facsimile transmission, on
the Business Day transmitted to the person to receive such notice; or (d) if
mailed, three (3)
Real Estate Purchase and Sale Agreement - 14
<PAGE>
calendar days after depositing same in the mail. Any notice sent by
facsimile transmission must be confirmed by personally delivering or mailing
a copy of the notice sent by facsimile transmission. Any party may change
its address for notice by written notice given to the other.
24. NO WAIVER. No waiver of any of the provisions of this Agreement shall
be deemed, or shall constitute, a waiver of any other provision, whether or not
similar, nor shall any waiver constitute a continuing waiver. No waiver shall
be binding unless executed in writing by the party making the waiver.
25. FURTHER ACTS. Each party, at the request of the other, shall execute,
acknowledge (if appropriate), and deliver whatever additional documents, and do
such other additional acts, as may be reasonably required in order to accomplish
the intent and purposes of this Agreement.
26. APPLICABLE LAW; ATTORNEYS' FEES. This Agreement shall be governed
by the laws of the State of Washington and any question arising hereunder
shall be construed and determined according to such laws. In the event of
any controversy, claim or dispute between the parties hereto, arising out of
or relating to this Agreement or the breach hereof, including without
limitation any litigation or arbitration through all appeals, the prevailing
party shall be entitled to recover its reasonable expenses, costs and
attorneys' fees from the non-prevailing party.
27. ENTIRE AGREEMENT; ADDENDA. There are no oral or other agreements,
including but not limited to any representations or warranties, which modify
or affect this Agreement. This Agreement embodies the entire agreement
between the parties and supersedes all prior agreements and understandings,
if any, relating to the Property. This Agreement may be amended or
supplemented only by an agreement in writing executed by both parties to this
Agreement.
28. SURVIVAL OF WARRANTIES. All warranties, representations,
disclaimers, acknowledgments, covenants, rights and obligations contained
herein shall survive the recordation of the deed and the Closing of escrow.
29. DELIVERY OF DOCUMENTS TO SELLER. In the event that this transaction
does not close for any reason, Buyer shall return to Seller all of the
documents which Seller has delivered to Buyer for its review and evaluation
as part of its due diligence. Buyer shall also deliver to Seller, at no cost
to Seller, copies of all consultants' and experts' reports which Buyer has
obtained relating to the Property.
30. CONFIDENTIALITY. Each party will use good faith efforts to keep
confidential this Agreement, the terms of this transaction, and the matters
relating to the other party (or
Real Estate Purchase and Sale Agreement - 15
<PAGE>
the other party's assets) disclosed in the course of this transaction (other
than information which is a matter of public knowledge or may be obtained
from sources readily available to the public). However, such matters may be
disclosed to either party's directors, officers, partners, attorneys,
accountants, consultants, agents and employees who are assisting in the
evaluation and completion of this transaction.
31. AUDIT RESPONSIBILITIES. From time to time, both before and after
Closing, Buyer may be engaged in financing and other transactions which will
require that both Buyer and the operation of the Property be audited as to
then current and past operations of the Property, including periods of time
during which Seller owned the Property. As a material inducement for Buyer
to enter into this Agreement, Seller agrees that upon written request of
Buyer, Seller shall render its timely and cooperative efforts to any such
auditors in delivering such responses to inquiries and information as is
within the knowledge or records of Seller with respect to the operations of
the Property or which is within the control or reasonable ability of Seller
to obtain, including, without limitation, operating statements and other
financial information relevant to the Property and its operations. In
addition to the foregoing, Seller shall sign and deliver to any such auditor,
such reasonable representations regarding the accuracy of the information and
documents provided to the auditor by Seller as may be requested by the
auditor. If the time or expenses which Seller is required to spend in
responding to and assisting the auditor can be provided at little or no cost
to Seller, Seller will bear those costs. If the time and expenses exceed
such amount, Buyer will pay Seller reasonable hourly rates for the time
incurred by Seller's employees in connection with the audit and will
reimburse Seller's expenses in connection with the audit.
32. COUNTERPARTS. This Agreement may be executed in any number of
identical counterparts which may contain the signatures of less than all the
parties but all of which shall be construed together as a single document.
The undersigned Buyer hereby offers and agrees to purchase the Property
for the price and upon the terms and conditions set forth in this Agreement.
BUYER:
PAN PACIFIC RETAIL PROPERTIES, INC.
By
---------------------------------
Stuart A. Tanz
Its President
Real Estate Purchase and Sale Agreement - 16
<PAGE>
AND
By
--------------------------------
David L. Adlard
Its Executive Vice President
Address: 1631-B South Melrose Drive
Vista, CA 92083
Telephone: (760) 727-1002
Fax: (760) 727-1430
DATE:
----------------------------------
SELLER:
MGMAB LIMITED PARTNERSHIP,
a Washington Limited Partnership
By SHER GP, INC., General Partner
By
--------------------------------
Its
------------------------------
Address: 320 - 108th Ave. N.E., Suite 406
Bellevue, WA 98004
Telephone: (425) 453-0324
Fax: (425) 455-4158
DATE:
--------------------------------
Real Estate Purchase and Sale Agreement - 17
<PAGE>
PURCHASE AND SALE AGREEMENT
September 24, 1997
Subject to the terms and conditions contained herein, PAN PACIFIC RETAIL
PROPERTIES, INC., a Maryland corporation ("Buyer"), agrees to purchase, and
OLYMPIA WEST PARTNERS, LP, a Washington limited partnership ("Seller"),
agrees to sell the following, all of which are collectively referred to as
the "Property":
A. All of Seller's right, title and interest in and to that certain
real property commonly known as Olympia West Plaza Shopping Center, legally
described on Exhibit A hereto; and all of the Seller's right, title and
interest in and to all rights, privileges, improvements and easements
appurtenant to said real property;
B. All leased equipment, signs and fixtures, if any, and all personal
property owned by Seller which is located on or in or used exclusively in
connection with the Property (the "Personal Property"); and
C. All intangible personal property now or hereafter owned by Seller
and used in the ownership, use or operation of the Property, including,
without limitation, the Seller's interest in and to all tenant leases,
subleases and tenancies, any service contracts and other agreements, records
relating to the Property and rights relating to the ownership, use and
operation of the Property, and all of Seller's right, title and interest in
trade names, trademarks, and service marks, if any, designating or describing
the Property.
The terms and conditions of the sale are as follows:
1. PURCHASE PRICE AND TERMS. The purchase price for the Property shall
be TWELVE MILLION ONE HUNDRED THOUSAND AND NO/100 DOLLARS ($12,100,000.00),
and shall be paid as follows:
(a) At Closing, Buyer shall assume Seller's obligations which arise
under a promissory note dated January 26, 1996, payable to GENERAL AMERICAN
LIFE INSURANCE CO. in the original principal amount of $7,000,000.00 (the
"GAL Note") and under the deed of trust on the Property which secures the GAL
Note, recorded in Thurston County, Washington (the "GAL Deed of Trust"), and
shall receive a credit against the purchase price in an amount equal to the
unpaid balance due on the GAL Note at Closing; and
(b) The Buyer shall pay Seller in cash or immediately available
funds (including the earnest money deposit earmarked for this transaction) at
Closing the amount equal to
Real Estate Purchase and Sale Agreement - 1
<PAGE>
the difference between the purchase price and the then existing unpaid
balance of the Seller's obligations under the GAL Note.
(c) PRICE ADJUSTMENT. The purchase price is based on the
assumption that all currently vacant space at the Property will be leased
prior to Closing by Seller to new tenants of a quality and financial standing
commensurate with existing tenants of the Property for terms of at least five
years, and for an average rental rate (including free rent and rent
escalations) of $15.00 per square foot, with all costs associated with the
lease, including but not limited to improvements, tenant improvements,
advertising, and leasing commissions, paid by Seller. Any such lease shall
not be entered into by Seller except with the written consent of Buyer which
consent shall not be unreasonably withheld or delayed. If the new lease is
for an average rental rate other than $15.00 per square foot, the purchase
price of the Property will be increased or decreased accordingly on the basis
of the following calculation. The annual rent for the space will be
calculated on the basis of a rental rate of $15.00 per square foot. Any
difference between this annual rent and the actual average annual rent agreed
to by the new tenant will be multiplied by a factor of 10, and if the actual
average rental rate is greater than $15.00 per square foot, this product will
be added to the purchase price, and if the actual average rental rate is less
than $15.00 per square foot, the product will be deducted from the purchase
price. If such new lease has not been entered into by Closing, the purchase
price shall be adjusted as provided in paragraph 1(d) below.
(d) EXECUTION OF LEASE. In the event that Seller has not leased
the currently vacant space by Closing, the purchase price shall be reduced by
$100,000, and Seller shall enter into a lease between Seller, as tenant, and
Buyer, as landlord, at Closing. The lease will be for a term of one (1) year
at a rental rate of $15.00 per square foot. The lease shall provide that if,
within one (1) year after Closing, the space is leased by Buyer or Seller to
a new tenant on the same lease terms as those provided in paragraph 1(c) of
this Agreement, or on other terms acceptable to Buyer, the lease between
Buyer and Seller shall terminate as of the effective date of the lease with
the new tenant. The lease between Buyer and Seller shall also provide that
as consideration for the $100,000 price reduction, all of the costs of
leasing the space to a new tenant which are allocated to Seller under
paragraph 1(c) above shall instead be paid for and be the obligation of Buyer
with respect to any lease entered into with a new tenant after Closing.
Real Estate Purchase and Sale Agreement - 2
<PAGE>
2. EARNEST MONEY DEPOSIT.
(a) INITIAL DEPOSIT. As a condition of Mutual Acceptance (as
defined in paragraph 5(e) below), Buyer shall deposit the sum of TWO HUNDRED
FIFTY THOUSAND AND NO/100 DOLLARS ($250,000.00) with First American Title
Insurance Company, 13010 N.E. 20th Street, #A, Bellevue, WA 98005 (the
"Closing Agent"), with instructions to First American to deposit the funds
into an insured interest bearing trust account. Of this deposit, $75,000.00
shall be earmarked and held by the Closing Agent as the initial earnest money
deposit for this transaction, and the balance of the deposit shall be
earmarked as the earnest money deposit for the purchases of the Other
Properties (as defined below). All accrued interest shall be credited at
Closing to Buyer, whose social security or tax I.D. number is
________________________. If this transaction fails to close, the interest
shall be paid to the same party entitled to be paid the earnest money. If
Buyer does not give Seller the Notice of Waiver of Certain Contingencies and
make the Additional Deposit with the Closing Agent within the time and in the
manner provided for in paragraphs 2(b) and 5(d), this Agreement shall be
deemed terminated, the entire earnest money deposit shall be returned to
Buyer, and Buyer and Seller shall have no further obligations hereunder.
