SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-------------
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended December 31, 1998
OR
______ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _______________ to ______________
Commission File Number: 1-8073
CV REIT, INC.
(Exact name of the registrant as specified in its charter)
Delaware 59-0950354
(State of Incorporation) (I.R.S. Employer Identification No.)
100 Century Boulevard, West Palm Beach, Florida 33417
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 407-640-3155
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common stock, par value New York Stock Exchange
$.01 per share
Securities registered pursuant to Section 12(g) of the Act: None
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
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [ X ]
<PAGE> 2
AGGREGATE MARKET VALUE OF THE VOTING STOCK
HELD BY NONAFFILIATES OF THE REGISTRANT
Common Stock, par value $.01 per share ("Common Stock"), was
the only class of voting stock of the Registrant outstanding on
December 31, 1998. Based on the last sale price of the Common
Stock on the New York Stock Exchange as reported by the
consolidated transaction reporting system on March 25, 1999
($11.38), the aggregate market value of the 6,531,285 shares of the
Common Stock held by persons other than officers, directors and
persons known to the Registrant to be the beneficial owner (as that
term is defined under the rules of the Securities and Exchange
Commission) of more than five percent of the Common Stock on that
date was approximately $74 million. By the foregoing statements,
the Registrant does not intend to imply that any of these officers,
directors or beneficial owners are affiliates of the Registrant or
that the aggregate market value, as computed pursuant to rules of
the Securities and Exchange Commission, is in any way indicative of
the amount which could be obtained for such shares of Common Stock.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Section 12, 13, or
14(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes ___ No ___
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the
Registrant's classes of common stock, as of the latest practicable
date:
7,966,621 shares of Common Stock, par value $.01
per share, were outstanding as of March 25, 1999.
DOCUMENTS INCORPORATED BY REFERENCE
Definitive Proxy Statement of CV Reit, Inc.
for the 1999 Annual Meeting of Stockholders
(incorporated in Part III)
<PAGE> 3
PART I
Item 1. Business
Background
CV Reit, Inc. ("CV Reit"), together with its subsidiaries, has
operated as a real estate investment trust ("REIT") under Sections
856 through 860 of the Internal Revenue Code since January 1, 1982.
A company which qualifies as a REIT may, if it distributes at least
95% of its ordinary taxable income for a taxable year, deduct
dividends paid to stockholders with respect to such taxable year
from taxable income. We intend to operate in such a manner that we
will continue to qualify as a REIT. In any year in which we
qualify, we will not be taxed under the Code on income distributed
to our stockholders attributable to that year.
After our qualification as a REIT in 1982, our operating strategy
consisted of investing in real estate mortgage notes receivable,
primarily loans to developers. Due to economic conditions in the
real estate market and the economy in general, in the early 1990's
we decided to limit new loan commitments and began to utilize
monies received from the repayment of mortgage notes receivable and
the sale of real estate primarily to reduce our outstanding
borrowings. By 1994, we had repaid all of our outstanding
borrowings (other than our long-term Collateralized Mortgage
Obligations - "CMO's") and had significantly reduced our mortgage
loan commitments.
While we evaluated alternative real estate investments, our
available funds were principally reinvested in high quality short-term
corporate or government securities, which generally yielded an
average of only 5 percent to 6 percent. Consequently, we
concluded that it was appropriate to seek to acquire a portfolio of
higher yielding real estate investments along with proven and
experienced personnel to manage and enhance such a portfolio.
On April 28, 1997, we entered into a contract to acquire a number
of shopping centers and an interest in Drexel Realty, Inc.
("Drexel"), a real estate management and leasing company.
Subsequently, certain of the parties entered into a definitive
agreement (the "Master Agreement"), dated as of September 19, 1997.
The Master Agreement and certain related matters were approved by
our stockholders at a Special Meeting of Stockholders on December
17, 1997 and the transactions closed on December 31, 1997.
<PAGE> 4
As a result, effective December 31, 1997 we converted to an
Umbrella Partnership REIT (UPREIT) structure as part of a series of
transactions which included the following: (1) a newly created
Operating Partnership, Montgomery CV Realty L.P. (together with its
wholly-owned subsidiaries, collectively referred to as the "OP"),
acquired 100% of the ownership interests in nine shopping centers
and an office building, located in Pennsylvania and New Jersey,
from two separate groups, the Montgomery Parties and the Levy
Parties (see Note 8 to Consolidated Financial Statements), and an
approximately 95% economic interest in Drexel from Louis P. Meshon,
Sr., (2) CV Reit and its subsidiaries transferred substantially all
of their net assets (or the economic benefit) to the OP and (3) our
Certificate of Incorporation and By-Laws were amended, among other
items, to provide that additional properties could be acquired only
if a majority of our Board of Directors determines that the
acquisition will not adversely affect our ability to pay a
quarterly dividend of at least 29 cents per share. As a result, CV
Reit, through a wholly-owned subsidiary, indirectly currently owns
84.2% of the OP, is its sole general partner and has become a self-administered,
self-managed equity REIT. In addition, Mr. Meshon
has become President, Chief Executive Officer and a director of CV
Reit.
Operating Strategies
Our primary business objectives are to increase Funds From
Operations (see Item 7. Management's Discussion and Analysis of
Results of Operations and Financial Condition - Funds From
Operations) and funds available for distribution, and to enhance
the value of our properties. We plan to achieve these objectives
through the business strategies listed below. There can be no
assurance, however, that such objectives will be achieved.
Maximization of cash flow through the efficient operation of our
properties including active leasing and property management,
maintenance of high occupancy levels, increasing rental rates
and controlling operating and capital costs.
Acquisition of additional properties which satisfy our criteria,
at favorable prices, including properties requiring renovation
or re-leasing.
Completion of strategic renovations and expansions to further
maximize operating cash flow.
Attainment of greater access to financing sources, including
securitized debt and public capital markets.
<PAGE> 5
Assets
At December 31, 1998, the book value of our assets amounted to
$225.4 million, including $142.4 million in income producing real
estate and $65 million in real estate mortgage notes receivable.
A description of our principal assets follows:
Real Estate - Income Producing
The OP, directly or indirectly, owns 100% (or the economic benefit)
of seventeen neighborhood or community shopping centers and two
office buildings, located in Pennsylvania, New Jersey and Florida
("Real Estate"), comprising 1,542,000 square feet. The properties
are diverse in size, ranging from 8,000 square feet to 177,000
square feet of gross leasable area and average 81,000 square feet.
The shopping centers generally attract local area customers and are
typically anchored by a supermarket, drugstore and/or discount
stores. The centers are smaller than regional malls and do not
depend on customers who travel long distances. The tenant base
generally concentrates on everyday purchases from local customers.
Anchors attract shoppers who then also often patronize the smaller
shops. At December 31, 1998, 95.6% of the Real Estate was leased
to tenants under operating leases. Substantially all of the Real
Estate is pledged as collateral for borrowings (See Note 6 to
Consolidated Financial Statements).
The following table sets forth certain pertinent information, as of
December 31, 1998, regarding our Real Estate. Except for Century
Plaza and the Century Village Administration Building, which we
originally built, each of the properties was acquired by the OP on
December 31, 1997, or during 1998:
Year of Lease
Year Latest Leas- Occupancy Expir-
Origin- Renova- able Rate ation/
ally tion or Square as of Principal Option
Built Expansion Footage 12/31/98 Tenants Expiration
------- --------- ------- --------- ------------ ----------
Shopping Centers
Century Plaza
Deerfield Beach, 1976 1991 85,151 92.4% Broward 2001
FL County
Library
Chesterbrook
Village Center 1980 1995 122,316 96.9% Genuardi 2010/2030
Wayne, PA Markets
Collegeville
Shopping Center 1978 1994 110,518 98.3% Acme 2003/2038
Collegeville, PA
<PAGE> 6
County Line Plaza 1970 1998 175,023 100.0% Ames 002/2017
Souderton, PA (1) Clemens 2007/2027
Markets
Danville Plaza 1971 1987 24,052 92.8% CVS Pharmacy 2007/2027
Danville, PA
Gilbertsville
Shopping Center 1974 N/A 85,748 96.5% Weis Markets 2004/2014
Gilbertsville, PA
Marlton Shopping
Center-Phase II 1986 N/A 141,795 90.9% Burlington 2002/2030
Evesham, NJ Coat Factory
T.J. Maxx 2001/2011
Marlton Shopping
Center-Phase I 1985 N/A 146,542 100.0% Super Fresh 2007/2047
Evesham, NJ Markets
New Holland
Plaza 1977 N/A 65,730 83.1% Weis Markets 2000/2015
New Holland, PA
Mount Carmel
Plaza 1988 N/A 14,504 90.3% CVS Pharmacy 2002/2012
Glenside, PA (1)
North Penn
Marketplace 1983 N/A 57,898 100.0% Eckerd Drugs 2003/2018
Upper Gwynedd,
PA
Rio Grande
Plaza 1991 1997 138,747 100.0% JC Penney 2012/2042
Rio Grande, NJ (1) Peebles 2012/2022
Sears 2006/2026
Route 6 Office
Max Center 1972 1990 47,224 100.0% Office Max 2006/2016
Dickson City, PA
Village at 1989 N/A 177,032 94.6% Genuardi 2008/2018
Newtown Markets
Newtown, PA
Whitemarsh
Shopping Center 1969 1996 67,546 100.0% Clemens 2017/2027
Conshohocken, PA Markets
Woodbourne
Square 1985 N/A 29,976 86.2% Rehab Place 2000
Langhorne, PA at Oxford
Valley
555 Scott Street
Center 1961 N/A 8,400 100.0% Pet Supplies 2000/2005
Wilkes-Barre, PA Plus
Office Buildings
Century Village
Administration
Building 1970 1995 25,100 100.0% First Choice 2000/2025
W. Palm Beach, Health Care
FL Services
Plymouth Plaza 1974 1974 30,026 96.3% Montgomery 2004
Plymouth Meeting, CV Realty
PA Trust
--------- ------
Totals 1,553,328 96.3%
========= ======
________
(1) Includes space for which rent is being paid but which is not presently
occupied (total of 20,800 square feet).
<PAGE> 7
In March 1999, we entered into conditional agreements to acquire
three additional shopping centers in Pennsylvania and New Jersey,
containing a total of approximately 400,000 square feet and an
overall occupancy of 96%, for an aggregate purchase price of
approximately $43 million. The acquisitions are subject to due
diligence and certain other conditions and there is no assurance
that they will be consummated.
On May 15, 1998, we sold our 154-room Days Inn motel for net cash
proceeds of $4.2 million and recognized a gain of $2.3 million.
Real Estate Mortgage Notes Receivable
Our real estate mortgage notes receivable are summarized as follows
(in thousands):
December 31,
------------------
1998 1997
-------- --------
Long Term Recreation Notes
(the "Recreation Notes") $64,963 $66,236
Other, principally due from
Hilcoast Development Corp.
("Hilcoast") 25 11,416
-------- --------
Totals (1) $64,988 $77,652
======== ========
_________
(1) As of December 31, 1998, none of the above real estate
mortgage notes were delinquent.
<PAGE> 8
Recreation Notes
At December 31, 1998, the Recreation Notes consisted of $24.9
million due from Hilcoast (the "Hilcoast Recreation Note" - see
Note 8(a) to Consolidated Financial Statements regarding Related
Party Transactions), principally collateralized by first
mortgages on the recreation facilities at the Century Village at
Pembroke Pines, Florida adult condominium project, and $40.1
million, collateralized by first mortgages on the recreation
facilities at the three previously completed Century Village
communities, including $10.7 million due from H. Irwin Levy (the
"Levy Note"), Chairman of the Board and a principal stockholder of
our company and Chairman of the Board, Chief Executive Officer and
a majority stockholder of Hilcoast.
