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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Dated of earliest event reported) March 13, 1998
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Resource Asset Investment Trust
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(Exact name of registrant as specified in its charter)
Maryland 1-14760 23-2919819
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(State of incorporation (Commission (I.R.S. Employer
or organization) File Number) Identification No.)
1845 Walnut Street, 10th Floor, Philadelphia, PA 19103
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (215) 861-7900
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Item 5 Other Events
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On March 13, 1998, the Company and Resource America, Inc. ("RAI")
jointly purchased a defaulted loan, in the original principal amount of $80.0
million plus accrued fees, restructuring charges, interest and other charges
(the "Loan"), for a purchase price of $85.5 million. (RAI was the sponsor of the
Company in its initial public offering.) The Company contributed $10.0 million
of the purchase price and RAI contributed $75.5 million. The rights and
interests of the Company and RAI are set forth in a Participation Agreement, the
terms of which are described below. RAI holds legal title to the Loan. The
Company's participation interest is subordinate to purchase money financing in
the amount of $55.0 million provided to RAI by Merrill Lynch Mortgage Capital
Inc. (the "Senior Financing"). The Company's participation interest entitles it
to receive (i) distributions from the monthly net cash flow of the Property,
after monthly debt service payments on the Senior Financing, in an amount
sufficent to pay interest on its $10.0 million investment at the annual rate of
10% and (ii) the first $10.0 million of principal payments from the Loan after
the prior repayment of the Senior Financing. In addition, the Company received
advance interest of approximately $510,000.
The Loan was purchased from Dai-Ichi Kangyo Bank, Limited. The Loan is
secured by a first priority mortgage lien on an office building known as the
"Evening Star Building" located at 1101 Pennsylvania Avenue, N.W., Washington,
D.C. (the "Property"). The Property has been valued by an independent valuation
firm retained by RAI at not less than $90.0 million. Such valuation is only an
estimate of value and should not be relied upon as a precise measure of
realizable value. The Company determined the amount of the consideration paid
for its participation interest based on such valuation and on the Company's
analysis of the Property.
Item 7(c) Exhibits.
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2 Participation Agreement between Resource Properties XLIX, Inc. and
RAIT Partnership, L.P.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
RESOURCE ASSET INVESTMENT TRUST
By: /s/ Ellen DiStefano
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Ellen DiStefano
Chief Financial Officer
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PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT ("Participation Agreement") dated as of
March 12, 1998 is by and between RESOURCE PROPERTIES XLIX, INC. ("RPI 49") and
RAIT PARTNERSHIP, L.P., a Delaware limited partnership ("RAIT").
BACKGROUND
A. On the date hereof RPI 49 shall acquire legal title to that certain
loan (the "Loan") which is subject to the documents, instruments and agreements
(the "Loan Documents") set forth on Exhibit "A" hereto from Dai-Ichi Kangyo
Bank, Limited, New York Branch ("Dai-Ichi"). The Loan Documents create a first
priority mortgage lien on that certain real property located in Washington,
D.C., commonly known as the Evening Star Building, and more fully described on
Exhibit "B" hereto (the "Property").
B. RAIT and RPI 49 will each contribute a portion of the funds
necessary to purchase the Loan and they desire that each of them have an
ownership interest in the Loan subject to the terms and conditions set forth in
this Participation Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto, intending to be legally bound hereby, agree as
follows:
1. THE LOAN.
a. Contributions; Structure.
(1) Cost. The price payable to Dai-Ichi for the Loan is $85,500,000. An
additional $2,500,000 of costs, expenses, fees and other third party payments is
anticipated to be incurred in connection with the purchase of the Loan, so that
the aggregate cost of the Loan will be deemed to be $88,000,000 (the "Cost") for
the purposes of this Participation Agreement. RPI 49 will contribute $78,000,000
of the Cost (the "RPI 49 Contribution"), which will include $55,000,000 (the
"Purchase Money Financing") which RPI 49 shall borrow from Merrill Lynch
Mortgage Capital, Inc. (the "Purchase Money Lender"). RAIT will contribute
$10,000,000 of the Cost (the "RAIT Contribution"). To the extent that the Cost
is other than $88,000,000, the RPI 49 Contribution shall be increased or reduced
by like amount.