(b) ADDITIONAL DEPOSIT. If Buyer gives Seller the Notice of Waiver
of Certain Contingencies, Buyer shall simultaneously deposit an additional
$750,000 with the Closing Agent in immediately available funds as an
additional earnest money deposit. The entire $1,000,000 deposited with the
Closing Agent shall thereafter be held as an earnest money deposit, which
shall be credited to Buyer, with interest at Closing. Except as otherwise
provided in paragraphs 3, 4, 5 and 6 of this Agreement, if this transaction
does not close thereafter, the earnest money deposit shall be disbursed by
the Closing Agent as provided in paragraph 21.
(c) EARMARKING. When the $1,000,000 mentioned in paragraph 2(b)
has been deposited as earnest money, the sum of $300,000.00 shall be
earmarked and held by the Closing Agent as the earnest money deposit for this
transaction, and the balance of the funds shall be earmarked as the earnest
money for the purchase of the Other Properties (as defined in paragraph 5(e)).
3. FINANCING CONTINGENCY. Buyer's obligation to close is conditioned
upon approval of Buyer's application to assume the GAL Note and the GAL Deed
of Trust (collectively, the "GAL Loan") which has an approximate balance due
of SIX MILLION EIGHT HUNDRED THOUSAND AND NO/100 DOLLARS ($6,800,000.00).
Upon Mutual Acceptance of this Agreement, Seller shall immediately deliver to
Buyer copies of the GAL Loan documents for review and approval, which
approval shall not be unreasonably
Real Estate Purchase and Sale Agreement - 3
<PAGE>
withheld. Buyer shall be deemed to have approved all of the terms of the GAL
Loan documents unless Buyer gives notice of disapproval within ten (10)
calendar days after receiving such documents. Assumption of the GAL Loan by
Buyer requires the consent of GENERAL AMERICAN LIFE INSURANCE CO. ("General
American"), and Buyer agrees to use commercially reasonable efforts to obtain
such approval and shall apply for such consent within fifteen (15) days after
receiving the GAL Loan documents. This Agreement shall terminate and Buyer
shall receive a refund of the earnest money unless General American gives
Buyer and/or Seller written notice prior to Closing stating that the consent
of General American to the loan assumption has been given; provided, however,
that if the assumption is not so approved, Buyer may elect to pay the
pre-payment penalty on the loan and close the transaction, in which case
Seller will pay the loan in full at closing. Buyer shall pay all title
insurance fees, loan assumption fees and other fees and costs associated with
the assumption by Buyer of the GAL Loan.
4. TITLE REVIEW. Within ten (10) calendar days of the date of Mutual
Acceptance, Seller shall deliver or cause to be delivered to Buyer, an ALTA
preliminary commitment for title insurance issued by First American Title
Insurance Company on the Property and copies of all of the documents noted as
title exceptions in the commitment. Buyer shall have twenty (20) calendar
days after the receipt of the commitment within which to notify Seller in
writing of Buyer's disapproval of any of the exceptions, encumbrances or
defects shown in the commitment. Failure of Buyer to provide written notice
of disapproval of any encumbrances or defects within the aforementioned time
limit shall be deemed notice of approval.
If Buyer objects to any exceptions, Seller shall, within ten (10)
calendar days after receipt of Buyer's objections, deliver to Buyer written
notice that either (a) Seller will, at Seller's expense, attempt to remove
the exceptions to which Buyer has objected before the Closing Date or (b)
Seller is unwilling or unable to eliminate said exceptions. If Seller fails
to so notify Buyer or is unwilling or unable to remove any such exception by
the Closing Date, Buyer may elect to terminate this Agreement and receive
back the entire earnest money, in which event Buyer and Seller shall have no
further obligations under this Agreement; or, alternatively, Buyer may elect
to purchase the Property subject to such exceptions.
5. INSPECTION CONTINGENCIES. Buyer's obligation to purchase the
Property is conditioned and contingent upon Buyer's satisfaction with the
following:
(a) BOOKS, RECORDS AND AGREEMENTS. Seller agrees to provide Buyer
with the items listed below for Buyer's
Real Estate Purchase and Sale Agreement - 4
<PAGE>
review and evaluation as soon as practicable after Mutual Acceptance:
(i) All rental agreements, leases, and all subleases,
assignments, amendments and modifications thereto, and all service contracts,
warranties, and other written agreements or notices which relate to the
Property;
(ii) Annual operating statements of the Property for the most
recent three (3) full calendar years, as well as tenants' sales reports in
Seller's possession or available to Seller and common area maintenance costs
and collections for the same period;
(iii) Copies of all CC&R's affecting the Property;
(iv) A complete and current rent roll, including a schedule of
all tenant deposits and fees;
(v) The tax bills and assessment notices for the most recent
tax year;
(vi) Copies of all Certificates of Occupancy that are in
Seller's possession;
(vii) Copies of any surveys, environmental audits, soil studies,
engineering studies, permits, and any and all other reports pertaining to the
land or buildings constructed on the Property in Seller's possession; and
(viii) Copies of any Tenant financial statements within
Seller's possession.
(ix) A schedule of all personal property;
(x) Copies of Seller's certificate of limited partnership and a
good standing certificate;
(xi) A schedule of filed, threatened, or potential litigation
regarding the Property; and
(xii) An aged receivables report for payments owed by Tenants
and the leases current as of the date of Mutual Acceptance.
After the commencement of the Inspection Period (as defined below), Buyer
may request copies of any other reports, studies or other documents relating
to the Property which are in Seller's possession or reasonably available to
Seller at little or no cost. Upon such request, Seller shall promptly
provide Buyer with copies of the requested documents or permit
Real Estate Purchase and Sale Agreement - 5
<PAGE>
Buyer access to Seller's records so as to review and copy the documents.
(b) PHYSICAL INSPECTION. During the Inspection Period Seller shall
permit Buyer or its agents, at Buyer's sole expense and risk, to enter upon
the Property, as reasonably necessary and subject to the rights of tenants,
to make inspections and investigations concerning the structural condition of
the improvements, all mechanical, electrical and plumbing systems, hazardous
materials (limited to a Phase I audit only without further consent of Seller,
which consent shall not be unreasonably withheld or delayed), pest
infestation, soils conditions, the roof and other matters pertaining to the
condition of the Property. Buyer shall comply with all laws and regulations,
including, without limitation, obtaining any necessary permits for any
inspection of the Property. Any damage to the Property made by Buyer or any
authorized person acting for or on behalf of Buyer shall be promptly repaired
by Buyer, and Buyer shall put the Property back in the same condition as
before the inspection or entry. Buyer agrees to indemnify and hold Seller
harmless from all liens, costs, and expenses, including attorney's and
expert's fees, arising from or relating to Buyer's entry onto and inspection
of the Property.
(c) FEASIBILITY. During the Inspection Period, Buyer, or its
agents, may investigate whether any federal, state or local laws which may
apply to the Property, such as the Americans with Disabilities Act or laws or
regulations regarding sensitive areas, zoning, building codes, energy codes,
energy conservation and the like affect the feasibility of the Property for
Buyer's intended use, and shall be provided reasonable access to the Property
and to Seller's records regarding the Property for purposes of this review.
(d) INSPECTION PERIOD. Seller shall use best efforts to provide
Buyer with all documents and things specified in paragraphs 5(a)(i)-(xii) as
soon as reasonably practicable after Mutual Acceptance. Buyer shall have
forty-five (45) calendar days following receipt of all documents and things
specified in paragraphs 5(a)(i)-(xii) within which to investigate all of the
documents, things and conditions specified in paragraphs 5(a), (b) and (c),
or any other matter pertaining to the Property which may be of concern to
Buyer (the "Inspection Period"). If Buyer decides to waive the contingencies
set forth in paragraphs 5(a), (b) and (c) and intends to close the purchase
and sale of the Property as specified in this Agreement, Buyer shall indicate
its decision to do so by giving Seller written notice (the Notice of Waiver
of Certain Contingencies) and simultaneously depositing the additional
earnest money deposit with the Closing Agent as provided in paragraph 2(b) on
or before the last day of the Inspection Period. If Buyer fails to either
give Seller the
Real Estate Purchase and Sale Agreement - 6
<PAGE>
Notice of Waiver of Contingencies or to deposit the additional earnest money
deposit with the Closing Agent within the time specified, this Agreement
shall be deemed terminated, Buyer's entire earnest money deposit shall be
returned to Buyer, and Buyer and Seller shall have no further obligations
hereunder.
(e) INSPECTION OF OTHER PROPERTIES. At the same time as this
Agreement is signed, Buyer will be entering into purchase and sale agreements
to purchase Claremont Village Shopping Center in Snohomish County,
Washington, and Tacoma Central Shopping Center in Pierce County, Washington,
collectively, the "Other Properties." Mutual Acceptance of this Agreement
will occur only when:
(i) Seller and Buyer have signed this Agreement;
(ii) Buyer has entered into written agreements with regard to
the purchase and sale of the Other Properties;
(iii) Buyer has deposited the initial earnest money deposit
with the Closing Agent as provided in paragraph 2(a) hereof. Each of the
purchase and sale agreements for the Other Properties will also have an
inspection period of forty-five (45) calendar days which will commence when
the seller of each of the Other Properties has delivered documents such as
those described in paragraph 5(a) hereof to Buyer. If those documents are
delivered by the respective sellers on a date after the date Seller has
delivered its documents under paragraph 5(a) of this Agreement, the
Inspection Period under this Agreement shall be extended by the same number
of days. Furthermore, Closing under this Agreement is contingent upon Buyer
waiving all contingencies under the purchase and sale agreements for the
Other Properties within the Inspection Period under this Agreement, as it may
be extended.