The Hilcoast Recreation Note bears interest at 11% and through July
31, 1998, required monthly interest payments only. On July 31,
1998, the Hilcoast Recreation Note was converted to an 11%, fixed
rate, 25 year, self-amortizing loan providing for equal monthly
payments of principal and interest in the aggregate amount of $2.9
million per annum. This note may not be prepaid by Hilcoast
without a prepayment penalty.
The remaining $40.1 million of Recreation Notes generally arose
from our sale of the recreation facilities at the Century Village
adult condominium communities in West Palm Beach and Deerfield
Beach, Florida to unrelated parties in January 1982 and in Boca
Raton, Florida to Mr. Levy in December 1981. The terms of Mr.
Levy's acquisition of the recreation facilities, including the
terms and security of the Levy Note, were substantially the same as
the terms of the sales (negotiated independently) of the other two
recreation facilities. These notes principally consist of 30 year
non-recourse notes maturing in 2012, with interest rates averaging
13% (13.25% in the case of the Levy Note). Equal monthly self-amortizing
installments of principal and interest in the aggregate
amount of $6.5 million per annum are required, including $1.7
million from Mr. Levy. The Levy Note may not be prepaid;
prepayments on the other Recreation Notes generally are not
permitted until 2007. Since 1990, companies owned by Mr. Levy and
certain members of his family have leased, managed and operated the
recreation facilities at the Century Villages in West Palm Beach,
Deerfield Beach and Boca Raton, which are collateral for these
notes.
The Recreation Notes, excluding the Hilcoast Recreation Note, are
pledged as collateral for the CMO's issued by our company, which as
of December 31, 1998, had an outstanding balance of $30.5 million.
In March 1999, the Hilcoast Recreation Note was pledged as
collateral for future borrowings under an $18.5 million Promissory
Note as part of the our $100 million line of credit. See Item 7.
Management's Discussion and Analysis of Results of Operations and
Financial Condition - Liquidity and Capital Resources for
descriptions of the CMO's and line of credit.
<PAGE> 9
Investments in Unconsolidated Affiliates
Self Storage Warehouse Partnerships
We own 45%-50% general and limited partnership interests in three
partnerships whose principal assets consist of self-storage
warehouses located in southeast Florida, with an aggregate of
approximately 2,800 units and 320,000 square feet, managed by
independent parties. Our partners in these partnerships are
certain members of the Granados family. We have no financial
obligation with respect to such partnerships except under state
law, as general partners. We receive monthly distributions from
each of the partnerships based on cash flows.
Drexel
Effective December 31, 1997, we acquired an approximately 95%
economic interest in Drexel, which for over 25 years has been
engaged in the development, brokerage, construction, leasing and
management of real estate. In addition to managing our Real
Estate, Drexel currently manages eleven other properties located in
Pennsylvania and New Jersey, including one property under contract
to the OP for purchase. During 1998, management contracts for 15
additional properties were terminated, primarily as a result of
Drexel's decision to concentrate mainly on management, leasing and
renovation of our Real Estate. It is not contemplated that Drexel
will seek any additional third party management contracts in the
future. Currently, 99% of the voting stock of Drexel is
beneficially owned by Mr. Meshon and held in a voting trust and
100% of the non-voting stock is owned by the OP. Mr. Meshon
currently serves as President of Drexel.
Other Real Estate
We own certain real estate acquired by deed in lieu of foreclosure
and held for resale, principally consisting of three parcels of
unimproved commercial land, totaling 38 acres located in southeast
Florida, with a book value of $5.5 million at December 31, 1998,
net of a $2.4 million allowance for losses.
<PAGE> 10
Industry Factors
Ownership of commercial real estate involves risks arising from
changes in economic conditions generally and in the commercial real
estate market specifically, as well as risks which result from
property-specific factors such as the failure or inability to make
needed capital improvements, competition, reductions in revenue
arising from decreased occupancy or reductions in the level of
rents obtainable, and factors which increase the cost of operating,
financing and refinancing properties such as escalating interest
rates and wage rates, increased taxes, fuel costs and other
operating expenses and casualties. All of these kinds of risks can
result in reduced net operating revenues available for
distribution. Our ability to manage the properties effectively
notwithstanding such risks and economic conditions will affect the
funds available for distribution.
The results of operations of our company also depend upon the
availability of suitable opportunities for investment and
reinvestment of our funds and on the yields available from time to
time on real estate investments, which in turn depend to a large
extent on the type of investment involved, prevailing interest
rates, the nature and geographical location of the property,
competition and other factors, none of which can be predicted
with certainty. Our competitors for acceptable investments include
insurance companies, pension funds, and other REIT's which may have
investment objectives similar to ours and some of which may have
greater financial resources than ours. We are not aware of
statistics which would allow us to determine our position with
respect to all of our competitors in the commercial real estate
investment industry.
Relationship With Hilcoast/H. Irwin Levy
See Note 8 to Consolidated Financial Statements and Business - Real
Estate Mortgage Notes Receivable in connection with certain related
party transactions with H. Irwin Levy and Hilcoast, and with one of
our directors, Alan Shulman.
Employees
On December 31, 1998, we employed 96 persons, substantially all of
whom were employed by Drexel or a wholly-owned subsidiary of
Drexel.
Item 2. Properties
See Item 1. Business - Real Estate, Other Real Estate and
Investments in Unconsolidated Affiliates.
<PAGE> 11
Item 3. Legal Proceedings
TGI Development, Inc. ("TGI")
On October 9, 1989, TGI filed a complaint in the Circuit Court of
Palm Beach County against our company, Mr. Levy and certain
unrelated parties, alleging misrepresentations by the defendants in
connection with TGI's purchase and development of land from a
previous borrower of our company. The complaint, as subsequently
amended, consisted of claims of common law fraud and breach of
contract and sought compensatory damages of approximately $2
million in addition to punitive damages. During 1998, the parties
settled the litigation whereby we paid $200,000 to TGI and both
parties executed general releases.
Other
We are subject to various claims and complaints relative to our
business activities. In our opinion, the ultimate disposition of
these matters will not have a material adverse effect on our
financial position.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders during the
fourth quarter of 1998.
PART II
Item 5. Market for Our Common Stock
and Related Security Holders Matters
Our Common Stock is listed for trading on the New York Stock
Exchange under the symbol CVI. The following table sets forth the
high and low sales prices per share and the dividends per share
which we declared on the Common Stock, for each quarter during the
past two years.
<PAGE> 12
Market Price Range
------------------- Dividends
High Low Declared
1998 ---- --- ------------
First Quarter 15-1/4 13-1/4 $ .29
Second Quarter 14-5/16 13 .29
Third Quarter 13-5/8 12 .29
Fourth Quarter 13 11-1/2 .29
-----
$1.16
1997 =====
First Quarter 14 12-3/8 $ .29
Second Quarter 12-7/8 11-1/4 .29
Third Quarter 14 12-1/2 .29
Fourth Quarter 13-15/16 12-11/16 .29
-----
$1.16
=====
As of March 25, 1999 there were 7,966,621 shares of Common Stock
outstanding and approximately 1,800 holders of record of our stock.
CV Reit, through its wholly-owned subsidiary, Montgomery CV Realty
Trust (the "Trust"), indirectly owns 7,966,621 OP units
(representing 84.2% of the OP). The holders of substantially all
of the remaining 15.8%, or 1,495,736 OP units, have the right to
require the OP to redeem their OP units for cash at any time after
December 31, 1998. However, upon a holder giving notice of the
exercise of this right, the Trust has the right to acquire such
holder's OP units in exchange for cash or, if certain conditions
are satisfied, an equal number of shares of CV Reit's Common Stock.
We expect to continue to qualify as a REIT. A corporation which
qualifies as a REIT may, if it distributes at least 95% of ordinary
taxable income for a taxable year, deduct dividends paid to
stockholders with respect to such taxable year from taxable income.
A REIT is not required to distribute capital gain income but to the
extent it does not, it must pay the applicable capital gain income
tax unless it has ordinary losses to offset such capital gain
income. We have historically distributed to our stockholders
capital gain income arising from principal repayments on the
Recreation Notes (see Item 1. Business - Real Estate Mortgage Notes
Receivable) which are being reported on the installment method for
tax purposes. We intend to continue to distribute such capital
gain income in the future. Future distributions will be at the
discretion of the Board of Directors and will depend on our cash
flow, financial condition, capital requirements, the annual REIT
distribution requirements and such other factors as the Board deems
appropriate.
<PAGE> 13
Item 6. Selected Financial Data
(dollars in millions, except per share data)
Year Ended December 31,
-------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
Revenues:
Income producing
real estate $17.2 $ 2.7 $ 1.1 $ .7 $ .6
Mortgage notes
receivable 8.8 10.6 11.7 12.2 12.8
--------- --------- --------- --------- ---------
Total revenues $26.0 $13.3 $12.8 $12.9 $13.4
========= ========= ========= ========= =========
Income before income
taxes $8.8 $8.5 $9.4 $8.4 $6.3
========= ========= ========= ========= =========
Net income $15.9(b) $8.5 $9.6 $9.4 $6.3
========= ========= ========= ========= =========
Funds From Operations
(FFO) (a) $9.5 $9.1 $9.0 $8.7 $8.4
========= ========= ========= ========= =========
Per common share:
Net income, basic
and diluted $1.99 $1.07 $1.20 $1.18 $0.79
========= ========= ========= ========= =========
Dividends declared $1.16 $1.16 $1.14 $1.08 $1.08
========= ========= ========= ========= =========
Average shares
outstanding,
basic and diluted 7,966,621 7,966,621 7,966,621 7,966,621 7,966,621
========= ========= ========= ========= =========
At Year End:
Total assets $225.4 $171.9 $118.9 $120.0 $122.8
========= ========= ========= ========= =========
Borrowings $121.9 $66.3 $35.1 $37.1 $38.9
========= ========= ========= ========= =========
Stockholders' equity:
Total $79.6 $72.9 $73.7 $73.2 $72.4
========= ========= ========= ========= =========
Per common share $9.99 $9.16 $9.25 $9.19 $9.09
========= ========= ========= ========= =========
__________
(a) Please refer to Management's Discussion and Analysis of Results of
Operations and Financial Condition for a definition of FFO.
(b) Includes $7 million benefit arising from the reversal of deferred tax
liability - please refer to Note 9 to Consolidated Financial Statements.
<PAGE> 14
Item 7. Management's Discussion and Analysis of Results
of Operations and Financial Condition
Results of Operations
Net Income
1998 Compared to 1997
Net income for the year ended December 31, 1998 was $15,850,000 or
$1.99 per share compared to $8,515,000 or $1.07 per share for 1997.
During 1998, rent revenue, operating expenses, interest expense and
depreciation and amortization increased by $14,452,000, $4,314,000,
$5,049,000 and $2,298,000, respectively, primarily due to the
acquisition of ten commercial properties on December 31, 1997 (the
"1997 Acquisition") and seven additional shopping centers in 1998
(collectively the "Acquisitions"). The Company expects continued
increases in rent revenue, operating expenses, interest expense and
depreciation and amortization as we realize a full twelve months of
operations from our 1998 acquisitions.
Interest income decreased by $1,758,000 during 1998, primarily
attributable to an approximately $11.2 million reduction in the
average balance of the mortgage notes receivable. These notes
principally consisted of a line of credit and certain other loans
to Hilcoast which matured and were repaid during 1998. The average
interest rate on these notes approximated 10.9% and the repayments
as well as a substantial portion of our existing cash balances were
generally utilized to acquire shopping centers in 1998 or
reinvested in lower yielding short-term investments (averaging
approximately 5% during 1998), pending the completion of certain
planned acquisitions. The Company's remaining mortgage notes
receivable are long term and require self-amortizing payments
through 2023. Accordingly, interest income is anticipated to
continue to decrease, although to a lesser extent, due to scheduled
repayments.
General and administrative expenses increased by $1,039,000 during
1998, reflecting increases in personnel and other costs due to the
1997 Acquisitions, and in legal fees primarily in connection with
the TGI litigation which has been settled (see Note 7 to
Consolidated Financial Statements).