(2) Loan Subject to Purchase Money Financing. RPI 49 and RAIT hereby
acknowledge, agree and covenant that the Loan is and shall be subject to an
absolute perfected first priority security interest of the Purchase Money Lender
and that the interests of RPI 49 and RAIT in and to the Loan and Loan Documents,
and in and to any proceeds or rights to payment therefrom are and shall be
completely and absolutely subject and subordinate to the Purchase Money Lender's
security interest and the Purchase Money Lender's right to payment from the
proceeds and payments from the Loan. As between RAIT and RPI 49, RPI 49 shall
have legal ownership of the Loan, in its name, on behalf of itself and RAIT as
their respective interests shall be described in
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this Participation Agreement. RAIT agrees that it shall not be regarded as a
creditor of RPI 49 and will, at the request of the Purchase Money Lender,
execute a standstill agreement and such other agreements satisfactory to the
Purchase Money Lender in which RAIT will agree to and confirm the terms and
conditions regarding the subordination of its Participation Interest (as
hereinafter defined) to the Purchase Money Financing.
b. Interests. RAIT shall own a Ten Million Dollar ($10,000,000)
participation interest (the "Participation Interest") in the Loan and Loan
Documents senior to the interest of RPI 49 in and to the Loan and Loan Documents
but subject and subordinate to the interests of the Purchase Money Lender in and
to the Loan and Loan Documents. RPI 49 will own the balance of the Loan (the
"Subordinate Interest"). At Closing, RPI 49 shall issue to RAIT a Participation
Certificate in the form of Exhibit C attached hereto, evidencing RAIT's
Participation Interest, which Participation Certificate shall acknowledge and
recite that it is subject and subordinate to the interests of the Purchase Money
Lender.
2. PROPERTY; NET CASH FLOW.
a. Bankruptcy; Liquidating Agent.
(1) Plan of Reorganization. The Property is currently subject to
Lender's Plan of Reorganization (the "Plan") confirmed by the United States
Bankruptcy Court for the District of Columbia in the matter "In Re: The Avenue
All Stars Limited Partnership, Case No. 97-1386". Pursuant to the Plan, RPI 49,
as successor to, and designee of, Dai-Ichi, is entitled, as "Lender", to (i)
appoint, in its sole discretion, a "Liquidating Agent" to manage, control and
take possession of the Property and (ii) to, at any time on or before June 30,
1998, designate any party to take legal title to the Property (an "Equity
Holder").
(2) Liquidating Agent. RAIT and RPI hereby agree that, subject to the
approval of the Purchase Money Lender, Brandywine Construction & Management,
Inc. shall be appointed as Liquidating Agent as of Closing. RPI 49 agrees that,
subject to the rights of the Purchase Money Lender, it will designate an Equity
Holder after consulting with RAIT. It is expressly agreed that RAIT may not, in
any manner whatsoever, interfere with, delay or otherwise impair Purchase Money
Lender's rights to require designation of an Equity Holder. As long as the
Purchase Money Financing shall be outstanding, the Liquidating Agent shall be
irrevocably instructed to make all payments due thereon to the Purchase Money
Lender prior to making any payments to RAIT or RPI 49.
(3) Designation of Manager. Any designation of an Equity Holder will be
conditioned on the appointment by RPI 49, after consulting with RAIT of a
"Property Manager" who will manage the Property and make all payments in
accordance herewith and with the Purchase Money Financing. It is expressly
agreed that RAIT may
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not, in any manner whatsoever, interfere with, delay or otherwise impair
Purchase Money Lender's rights to require appointment (or replacement) of a
Property Manager. As long as the Purchase Money Financing shall be outstanding,
the Property Manager shall be irrevocably instructed to make all payments due
thereon to the Purchase Money Lender prior to making any payments to RAIT or RPI
49.
b. Net Cash Flow.
(1) RPI 49 to Collect Net Cash Flow. RPI 49 and RAIT agree that RPI 49
shall receive all Net Cash Flow (as later defined in this Section 2.b.) from the
Liquidating Agent or Property Manager, in accordance with the provisions of the
Purchase Money Financing and such funds shall be deposited in the Borrower
Collection Account in accordance with the terms of the Purchase Money Financing
documents. The term "Net Cash Flow" shall mean (i) all moneys from whatever
source derived, on account of the Loan or Loan Documents, or as proceeds or from
the Property in any manner whatsoever, less (ii) payments of reasonable,
necessary and appropriate expenses and costs of maintaining, operating and
managing the Property, pursuant to the Property Operating Budget (under and as
defined in the Purchase Money Financing) and less (iii) all interest, principal
and other payments due pursuant to the Purchase Money Financing.