6. ADDITIONAL CONDITIONS TO CLOSING.
(a) TENANT ESTOPPEL CERTIFICATES. Buyer's obligation to purchase
the Property is conditioned upon Seller obtaining and delivering to Buyer at
or before Closing estoppel certificates from each tenant at the Property
occupying more than 3,000 square feet of space and seventy-five percent (75%)
of all other Tenants occupying space on the Property. The estoppel
certificates shall state:
(i) The date of commencement and the scheduled date of
termination of the Lease;
(ii) The amount of advance rentals or rent deposits paid to
the Seller;
Real Estate Purchase and Sale Agreement - 7
<PAGE>
(iii) The amount of monthly (or other periodic) rent paid to
Seller;
(iv) That the Lease is in full force and effect and that
there have been no modifications or amendments thereto, or, if there have
been any modifications, subleases, assignments or amendments, an explanation
of the same;
(v) Square footage (if set forth in the Lease); and
(vi) That there is no default under the terms of the Lease by
Lessor or Lessee.
In the event such estoppel certificates are not delivered to Buyer prior
to Closing, Buyer may terminate this Agreement, in which event all earnest
money, additional earnest money and accrued interest shall be paid to Buyer,
and Buyer and Seller shall have no further obligations under this Agreement.
(b) SIMULTANEOUS CLOSINGS. Both parties' obligations to close this
transaction are conditioned upon the closing of this transaction and the
closing of the purchase and sale of both of the Other Properties by Buyer
occurring simultaneously. If for any reason the purchase of either of the
Other Properties by Buyer does not close on the Closing Date specified
herein, this transaction shall not close. If the other transaction did not
close because of the fault of either Buyer or Seller, the other party shall
have all of its remedies under this Agreement as a non-defaulting party. If
the other transaction does not close for any reason other than the fault of
Buyer or the default of Seller, this transaction shall terminate, Buyer's
entire earnest money deposit shall be returned to Buyer, and Buyer and Seller
shall have no further obligations hereunder.
7. CLOSING. First American Title Insurance Company, as Closing Agent,
shall conduct the Closing of the transaction. Immediately upon Mutual
Acceptance, the parties hereto shall deposit with the Closing Agent this
Agreement, and the earnest money deposit and within a reasonable time prior
to Closing shall deposit such instruments and funds as are necessary to close
the escrow and consummate the purchase and sale of the Property in the manner
set forth in this Agreement. "Date of Closing," "Closing Date" or "Closing"
shall mean the date upon which the deeds and documents given hereunder are
filed of record and the sale proceeds are available to Seller, and shall be
no more than fifteen (15) calendar days after the last day of the Inspection
Period, but in any event no later than December 1, 1997, assuming
substantially all documents and things specified in paragraphs 5(a)(i)-(xii)
are delivered to Buyer on or before September 26, 1997. Time is of the
essence in the performance of this Agreement.
Real Estate Purchase and Sale Agreement - 8
<PAGE>
8. COSTS AND PRORATIONS. The Seller shall be responsible for the
payment in full at Closing of any monetary encumbrances not to be assumed by
Buyer. Ad valorem real estate taxes and personal property taxes for the year
of Closing, rents, maintenance and service agreements, insurance, interest,
lender's tax and insurance reserves, water and other utilities, and all other
operating costs and revenues shall be prorated as of the Date of Closing.
Special assessment liens which are not recoverable from tenants shall be paid
by Seller at Closing. Buyer and Seller shall each pay one-half (1/2) of the
escrow fees. Seller shall pay the excise tax charged in connection with the
conveyance of the Property, together with the recording fee of any deed.
Buyer shall pay the costs of the Loan assumption as provided in paragraph 3
and any use tax due in connection with the purchase of personal property.
Seller shall deliver to Buyer at Closing all deposits and prepaid rent made
under any leases assumed by Buyer.
9. RENT AND CAM.
(a) RENT AND CAM COLLECTION. Rents and common area maintenance
charges ("CAM charges") actually collected prior to Closing will be prorated
as of Closing. Any rents, taxes and CAM charges owed by tenants for any
period prior to Closing and unpaid at Closing shall remain the property of
Seller, provided, however, that except as provided in paragraph 9(b), Buyer
shall diligently attempt to collect such arrears for Seller's account for a
period of sixty (60) days after Closing. Buyer shall not be required to
terminate a tenancy or evict a tenant in order to collect rent owed to
Seller. Rent, taxes and CAM charges collected by Buyer after Closing from
tenants who were in arrears on their pre-closing obligations shall be applied
first to payments owed to the Seller for the pre-closing period, and the
remainder paid to the Buyer.
(b) PERCENTAGE RENT. As soon after December 31, 1997 as possible
under the terms of the leases in question, Buyer and Seller shall calculate
the total percentage rent due for 1997 from tenants at the Property.
Percentage rent due in 1997 shall be prorated between Buyer and Seller on the
basis of the number of days in 1997 that each party owned the Property.
Within fifteen (15) days after collection of the 1997 percentage rent, Buyer
shall pay Seller its prorata share, taking into account any percentage rent
already paid to Seller for 1997.
(c) CAM RECONCILIATION. If it is not possible to accurately
reconcile CAM expenses for the Property and CAM collections from tenants at
the Property as of the Closing Date, Seller will prepare a good faith
estimated reconcilia-
Real Estate Purchase and Sale Agreement - 9
<PAGE>
tion as of Closing, and the parties will close on that basis. The parties
will thereafter prepare a final post-Closing reconciliation of CAM expenses
and collections as soon after Closing as practicable. The amount by which
CAM collections exceed CAM expenses for the period prior to Closing shall be
paid to Buyer, and the amount by which CAM expenses exceed CAM collections
for such period shall be paid to Seller. Any payments due from Buyer or
Seller as a result of a post-Closing reconciliation shall be paid within
fifteen (15) days of the reconciliation.
10. OPERATIONS; POSSESSION. Subject to paragraph 12 hereof, Seller
shall deliver the Property in substantially the same condition at Closing as
it was in at the time the inspection contingencies in paragraph 5 were
removed, ordinary wear and tear excepted. During the Inspection Period and
prior to Closing, Seller shall not enter into or modify any leases or
agreements affecting the Property without Buyer's written consent, which
consent shall not be unreasonably withheld or delayed. Buyer shall be
entitled to possession of the Property on the Date of Closing, subject to
existing tenancies.
11. TITLE INSURANCE AND TITLE. At Closing Seller shall pay for and
deliver to Buyer an ALTA standard form owner's policy of title insurance
naming Buyer as the insured, issued by First American Title Insurance Company
in an amount equal to the purchase price and containing no exceptions or
encumbrances other than those approved by Buyer pursuant to paragraph 4 and
this paragraph 11. If Buyer wishes to obtain extended coverage, Buyer shall
pay any additional premium for such extended coverage, and shall also pay the
cost of any survey which may be required by the title insurance company as a
condition of such coverage. At Closing Seller shall convey to Buyer good,
marketable title to the Property, free of all liens, encumbrances or defects
except as expressly approved or accepted by Buyer pursuant to paragraph 4 and
this paragraph 11. Title shall be conveyed by statutory warranty deed.
12. PERSONAL PROPERTY. This offer includes all appliances, furniture,
fixtures, and equipment now on the Property owned by Seller and used in the
operation of the Property, as well as all plans, permits, certificates,
studies and similar documents and rights in Seller's possession or available
to Seller at little or no cost. Title to the personal property
Real Estate Purchase and Sale Agreement - 10
<PAGE>
shall be transferred by bill of sale in the form attached hereto as Exhibit
B, free and clear of encumbrances except those approved by Buyer in paragraph
4 or paragraph 11. Buyer and Seller shall attempt to agree as to that portion
of the Purchase Price attributable to the value of such personal property as
of the Closing Date, and if they are unable to agree, the value of the
personal property shall be the personal property tax assessment value.
13. ASSUMPTION OF LEASES AND CONTRACTS. At Closing, Buyer shall assume
all of Seller's obligations under the terms of each lease, contract and
agreement which Buyer was given copies of under the terms of subparagraph
5(a) above, by executing the Assumption Agreement attached hereto as Exhibit
C.
14. FIRPTA-TAX WITHHOLDING. If Seller is not a "foreign person" within
the meaning of the Foreign Investment in Real Property Tax Act, Seller agrees
to sign a certification to this effect at Closing. If Seller is a foreign
person and this transaction is not otherwise exempt from FIRPTA, the Closing
Agent shall withhold from the sales proceeds the required amount and pay it
to the Internal Revenue Service.
15. RISK OF LOSS. In the event of material loss of or damage to the
Property, or a portion thereof, prior to the Closing Date through casualty,
taking by eminent domain or otherwise, Buyer may terminate this Agreement and
all Escrow Deposits shall be refunded, or Buyer may elect to purchase the
Property in the condition existing at the Date of Closing. If Buyer elects
to purchase the Property, Seller shall assign to Buyer at Closing all
insurance proceeds and awards payable on account of the loss or damage as
Buyer's sole compensation for the loss or damage. Seller shall not in any
event be liable to restore the Property.
16. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby represents
and warrants to and covenants with Buyer as follows, which representations
and warranties shall survive Closing:
(a) ORGANIZATION. Seller is duly organized and validly existing
and in good standing under the laws of the State of Washington;
(b) OWNERSHIP. Seller is the legal and equitable owner of the
Property, with full right to convey the same, and Seller has not granted any
option or right of first refusal or first opportunity to any party to acquire
any interest in any of the Property;
(c) BINDING OBLIGATIONS. This Agreement and all documents executed
by Seller which are to be delivered to
Real Estate Purchase and Sale Agreement - 11
<PAGE>
Buyer at Closing are, and at the time of Closing will be, legal, valid and
binding obligations of Seller enforceable against Seller in accordance with
their respective terms; will be sufficient to convey title; and will not
violate any provisions of any agreement or judicial order to which Seller or
the Property is subject.
(d) HAZARDOUS SUBSTANCES. Except for substances stored, used or
disposed of in the normal course of business in accordance with all
applicable laws, regulations and ordinances, and except as disclosed to Buyer
in writing by Seller prior to the end of the Inspection Period, Seller has no
knowledge of (i) the presence, now or at any prior time, of any hazardous
substances located on the Property; (ii) the presence, now or at any prior
time, of any underground tank or vault on the Property; (iii) the use of the
Property for storage of oils, petroleum byproducts or other hazardous
materials; (iv) spills of any hazardous substance on the Property or from any
adjacent property onto the Property; (v) the use of asbestos or other
hazardous substances in the construction of any improvements located on the
Property; or (vi) any notice of any violation or claimed violation of any
law, rule or regulation relating to hazardous substances. As used herein,
"Seller's knowledge" means the actual knowledge of the officers of Seller's
general partners and Seller's property manager for the Property, Susan Benton.