Net income for the year ended December 31, 1998 includes a
$2,347,000 gain on the sale of the Days Inn Motel on May 15, 1998
and a $7,041,000 deferred income tax benefit (see Note 9 to
Consolidated Financial Statements).
<PAGE> 15
1997 Compared to 1996
For the year ended December 31, 1997, net income was $8,515,000 or
$1.07 per share compared to $9,570,000 or $1.20 per share for 1996.
Net income for 1996 included a $906,000 reversal of previously
recorded losses, including $500,000 received from the settlement of
litigation in connection with a loan which had been written off and
reversals primarily related to a re-evaluation of the allowance for
losses associated with other real estate.
Interest income decreased by $1,083,000 during 1997, including a
$694,000 reduction attributable to an approximately $6 million
reduction in the average balance of the Hilcoast mortgage notes
receivable. The average interest rate on the mortgage notes repaid
approximated 12% and the repayments were generally reinvested in
lower yielding short-term investments (averaging approximately
5.55%). Interest income also decreased by $426,000 due to the
elimination of certain income producing assets utilized in the
acquisition of the Century Plaza shopping center ("Century Plaza")
on September 30, 1996, which decrease was more than offset by
higher net rental income (rent income less operating costs) from
Century Plaza as discussed below.
During 1997, rent income, operating expenses and depreciation and
amortization increased by $1,646,000, $525,000 and $171,000,
respectively, primarily due to the acquisition of Century Plaza.
General and administrative expenses decreased by $230,000 during
1997, reflecting reductions in personnel costs, professional fees
and insurance.
Funds From Operations
Funds From Operations ("FFO"), as defined by the National
Association of Real Estate Investment Trusts (NAREIT), consists of
net income (computed in accordance with generally accepted
accounting principles) before depreciation and amortization of real
property, certain non-recurring items, extraordinary items, gains
and losses on sales of real estate and income taxes.
For the years ended December 31, 1998, 1997 and 1996, FFO amounted
to $9,535,000, $9,088,000 and $8,956,000, respectively. The
following schedule reconciles FFO to net income for the years
presented (in thousands):
<PAGE> 16
1998 1997 1996
------- ------- -------
Net income $15,850 $ 8,515 $ 9,570
Minority interests in income of OP 1,855 - -
Deferred income tax benefit (7,041) - (121)
------- ------- -------
Income before minority interests
and deferred income tax benefit 10,664 8,515 9,570
Depreciation and amortization
of real property 2,702 398 238
Equity in depreciation and
amortization of real property
of unconsolidated affiliates 171 175 175
Gain on sale of real estate (2,347) - -
Non-recurring items, principally
settlement of litigation in
1998 and reversal of provision
for losses in 1996 300 - (906)
-------
FFO before minority interests $11,490
======= ------- -------
FFO after minority interests (a) $ 9,535 $ 9,088 $ 8,956
======= ======= =======
________
(a) Minority interests in OP averaged 17% in 1998. There were no
minority interests prior to December 31, 1997.
We believe that FFO is an appropriate measure of operating
performance because real estate depreciation and amortization
charges are not meaningful in evaluating the operating results of
our properties and certain non-recurring items, such as the gain on
the sale of real estate, deferred income tax benefit, reversal of
provision for losses and settlement of litigation, would distort
the comparative measurement of performance and are not relevant to
ongoing operations. However, FFO does not represent cash
generated from operating activities in accordance with generally
accepted accounting principles and should not be considered as an
alternative to either net income as a measure of our operating
performance or to cash flows from operating activities as an
indicator of liquidity or cash available to fund all cash flow
needs. In addition, since other REITs may not calculate FFO in the
same manner, FFO presented herein may not be comparable to that
reported by other REITs.
<PAGE> 17
Liquidity and Capital Resources
Consolidated Statements of Cash Flows
As of December 31, 1998, unrestricted cash and cash equivalents
decreased to $3.8 million from $12 million at December 31, 1997.
Net cash provided by operating activities, as reported in the
Consolidated Statements of Cash Flows, increased to $9.9 million in
1998 from $8.9 million in 1997 and $9.1 million in 1996. These
amounts generally reflect FFO and net changes in other assets and
liabilities.
Net cash used by investing activities amounted to $6.8 million in
1998 compared to net cash provided by investing activities of $7.8
million in 1997 and $1.8 million in 1996. The 1998 amounts
principally consist of $21.4 million of cash required in connection
with the acquisitions of seven shopping centers and $2.1 million of
capital improvements, partially offset by $12.7 million of net
collections on real estate mortgage notes receivable and $4.2
million received from the sale of real estate. The 1997 amounts
principally consist of $7.2 million of net collections on real
estate mortgage notes receivable and the maturity of $6.4 million
of short-term investments, partially offset by $5.6 million of cash
required in connection with the acquisition of nine shopping
centers and an office building on December 31, 1997. The 1996
amounts consist of $9.4 million of net collections on real estate
mortgage notes receivable, partially offset by a $6.4 million
increase in short-term investments and 1.2 million of cash required
in connection with the acquisition of Century Plaza.
Net cash used in financing activities amounted to $11.2 million in
1998 compared to $11.4 million in 1997 and $10.9 million in 1996.
The 1998 amounts consist of cash distributions amounting to $9.2
million to stockholders and $1.5 million to minority interests, and
$3.7 million for the redemption of approximately 300,000 OP units,
partially offset by $3.2 million of net borrowings. The 1997
amounts consist of $9.2 million of cash distributions to
stockholders and $2.2 million of repayments of borrowings. The
1996 amounts consist of $8.9 million of cash distributions to
stockholders and $2 million of repayments of borrowings. There
were no minority interests prior to December 31, 1997. Cash
dividends declared amounted to $1.16 per share in 1998 and 1997 and
$1.14 per share in 1996.
<PAGE> 18
Borrowings
At December 31, 1998, our borrowings increased to $121.9 million
from $66.3 million at December 31, 1997 as a result of the
acquisition of seven shopping centers during 1998. Scheduled
principal payments over the next five years are $70.3 million with
$51.6 million due thereafter.
Borrowings include $91.4 million, collateralized by a substantial
portion of our Real Estate, including $16.9 million under the Line
of Credit (see below). We expect to refinance certain of these
borrowings, at or prior to maturity, through new mortgage loans on
Real Estate including refinancing under the Line of Credit. The
ability to do so, however, is dependent upon various factors,
including the income level of the properties, interest rates and
credit conditions within the commercial real estate market.
Accordingly, there can be no assurance that such refinancings can
be achieved.
The remaining $30.5 million of borrowings consists of the CMO's
which are collateralized by $40.1 million of the Recreation Notes
and require self-amortizing principal and interest payments through
March 2007. During the term of the CMO's, the scheduled annual
debt service requirement approximates $5.2 million compared to
annual principal and interest payments scheduled to be received
under the related Recreation Notes of $6.5 million.
Effective March 31, 1998, we entered into an agreement with a
financial institution which provides us with a three year non-revolving
line of credit for up to $100 million (the "Line of
Credit"). Advances under the Line of Credit: (1) must be secured
by assets based on specified aggregate loan to value and debt
service coverage ratios, (2) bear interest at an annual rate of
one month LIBOR plus 1.75% and (3) may be drawn only during the
first two years of the credit facility and must be repaid by
certain dates during the third year. Additional provisions include
a 1% commitment fee, a minimum net worth covenant and cross-default
and cross-collateralization requirements. Advances under the Line
of Credit are used to fund acquisitions, expansions, renovations,
financing and refinancing of real estate, including reimbursement
of equity advances, and require certain performance covenants. As
of December 31, 1998, we had borrowed $16.9 million under the Line
of Credit. In March 1999, we pledged the Hilcoast Recreation Note
as collateral for future borrowings under an $18.5 million
Promissory Note as part of the Line of Credit.
<PAGE> 19
Capital Resources
Our operating funds are expected to be principally generated from
rent revenue from income producing properties and interest income
on the Long Term Recreation Notes. We believe that our operating
funds will be sufficient in the foreseeable future to fund
operating and administrative expenses, interest expense, recurring
capital expenditures and distributions to stockholders in
accordance with REIT requirements. Sources of capital for non-recurring
capital expenditures and scheduled principal payments,
including balloon payments, on outstanding borrowings are expected
to be obtained from property refinancings, scheduled principal
repayments on the Long Term Recreation Notes, sales of non-strategic other
real estate, the Line of Credit and/or potential
debt or equity financing in the public or private markets.
Acquisitions
During 1998, we acquired seven shopping centers for purchase prices
aggregating $74.6 million, including transaction costs, which
consisted of $21.4 million of cash and the incurrence or assumption
of $53.2 million of liabilities, principally mortgage debt.
In addition, in March 1999, we entered into conditional agreements
to acquire three shopping centers in Pennsylvania and New Jersey
for an aggregate purchase price of approximately $43 million. The
acquisitions are subject to due diligence and certain other
conditions and there can be no assurance that they will be
consummated. If consummated, we plan to finance substantially all
of the purchase prices.
We are also in various stages of negotiating acquisitions of
additional shopping centers. However, there is no assurance that
we will be able to complete any such acquisition. In the event
properties are acquired in the future, the OP may issue additional
OP units, pay cash, or a combination thereof. If cash payments are
required in excess of funds available under the Line of Credit, we
may be required to seek outside financing which may or may not be
available.
Our policy is to acquire additional properties only if they are
income producing and any proposed acquisition requires a resolution
by a majority of our Board of Directors that the acquisition will
not adversely affect our ability to pay a quarterly dividend of at
least 29 cents per share. Under the OP agreement, all of the
activities of the OP must generally be conducted with a view toward
enabling the OP to make quarterly distributions to all partners of
at least 29 cents per OP unit and such additional amount, if
required, to enable CV Reit to pay a regular quarterly dividend of
at least 29 cents per share to its stockholders. As of December
31, 1998, there were 1,495,736 OP units held by minority interests.
<PAGE> 20
Inflation
During recent years, the rate of inflation has remained at a low
level and had minimal impact on our operating results.
Most of the tenant leases contain provisions designed to lessen the
impact of inflation. These provisions include escalation clauses
which generally increase rental rates annually based on cost of
living indexes (or based on stated rental increases which are
currently higher than recent cost of living increases), and
percentage rentals based on tenants gross sales, which generally
increase as prices rise. Many of the leases are for terms of less
than ten years which increases our ability to replace those leases
which are below market rates with new leases at higher base and/or
percentage rentals. In addition, most of the leases require the
tenants to pay their proportionate share of increases in operating
expenses, including common area maintenance, real estate taxes and
insurance.
However, in the event of significant inflation, our operating
results could be adversely affected if general and administrative
expenses and interest expense increase at a rate higher than rent
income or if the increase in inflation exceeds rent increases for
certain tenant leases which provide for stated rent increases
(rather than based on cost of living indexes).
Year 2000 Issue
As many computer systems, software programs and other equipment
with embedded chips or processors (collectively, "Information
Systems") use only two digits rather than four to define the
applicable year, they may be unable to process accurately certain
data, during or after the year 2000. As a result, business and
governmental entities are at risk for possible miscalculations or
systems failures causing disruptions in their business operations.
This is commonly known as the Year 2000 ("Y2K") issue. The Y2K
issue concerns not only Information Systems used solely within a
company but also concerns third parties, such as customers, vendors
and creditors, using Information Systems that may interact with or
affect a company's operations.
<PAGE> 21
Our State of Readiness
We have implemented a Y2K readiness program with the objective of
having all of our significant Information Systems functioning
properly with respect to Y2K before January 1, 2000. The first
component of our readiness program was to identify our internal
Information Systems that are susceptible to system failures or
processing errors as a result of the Y2K issue. This effort is
substantially complete and any issues which arose have been
identified and corrected where necessary.