(2) Payments of Net Cash Flow. Provided RPI 49 is otherwise entitled to
receive Net Cash Flow pursuant to the terms of the Purchase Money Financing
documents, then RPI 49 shall distribute Net Cash Flow each month: (i) first to
RAIT in an amount equal to pay interest on its Participation Interest at the
annual rate of ten percent (10%) per annum; and (ii) the balance to RPI 49 on
account of its Subordinate Interest. Notwithstanding the forgoing, if any Net
Cash Flow represents principal payments, or if the Property shall be sold or
refinanced and proceeds shall remain after the payment in full of the Purchase
Money Financing, such Net Cash Flow (or sale or refinance proceeds) shall be
paid to RAIT until its Participation Interest shall have been paid in full. It
is the intent of RAIT and RPI 49 that, provided all payments under the Purchase
Money Financing have been made and RPI 49 is otherwise entitled to receive Net
Cash Flow under the Purchase Money Financing documents, to the extent of
payments required pursuant to this section, the Participation Interest of RAIT
shall be superior and first in payment to the Subordinate Interest, and RAIT
shall be entitled to receive all amounts due to it each month prior to RPI 49
receiving any payments in such month on account of its Subordinated Interest.
c. Loan Administration. RPI 49 will administer the Loan, receiving all
Net Cash Flow from the Property Manager and/or the Liquidating Agent and holding
or distributing the same as required under the Purchase Money Financing
documents and this Agreement. RPI 49 shall provide, or cause to be provided,
monthly statements to RAIT of all revenues and expenses of the Property within
fifteen (15) days after the end of each month. The sole responsibilities of RPI
49 shall be to attend to the administration of the Loan Documents, to keep
accurate books and records with respect
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thereto and to administer the Loan as set forth herein. RPI 49 will not be
liable to RAIT for any action taken or omitted, or for any error in judgment,
except as the same may arise from its negligence or misconduct.
3. CLOSING. The closing (the "Closing") of the acquisition of the Loan
and Loan Documents from Dai-Ichi and of the Purchase Money Financing as
described herein shall be consummated on March 12, 1998 (the "Closing Date"). At
Closing:
a. RPI 49 Deliveries. RPI 49 shall deliver to RAIT:
(1) The original Participation Certificate; and
(2) A copy of each other Loan Document.
b. RAIT Deliveries. RAIT shall deliver to RPI 49 a wire transfer of the
RAIT Contribution.
4. DEFAULT AND ENFORCEMENT.
a. Default Under Loan Documents. In accordance with Section 2.c. and
subject to the provisions of Section 1.a.2., the Loan Documents shall be
enforced and the Collateral shall be dealt with by RPI 49 on behalf of itself
and RAIT, with the consent of the Purchase Money Lender. Simultaneous with the
sending of a notice of any event of default under any of the Loan Documents (a
"Loan Default"), RPI 49 shall send such notice to the Purchase Money Lender and
to RAIT.
b. Default Under this Agreement.
(1) Events of Default Affecting RAIT. Any of the following shall be
deemed Events of Default affecting RAIT under this Participation Agreement:
(A) If RPI 49 should:
i. apply for or consent to the appointment of a receiver,
trustee or liquidator of itself or of any of its property;
ii. be unable to pay its debts as they mature or admit in
writing its inability to pay such debts;
iii. make a general assignment for the benefit of creditors;
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iv. be adjudicated a bankrupt or insolvent; or
v. file a voluntary petition in bankruptcy, or a petition or
an answer seeking reorganization or an arrangement with creditors or to take
advantage of any bankruptcy, reorganization, insolvency, debt readjustment,
dissolution or liquidation law or statute, or an answer admitting the material
allegations of a petition filed against it in any proceedings under any such law
or if any action shall be taken by RPI 49 for the purpose of effecting any of
the foregoing.
vi. If any order, judgment or decree shall be entered, without
the application, approval or consent of RAIT, by any court of competent
jurisdiction, approving a petition seeking reorganization of RPI 49, appointing
a receiver, trustee or liquidator of RPI 49 or of all or a substantial part of
any of its assets, and such order, judgment of decree shall continue unstayed
and in effect for a period of 30 days from the date of entry thereof.
(B) If Net Cash Flow shall be insufficient to pay when due amounts owed
to RAIT with respect to its Participation Interest.
(C) If RPI 49 shall not disburse amounts to RAIT in accordance with
this Participation Agreement.