"Hazardous substances" shall mean and include any chemical, compound,
material, mixture, waste, or substance that is now or hereafter defined or
listed in, or otherwise classified pursuant to, any environmental laws as a
"hazardous substance," "hazardous material," "hazardous waste," "extremely
hazardous waste," "infectious waste," "toxic substance," "toxic pollutant" or
any other formulation intended to define, list, or classify substances by
reason of deleterious properties such as ignitability, corrosivity,
reactivity, carcinogenicity, or toxicity including any petroleum, natural
gas, natural gas liquids, liquefied natural gas, or synthetic gas usable for
fuel (or mixture of natural gas and such synthetic gas). "Hazardous
substances" shall include, without limitation, any hazardous or toxic
substance, material or waste or any chemical, compound, or mixture which is
(i) asbestos, (ii) motor oil, gasoline, petroleum, or any petroleum
by-product, (iii) designated as a "hazardous substance" pursuant to Section
1317 of the Federal Water Pollution Control Act (33 U.S.C. Section 1251, ET
SEQ.), (iv) defined as a "hazardous waste" pursuant to Section 6903 of the
Federal Resource Conservation and Recovery Act, (42 U.S.C. Section 6901, ET
SEQ., (v) defined as "hazardous substances" pursuant to Section 9601 of the
Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. Section 9601, ET SEQ.,), or (vi) listed in the United States
Department of Transportation Table (49 CFR 172.101) or by the Environmental
Protection Agency as hazard-
Real Estate Purchase and Sale Agreement - 12
<PAGE>
ous substances (40 CFR part 302); or in any and all amendments thereto in
effect as of the Closing Date; or such chemicals, compounds, mixtures,
substances, materials or wastes otherwise regulated under any applicable
local, state or federal environmental laws.
(e) DISCLAIMER. Seller makes no representations or warranties
regarding the Property or this transaction except as may be expressly set
forth in this Agreement. Seller shall not in any way be liable for or with
respect to the condition of the personal property, the Property or any
building, structures, or improvements thereon, their compliance with any
applicable building, zoning, land use or fire laws or regulations, or the
suitability of the Property for Buyer's intended use or for any use
whatsoever. Except as otherwise provided in this Agreement, Buyer is
purchasing the Property and the personal property "AS IS" and assumes the
responsibility and risks of all defects and conditions, including such
defects and conditions, if any, that cannot be observed by casual inspection.
Buyer has had or will have the opportunity prior to Closing to inspect the
Property and the personal property and will be relying entirely thereon and
on any consultant Buyer may retain. Seller has disclosed to Buyer that the
roof on the improvements located on the Property may need repair, and Buyer
agrees that if, after its inspection of the roof as provided under paragraph
5(b), it determines to go ahead with the transaction, all costs of roof
repairs shall be the exclusive responsibility of the Buyer.
(f) GOVERNMENTAL COMPLIANCE. Except as otherwise disclosed to
Buyer in writing, to Seller's knowledge (as defined in paragraph 16(d)
above), without any duty to investigate further, the Property and its current
use comply with all laws, rules and regulations related to sensitive areas,
zoning, building codes, energy codes, and energy conservation rules and
regulations. Seller has not received any written notices and neither the
officers of Seller's general partners nor Susan Benton, Seller's property
manager, have received any oral notices that the Property or its current use
are in violation of the Americans with Disabilities Act, or other federal,
state or local laws which apply to the Property or its use, other than
violations which have been cured.
17. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby represents
and warrants to and covenants with Seller as follows, which representations
and warranties shall survive Closing:
(a) ORGANIZATION. Buyer is duly organized and validly existing and
in good standing under the laws of the state of its incorporation and is duly
authorized to transact business in the State of Washington;
Real Estate Purchase and Sale Agreement - 13
<PAGE>
(b) BINDING OBLIGATIONS. This Agreement and all documents executed
by Buyer which are to be delivered to Seller at Closing are, and at the time
of Closing will be, legal, valid and binding obligations of Buyer enforceable
against Buyer in accordance with their respective terms; and will not violate
any provisions of any agreement or judicial order to which Buyer is subject.
18. AGENCY DISCLOSURE. At the signing of this Agreement, Terranomics
Retail Services represented Seller only, and Buyer was not represented by a
real estate broker. Each party signing this Agreement confirms that prior
oral and/or written disclosure of agency and a copy of the pamphlet "The Law
of Real Estate Agency" was provided to it in this transaction. Seller has
agreed to pay Terranomics a commission of $242,000 pursuant to the terms of a
separate agreement and it shall be Seller's sole responsibility to pay the
commission.
19. ASSIGNMENT. Buyer may not assign this Agreement, or Buyer's rights
hereunder, without Seller's prior written consent, which consent shall not be
unreasonably withheld. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their permitted successors and assigns.
20. LIKE-KIND EXCHANGE. Either party may elect to sell/buy the Property
as part of a like-kind exchange under IRC Section 1031, by giving written
notice to the other party at least twenty (20) days prior to the Closing
Date, provided that: The non-exchanging party shall not incur any costs or
additional obligations as a result of the exchange; the exchange shall not
increase or decrease the amounts to be paid or received under the terms of
this Agreement; the closing on the exchange property shall occur
contemporaneously with the Closing provided for in this Agreement; and the
electing party shall indemnify and hold the other party harmless from any and
all liabilities, claims, losses or actions, including attorney's fees, which
the other party incurs or to which it may be exposed as a result of its
participation in the contemplated exchange. This Agreement is not subject to
or contingent upon the electing party's ability to effectuate an exchange.
In the event any desired exchange should fail to occur, for whatever reason,
the sale of the Property shall nonetheless be consummated as provided herein.
Real Estate Purchase and Sale Agreement - 14
<PAGE>
21. DEFAULT. In the event the Buyer fails, without legal excuse, to
complete purchase of the Property, the entire $1,000,000 earnest money
deposit made by Buyer shall be forfeited to the Seller as the sole and
exclusive remedy available to the Seller for such failure. The failure of
this transaction to close because of Buyer's breach of its agreement to
purchase one of the Other Properties shall be a breach of this Agreement.
The parties understand and acknowledge that the Seller shall not have any
other remedies which would otherwise be available to Seller at law or in
equity as a result of such failure of the Buyer, and that the amount
forfeited will be paid to Seller regardless of whether the Seller incurs any
actual damages.
22. DEFAULT BY SELLER. After the Conditions are timely waived or
satisfied, if Seller neglects or refuses to timely close this transaction,
then Buyer (in Buyer's sole discretion) shall be entitled to the immediate
return of the earnest money deposit, additional earnest money deposit, and
all accrued interest, and shall also have the following options:
(a) Buyer may seek damages;
(b) Buyer may terminate this Agreement, and this Agreement will
become null, void, and of no further force or effect;
(c) Buyer may seek specific performance of this Agreement; or
(d) Buyer may seek any other remedy provided under applicable law.
The remedies given to Buyer are not exclusive but shall be cumulative with
and in addition to all remedies now or hereafter at law or equity.
23. NOTICES. Any communication, notice, or demand of any kind
whatsoever that either party may be required or may desire to give to or
serve upon the other shall be in writing, addressed to the parties at the
addresses set forth below, and delivered by personal service, by Federal
Express or other reputable overnight delivery service, by facsimile
transmission, or by registered or certified mail, postage prepaid, return
receipt requested. Any such notice shall be deemed delivered as follows:
(a) if personally delivered, the date of delivery to the address of the
person to receive such notice; (b) if sent by Federal Express or other
reputable overnight delivery service, the date of delivery to the address of
the person to receive such notice; (c) if sent by facsimile transmission, on
the Business Day transmitted to the person to receive such notice; or (d) if
mailed, three (3) calendar days after depositing same in the mail. Any
notice
Real Estate Purchase and Sale Agreement - 15
<PAGE>
sent by facsimile transmission must be confirmed by personally delivering or
mailing a copy of the notice sent by facsimile transmission. Any party may
change its address for notice by written notice given to the other.
24. NO WAIVER. No waiver of any of the provisions of this Agreement
shall be deemed, or shall constitute, a waiver of any other provision,
whether or not similar, nor shall any waiver constitute a continuing waiver.
No waiver shall be binding unless executed in writing by the party making the
waiver.
25. FURTHER ACTS. Each party, at the request of the other, shall
execute, acknowledge (if appropriate), and deliver whatever additional
documents, and do such other additional acts, as may be reasonably required
in order to accomplish the intent and purposes of this Agreement.
26. APPLICABLE LAW; ATTORNEYS' FEES. This Agreement shall be governed
by the laws of the State of Washington and any question arising hereunder
shall be construed and determined according to such laws. In the event of
any controversy, claim or dispute between the parties hereto, arising out of
or relating to this Agreement or the breach hereof, including without
limitation any litigation or arbitration through all appeals, the prevailing
party shall be entitled to recover its reasonable expenses, costs and
attorneys' fees from the non-prevailing party.
27. ENTIRE AGREEMENT; ADDENDA. There are no oral or other agreements,
including but not limited to any representations or warranties, which modify
or affect this Agreement. This Agreement embodies the entire agreement
between the parties and supersedes all prior agreements and understandings,
if any, relating to the Property. This Agreement may be amended or
supplemented only by an agreement in writing executed by both parties to this
Agreement.
28. SURVIVAL OF WARRANTIES. All warranties, representations,
disclaimers, acknowledgments, covenants, rights and obligations contained
herein shall survive the recordation of the deed and the Closing of escrow.
29. DELIVERY OF DOCUMENTS TO SELLER. In the event that this transaction
does not close for any reason, Buyer shall return to Seller all of the
documents which Seller has delivered to Buyer for its review and evaluation
as part of its due diligence. Buyer shall also deliver to Seller, at no cost
to Seller, copies of all consultants' and experts' reports which Buyer has
obtained relating to the Property.
30. CONFIDENTIALITY. Each party will use good faith efforts to keep
confidential this Agreement, the terms of this
Real Estate Purchase and Sale Agreement - 16
<PAGE>
transaction, and the matters relating to the other party (or the other
party's assets) disclosed in the course of this transaction (other than
information which is a matter of public knowledge or may be obtained from
sources readily available to the public). However, such matters may be
disclosed to either party's directors, officers, partners, attorneys,
accountants, consultants, agents and employees who are assisting in the
evaluation and completion of this transaction.