As to the second component of the Y2K readiness program, we intend
to identify our significant tenants, vendors and creditors that are
believed, at this time, to be critical to business operations
subsequent to January 1, 2000. We expect to reasonably ascertain
their respective stages of Y2K readiness through the use of
questionnaires, interviews, on-site visits and other available
means. We will take appropriate action based on those responses,
but there can be no assurance that the Information Systems provided
by or utilized by other companies which affect their operations
will be timely converted in such a way as to allow them to continue
normal business operations or furnish products, services or data to
us without disruption.
Risks
If needed remediations and conversions to the Information Systems
are not made on a timely basis by our materially-significant
customers or vendors, we could be affected by business disruption,
operational problems, financial loss, legal liability to third
parties and similar risks, any of which could have a material
adverse effect on our operations, liquidity or financial condition.
Factors which could cause material differences in results, many of
which are outside our control, include, but are not limited to, the
accuracy of representations by manufacturers of our Information
Systems that their products are Y2K complaint, the ability of our
tenants and vendors to identify and resolve their own Y2K issues
and our ability to respond to unforeseen Y2K complications.
Y2K Costs
Our total cost of these Y2K compliance activities has not been and
is not anticipated to be material to our business, results of
operations or financial condition. The costs and time necessary to
complete the Y2K modification and testing processes are based on
our best estimates, which were derived utilizing numerous
assumptions of future events including the continued availability
of certain resources, third party modification plans and other
factors. However, there can be no assurance that these estimates
will be achieved and actual results could differ from the
estimates. Our Y2K readiness program is an ongoing process and the
estimates of costs and completion dates for various components of
the Y2K readiness program described above are subject to change.
<PAGE> 22
Recently Issued Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No.133, "Accounting for
Derivative Instruments and Hedging Activities" (SFAS 133). SFAS
133 requires companies to recognize all derivative contracts as
either assets or liabilities in the balance sheet and to measure
them at fair value. SFAS 133 is effective for periods beginning
after June 15, 1999. The adoption of this pronouncement is not
expected to have a material impact on our financial statements or
disclosures.
Forward Looking Information: Certain Cautionary Statements
Certain statements contained in "Management's Discussion and
Analysis of Results of Operations and Financial Condition" and
elsewhere in this Form 10-K, that are not related to historical
results, are forward looking statements, such as anticipated
liquidity and capital resources, completion of potential
acquisitions and collectibility of real estate mortgage notes
receivable. The matters referred to in forward looking statements
are based on assumptions of future events which may not prove to be
accurate and which could be affected by the risks and uncertainties
involved in our business; accordingly, actual results may differ
materially from those projected and implied in the forward looking
statements. These risks and uncertainties include, but are not
limited to, the effect of conditions in the commercial real estate
market and the economy in general, the level and volatility of
interest rates, the impact of current or pending legislation and
regulation, as well as certain other risks described in the Form
10-K. Subsequent written and oral forward looking statements
attributable to our company or persons acting on its behalf are
expressly qualified in their entirety by cautionary statements in
this paragraph and elsewhere described in this Form 10-K and in
other reports we filed with the Securities and Exchange Commission.
<PAGE> 23
Item 8. Financial Statements and Supplementary Data
Table of Contents to Consolidated Financial Statements
Page
----
Report of Independent Certified Public Accountants 24
Consolidated Financial Statements:
Balance Sheets - December 31, 1998 and 1997 25
Statements of Income - Years Ended
December 31, 1998, 1997 and 1996 26
Statements of Stockholders' Equity - Years
Ended December 31, 1998, 1997 and 1996 27
Statements of Cash Flows - Years Ended
December 31, 1998, 1997 and 1996 28-29
Notes to Consolidated Financial Statements 30-44
Consolidated Financial Statements Schedules:
Schedule III - Real Estate and Accumulated 45-46
Depreciation
Schedule IV - Mortgage Loans on Real Estate 47
Schedules, other than that listed above, are omitted because they
are not required, or because the information required therein is
set forth in the consolidated financial statements or the notes
thereto.
<PAGE> 24
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of CV Reit, Inc.
West Palm Beach, Florida
We have audited the accompanying consolidated balance sheets of CV
Reit, Inc. and subsidiaries as of December 31, 1998 and 1997 and
the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended
December 31, 1998. We have also audited the schedules listed in
the accompanying index. These financial statements and the
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements and the schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements and schedule are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of CV Reit, Inc. and subsidiaries at December 31, 1998 and
1997, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles.
Also, in our opinion, the schedules present fairly, in all material
respects, the information set forth therein.
New York, New York BDO SEIDMAN, LLP
March 9, 1999
<PAGE> 25
CV REIT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
December 31,
-------------------
ASSETS 1998 1997
------ -------- --------
Real estate - income producing,
net of accumulated depreciation
(Notes 2, 3, 6 and 8):
Land $ 14,980 $ 7,556
Buildings 127,428 63,452
-------- --------
142,408 71,008
Real estate mortgage notes receivable
(Notes 4 and 8) 64,988 77,652
Investments in unconsolidated affiliates 3,323 3,284
Cash and cash equivalents (includes
$930 and $915 restricted) 4,775 12,869
Other real estate (net of allowance
for losses of $2,401) (Note 5) 5,463 5,451
Other 4,465 1,663
-------- --------
$225,422 $171,927
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Liabilities:
Borrowings (Notes 2 and 6) $121,933 $ 66,281
Accounts payable and other liabilities 6,282 4,443
Deferred income taxes (Note 9) - 7,041
-------- --------
Total liabilities 128,215 77,765
-------- --------
Minority interests in Operating
Partnership (Notes 2 and 13) 17,650 21,214
-------- --------
Commitments and contingencies (Notes 6 and 7)
Stockholders' equity (Note 12):
Common stock, $.01 par-shares authorized
20,000,000; outstanding 7,966,621 80 80
Additional paid-in capital 18,490 18,490
Retained earnings 60,987 54,378
-------- --------
Total stockholders' equity 79,557 72,948
-------- --------
$225,422 $171,927
======== ========
See accompanying notes to consolidated financial statements.
<PAGE> 26
CV REIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
Year Ended December 31,
---------------------------------
1998 1997 1996
--------- --------- ---------
Revenues:
Rent $ 17,155 $ 2,703 $ 1,057
Interest, principally from
mortgage notes (Notes 4,
8 and 10) 8,854 10,612 11,695
--------- --------- --------
26,009 13,315 12,752
--------- --------- --------
Expenses:
Interest (Note 6) 8,355 3,306 3,232
Operating 5,184 870 345
General and administrative 1,693 654 884
Depreciation and amortization 2,707 409 238
--------- --------- --------
17,939 5,239 4,699
--------- --------- --------
8,070 8,076 8,053
Equity in income of unconsolidated
affiliates 547 439 490
Gain on sale of real estate
(Note 3(d)) 2,347 - -
Non-recurring items, principally
settlement of litigation in 1998
and reversal of provision for
losses in 1996 (300) - 906
Minority interests in income of
Operating Partnership (1,855) - -
--------- --------- --------
Income before income tax benefit 8,809 8,515 9,449
Deferred income tax benefit (Note 9) (7,041) - (121)
--------- --------- --------
Net income $ 15,850 $ 8,515 $ 9,570
========= ========= ========
Per Common Share:
Net income, basic and diluted $ 1.99 $ 1.07 $ 1.20
========= ========= ========
Dividends declared $ 1.16 $ 1.16 $ 1.14
========= ========= ========
Average common shares outstanding,
basic and diluted 7,966,621 7,966,621 7,966,621
========= ========= =========
See accompanying notes to consolidated financial statements.
<PAGE> 27
CV REIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
Additional
Common Paid-in Retained
Stock Capital Earnings Total
------ ---------- -------- -------
Balance at December 31, 1995 80 18,490 54,616 $73,186
Net income for the year - - 9,570 9,570
Cash dividends declared - - (9,082) (9,082)
------ --------- -------- -------
Balance at December 31, 1996 80 18,490 55,104 73,674
Net income for the year - - 8,515 8,515
Cash dividends declared - - (9,241) (9,241)
------ --------- -------- -------
Balance at December 31, 1997 80 18,490 54,378 72,948
Net income for the year - - 15,850 15,850
Cash dividends declared - - (9,241) (9,241)
------ --------- -------- -------
Balance at December 31, 1998 $ 80 $18,490 $60,987 $79,557
====== ========= ======== =======
See accompanying notes to consolidated financial statements.
<PAGE> 28
CV REIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31,
-------------------------
1998 1997 1996
------- ------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $15,850 $8,515 $ 9,570
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,707 409 238
Equity in depreciation of unconsolidated
affiliates 171 175 175
Gain on sale of real estate (2,347) - -
Minority interests in income of
Operating Partnership 1,855 - -
Deferred income tax benefit (7,041) - (121)
Reversal of provision for losses, net - - (906)
Changes in assets and liabilities, net
of effects from acquisitions:
(Increase) decrease in other assets (2,069) 47 (51)
Increase (decrease) in accounts
payable and other liabilities 743 (242) 207
------- ------- -------
Net cash provided by operating activities 9,869 8,904 9,112
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of real estate (21,364) (5,577) (1,154)
Capital improvements (2,069) (59) (7)
Fundings on real estate mortgage notes (5,190) (16,112) (16,369)
Collections on real estate mortgage notes 17,854 23,268 25,732
Proceeds from the sale of real estate 4,151 - -
Purchase of short-term investments,
net of maturities - 6,436 (6,436)
Other (146) (162) (14)
------- ------- -------
Net cash (used) provided by
investing activities (6,764) 7,794 1,752
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 8,366 - -
Repayments of borrowings (5,196) (2,201) (2,010)
Cash dividends paid (9,249) (9,209) (8,937)
Distributions to minority interests (1,470) - -
Redemption of Operating Partnership units (3,665) - -
------- ------- -------
Net cash used in financing activities (11,214) (11,410) (10,947)
------- ------- -------
Net (decrease) increase in unrestricted
cash and cash equivalents (8,109) 5,288 (83)
Unrestricted cash and cash equivalents at
beginning of the period 11,954 6,666 6,749
------- ------- -------
Unrestricted cash and cash equivalents at
end of the period $ 3,845 $11,954 $ 6,666
======= ======= =======
<PAGE> 29
CV REIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(concluded)
Year Ended December 31,
-------------------------
1998 1997 1996
------- ------- -------
Supplemental disclosure of cash flow information:
Cash paid for interest $ 7,542 $ 3,296 $ 3,239
======= ======= =======
Acquisitions:
Fair value of assets acquired ($74,561)($61,711)($ 7,402)
Liabilities assumed 53,047 34,913 -
Reduction of mortgage notes receivable - - 6,248
Operating Partnership units issued 150 21,221 -
------- ------- -------
Cash paid for acquisitions, net of cash
acquired (Note 2) ($21,364)($ 5,577)($ 1,154)
======= ======= =======
See accompanying notes to consolidated financial statements.
<PAGE> 30
CV REIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies
Organization and Business
CV Reit, Inc. ("CV Reit") is a real estate investment trust
("REIT") which until December 31, 1997, was principally engaged in
investing in real estate mortgage notes. Effective December 31,
1997, CV Reit and its subsidiaries converted to an Umbrella
Partnership REIT (UPREIT) structure as part of a series of
transactions which closed on that date and which included the
following: (1) a newly created Operating Partnership, Montgomery
CV Realty L.P. (together with its wholly-owned subsidiary
hereinafter collectively referred to as the "OP"), acquired 100% of
the ownership interests in ten commercial properties, and an
approximately 95% economic interest in Drexel Realty, Inc.
("Drexel"), a real estate management and leasing company (Note 2)
and (2) CV Reit and its subsidiaries transferred substantially all
of their net assets (or the economic benefit thereof) to the OP.
As a result, CV Reit, through a wholly-owned subsidiary, indirectly
currently owns 84.2% of the OP, is the OP's sole general partner
and has become a self-administered, self-managed equity REIT.