(2) Events of Default Affecting RPI 49. Any of the following shall be
deemed Events of Default affecting RPI 49 under this Participation Agreement:
(A) If RAIT should:
i. apply for or consent to the appointment of a receiver,
trustee or liquidator of itself or of any of its property;
ii. be unable to pay its debts as they mature or admit in
writing its inability to pay such debts;
iii. make a general assignment for the benefit of creditors;
iv. be adjudicated a bankrupt or insolvent; or
v. file a voluntary petition in bankruptcy, or a petition or
an answer seeking reorganization or an arrangement with creditors or to take
advantage of any bankruptcy, reorganization, insolvency, debt readjustment,
dissolution or liquidation law or statute, or an answer admitting the material
allegations of a petition filed against it in any proceedings under any such law
or if any action shall be taken by RAIT for the purpose of effecting any of the
foregoing.
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vi. If any order, judgment or decree shall be entered, without
the application, approval or consent of RPI 49, by any court of competent
jurisdiction, approving a petition seeking reorganization of RAIT, appointing a
receiver, trustee or liquidator of RAIT or of all or a substantial part of any
of its assets, and such order, judgment of decree shall continue unstayed and in
effect for a period of 30 days from the date of entry thereof.
(3) Remedies.
(A) Affecting RAIT. If an Event of Default affecting RAIT hereunder
shall occur and not be cured within ten (10) days after written notice of the
same from RAIT to RPI 49, then, provided there is not an event of default then
in existence under the Purchase Money Financing, all Net Cash Flow available for
distribution and to which RPI 49 is entitled under the Purchase Money Financing
documents shall be paid by RPI 49 to RAIT to apply first to accrued interest on
its Participation Interest and then to reduce its Participation Interest until
such Participation Interest shall have been paid in full.
(B) Affecting RPI 49. If an Event of Default affecting RPI 49 hereunder
shall occur and not be cured within ten (10) days after written notice of the
same from RPI 49 to RAIT, then, provided there is not an event of default then
in existence under the Purchase Money Financing, all Net Cash Flow available for
distribution and to which RPI 49 is entitled under the Purchase Money Financing
documents shall be paid to RPI 49 to apply first to accrued interest on its
Subordinate Interest and then to reduce its Subordinate Interest until such
Subordinate Interest shall have been paid in full.
c. Transfer of Legal Title to Loan Holder. If RPI 49 or RAIT shall
acquire legal title to the Property, which may only occur with the written
consent of the Purchase Money Lender, as a result of exercise of remedies
pursuant to a Loan Default, Net Cash Flow from the Property shall be distributed
in accordance with the priority of distributions established hereunder.
5. REPRESENTATIONS AND WARRANTIES OF RPI 49. RPI 49 hereby represents,
warrants and covenants to RAIT that:
a. It is a corporation organized, validly existing and in good standing
under the laws of the State of Delaware and has the requisite power to execute
this Participation Agreement and to consummate the transactions contemplated
herein;
b. This Participation Agreement has been duly authorized, is valid and
enforceable against any law, rule, regulation, order or agreement by which
resource is bound and the execution, delivery and performance of this
Participation Agreement by
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RPI 49 will not result in and has not resulted in any breach of any provision
of, or constitute a default under (or an event which, with or without notice
and/or lapse of time would constitute a default under) RPI 49's charter
documents or by-laws or any statute, order, rule or regulation applicable to it
or any agreement or instrument binding on RPI 49;
c. No proceedings are pending or threatened against or affecting RPI 49
before any court, arbitration or administrative or governmental body which, in
the aggregate, would materially and adversely affect any action taken or to be
taken by RPI 49 under this Participation Agreement;
d. Upon Closing, RPI 49 will be the lawful holder of the Loan Documents
and, except pursuant to the Purchase Money Financing none of the Loan Documents
shall have been pledged, hypothecated or subordinated by RPI 49, nor have any of
them been discharged, satisfied or released, and RPI 49 shall not have granted a
participation interest in any of the Loan Documents except pursuant to this
Participation Agreement. Further, RPI 49 will not hereafter amend or modify any
of the Loan Documents without informing RAIT, and only if permitted in writing
by the Purchase Money Lender pursuant to the terms of the Purchase Money
Financing.