31. AUDIT RESPONSIBILITIES. From time to time, both before and after
Closing, Buyer may be engaged in financing and other transactions which will
require that both Buyer and the operation of the Property be audited as to
then current and past operations of the Property, including periods of time
during which Seller owned the Property. As a material inducement for Buyer
to enter into this Agreement, Seller agrees that upon written request of
Buyer, Seller shall render its timely and cooperative efforts to any such
auditors in delivering such responses to inquiries and information as is
within the knowledge or records of Seller with respect to the operations of
the Property or which is within the control or reasonable ability of Seller
to obtain, including, without limitation, operating statements and other
financial information relevant to the Property and its operations. In
addition to the foregoing, Seller shall sign and deliver to any such auditor,
such reasonable representations regarding the accuracy of the information and
documents provided to the auditor by Seller as may be requested by the
auditor. If the time or expenses which Seller is required to spend in
responding to and assisting the auditor can be provided at little or no cost
to Seller, Seller will bear those costs. If the time and expenses exceed
such amount, Buyer will pay Seller reasonable hourly rates for the time
incurred by Seller's employees in connection with the audit and will
reimburse Seller's expenses in connection with the audit.
32. COUNTERPARTS. This Agreement may be executed in any number of
identical counterparts which may contain the signatures of less than all the
parties, but all of which shall be construed together as a single document.
The undersigned Buyer hereby offers and agrees to purchase the Property
for the price and upon the terms and conditions set forth in this Agreement.
Real Estate Purchase and Sale Agreement - 17
<PAGE>
BUYER:
PAN PACIFIC RETAIL PROPERTIES, INC.
By
------------------------------------
Stuart A. Tanz
Its President
AND
By
------------------------------------
David L. Adlard
Its Executive Vice President
Address: 1631-B South Melrose Drive
Vista, CA 92083
Telephone: (760) 727-1002
Fax: (760) 727-1430
DATE:
------------------------------------
Real Estate Purchase and Sale Agreement - 18
<PAGE>
SELLER:
OLYMPIA WEST PARTNERS, LP,
a Washington Limited Partnership
By SHER GP, INC., General Partner
By
------------------------------------
Its
-----------------------------------
Address: 320 - 108th Ave. N.E., Suite 406
Bellevue, WA 98004
Telephone: (425) 453-0324
Fax: (425) 455-4158
DATE:
--------------------------------------
Real Estate Purchase and Sale Agreement - 19
<PAGE>
PURCHASE AND SALE AGREEMENT
September 24, 1997
Subject to the terms and conditions contained herein, PAN PACIFIC RETAIL
PROPERTIES, INC., a Maryland corporation ("Buyer"), agrees to purchase, and
TACOMA DEVELOPMENT LIMITED PARTNERSHIP, a Texas limited partnership
("Seller"), agrees to sell the following, all of which are collectively
referred to as the "Property":
A. All of Seller's right, title and interest in and to that certain
real property commonly known as Tacoma Central Shopping Center, legally
described on Exhibit A hereto; and all of the Seller's right, title and
interest in and to all rights, privileges, improvements and easements
appurtenant to said real property;
B. All leased equipment, signs and fixtures, if any, and all personal
property owned by Seller which is located on or in or used exclusively in
connection with the Property (the "Personal Property"); and
C. All intangible personal property now or hereafter owned by Seller
and used in the ownership, use or operation of the Property, including,
without limitation, the Seller's interest in and to all tenant leases,
subleases and tenancies, any service contracts and other agreements, records
relating to the Property and rights relating to the ownership, use and
operation of the Property, and all of Seller's right, title and interest in
trade names, trademarks, and service marks, if any, designating or describing
the Property.
The terms and conditions of the sale are as follows:
1. PURCHASE PRICE AND TERMS. The purchase price for the Property shall
be EIGHTEEN MILLION SEVEN HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS
($18,750,000.00), and shall be paid as follows:
(a) At Closing, Buyer shall assume Seller's obligations which arise
under a promissory note dated December 15, 1995, payable to NORTHWESTERN
MUTUAL LIFE INSURANCE CO. in the original principal amount of $12,250,000
(the "NML Note") and under the deed of trust on the Property which secures
the NML Note, recorded in Pierce County, Washington (the "NML Deed of
Trust"), and shall receive a credit against the purchase price in an amount
equal to the unpaid balance due on the NML Note at Closing; and
(b) The Buyer shall pay Seller in cash or immediately available
funds (including the earnest money deposit
Real Estate Purchase and Sale Agreement - 1
<PAGE>
earmarked for this transaction) at Closing the amount equal to the difference
between the purchase price and the then existing unpaid balance of the
Seller's obligations under the NML Note.
2. EARNEST MONEY DEPOSIT.
(a) INITIAL DEPOSIT. As a condition of Mutual Acceptance (as
defined in paragraph 5(e) below), Buyer shall deposit the sum of TWO HUNDRED
FIFTY THOUSAND AND NO/100 DOLLARS ($250,000.00) with First American Title
Insurance Company, 13010 N.E. 20th Street, #A, Bellevue, WA 98005 (the
"Closing Agent"), with instructions to First American to deposit the funds
into an insured interest bearing trust account. Of this deposit, $112,500
shall be earmarked and held by the Closing Agent as the initial earnest money
deposit for this transaction, and the balance of the deposit shall be
earmarked as the earnest money deposit for the purchases of the Other
Properties (as defined below). All accrued interest shall be credited at
Closing to Buyer, whose social security or tax I.D. number is
________________________. If this transaction fails to close, the interest
shall be paid to the same party entitled to be paid the earnest money. If
Buyer does not give Seller the Notice of Waiver of Certain Contingencies and
make the Additional Deposit with the Closing Agent within the time and in the
manner provided for in paragraphs 2(b) and 5(d), this Agreement shall be
deemed terminated, the entire earnest money deposit shall be returned to
Buyer, and Buyer and Seller shall have no further obligations hereunder.
(b) ADDITIONAL DEPOSIT. If Buyer gives Seller the Notice of Waiver
of Certain Contingencies, Buyer shall simultaneously deposit an additional
$750,000 with the Closing Agent in immediately available funds as an
additional earnest money deposit. The entire $1,000,000 deposited with the
Closing Agent shall thereafter be held as an earnest money deposit, which
shall be credited to Buyer, with interest at Closing. Except as otherwise
provided in paragraphs 3, 4, 5 and 6 of this Agreement, if this transaction
does not close thereafter, the earnest money deposit shall be disbursed by
the Closing Agent as provided in paragraph 21.
(c) EARMARKING. When the $1,000,000 mentioned in paragraph 2(b)
has been deposited as earnest money, the sum of $450,000 shall be earmarked
and held by the Closing Agent as the earnest money deposit for this
transaction, and the balance of the funds shall be earmarked as the earnest
money for the purchase of the Other Properties (as defined in paragraph 5(e)).
3. FINANCING CONTINGENCY. Buyer's obligation to close is conditioned
upon approval of Buyer's application to assume the NML Note and the NML Deed
of Trust (collectively, the "NML
Real Estate Purchase and Sale Agreement - 2
<PAGE>
Loan") which has an approximate balance due of ELEVEN MILLION SEVEN HUNDRED
THOUSAND AND NO/100 DOLLARS ($11,700,000.00). Upon Mutual Acceptance of this
Agreement, Seller shall immediately deliver to Buyer copies of the NML Loan
documents for review and approval, which approval shall not be unreasonably
withheld. Buyer shall be deemed to have approved all of the terms of the NML
Loan documents unless Buyer gives notice of disapproval within ten (10)
calendar days after receiving such documents. Assumption of the NML Loan by
Buyer requires the consent of NORTHWESTERN MUTUAL LIFE INSURANCE CO.
("Northwestern Mutual"), and Buyer agrees to use commercially reasonable
efforts to obtain such approval and shall apply for such consent within
fifteen (15) days after receiving the NML Loan documents. This Agreement
shall terminate and Buyer shall receive a refund of the earnest money unless
Northwestern Mutual gives Buyer and/or Seller written notice prior to Closing
stating that the consent of Northwestern Mutual to the loan assumption has
been given; provided, however, that if the assumption is not so approved,
Buyer may elect to pay the pre-payment penalty on the loan and close the
transaction, in which case Seller will pay the loan in full at closing.
Buyer shall pay all title insurance fees, loan assumption fees and other fees
and costs associated with the assumption by Buyer of the NML Loan.
4. TITLE REVIEW. Within ten (10) calendar days of the date of Mutual
Acceptance, Seller shall deliver or cause to be delivered to Buyer, an ALTA
preliminary commitment for title insurance issued by First American Title
Insurance Company on the Property and copies of all of the documents noted as
title exceptions in the commitment. Buyer shall have twenty (20) calendar
days after the receipt of the commitment within which to notify Seller in
writing of Buyer's disapproval of any of the exceptions, encumbrances or
defects shown in the commitment. Failure of Buyer to provide written notice
of disapproval of any encumbrances or defects within the aforementioned time
limit shall be deemed notice of approval.
If Buyer objects to any exceptions, Seller shall, within ten (10)
calendar days after receipt of Buyer's objections, deliver to Buyer written
notice that either (a) Seller will, at Seller's expense, attempt to remove
the exceptions to which Buyer has objected before the Closing Date or (b)
Seller is unwilling or unable to eliminate said exceptions. If Seller fails
to so notify Buyer or is unwilling or unable to remove any such exception by
the Closing Date, Buyer may elect to terminate this Agreement and receive
back the entire earnest money, in which event Buyer and Seller shall have no
further obligations under this Agreement; or, alternatively, Buyer may elect
to purchase the Property subject to such exceptions.
Real Estate Purchase and Sale Agreement - 3
<PAGE>
5. INSPECTION CONTINGENCIES. Buyer's obligation to purchase the
Property is conditioned and contingent upon Buyer's satisfaction with the
following:
(a) BOOKS, RECORDS AND AGREEMENTS. Seller agrees to provide Buyer
with the items listed below for Buyer's review and evaluation as soon as
practicable after Mutual Acceptance:
(i) All rental agreements, leases, and all subleases,
assignments, amendments and modifications thereto, and all service contracts,
warranties, and other written agreements or notices which relate to the
Property;
(ii) Annual operating statements of the Property for the most
recent three (3) full calendar years, as well as tenants' sales reports in
Seller's possession or available to Seller and common area maintenance costs
and collections for the same period;
(iii) Copies of all CC&R's affecting the Property;
(iv) A complete and current rent roll, including a schedule of
all tenant deposits and fees;
(v) The tax bills and assessment notices for the most recent
tax year;
(vi) Copies of all Certificates of Occupancy that are in
Seller's possession;
(vii) Copies of any surveys, environmental audits, soil
studies, engineering studies, permits, and any and all other reports
pertaining to the land or buildings constructed on the Property in Seller's
possession; and
(viii) Copies of any Tenant financial statements within
Seller's possession.