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of CV Reit and all subsidiaries ("the Company"), including
the OP. The Company owns 99% of the non-voting common stock of,
and a 95% economic interest in Drexel, and owns 45%-50% interests
in certain real estate partnerships, which are accounted for on the
equity method. Significant intercompany accounts and transactions
have been eliminated in consolidation.
Real Estate - Income Producing ("Real Estate")
Real Estate, consisting of seventeen shopping centers and two
office buildings, is carried at cost, net of accumulated
depreciation, and is subject to operating leases. Depreciation is
provided over the estimated useful lives of the assets (7 to 40
years) on the straight-line method.
<PAGE> 31
The Company evaluates its long-lived assets, including its Real
Estate, for impairment based on the undiscounted future cash flows
of the asset. If a long-lived asset is identified as impaired, the
value of the asset must be reduced to its fair value.
Real Estate Mortgage Notes Receivable,
Other Real Estate and Allowance For Losses
Real estate mortgage notes receivable are carried at the lower of
cost or estimated net realizable value. Accrual of interest is
discontinued when management believes, after considering economic
and business conditions and collection efforts, that timely
collection is doubtful.
Other real estate principally consists of three parcels of
unimproved commercial land, totaling 38 acres located in southeast
Florida, acquired by deed in lieu of foreclosure and held for
resale. These properties are carried at the lower of cost (fair
value at date of acquisition) or fair value less selling costs.
Carrying costs and subsequent declines in net realizable value are
charged to operations as incurred.
The allowance for losses is established through a provision charged
to operations based upon an evaluation by management of its real
estate mortgage notes receivable and other real estate. In
evaluating possible losses, management takes into consideration
appropriate information which may include the borrower's cash flow
projections, historical operating results and financial strength,
pending sales, adverse conditions that may affect the borrower's
ability to repay, appraisals and current economic conditions.
Revenue Recognition
Rental income from tenants is generally recognized on a straight-line
basis over the term of the respective leases. Certain leases
provide for reimbursement to the Company of the tenants' share of
common area maintenance costs, insurance and real estate taxes
which are recorded on the accrual basis. Interest income is
recognized on the accrual basis.
Dividends and Income Taxes
The Company has elected to qualify as a REIT under the provisions
of Section 856-860 of the Internal Revenue Code. As a REIT, the
Company is required to distribute at least 95% of its ordinary
taxable income to stockholders and may deduct such distributions
from taxable income. A REIT is not required to distribute capital
gain income but to the extent it does not, it must pay the
applicable capital gain income tax unless it has ordinary losses to
offset such capital gain income.
<PAGE> 32
The federal income tax characteristics of dividends paid by the
Company consisted of:
1998 1997 1996
Ordinary income 65.4% 88.1% 91.9%
Capital gain distribution 34.6% 10.9% 8.1%
The Company accounts for income taxes based upon SFAS No.109
"Accounting for Income Taxes", which requires, among other things,
a liability approach to calculating deferred income taxes (Note 9).
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Net Income Per Common Share
Basic net income per common share is computed using net income
divided by the weighted average number of common shares
outstanding. Diluted net income per common share includes the
effect of potentially dilutive securities. During the years
presented, the Company had no dilutive securities since the
exercise price of all outstanding options exceeded the average
market price of the Company's common stock for the year,
accordingly, basic and diluted net income per share are identical.
Statements of Cash Flows
For financial statement purposes, the Company considers all highly
liquid investments with initial maturities of three months or less
to be cash equivalents.
Reclassifications
Certain 1997 and 1996 amounts have been reclassified to conform to
the 1998 financial statement presentation. These reclassifications
had no impact on operating results previously reported.
<PAGE> 33
New Pronouncements
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No.133, "Accounting for
Derivative Instruments and Hedging Activities" (SFAS 133). SFAS
133 requires companies to recognize all derivative contracts as
either assets or liabilities in the balance sheet and to measure
them at fair value. SFAS 133 is effective for periods beginning
after June 15, 1999. The adoption of this pronouncement is not
expected to have a material impact on our financial statements or
disclosures.
(2) Acquisitions
During 1998, the OP purchased seven shopping centers, aggregating
796,000 square feet, located in Pennsylvania and New Jersey. The
aggregate purchase prices amounted to $74.6 million, including
transaction costs, which consisted of $21.4 million of cash and the
incurrence or assumption of $53.2 million of liabilities,
principally mortgage debt.
On December 31, 1997, the OP completed the acquisition of nine
shopping centers and an office building from two separate groups,
the Montgomery Parties and the Levy Parties (Note 8), and an
approximately 95% economic interest in Drexel from Louis P. Meshon,
Sr. Effective December 31, 1997, Mr. Meshon became President,
Chief Executive Officer and a director of CV Reit. The purchase
price amounted to $61.7 million (net of cash acquired), consisting
of 1,787,010 OP units issued to the sellers, valued at $11.88 per
OP unit, or $21.2 million, based on the closing price of the
Company's common stock (into which the OP units were redeemable -
Note 13) on April 28, 1997, the date the acquisition was publicly
announced; the assumption of $34.9 million of liabilities,
principally mortgage indebtedness; and, cash in the amount of $5.6
million, including transaction costs.
All of the acquisitions were accounted for under the purchase
method; accordingly, the operating results of the net assets
acquired are included in the consolidated financial statements from
their respective purchase dates.
The following unaudited proforma data summarizes the consolidated
results of operations for the years indicated as if the
acquisitions had occurred as of the beginning of each year. The
proforma results do not purport to be indicative of the results of
operations which would have actually been reported had the
acquisitions been consummated on those dates, or which may be
reported in the future (in thousands, except per share data):
<PAGE> 34
1998 1997
------- -------
Revenues $30,116 $31,361
Net income before tax benefit $ 8,532 $ 6,814
Net income $15,573 $ 6,814
Net income per common share,
basic and diluted $1.95 $.86
In March 1999, the Company entered into conditional agreements to
acquire three shopping centers in Pennsylvania and New Jersey for
an aggregate purchase price of approximately $43 million. If
consummated, the Company plans to finance substantially all of the
purchase prices. The acquisitions are subject to due diligence and
certain other conditions and there can be no assurance that they
will be consummated.
(3) Real Estate
(a) Real Estate is located in Pennsylvania, New Jersey and Florida
and consists of (in thousands):
December 31,
---------------------
1998 1997
-------- -------
Shopping centers $140,212 $64,356
Office buildings 5,338 5,334
Motel (Note 3(d)) - 4,058
-------- -------
Totals 145,550 73,748
Less accumulated depreciation (3,142) (2,740)
-------- -------
Net Real Estate (Note 6) $142,408 $71,008
======== =======
(b) Real Estate is leased to tenants under leases expiring at
various dates through 2017, some of which contain renewal options
of up to 30 years. Most of the leases require fixed base rentals
payable monthly in advance; additional rental based on
reimbursements of common area maintenance, insurance and real
estate taxes and, in some leases, based on a percentage of tenants'
sales; and, rent increases based on cost-of-living indexes. As of
December 31, 1998, future minimum rental income under
noncancellable operating leases, excluding rentals from the
exercise of renewal options, is as follows (in thousands):
<PAGE> 35
Year ending December 31,
1999 $15,431
2000 14,087
2001 12,472
2002 9,994
2003 8,190
Thereafter 29,514
-------
Total $89,688
=======
(c) Real Estate with a net book value of $136.8 million, at
December 31, 1998, is pledged as collateral for borrowings (Note
6).
(d) On May 15, 1998, the Company sold the motel for net cash
proceeds of $4.2 million and recognized a gain of $2.3 million.
(4) Real Estate Mortgage Notes Receivable
(a) Real estate mortgage notes receivable are collateralized by
real estate located in southeast Florida and consist of (in
thousands):
December 31,
------------------
1998 1997
Long Term Recreation Notes (the ------- -------
"Recreation Notes") (Notes
4(b), 6 and 8) $64,963 $66,236
Other, principally due from
Hilcoast Development Corp.
("Hilcoast" - Note 8) 25 11,416
------- -------
Totals $64,988 $77,652
======= =======
The real estate mortgage notes at December 31, 1998 bear interest
at fixed rates and mature as follows:
One year or less $ 1,459
After one year through five years 8,614
After five years 54,915
-------
Totals $64,988
=======
<PAGE> 36
(b) At December 31, 1998, the Recreation Notes consisted of $24.9
million due from Hilcoast (the "Hilcoast Recreation Note"),
primarily collateralized by first mortgages on the recreation
facilities at the Century Village at Pembroke Pines, Florida adult
condominium project and $40.1 million, collateralized by first
mortgages on the recreation facilities at the three previously
completed Century Village communities. The Hilcoast Recreation
Note bears interest at 11% and through July 31, 1998, required
monthly interest payments only. On July 31, 1998, the Hilcoast
Recreation Note was converted to an 11%, fixed rate, 25 year,
self-amortizing loan providing for equal monthly payments of principal
and interest. This note may not be prepaid by Hilcoast without a
prepayment penalty. The remaining $40.1 million of Recreation
Notes principally provide for self-amortizing equal monthly
principal and interest payments due through 2012, with interest
rates averaging 13%, and contain certain prepayment prohibitions.
These notes are pledged as collateral for borrowings (Note 6).
(5) Allowance For Losses
Changes in the allowance for losses follow (in thousands):
1998 1997 1996
------ ------ ------
Balance, beginning of year $2,401 $2,401 $3,107
Reversal of provision for losses - - (1,163)
Charge-offs - - (43)
Recoveries - - 500
------ ------ ------
Balance, end of year $2,401 $2,401 $2,401
====== ====== ======
(6) Borrowings
(a) Borrowings consist of (in thousands):
December 31,
------------------
1998 1997
Mortgage notes payable through -------- --------
September 2008, interest
ranging from 6.85% to 10.25%,
collateralized by Real Estate
(Note 3) $ 74,528 $ 33,418
<PAGE> 37
Mortgage notes payable in December
2000, under $100 million credit
facility (the "Line of Credit"),
interest at one month LIBOR plus
1.75% (6.81% at December 31,
1998), collateralized by
Real Estate (Note 3) 16,950 -
Collateralized Mortgage Obligations,
net of unamortized discounts of
$553,000 and $676,000 based on
an effective interest rate of
8.84%, collateralized by certain
of the Recreation Notes (Note 4
(b)), quarterly self-amortizing
principal and interest payments
required through March 2007 30,455 32,863
-------- --------
Totals $121,933 $ 66,281
======== ========
(b) Effective March 31, 1998, the Company entered into the Line of
Credit with a financial institution which provides the Company with
a $100 million three year non-revolving line of credit. Advances
under the Line of Credit: (1) must be secured by assets based on
specified aggregate loan to value and debt service coverage ratios,
(2) bear interest at an annual rate of one month LIBOR plus 1.75%
and (3) may be drawn only during the first two years of the credit
facility and must be repaid by certain dates during the third year.
Additional provisions include a 1% commitment fee, a minimum net
worth covenant and cross-default and cross-collateralization
requirements. Advances under the Line of Credit are used to fund
acquisitions, expansions, renovations, financing and refinancing of
real estate, including reimbursement of equity advances, and
require certain performance covenants.
(c) The OP has agreed that it will not make certain prepayments or
refinancings of certain of the mortgage notes prior to various
dates not later than July 31, 2002, without the consent of certain
of the limited partners of the OP.
(d) Maturities of borrowings are as follows (in thousands):
1999 23,145
2000 20,625
2001 3,976
2002 4,237
2003 18,311
Thereafter 51,639
--------
Total $121,933
========
<PAGE> 38
(7) Contingencies
(a) TGI Development, Inc. ("TGI")
On October 9, 1989, TGI filed a complaint in the Circuit Court of
Palm Beach County against CV Reit, H. Irwin Levy, the Company's
Chairman of the Board and a principal stockholder, and certain
unrelated parties alleging misrepresentations by the defendants in
connection with TGI's purchase and development of land from a
previous borrower of the Company. The complaint, as subsequently
amended, consisted of claims of common law fraud and breach of
contract and sought compensatory damages of approximately $2
million in addition to punitive damages. During 1998, the parties
settled the litigation whereby the Company paid $200,000 to TGI and
both parties executed general releases.