6. REPRESENTATIONS AND WARRANTIES OF RAIT. RAIT hereby represents,
warrants and covenants to RPI 49 that:
a. RAIT is a limited partnership organized, validly existing and in
good standing under the laws of the State of Delaware and RAIT has the requisite
power and authority to execute this Participation Agreement and to consummate
the transactions contemplated herein;
b. This Participation Agreement has been duly authorized, executed and
delivered by RAIT, is valid and enforceable against RAIT in accordance with its
terms and is not in contravention of any law, rule, regulation, order or
agreement by which RAIT is bond and the execution, delivery and performance of
this Participation Agreement by RAIT will not result in and has not resulted in
any breach of any provision of, or constitute a default under (or an event
which, with or without notice and/or lapse of time would constitute a default
under) RAIT's partnership agreement statute, order, rule or regulation
applicable to it or any agreement or instrument binding on RAIT;
c. No proceedings are pending or threatened against or affecting RAIT
before any court, arbitration or administrative or governmental body which, in
the aggregate, would adversely affect any action taken or to be taken by RAIT
under this Participation Agreement.
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7. MISCELLANEOUS.
a. RAIT and RPI 49 each hereby agree to execute and deliver to the
other, as requested, such instruments or documents as are reasonably deemed
necessary or appropriate to consummate the transactions contemplated herein.
b. This Participation Agreement and the Exhibits attached hereto
represent the final agreement between the parties and may not be contradicted by
evidence of prior, contemporaneous or subsequent oral or written statements,
documents or agreements. There are no unwritten oral agreements between the
parties Participation Agreement can not be amended, modified or supplemented
except by an instrument in writing executed by both parties hereto. RAIT and RPI
49 expressly agree for the benefit of the Purchase Money Lender that this
Participation Agreement cannot be modified, amended or changed without the
Purchase Money Lender's written consent. It is further agreed that the Purchase
Money Lender is an intended third party beneficiary of this Participation
Agreement.
c. Any notices to parties required or permitted by this Participation
Agreement shall be in writing, and any such notices, and any payments or
documents to be delivered hereunder, shall be delivered by overnight mail
service, in person or by facsimile with written confirmation thereof, and shall
be deemed delivered one (1) business day after mailing by overnight courier
service and upon receipt thereof if personally or by facsimile to the following
addresses:
If to RPI 49:
Resource Properties XLIX, Inc.
1521 Locust Street; Suite 400
Philadelphia, PA 19102
ATTN: Scott F. Schaeffer
If to RAIT:
RAIT Partnership, L.P.
1845 Walnut Street
10th Floor
Philadelphia, PA 19103
ATTN: Jay Eisner
A party may change its address by notifying the other party to this
Participation Agreement of the address change in the manner set forth in this
Section.
d. The terms of this Participation Agreement shall be binding upon, and
shall inure to the benefit of RAIT, RPI 49 and their successors and assigns.
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e. This Participation Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania.
f. This Participation Agreement may be signed in counterparts, each of
which shall be an original and both of which taken together constitute one
agreement. In making proof of this Participation Agreement, it shall not be
necessary to produce or account for more than one counterpart signed by the
party to be charged.
g. This Participation Agreement may not be recorded in any place of
public record. Any such attempted recording shall be null and void.
h. This Participation Agreement is an agreement of participation only
and neither the execution of this Participation Agreement, nor the sharing by
RPI 49 and RAIT of an interest in the Loan or in the collateral or security for
the Loan is intended to be, nor shall it be construed to be a loan from the RAIT
to RPI 49, nor the formation of a partnership or joint venture between RAIT and
RPI 49. This Participation Agreement may not be amended without the prior
written consent of the Purchase Money Lender.
i. All of the terms, covenants and conditions herein shall inure to the
benefit of and be binding upon the parties hereto. Neither RPI 49 nor RAIT,
however, shall, without the prior consent of the other, assign this
Participation Agreement or any rights thereunder, or any part of its
participation ownership interest covered by this Participation Agreement. A
transfer of any interest herein or in the Loan in violation of any of the
provisions hereof shall confer no rights upon the transferee. Any transfer
permitted hereunder shall bind the assignee to the same extent as the assignor
has been bound.
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IN WITNESS WHEREOF, and intending to be legally bound, the undersigned
have executed and delivered this Participation Agreement as of the date first
above written.
RESOURCE PROPERTIES XLIX, INC.
By:_____________________________
Scott Schaeffer, President
RAIT PARTNERSHIP, L.P.
BY: RAIT GENERAL, INC., ITS
GENERAL PARTNER
By:____________________________
Jay Eisner, President
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