(ix) a schedule of all personal property;
(x) copies of Seller's certificate of limited partnership and a
good standing certificate;
(xi) a schedule of filed, threatened, or potential litigation
regarding the Property; and
(xii) an aged receivables report for payments owed by Tenants
and the leases current as of the date of Mutual Acceptance;
Real Estate Purchase and Sale Agreement - 4
<PAGE>
After the commencement of the Inspection Period (as defined below), Buyer
may request copies of any other reports, studies or other documents relating
to the Property which are in Seller's possession or reasonably available to
Seller at little or no cost. Upon such request, Seller shall promptly
provide Buyer with copies of the requested documents or permit Buyer access
to Seller's records so as to review and copy the documents.
(b) PHYSICAL INSPECTION. During the Inspection Period Seller shall
permit Buyer or its agents, at Buyer's sole expense and risk, to enter upon
the Property, as reasonably necessary and subject to the rights of tenants,
to make inspections and investigations concerning the structural condition of
the improvements, all mechanical, electrical and plumbing systems, hazardous
materials (limited to a Phase I audit only without further consent of Seller,
which consent shall not be unreasonably withheld or delayed), pest
infestation, soils conditions, the roof and other matters pertaining to the
condition of the Property. Buyer shall comply with all laws and regulations,
including, without limitation, obtaining any necessary permits for any
inspection of the Property. Any damage to the Property made by Buyer or any
authorized person acting for or on behalf of Buyer shall be promptly repaired
by Buyer, and Buyer shall put the Property back in the same condition as
before the inspection or entry. Buyer agrees to indemnify and hold Seller
harmless from all liens, costs, and expenses, including attorney's and
expert's fees, arising from or relating to Buyer's entry onto and inspection
of the Property.
(c) FEASIBILITY. During the Inspection Period, Buyer, or its
agents, may investigate whether any federal, state or local laws which may
apply to the Property, such as the Americans with Disabilities Act or laws or
regulations regarding sensitive areas, zoning, building codes, energy codes,
energy conservation and the like affect the feasibility of the Property for
Buyer's intended use, and shall be provided reasonable access to the Property
and to Seller's records regarding the Property for purposes of this review.
(d) INSPECTION PERIOD. Seller shall use best efforts to provide
Buyer with all documents and things specified in paragraphs 5(a)(i)-(xii) as
soon as reasonably practicable after Mutual Acceptance. Buyer shall have
forty-five (45) calendar days following receipt of all documents and things
specified in paragraphs 5(a)(i)-(xii) within which to investigate all of the
documents, things and conditions specified in paragraphs 5(a), (b) and (c),
or any other matter pertaining to the Property which may be of concern to
Buyer (the "Inspection Period"). If Buyer decides to waive the contingencies
set forth in paragraphs 5(a), (b) and (c) and intends to close the purchase
and sale of the Property as specified in this Agreement, Buyer shall indicate
its decision
Real Estate Purchase and Sale Agreement - 5
<PAGE>
to do so by giving Seller written notice (the Notice of Waiver of Certain
Contingencies) and simultaneously depositing the additional earnest money
deposit with the Closing Agent as provided in paragraph 2(b) on or before the
last day of the Inspection Period. If Buyer fails to either give Seller the
Notice of Waiver of Contingencies or to deposit the additional earnest money
deposit with the Closing Agent within the time specified, this Agreement
shall be deemed terminated, Buyer's entire earnest money deposit shall be
returned to Buyer, and Buyer and Seller shall have no further obligations
hereunder.
(e) INSPECTION OF OTHER PROPERTIES. At the same time as this
Agreement is signed, Buyer will be entering into purchase and sale agreements
to purchase Claremont Village Shopping Center in Snohomish County,
Washington, and Olympia West Plaza Shopping Center in Thurston County,
Washington, collectively, the "Other Properties." Mutual Acceptance of this
Agreement will occur only when:
(i) Seller and Buyer have signed this Agreement;
(ii) Buyer has entered into written agreements with regard to
the purchase and sale of the Other Properties;
(iii) Buyer has deposited the initial earnest money deposit
with the Closing Agent as provided in paragraph 2(a) hereof. Each of the
purchase and sale agreements for the Other Properties will also have an
inspection period of forty-five (45) calendar days which will commence when
the seller of each of the Other Properties has delivered documents such as
those described in paragraph 5(a) hereof to Buyer. If those documents are
delivered by the respective sellers on a date after the date Seller has
delivered its documents under paragraph 5(a) of this Agreement, the
Inspection Period under this Agreement shall be extended by the same number
of days. Furthermore, Closing under this Agreement is contingent upon Buyer
waiving all contingencies under the purchase and sale agreements for the
Other Properties within the Inspection Period under this Agreement, as it may
be extended.
6. ADDITIONAL CONDITIONS TO CLOSING.
(a) TENANT ESTOPPEL CERTIFICATES. Buyer's obligation to purchase
the Property is conditioned upon Seller obtaining and delivering to Buyer at
or before Closing estoppel certificates from each tenant at the Property
occupying more than 3,000 square feet of space and seventy-five percent (75%)
of all other Tenants occupying space on the Property. The estoppel
certificates shall state:
Real Estate Purchase and Sale Agreement - 6
<PAGE>
(i) The date of commencement and the scheduled date of
termination of the Lease;
(ii) The amount of advance rentals or rent deposits paid to
the Seller;
(iii) The amount of monthly (or other periodic) rent paid to
Seller;
(iv) That the Lease is in full force and effect and that
there have been no modifications or amendments thereto, or, if there have
been any modifications, subleases, assignments or amendments, an explanation
of the same;
(v) Square footage (if set forth in the Lease); and
(vi) That there is no default under the terms of the Lease by
Lessor or Lessee.
In the event such estoppel certificates are not delivered to Buyer prior
to Closing, Buyer may terminate this Agreement, in which event all earnest
money, additional earnest money and accrued interest shall be paid to Buyer,
and Buyer and Seller shall have no further obligations under this Agreement.
(b) SIMULTANEOUS CLOSINGS. Both parties' obligations to close this
transaction are conditioned upon the closing of this transaction and the
closing of the purchase and sale of both of the Other Properties by Buyer
occurring simultaneously. If for any reason the purchase of either of the
Other Properties by Buyer does not close on the Closing Date specified
herein, this transaction shall not close. If the other transaction did not
close because of the fault of either Buyer or Seller, the other party shall
have all of its remedies under this Agreement as a non-defaulting party. If
the other transaction does not close for any reason other than the fault of
Buyer or the default of Seller, this transaction shall terminate, Buyer's
entire earnest money deposit shall be returned to Buyer, and Buyer and Seller
shall have no further obligations hereunder.
7. CLOSING. First American Title Insurance Company, as Closing Agent,
shall conduct the Closing of the transaction. Immediately upon Mutual
Acceptance, the parties hereto shall deposit with the Closing Agent this
Agreement, and the earnest money deposit and within a reasonable time prior
to Closing shall deposit such instruments and funds as are necessary to close
the escrow and consummate the purchase and sale of the Property in the manner
set forth in this Agreement. "Date of Closing," "Closing Date" or "Closing"
shall mean the date upon which the deeds and documents given hereunder are
filed of record and the sale proceeds are available to Seller, and
Real Estate Purchase and Sale Agreement - 7
<PAGE>
shall be no more than fifteen (15) calendar days after the last day of the
Inspection Period, but in any event no later than December 1, 1997, assuming
substantially all documents and things specified in paragraphs 5(a)(i)-(xii)
are delivered to Buyer on or before September 26, 1997. Time is of the
essence in the performance of this Agreement.
8. COSTS AND PRORATIONS. The Seller shall be responsible for the
payment in full at Closing of any monetary encumbrances not to be assumed by
Buyer. Ad valorem real estate taxes and personal property taxes for the year
of Closing, rents, maintenance and service agreements, insurance, interest,
lender's tax and insurance reserves, water and other utilities, and all other
operating costs and revenues shall be prorated as of the Date of Closing.
Special assessment liens which are not recoverable from tenants shall be paid
by Seller at Closing. Buyer and Seller shall each pay one-half (1/2) of the
escrow fees. Seller shall pay the excise tax charged in connection with the
conveyance of the Property, together with the recording fee of any deed.
Buyer shall pay the costs of the Loan assumption as provided in paragraph 3
and any use tax due in connection with the purchase of personal property.
Seller shall deliver to Buyer at Closing all deposits and prepaid rent made
under any leases assumed by Buyer.
9. RENT AND CAM.
(a) RENT AND CAM COLLECTION. Rents and common area maintenance
charges ("CAM charges") actually collected prior to Closing will be prorated
as of Closing. Any rents, taxes and CAM charges owed by tenants for any
period prior to Closing and unpaid at Closing shall remain the property of
Seller, provided, however, that except as may be provided in paragraphs 9(b)
and 13(b)(ii) to the contrary, Buyer shall diligently attempt to collect such
arrears for Seller's account for a period of sixty (60) days after Closing.
Buyer shall not be required to terminate a tenancy or evict a tenant in order
to collect rent owed to Seller. Rent, taxes and CAM charges collected by
Buyer after Closing from tenants who were in arrears on their pre-closing
obligations shall be applied first to payments owed to the Seller for the
pre-closing period, and the remainder paid to the Buyer.
(b) PERCENTAGE RENT. As soon after December 31, 1997 as possible
under the terms of the leases in question, Buyer and Seller shall calculate
the total percentage rent due for 1997 from tenants at the Property.
Percentage rent due in 1997 shall be prorated between Buyer and Seller on the
basis of the number of days in 1997 that each party owned the Property.
Within fifteen (15) days after collection of the 1997 percentage rent, Buyer
shall pay Seller its prorata share, taking into account any percentage rent
already paid to Seller for 1997.