(b) Other
The Company is subject to various claims and complaints relative to
its business activities. In the opinion of management, the
ultimate disposition of these matters will not have a material
adverse effect on the Company's financial position.
(8) Related Party Transactions
Hilcoast/H. Irwin Levy ("Mr. Levy")
(a) On July 31, 1992, Hilcoast, an affiliate of the Company on
that date, acquired certain assets from a previous borrower of the
Company, subject to the borrower's indebtedness to the Company,
principally consisting of the Hilcoast Recreation Note (Note 4(b)),
which as of December 31, 1998, had an outstanding balance of $24.9
million. Mr. Levy is the Chairman of the Board, Chief Executive
Officer and a majority stockholder of Hilcoast. During 1998, 1997
and 1996, the Company recognized interest income of $3.1 million,
$4.3 million and $5 million, respectively, from Hilcoast.
(b) Effective July 31, 1992, the Company and Hilcoast entered into
a consulting and advisory agreement under which Hilcoast provides
certain investment advisory, consulting and administrative services
to the Company, excluding matters related to Hilcoast's loans from
the Company. The agreement provides for the payment of $10,000 per
month to Hilcoast, plus reimbursement for reasonable out of pocket
expenses. The agreement may be terminated by Hilcoast upon 180
days notice and by the Company upon 30 days notice. During 1998,
1997 and 1996 the Company paid $110,000, $120,000, and $120,000,
respectively, to Hilcoast under this agreement, plus expense
reimbursement.
<PAGE> 39
(c) Mr. Levy owns the recreation facilities at the Century Village
in Boca Raton, acquired from the Company in 1981, which is
collateral for one of the Company's Recreation Notes, which had an
outstanding balance of $10.7 million at December 31, 1998 (Note
4(b)). The note bears interest at 13.25%, requires self-amortizing
equal monthly payments of principal and interest in the aggregate
amount of $1.7 million per annum through 2011 and may not be
prepaid. During 1998, 1997 and 1996, the Company recognized
interest income of approximately $1.4 million, $1.5 million and
$1.5 million, respectively, on this note.
(d) Companies owned by Mr. Levy and certain members of his family
lease, manage and operate the recreation facilities at the Century
Villages in West Palm Beach, Deerfield Beach and Boca Raton, which
are collateral for $40.1 million of the Company's Recreation Notes
(Note 4(b)).
(e) Two of the shopping centers purchased by the OP on December
31, 1997 (Note 2) were acquired from the Levy Parties (Mr. Levy and
members of his family) in exchange for 386,811 OP units (valued at
approximately $4.6 million), including 77,363 OP units (valued at
approximately $900,000) issued to Mr. Levy. The economic basis
used to determine the acquisition price was the same as that used
for the other properties acquired on that date.
(f) The Company leases approximately 2,500 square feet of an
office building, located within the Century Village at West Palm
Beach community, on a month to month basis, to a company owned by
Mr. Levy and a member of his family at a monthly rental of
approximately $2,100, plus an allocation of utility expenses.
Days Inn
On May 15, 1998, the Company sold its Days Inn motel, located near
the entrance to Century Village at West Palm Beach, Florida (Note
3(d)). The motel had been leased to a corporation controlled by
Alan Shulman, a director of the Company. In 1998, 1997 and 1996,
the Company recognized rent income of $223,000, $489,000 and
$454,000, respectively, under the lease.
(9) Deferred Income Taxes
(a) Net deferred tax liability included in the Company's
consolidated balance sheets prior to 1998 principally arose in
connection with capital gains on the sales of the recreation
facilities during 1981 and 1982 which are being reported on the
installment method for tax purposes. The Company has historically
distributed to its stockholders capital gain income arising from
principal payments on the related installment notes. As a result
of the acquisitions described in Note 2 and the OP structure, the
Company does not expect to be subject to federal income taxes in
the future as it intends to distribute such capital gain income.
Accordingly, during 1998, the Company reversed the net deferred tax
liability and recorded a deferred tax benefit of $7,041,000.
<PAGE> 40
(b) As of December 31, 1998, the Company has aggregate net
operating loss carryforwards for tax purposes of approximately
$15.7 million, expiring $7.1 million in 2007 and $8.6 million in
2006
(10) Major Customers
During 1998, interest income from one borrower (Hilcoast) provided
12% of total revenues. During 1997, interest income from four
borrowers provided 33% (Hilcoast), 16%, 14% and 11% (Mr. Levy),
respectively, of total revenues. During 1996, interest income from
four borrowers provided 39% (Hilcoast), 17%, 15% and 12% (Mr.
Levy), respectively, of total revenues.
(11) Fair Value of Financial Instruments
The estimated fair values of the Company's financial instruments
are as follows:
December 31,
-------------------------------------
1998 1997
------------------ ------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- -------- -------- --------
Real estate mortgage
notes receivable $ 64,988 $ 90,835 $77,652 $99,200
Cash and cash equivalents 4,775 4,775 12,869 12,869
Borrowings (121,933) (124,274) (66,281) (67,745)
Real estate mortgage notes receivable - The fair value of the
fixed rate, Long Term Recreation Notes (Note 4(b)) is estimated by
discounting the future cash flows using the current rates at which
similar loans would be made with similar credit ratings and for the
same remaining maturities.
Borrowings - Rates currently available to the Company for debt
with similar terms and remaining maturities are used to estimate
the fair value of the Company's borrowings.
<PAGE> 41
(12) Stockholders' Equity
Stock Options
The Company applies APB Opinion 25, "Accounting for Stock Issued to
Employees", and related interpretations in accounting for its three
stock option plans - the Montgomery CV Trust Executive Stock Option
Plan (the "CV Plan"), the Drexel Realty, Inc. 1997 Stock Option
Plan (the "Drexel Plan") and the CV Reit, Inc. Non-Employee
Director 1998 Stock Option Plan (the "Director Plan").
Under the CV Plan, the Drexel Plan and the Director Plan, qualified
and nonqualified stock options to purchase up to 150,000 shares,
400,000 shares and 150,000 shares, respectively, of the Company's
common stock may be granted to certain executives, employees and
non-employee directors. The maximum term of the options granted
under each of the plans are ten years.
Statement of Financial Accounting Standards No.123 (SFAS 123),
"Accounting for Stock-Based Compensation", requires the Company to
provide pro forma information regarding net income and net income
per common share as if compensation cost for stock options granted
under the plans, if applicable, had been determined in accordance
with the fair value based method prescribed in SFAS 123.
The Company estimates the fair value of each stock option at the
grant date by using the Black-Scholes option-pricing model with the
following weighted average assumptions used for grants: dividend
yield of 8.44%, volatility at 46%, risk free interest rate of 5.71%
and expected lives of ten years.
Under accounting provisions of SFAS 123 the Company's net income
per share, for the year ended December 31, 1998, would have been
reduced to the pro forma amounts indicated below (in thousands,
except per share data):
Net income:
As reported $15,850
Pro forma $15,515
Income per share:
As reported $1.99
Pro forma $1.95
<PAGE> 42
Changes in options outstanding are summarized as follows:
Weighted
Average
Weighted Fair
Average Value Per
Exercise Share of
Price per Options
Shares Share Granted
1997: ------- ---------- ----------
Granted - equal to
market value $13.69 150,000 $13.69 $2.95
1998:
Granted - equal to
market value: $13.69 95,000 $13.69 $2.91
$14.50 25,000 14.50 3.15
-------
Balance December 31, 1998 270,000 $13.76 $2.96
=======
At December 31, 1998, the weighted average remaining contractual
life of the 270,000 options outstanding was 7.36 years. A total of
84,000 of the outstanding options were exercisable with a weighted
- - average exercise price of $13.93 per share.
Redemption Rights
Holders of the 1,495,736 OP units at December 31, 1998 have the
right to require the OP to redeem their OP units at any time.
However, upon a holder giving notice of the exercise of this right,
the Company has the right to acquire such holder's OP units in
exchange for cash or, if certain conditions are satisfied, an equal
number of shares of the Company's common stock.
Effective July 1, 1998, the OP redeemed 302,552 OP units for
approximately $3.7 million, resulting in an increase in CV Reit's
indirect ownership of the OP from 81.7% to 84.2%.
(13) Segment Reporting
The Company has adopted Statement of Financial Accounting Standards
No.131, "Disclosures about Segments of an Enterprise and Related
Information", which requires disclosure of financial and
descriptive information about the Company's reportable operating
segments. The operating segments presented are the segments of the
Company for which separate financial information is available and
operating performance is evaluated regularly by senior management
in deciding how to allocate resources and in assessing performance.
The Company evaluates the performance of its operating segments
generally based on net operating income (before and after interest
expense) and Funds From Operations ("FFO" - see below).
<PAGE> 43
Effective December 31, 1997, the Company became an equity REIT
engaged in the acquisition, leasing and management of neighborhood
or community shopping centers, located in Pennsylvania, New Jersey
and Florida. Prior to 1998, the Company's only principal business
segment consisted of investments in real estate mortgage notes and
its ownership of income producing properties was not significant.
Accordingly, the following table presents segment information for
1998 only. Although the Company no longer invests in new real
estate mortgage notes, it continues to hold its Long-Term
Recreation Notes (Note 4(b)), and, as a result, the 1998 segment
disclosure includes information on those investments.
Income
Producing
Real Estate, Real
Principally Estate
Shopping Mortgage
Centers Notes Other Consolidated
--------- -------- ------ ------------
Rent revenues $ 16,853 $ - $ 302 $ 17,155
Operating expenses (4,985) - (199) (5,184)
-------- ------- ------ --------
Real estate net operating
income 11,868 - 103 11,971
-------- ------- ------ --------
Interest income - 8,471 383 8,854
Interest expense (5,528) (2,827) - (8,355)
-------- ------- ------ --------
Net interest income (expense) (5,528) 5,644 383 499
-------- ------- ------ --------
Net operating income after
interest expense 6,340 5,644 486 12,470
General, administrative
and other (26) - (954) (980)
-------- ------- ------ --------
FFO - OP (a) 6,314 5,644 (468) 11,490
Reconciliation of FFO to
income before income
tax benefit:
Depreciation and amorti-
zation of real property (2,668) - (205) (2,873)
Non-recurring items,
principally gain on
sale of real estate - - 2,047 2,047
-------- ------- ------ --------
Income before deferred
income tax benefit - OP $ 3,646 $ 5,644 $1,374 10,664
======== ======= ======
Less minority interests in OP (1,855)
--------
<PAGE> 44
Income before deferred income
tax benefit - consolidated $ 8,809
========
At December 31, 1998:
Investment in real estate
and real estate mortgage
notes $142,708 $64,988 $8,786 $216,482
======== ======= ====== ========
Additions to real estate $ 75,397 $ - $ - $ 75,397
======== ======= ====== ========
Borrowings $ 91,478 $30,455 $ - $121,933
======== ======= ====== ========
________
(a) Funds From Operations ("FFO"), as defined by the National Association of
Real Estate Investment Trusts (NAREIT), consists of net income (computed in
accordance with generally accepted accounting principles) before depreciation
and amortization of real property, certain non-recurring items, extraordinary
items, gains and losses on sales of real estate and income taxes.
(14) Selected Quarterly Financial Data (Unaudited)
Selected quarterly financial data follows (in thousands, except per
share data):
Quarter Ended
-----------------------------------------
Mar. 31, Jun. 30, Sept.30, Dec. 31,
-------- -------- -------- --------
1998
Revenues $5,248 $5,993 $7,226 $7,542
Net income 1,877 3,680(a) 1,556 8,737(b)
Per common share .24 .46 .20 1.09
1997
Revenues $3,237 $3,211 $3,197 $3,670
Net income 2,138 2,126 2,195 2,056
Per common share .27 .27 .28 .26
________
(a) Includes the Company's share of $2.3 million gain on sale of
real estate.