Real Estate Purchase and Sale Agreement - 8
<PAGE>
(c) CAM RECONCILIATION. If it is not possible to accurately
reconcile CAM expenses for the Property and CAM collections from tenants at
the Property as of the Closing Date, Seller will prepare a good faith
estimated reconciliation as of Closing, and the parties will close on that
basis. The parties will thereafter prepare a final post-Closing
reconciliation of CAM expenses and collections as soon after Closing as
practicable. The amount by which CAM collections exceed CAM expenses for the
period prior to Closing shall be paid to Buyer, and the amount by which CAM
expenses exceed CAM collections for such period shall be paid to Seller. Any
payments due from Buyer or Seller as a result of a post-Closing
reconciliation shall be paid within fifteen (15) days of the reconciliation.
10. OPERATIONS; POSSESSION. Subject to paragraph 12 hereof, Seller
shall deliver the Property in substantially the same condition at Closing as
it was in at the time the inspection contingencies in paragraph 5 were
removed, ordinary wear and tear excepted. During the Inspection Period and
prior to Closing, Seller shall not enter into or modify any leases or
agreements affecting the Property without Buyer's written consent, which
consent shall not be unreasonably withheld or delayed. Buyer shall be
entitled to possession of the Property on the Date of Closing, subject to
existing tenancies.
11. TITLE INSURANCE AND TITLE. At Closing Seller shall pay for and
deliver to Buyer an ALTA standard form owner's policy of title insurance
naming Buyer as the insured, issued by First American Title Insurance Company
in an amount equal to the purchase price and containing no exceptions or
encumbrances other than those approved by Buyer pursuant to paragraph 4 and
this paragraph 11. If Buyer wishes to obtain extended coverage, Buyer shall
pay any additional premium for such extended coverage, and shall also pay the
cost of any survey which may be required by the title insurance company as a
condition of such coverage. At Closing Seller shall convey to Buyer good,
marketable title to the Property, free of all liens, encumbrances or defects
except as expressly approved or accepted by Buyer pursuant to paragraph 4 and
this paragraph 11. Title shall be conveyed by statutory warranty deed.
12. PERSONAL PROPERTY. This offer includes all appliances, furniture,
fixtures, and equipment now on the Property owned by Seller and used in the
operation of the Property, as well as all plans, permits, certificates,
studies and similar documents and rights in Seller's possession or available
to Seller at little or no cost. Title to the personal property shall be
transferred by bill of sale in the form attached hereto as Exhibit B, free
and clear of encumbrances except those approved by Buyer in paragraph 4 or
paragraph 11. Buyer and Seller shall attempt to agree as to that portion of
the Purchase Price attributable to the value of such personal
Real Estate Purchase and Sale Agreement - 9
<PAGE>
property as of the Closing Date, and if they are unable to agree, the value
of the personal property shall be the personal property tax assessment value.
13. ASSUMPTION OF LEASES AND CONTRACTS.
(a) ASSUMPTION. At Closing, Buyer shall assume all of Seller's
obligations under the terms of each lease, contract and agreement which Buyer
was given copies of under the terms of subparagraph 5(a) above, by executing
the Assumption Agreement attached hereto as Exhibit C.
(b) POST-CLOSING COLLECTIONS.
(i) JOINT USE PARKING AGREEMENT. Seller is a party to a Joint
Use Parking Agreement dated November 18, 1987 and recorded under Pierce
County Auditor's Recording No. 89711230229, under which Seller is entitled to
be reimbursed by the other parties to that agreement for certain costs
incurred by Seller in connection with the development of parking on the other
party's property for the benefit of the Property. Seller's rights to
reimbursement under the Joint Use Parking Agreement are not being sold to
Buyer as part of this transaction, and Seller will retain all of its rights
to be reimbursed under paragraph 5 of the Joint Use Parking Agreement.
Seller's recorded conveyance of the Joint Use Parking Agreement to Buyer at
Closing will reflect that Seller retains this right to reimbursement.
(ii) THEATER DEFERRED RENT. The Third Amendment to Seller's
lease with Plitt Theatres, Inc., a tenant at the Property, provides that the
tenant shall pay the landlord certain amounts defined therein as Additional
Deferred Rent Payments. In the event that any such Additional Deferred Rent
Payments are paid by the tenant post-Closing, all amounts due for the
pre-Closing period shall be paid to Seller and all amounts due for the
post-Closing period shall be divided equally between Buyer and Seller. Buyer
shall not modify the terms of said Third Amendment without Seller's consent.
Seller may record an instrument reflecting this Agreement as an encumbrance
on the Property at Closing.
14. FIRPTA-TAX WITHHOLDING. If Seller is not a "foreign person" within
the meaning of the Foreign Investment in Real Property Tax Act, Seller agrees
to sign a certification to this effect at Closing. If Seller is a foreign
person and this transaction is not otherwise exempt from FIRPTA, the Closing
Agent shall withhold from the sales proceeds the required amount and pay it
to the Internal Revenue Service.
15. RISK OF LOSS. In the event of material loss of or damage to the
Property, or a portion thereof, prior to the Closing Date through casualty,
taking by eminent domain or
Real Estate Purchase and Sale Agreement - 10
<PAGE>
otherwise, Buyer may terminate this Agreement and all Escrow Deposits shall
be refunded, or Buyer may elect to purchase the Property in the condition
existing at the Date of Closing. If Buyer elects to purchase the Property,
Seller shall assign to Buyer at Closing all insurance proceeds and awards
payable on account of the loss or damage as Buyer's sole compensation for the
loss or damage. Seller shall not in any event be liable to restore the
Property.
16. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby represents
and warrants to and covenants with Buyer as follows, which representations
and warranties shall survive Closing:
(a) ORGANIZATION. Seller is duly organized and validly existing
and in good standing under the laws of the State of Texas and is authorized
to transact business in the State of Washington;
(b) OWNERSHIP. Seller is the legal and equitable owner of the
Property, with full right to convey the same, and Seller has not granted any
option or right of first refusal or first opportunity to any party to acquire
any interest in any of the Property;
(c) BINDING OBLIGATIONS. This Agreement and all documents executed
by Seller which are to be delivered to Buyer at Closing are, and at the time
of Closing will be, legal, valid and binding obligations of Seller
enforceable against Seller in accordance with their respective terms; will be
sufficient to convey title; and will not violate any provisions of any
agreement or judicial order to which Seller or the Property is subject.
(d) HAZARDOUS SUBSTANCES. Except for substances stored, used or
disposed of in the normal course of business in accordance with all
applicable laws, regulations and ordinances, and except as disclosed to Buyer
in writing by Seller prior to the end of the Inspection Period, Seller has no
knowledge of (i) the presence, now or at any prior time, of any hazardous
substances located on the Property; (ii) the presence, now or at any prior
time, of any underground tank or vault on the Property; (iii) the use of the
Property for storage of oils, petroleum byproducts or other hazardous
materials; (iv) spills of any hazardous substance on the Property or from any
adjacent property onto the Property; (v) the use of asbestos or other
hazardous substances in the construction of any improvements located on the
Property; or (vi) any notice of any violation or claimed violation of any
law, rule or regulation relating to hazardous substances. As used herein,
"Seller's knowledge" means the actual knowledge of the officers of Seller's
general partners and Seller's property manager for the Property, Susan Benton.
Real Estate Purchase and Sale Agreement - 11
<PAGE>
"Hazardous substances" shall mean and include any chemical, compound,
material, mixture, waste, or substance that is now or hereafter defined or
listed in, or otherwise classified pursuant to, any environmental laws as a
"hazardous substance," "hazardous material," "hazardous waste," "extremely
hazardous waste," "infectious waste," "toxic substance," "toxic pollutant" or
any other formulation intended to define, list, or classify substances by
reason of deleterious properties such as ignitability, corrosivity,
reactivity, carcinogenicity, or toxicity including any petroleum, natural
gas, natural gas liquids, liquefied natural gas, or synthetic gas usable for
fuel (or mixture of natural gas and such synthetic gas). "Hazardous
substances" shall include, without limitation, any hazardous or toxic
substance, material or waste or any chemical, compound, or mixture which is
(i) asbestos, (ii) motor oil, gasoline, petroleum, or any petroleum
by-product, (iii) designated as a "hazardous substance" pursuant to Section
1317 of the Federal Water Pollution Control Act (33 U.S.C. Section 1251, ET
SEQ.), (iv) defined as a "hazardous waste" pursuant to Section 6903 of the
Federal Resource Conservation and Recovery Act, (42 U.S.C. Section 6901, ET
SEQ., (v) defined as "hazardous substances" pursuant to Section 9601 of the
Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. Section 9601, ET SEQ.,), or (vi) listed in the United States
Department of Transportation Table (49 CFR 172.101) or by the Environmental
Protection Agency as hazardous substances (40 CFR part 302); or in any and
all amendments thereto in effect as of the Closing Date; or such chemicals,
compounds, mixtures, substances, materials or wastes otherwise regulated
under any applicable local, state or federal environmental laws.
(e) DISCLAIMER. Seller makes no representations or warranties
regarding the Property or this transaction except as may be expressly set
forth in this Agreement. Seller shall not in any way be liable for or with
respect to the condition of the personal property, the Property or any
building, structures, or improvements thereon, their compliance with any
applicable building, zoning, land use or fire laws or regulations, or the
suitability of the Property for Buyer's intended use or for any use
whatsoever. Except as otherwise provided in this Agreement, Buyer is
purchasing the Property and the personal property "AS IS" and assumes the
responsibility and risks of all defects and conditions, including such
defects and conditions, if any, that cannot be observed by casual inspection.
Buyer has had or will have the opportunity prior to Closing to inspect the
Property and the personal property and will be relying entirely thereon and
on any consultant Buyer may retain.
(f) GOVERNMENTAL COMPLIANCE. Except as otherwise disclosed to
Buyer in writing, to Seller's knowledge (as defined in paragraph 16(d)
above), without any duty to inves-
Real Estate Purchase and Sale Agreement - 12
<PAGE>
tigate further, the Property and its current use comply with all laws, rules
and regulations related to sensitive areas, zoning, building codes, energy
codes, and energy conservation rules and regulations. Seller has not
received any written notices and neither the officers of Seller's general
partners nor Susan Benton, Seller's property manager, have received any oral
notices that the Property or its current use are in violation of the
Americans with Disabilities Act, or other federal, state or local laws which
apply to the Property or its use, other than violations which have been cured.
17. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby represents
and warrants to and covenants with Seller as follows, which representations
and warranties shall survive Closing:
(a) ORGANIZATION. Buyer is duly organized and validly existing and
in good standing under the laws of the state of its incorporation and is duly
authorized to transact business in the State of Washington;
(b) BINDING OBLIGATIONS. This Agreement and all documents executed
by Buyer which are to be delivered to Seller at Closing are, and at the time
of Closing will be, legal, valid and binding obligations of Buyer enforceable
against Buyer in accordance with their respective terms; and will not violate
any provisions of any agreement or judicial order to which Buyer is subject.