(b) Includes $7 million benefit arising from reversal of deferred
tax liability.
<PAGE> 45
<TABLE>
CV Reit, Inc. and Subsidiaries
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1998
(in thousands)
<CAPTION>
Costs Gross Amount at
Initaial Capitalized Which Carried at Depreciable
Cost to Company Subsequent to Close of Year Accumulated Date of Date Life
Description Encumbrances Land Building Acquisition Land Building Total Depreciation Construction Acquired (Years)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shopping Centers
Pennsylvania
Chesterbrook
Village Center $5,545 $1,337 $12,030 $93 $1,337 $12,123 $13,460 $313 1980 1997 40
Collegeville
Shopping Center 4,764 718 6,461 8 718 6,469 7,187 68 1978 1998 40
County Line
Plaza 5,133 539 4,852 1,806 539 6,658 7,197 197 1970 1997 40
Danville Plaza 867 156 1,400 33 156 1,433 1,589 36 1971 1997 40
Gilbertsville
Shopping Center 2,664 382 3,441 - 382 3,441 3,823 36 1974 1998 40
New Holland Plaza 952 117 1,051 - 117 1,051 1,168 11 1977 1998 40
Mount Carmel Plaza 838 210 1,892 - 210 1,892 2,102 47 1988 1997 40
North Penn
Marketplace 3,024 532 4,219 10 532 4,229 4,761 53 1983 1998 40
Route 6 Office
Max Center - 427 3,844 - 427 3,844 4,271 96 1972 1997 40
Village at
Newtown 19,753 2,766 24,893 - 2,766 24,893 27,659 467 1989 1998 40
Whitemarsh
Shopping Center 7,164 1,077 9,694 - 1,077 9,694 10,771 242 1969 1997 40
Woodbourne Square 1,993 427 3,840 - 427 3,840 4,267 96 1985 1997 40
555 Scott Street
Center - 74 662 - 74 662 736 17 1961 1997 40
New Jersey
Marlton Shopping
Center - Phase II 9,300(1) 1,252 11,272 25 1,252 11,297 12,549 143 1986 1998 40
Marlton Shopping
Center - Phase I 11,650 1,657 14,921 - 1,657 14,921 16,578 187 1985 1998 40
Rio Grande Plaza 7,835 1,442 12,975 - 1,442 12,975 14,417 324 1991 1997 40
Florida
Century Plaza 10,200(1) 1,429 5,973 275 1,429 6,248 7,677 433 1976 1996 15-39
Office Buildings
Century Village
Administration
Building, Florida - - 750 212 - 962 962 277 1970 1991 5-30
Plymouth Plaza,
Pennsylvania 2,346 438 3,938 - 438 3,938 4,376 99 1974 1997 40
------- ------- -------- ------ ------- -------- -------- ------
$94,028 $14,980 $128,108 $2,462 $14,980 $130,570 $145,550 $3,142
======= ======= ======== ====== ======= ======== ======== ======
(1) These encumbrances are cross collateralized under mortgages in
the amount of $19.5 million at December 31, 1998.
</TABLE>
<PAGE> 46
CV Reit, Inc. and Subsidiaries
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1998
(in thousands)
The changes in total real estate assets for the three years ended
December 31, 1998, are as follows:
1998 1997 1996
-------- ------- -------
Balance, beginning of year $73,748 $12,423 $5,014
New property acquisitions 73,881 61,266 7,402
Capital improvements 2,069 59 7
Sale of real estate (4,148) - -
-------- ------- -------
Balance, end of year $145,550 $73,748 $12,423
======== ======= =======
The changes in accumulated depreciation for the three years ended
December 31, 1998, are as follows:
1998 1997 1996
------ ------ ------
Balance, beginning of year $2,740 $2,359 $2,146
Depreciation for the year 2,656 381 213
Sale of real estate (2,254) - -
------ ------ ------
Balance, end of year $3,142 $2,740 $2,359
====== ====== ======
<PAGE> 47
<TABLE>
CV REIT, INC. AND SUBSIDIARIES
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
December 31, 1998
(dollars in thousands)
<CAPTION>
Carrying
Final Face amount of
Interest maturity amount of mortgages
Description Rate date Periodic payment terms mortgages (a)
- ----------------------- -------- -------- ---------------------- --------- ----------
<S> <C> <C> <C> <C> <C>
Permanent -
Recreation Facilities
Century Village at:
Boca Raton, FL 13.25% 12/31/11 Level P & I due monthly $12,533 $10,669
West Palm Beach, FL 13.25% 01/15/12 Level P & I due monthly 18,342 15,615
Deerfield Beach, FL
(2nd mortgage) 13.50% 01/15/12 Level P & I due monthly 13,235 11,318
Deerfield Beach, FL 8.84% 03/01/07 Level P & I due monthly 3,485 2,425
Pembroke Pines, FL 11% 07/31/23 Level P & I due monthly 25,000 24,936
-------
$64,963
Aggregate of mortgage loans
which individually
do not exceed 3% 15.00% 02/01/1025 25
-------
$64,988(b)
=======
Note: All loans are first mortgages except where noted, there are no prior liens
and no delinquent principal or interest.
(a) The tax carrying value of the notes is approximately $30 million.
(b) The changes in the carrying amounts are summarized as follows:
1998 1997 1996
------- ------- -------
Balance, beginning of period $77,652 $84,808 $99,919
Advances on new mortgage loans 5,190 16,112 16,369
Collections of principal (17,854) (23,268) (25,732)
Reduction of mortgage note in
connection with purchase of real estate - - (6,248)
Recoveries (charge-offs) - - 500
------- ------- -------
Balance, end of period $64,988 $77,652 $84,808
======= ======= =======
</TABLE>
<PAGE> 48
Item 9. Disagreement on Accounting
and Financial Disclosure
None
PART III
Information in response to Items 10, 11, 12 and 13 is not included in this
Report, since we anticipate filing prior to May 1, 1999, a definitive proxy
statement pursuant to Regulation 14A for our next annual meeting of
stockholders. Such definitive proxy statement is incorporated by reference
herein.
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K
(a) (1) List of Consolidated Financial Statements:
Report of Independent Certified Public Accountants
Consolidated Balance Sheets - December 31, 1998 and 1997
Consolidated Statements of Income - Years Ended
December 31, 1998, 1997 and 1996
Consolidated Statements of Stockholders' Equity - Years
Ended December 31, 1998, 1997, and 1996
Consolidated Statements of Cash Flows - Years Ended
December 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
(2) List of Consolidated Financial Statements Schedules:
Schedule III - Real Estate and Accumulated
Depreciation
Schedule IV - Mortgage Loans on Real Estate
(3) See Exhibit Index at page 49 of this Form 10-K
(b) Reports on Form 8-K:
No reports were filed by the Registrant on Form 8-K
during the fourth quarter of 1998.
<PAGE> 49
Exhibit
Number Description
3.1 Amended Certificate of Incorporation of CV Reit, Inc., filed with
Secretary of State of Delaware on December 31, 1997. (Incorporated
by reference to Appendix C to the proxy statement of the Company filed
November 11, 1997.)
3.2 Amended and Restated By-laws of CV Reit, Inc. (Incorporated by
reference to Appendix D to the proxy statement of the Company filed
November 11, 1997.)
10.1 Agreement between Cenvill Investors, Inc. and H. Irwin Levy, dated
December 31, 1981. (Incorporated by reference to Exhibit (2)(i) to
the current report on Form 8-K filed by the Company to report event of
December 31, 1981.)
10.2 Agreement of Lease between Cenvill Investors, Inc. and B.R.F., Inc.,
dated December 30, 1981. (Incorporated by reference to Exhibit (2)
(ii) to the current report on Form 8-K filed by the Company to report
event of December 31, 1981.)
10.3 Agreement dated January 15, 1982, between Century Village, Inc. and
Benenson Capital Company. (Incorporated by reference to Exhibit (2)
(i) to the current report on Form 8-K filed by Cenvill Investors, Inc.
(File No. 0-03427) to report event of January 15, 1982.)
10.4 Agreement dated January 15, 1982, between Century Village East, Inc.
and CVRF Deerfield Limited. (Incorporated by reference to exhibit
(2) (ii) to the current report on Form 8-K filed by Cenvill Investors,
Inc. (File No. 0-03427) to report event of January 15, 1982.)
10.5 Indenture for Collateralized Mortgage Obligations, dated as of
December 30, 1991 between Recreation Mortgages, Inc. (Issuer) and
Bankers Trust Company (Trustee). (Incorporated by reference to
Exhibit (10)(xvi) to the Annual Report on Form 10-K of the Company
for the fiscal year ended December 31, 1991.)
10.6 Restated Loan Agreement, dated July 31, 1992, between CV Reit, Inc.
and Cenvill Development Corp. and certain subsidiaries and affiliates
thereof. (Incorporated by reference to Exhibit (10)(xi) to the Annual
Report on Form 10-K of the Company for the fiscal year ended December
31, 1992.)
<PAGE> 50
10.7 Proposal for the Acquisition of Certain Assets, dated June 19, 1992,
by and among CV Reit, Inc., Cenvill Development Corp. and certain
subsidiaries and affiliates thereof. (Incorporated by reference to
Exhibit (10)(xiv) to the Annual Report on Form 10-K of the Company for
the fiscal year ended December 31, 1992.)
10.8 Order granting Motion of Debtor's [sic] for Approval of Sale of Assets
dated July 17, 1992. (Incorporated by reference to Exhibit (10)(xv)
to the Annual Report on Form 10-K of the Company for the fiscal year
ended December 31, 1992.)
10.9 Consulting and Advisory Agreement, dated July 31, 1992, between CV
Reit, Inc. and Hilcoast Development Corp. (Incorporated by reference
to Exhibit (10)(xviii) to the Annual Report on Form 10-K of the
Company for the fiscal year ended December 31, 1992.)
10.10 Letter Agreements, dated July 11, 1994 and August 3, 1995, between CV
Reit, Inc. and Hilcoast Advisory Services, Inc. extending the
Consulting and Advisory Agreement to July 31, 1995 and July 31, 1996,
respectively. (Incorporated by reference to Exhibit 10(vi) to the
Quarterly Report on Form 10-Q of the Company for the quarter ended
September 30, 1995.)
10.11 Letter Agreement, dated July 12, 1996, between CV Reit, Inc. and
Hilcoast Advisory Services, Inc. extending the Consulting and
Advisory Agreement to July 31, 1997. (Incorporated by reference to
Exhibit 10(i) to the Quarterly Report on Form 10-Q of the Company for
the quarter ended September 30, 1996.)
10.12 Letter agreement, dated June 10, 1997, between CV Reit, Inc. and
Hilcoast Advisory Services, Inc. extending the Consulting and Advisory
Agreement to December 31, 1997. (Incorporated by reference to Exhibit
10(i) to the Quarterly Report on Form 10-Q of the Company for the
quarter ended June 30,1997.)
10.13 Definitive Master Agreement, dated September 19, 1997, among CV Reit,
Inc., Montgomery CV Realty Trust, and Drexel Realty, Inc., Royce
Realty, Inc., Louis P. Meshon, Sr. and certain of the Meshon Parties
named therein and the Levy Parties named therein. (Incorporated by
reference to Appendix A to the Company's proxy statement filed on
November 11,1997.)
<PAGE> 51
10.14 Amended and Restated Agreement of Limited Partnership of Montgomery CV
Realty L.P. dated December 31, 1997. (Incorporated by reference to
Appendix B to the Company's proxy statement filed on November 11,
1997.)
10.15 Supplemental Indenture No. 2 for Collateralized Mortgage Obligations,
dated as of December 30, 1997 between Recreation Mortgages, L.P.,
(Issuer) and Bankers Trust Company (Trustee). (Incorporated by
reference to the Annual Report on Form 10-K of the Company for fiscal
year ended December 31, 1997.)