18. AGENCY DISCLOSURE. At the signing of this Agreement, Argus Realty,
Inc., represented Seller only, and Buyer was not represented by a real estate
broker. Each party signing this Agreement confirms that prior oral and/or
written disclosure of agency and a copy of the pamphlet "The Law of Real
Estate Agency" was provided to it in this transaction. Seller has agreed to
pay Argus Realty, Inc., a commission of $93,750.00 pursuant to the terms of a
separate agreement and it shall be Seller's sole responsibility to pay the
commission.
19. ASSIGNMENT. Buyer may not assign this Agreement, or Buyer's rights
hereunder, without Seller's prior written consent, which consent shall not be
unreasonably withheld. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their permitted successors and assigns.
20. LIKE-KIND EXCHANGE. Either party may elect to sell/buy the Property
as part of a like-kind exchange under IRC Section 1031, by giving written
notice to the other party at least twenty (20) days prior to the Closing
Date, provided that: The non-exchanging party shall not incur any costs or
additional obligations as a result of the exchange; the
Real Estate Purchase and Sale Agreement - 13
<PAGE>
exchange shall not increase or decrease the amounts to be paid or received
under the terms of this Agreement; the closing on the exchange property shall
occur contemporaneously with the Closing provided for in this Agreement; and
the electing party shall indemnify and hold the other party harmless from any
and all liabilities, claims, losses or actions, including attorney's fees,
which the other party incurs or to which it may be exposed as a result of its
participation in the contemplated exchange. This Agreement is not subject to
or contingent upon the electing party's ability to effectuate an exchange.
In the event any desired exchange should fail to occur, for whatever reason,
the sale of the Property shall nonetheless be consummated as provided herein.
21. DEFAULT. In the event the Buyer fails, without legal excuse, to
complete purchase of the Property, the entire $1,000,000 earnest money
deposit made by Buyer shall be forfeited to the Seller as the sole and
exclusive remedy available to the Seller for such failure. The failure of
this transaction to close because of Buyer's breach of its agreement to
purchase one of the Other Properties shall be a breach of this Agreement.
The parties understand and acknowledge that the Seller shall not have any
other remedies which would otherwise be available to Seller at law or in
equity as a result of such failure of the Buyer, and that the amount
forfeited will be paid to Seller regardless of whether the Seller incurs any
actual damages.
22. DEFAULT BY SELLER. After the Conditions are timely waived or
satisfied, if Seller neglects or refuses to timely close this transaction,
then Buyer (in Buyer's sole discretion) shall be entitled to the immediate
return of the earnest money deposit, additional earnest money deposit, and
all accrued interest, and shall also have the following options:
(a) Buyer may seek damages;
(b) Buyer may terminate this Agreement, and this Agreement will
become null, void, and of no further force or effect;
(c) Buyer may seek specific performance of this Agreement; or
(d) Buyer may seek any other remedy provided under applicable law.
The remedies given to Buyer are not exclusive but shall be cumulative with
and in addition to all remedies now or hereafter at law or equity.
23. NOTICES. Any communication, notice, or demand of any kind
whatsoever that either party may be required or may desire to give to or
serve upon the other shall be in writing, addressed to the parties at the
addresses set forth below, and
Real Estate Purchase and Sale Agreement - 14
<PAGE>
delivered by personal service, by Federal Express or other reputable
overnight delivery service, by facsimile transmission, or by registered or
certified mail, postage prepaid, return receipt requested. Any such notice
shall be deemed delivered as follows: (a) if personally delivered, the date
of delivery to the address of the person to receive such notice; (b) if sent
by Federal Express or other reputable overnight delivery service, the date of
delivery to the address of the person to receive such notice; (c) if sent by
facsimile transmission, on the Business Day transmitted to the person to
receive such notice; or (d) if mailed, three (3) calendar days after
depositing same in the mail. Any notice sent by facsimile transmission must
be confirmed by personally delivering or mailing a copy of the notice sent by
facsimile transmission. Any party may change its address for notice by
written notice given to the other.
24. NO WAIVER. No waiver of any of the provisions of this Agreement
shall be deemed, or shall constitute, a waiver of any other provision,
whether or not similar, nor shall any waiver constitute a continuing waiver.
No waiver shall be binding unless executed in writing by the party making the
waiver.
25. FURTHER ACTS. Each party, at the request of the other, shall
execute, acknowledge (if appropriate), and deliver whatever additional
documents, and do such other additional acts, as may be reasonably required
in order to accomplish the intent and purposes of this Agreement.
26. APPLICABLE LAW; ATTORNEYS' FEES. This Agreement shall be governed
by the laws of the State of Washington and any question arising hereunder
shall be construed and determined according to such laws. In the event of
any controversy, claim or dispute between the parties hereto, arising out of
or relating to this Agreement or the breach hereof, including without
limitation any litigation or arbitration through all appeals, the prevailing
party shall be entitled to recover its reasonable expenses, costs and
attorneys' fees from the non-prevailing party.
27. ENTIRE AGREEMENT; ADDENDA. There are no oral or other agreements,
including but not limited to any representations or warranties, which modify
or affect this Agreement. This Agreement embodies the entire agreement
between the parties and supersedes all prior agreements and understandings,
if any, relating to the Property. This Agreement may be amended or
supplemented only by an agreement in writing executed by both parties to this
Agreement.
28. SURVIVAL OF WARRANTIES. All warranties, representations,
disclaimers, acknowledgments, covenants, rights and obligations contained
herein shall survive the recordation of the deed and the Closing of escrow.
Real Estate Purchase and Sale Agreement - 15
<PAGE>
29. DELIVERY OF DOCUMENTS TO SELLER. In the event that this transaction
does not close for any reason, Buyer shall return to Seller all of the
documents which Seller has delivered to Buyer for its review and evaluation
as part of its due diligence. Buyer shall also deliver to Seller, at no cost
to Seller, copies of all consultants' and experts' reports which Buyer has
obtained relating to the Property.
30. CONFIDENTIALITY. Each party will use good faith efforts to keep
confidential this Agreement, the terms of this transaction, and the matters
relating to the other party (or the other party's assets) disclosed in the
course of this transaction (other than information which is a matter of
public knowledge or may be obtained from sources readily available to the
public). However, such matters may be disclosed to either party's directors,
officers, partners, attorneys, accountants, consultants, agents and employees
who are assisting in the evaluation and completion of this transaction.
31. AUDIT RESPONSIBILITIES. From time to time, both before and after
Closing, Buyer may be engaged in financing and other transactions which will
require that both Buyer and the operation of the Property be audited as to
then current and past operations of the Property, including periods of time
during which Seller owned the Property. As a material inducement for Buyer
to enter into this Agreement, Seller agrees that upon written request of
Buyer, Seller shall render its timely and cooperative efforts to any such
auditors in delivering such responses to inquiries and information as is
within the knowledge or records of Seller with respect to the operations of
the Property or which is within the control or reasonable ability of Seller
to obtain, including, without limitation, operating statements and other
financial information relevant to the Property and its operations. In
addition to the foregoing, Seller shall sign and deliver to any such auditor,
such reasonable representations regarding the accuracy of the information and
documents provided to the auditor by Seller as may be requested by the
auditor. If the time or expenses which Seller is required to spend in
responding to and assisting the auditor can be provided at little or no cost
to Seller, Seller will bear those costs. If the time and expenses exceed
such amount, Buyer will pay Seller reasonable hourly rates for the time
incurred by Seller's employees in connection with the audit and will
reimburse Seller's expenses in connection with the audit.
32. COUNTERPARTS. This Agreement may be executed in any number of
identical counterparts which may contain the signatures of less than all the
parties, but all of which shall be construed together as a single document.
The undersigned Buyer hereby offers and agrees to purchase the Property
for the price and upon the terms and conditions set forth in this Agreement.
Real Estate Purchase and Sale Agreement - 16
<PAGE>
BUYER:
PAN PACIFIC RETAIL PROPERTIES, INC.
By
--------------------------------
Stuart A. Tanz
Its President
AND
By
--------------------------------
David L. Adlard
Its Executive Vice President
Address: 1631-B South Melrose Drive
Vista, CA 92083
Telephone: (760) 727-1002
Fax: (760) 727-1430
DATE:
----------------------------------
Real Estate Purchase and Sale Agreement - 17
<PAGE>
SELLER:
TACOMA DEVELOPMENT LIMITED PARTNERSHIP,
a Texas Limited Partnership
By ARGUS GROUP, LTD., General Partner
By
--------------------------------
Its
-------------------------------
By SHER GP, INC., General Partner
By
--------------------------------
Its
-------------------------------
By BB GENPAR, INC., General Partner
By
--------------------------------
Its
-------------------------------
Address: 320 - 108th Ave. N.E., Suite 406
Bellevue, WA 98004
Telephone: (425) 453-0324
Fax: (425) 455-4158
DATE:
----------------------------------
Real Estate Purchase and Sale Agreement - 18
<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> 6,916 8,932
<SECURITIES> 0 0
<RECEIVABLES> 11,393 10,526
<ALLOWANCES> 891 738
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 414,135 290,874
<DEPRECIATION> 31,875 26,857
<TOTAL-ASSETS> 419,274 293,186
<CURRENT-LIABILITIES> 0 0
<BONDS> 0 0
0 0
0 0
<COMMON> 168 0
<OTHER-SE> 307,593 61,808
<TOTAL-LIABILITY-AND-EQUITY> 419,274 293,186
<SALES> 0 0
<TOTAL-REVENUES> 31,936 25,423
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 16,306 14,304
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 11,253 10,791
<INCOME-PRETAX> 4,377 328
<INCOME-TAX> 65 135
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 1,043 0
<CHANGES> 0 0
<NET-INCOME> 3,163 171
<EPS-PRIMARY> .19 .01<F1>
<EPS-DILUTED> 0 0
<FN>
<F1>EARNINGS PER SHARE IS BASED ON WEIGHTED AVERAGE SHARES OUTSTANDING OF
16,852,662 ASSUMED TO HAVE BEEN OUTSTANDING DURING ALL PERIODS PRESENTED IN THE
CONSOLIDATED AND COMBINED STATEMENTS OF INCOME.
</FN>
</TABLE>