10.16 Real Estate Purchase Agreement dated September 29, 1997 by and between
Newtown Village Partnership and RCEK, Inc., or its nominee or
assignee. (Incorporated by reference to Exhibit 2.1 to the current
report on Form 8-K filed by CV Reit, Inc. on April 14, 1998.)
10.17 Letter Amendment to Real Estate Purchase Agreement dated December 15,
1997 by and between Newtown Village Partnership and RCEK, Inc.
(Incorporated by reference to Exhibit 2.2 to the current report on
Form 8-K filed by CV Reit, Inc. on April 14, 1998.)
10.18 Assignment of Real Estate Purchase Agreement dated January 26, 1998
from RCEK, Inc. to Newtown Village Plaza Associates, L.P.
(Incorporated by reference to Exhibit 2.3 to the current report on
Form 8-K filed by CV Reit, Inc. on April 14, 1998.)
10.19 Second Amendment to Real Estate Purchase Agreement dated February 5,
1998 by and between Newtown Village Partnership and Newtown Village
Plaza Associates, L.P. (Incorporated by reference to Exhibit 2.4 to
the current report on Form 8-K filed by CV Reit, Inc. on April 14,
1998.)
10.20 Third Amendment to Real Estate Purchase Agreement dated March 31, 1998
by and between Newtown Village Partnership and Newtown Village Plaza
Associates, L.P. (Incorporated by reference to Exhibit 2.5 to the
current report on Form 8-K filed by CV Reit, Inc. on April 14, 1998.)
10.21 Loan and Credit Facility Agreement dated as of March 31, 1998 by and
between Montgomery CV Realty L.P. as Borrower, Century Plaza
Associates, L.P. and CV Reit, Inc., as guarantors, and GMAC Commercial
Mortgage Corporation, as Lender. (Incorporated by reference to
Exhibit 5.1 to the current report on Form 8-K filed by CV Reit, Inc.
on April 15, 1998.)
<PAGE> 52
10.22 $7,650,000 Promissory Note dated as of April 9, 1998 from Montgomery
CV Realty L.P. to GMAC Commercial Mortgage Corporation. (Incorporated
by reference to Exhibit 5.2 to the current report on Form 8-K filed
by CV Reit, Inc. on April 15, 1998.)
10.23 Mortgage and Security Agreement dated as of April 9, 1998 by Century
Plaza Associates, L.P. to GMAC Commercial Mortgage Corporation.
(Incorporated by reference to Exhibit 5.3 to the current report on
Form 8-K filed by CV Reit, Inc. on April 15, 1998.)
10.24 Guaranty and Suretyship Agreement dated as of April 9, 1998 by CV
Reit, Inc. to GMAC Commercial Mortgage Corporation. (Incorporated by
reference to Exhibit 5.4 to the current report on Form 8-K filed by CV
Reit, Inc. on April 15, 1998.)
10.25 Contribution Agreement dated May 29, 1998 by and between Marlton
Crossing Shopping Center Limited Partnership and Montgomery CV Realty
L.P. (Incorporated by reference to Exhibit 2.1 to the current report
on Form 8-K dated June 24, 1998, filed by CV Reit, Inc. on July 7,
1998.)
10.26 Assignment and Assumption of Contribution Agreement dated June 22,
1998 by and between Montgomery CV Realty L.P. and Marlton Plaza
Associates II, L.P. (Incorporated by reference to Exhibit 2.2 to the
current report on Form 8-K dated June 24, 1998 filed by CV Reit, Inc.
on July 7, 1998.)
10.27 Mortgage and Security Agreement dated as of June 24, 1998 by and
between Marlton Plaza Associates II, L.P., as Borrower, and GMAC
Commercial Mortgage Corporation, as Lender. (Incorporated by
reference to Exhibit 2.3 to the current report on Form 8-K dated
June 24, 1998, filed by CV Reit, Inc. on July 7, 1998.)
10,28 $11,650,000 Promissory Note dated as of June 24, 1998 from Marlton
Plaza Associates II, L.P. to GMAC Commercial Mortgage Corporation.
(Incorporated by reference to Exhibit 2.4 to the current report on
Form 8-K dated June 24, 1998, filed by CV Reit, Inc. on July 7, 1998.)
10.29 Real Estate Purchase Agreement dated January 27, 1998 by and between
Seller and Purchaser. (Incorporated by reference to Exhibit 2.1 to
the current report on Form 8-K dated June 25, 1998, filed by CV Reit,
Inc. on July 7, 1998.)
<PAGE> 53
10.30 Amendment to Real Estate Purchaser Agreement dated February 26, 1998
by and between Seller and Purchaser. (Incorporated by reference to
Exhibit 2.2 to the current report on Form 8-K dated June 25, 1998,
filed by CV Reit, Inc. on July 7, 1998.)
10.31 Second Amendment to Real Estate Purchase Agreement dated March 31,
1998 by and between Seller and Purchaser. (Incorporated by reference
to Exhibit 2.3 to the current report on Form 8-K dated June 25, 1998,
filed by CV Reit, Inc. on July 7, 1998.)
10.32 Mortgage and Security Agreement dated as of June 25, 1998 by and
between Marlton Plaza Associates, L.P., as Borrower, and GMAC
Commercial Mortgage Corporation, as Lender. (Incorporated by
reference to Exhibit 2.4 to the current report on Form 8-K dated
June 25, 1998, filed by CV Reit, Inc. on July 7, 1998.)
10.33 $9,300,000 Promissory Note dated as of June 25, 1998 from Marlton
Plaza Associates, L.P. to GMAC Commercial Mortgage Corporation.
(Incorporated by reference to Exhibit 2.5 to the current report on
Form 8-K dated June 25, 1998, filed by CV Reit, Inc. on July 7, 1998.)
10.34 Guaranty and Suretyship Agreement dated as of June 25, 1998 by CV
Reit,Inc. to GMAC Commercial Mortgage Corporation. (Incorporated by
reference to Exhibit 2.6 to the current report on Form 8-K dated June
25, 1998, filed by CV Reit, Inc. on July 7, 1998.)
10.35 Guaranty and Suretyship Agreement dated as of June 25, 1998 by
Montgomery CV Realty L.P. to GMAC Commercial Mortgage Corporation.
(Incorporated by reference to Exhibit 2.7 to the current report on
Form 8-K dated June 25, 1998, filed by CV Reit, Inc. on July 7, 1998.)
10.36 Second Amendment to Loan and Credit Facility Agreement dated as of
March 8, 1999, by and between Montgomery CV Realty, L.P. as Borrower,
Century Plaza Associates, L.P. and CV Reit, Inc., as Guarantors, and
GMAC Commercial Mortgage Corporation as Lender.
10.37 $18,500,000 Note dated March 8, 1999 between Montgomery CV Realty,
L.P. as Borrower and GMAC Commercial Mortgage Corporation as Lender.
10.38 Collateral, Pledge, Assignment and Security Agreement, dated March 8,
1999 between Montgomery CV Realty, L.P. and GMAC Commercial Mortgage
Corporation.
<PAGE> 54
11 Statement regarding computation of per share earnings. Omitted;
computation can be clearly determined from material contained in the
report.
21 Subsidiaries of the Company.
27 Financial Data Schedule
SIGNATURES
Pursuant to the requirements of Section 13 and 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.
CV REIT, INC.
/s/ Elaine Hauff
March 29, 1999 By:__________________________________
Elaine Hauff, Vice President
and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
/s/ H. Irwin Levy
March 29, 1999 _________________________________
H. Irwin Levy, Chairman of the
Board of Directors
/s/ Louis P. Meshon
March 29, 1999 _________________________________
Louis P. Meshon, President and
Director
/s/ Elaine Hauff
March 29, 1999 _________________________________
Elaine Hauff, Vice President,
and Treasurer (Principal
Financial Officer and
Principal Accounting Officer)
/s/ Stanley Brenner
March 29, 1999 _________________________________
Stanley Brenner, Director
/s/ Stanley S. Cohen
March 29, 1999 _________________________________
Stanley S. Cohen, Director
/s/ Allyn Levy
March 29, 1999 _________________________________
Allyn Levy, Director
/s/ Alan L. Shulman
March 29, 1999 ________________________________
Alan L. Shulman, Director
/s/ Milton S. Schneider
March 29, 1999 ________________________________
Milton S. Schneider, Director
EXHIBIT 10.36
SECOND AMENDMENT TO LOAN AND CREDIT FACILITY AGREEMENT
by and between
MONTGOMERY CV REALTY L.P.
(Borrower),
CENTURY PLAZA ASSOCIATES, L.P.,
MARLTON PLAZA ASSOCIATES, L.P.
and
CV REIT, INC.
(Guarantors)
and
GMAC COMMERCIAL MORTGAGE CORPORATION
(Lender)
Date: March 8, 1999
SECOND AMENDMENT TO LOAN AND CREDIT FACILITY AGREEMENT
THIS SECOND AMENDMENT TO LOAN AND CREDIT FACILITY AGREEMENT (this
"Amendment") is made as of the 8th day of March, 1999, by and
between MONTGOMERY CV REALTY L.P., a Delaware limited partnership
("Borrower"), CENTURY PLAZA ASSOCIATES, L.P., a Delaware limited
partnership ("Century"), MARLTON PLAZA ASSOCIATES, L.P., a
Delaware limited partnership ("Marlton"), and CV REIT, INC., a
Delaware corporation ("CV") (each, a "Guarantor" and
collectively, "Guarantors") and GMAC COMMERCIAL MORTGAGE
CORPORATION, a California corporation ("Lender").
PRELIMINARY STATEMENTS
A. Borrower, Century, CV and Lender entered into a Loan and
Credit Facility Agreement dated March 31, 1998, amended June
25, 1998 (the "Agreement") pursuant to which Lender agreed,
upon the terms and subject to the conditions set forth
therein and in other Facility Loan Documents (as such term
is defined in the Agreement), to make advances (each
advance, a "Loan", as more particularly described in the
Agreement) to Borrower in an aggregate maximum outstanding
principal amount of One Hundred Million Dollars
($100,000,000), and Borrower agreed to pay the amounts due
thereunder and otherwise comply with the terms and
conditions of the Agreement and of each Loan.
B. Borrower has requested that Lender make a Loan to Borrower
pursuant to the Agreement in an amount not to exceed
$18,500,000, which such Loan shall be secured by Borrower's
pledge of all its right, title and interest in a certain
note receivable, which such note receivable is secured by
certain real property in the County of Broward, State of
Florida, all as more particularly described herein.
C. All terms not otherwise defined herein shall have the
meanings ascribed to them in the Agreement.
NOW THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties agree as follows:
1. The List of Loan Schedules shall be replaced with that set
forth on Exhibit "A" attached hereto and made a part hereof.
2. Schedule 3-1 shall be added to the Agreement as set forth on
Exhibit "B" attached hereto and made a part hereof, and such Loan
shall be referred to herein as the "Pembroke Note Advance". The
note receivable pledged to Lender as collateral for the Pembroke
Note Advance is referred to herein as the "Pembroke Note
Receivable"
3. Section 2.9 is amended and restated in its entirety as
follows:
2.9 Funding of Facility.
(a) Advances. Each Loan under this Agreement shall be a
minimum amount of one million dollars ($1,000,000) with
any additional amounts of such Loan in fifty thousand
dollar ($50,000) increments. No Loan under this
Agreement shall be permitted after the twenty-fourth
(24th) month after the date of this Agreement.
(b) Maximum Outstanding Facility Amount/Loan Amount.
I. The Maximum Outstanding Facility Amount shall not exceed the
sum of the following:
A. In the case of Loans which are secured by
mortgages on real estate, seventy-five (75%)
percent of the Appraised Value (as hereinafter
defined) of the Projects which are collateral for
the Loans;
B. In the case of the Pembroke Note Advance, the
lesser of (i) $18,500,000; (ii) 75 percent of the
Adjusted Principal Balance (as hereinafter
defined) only in the event any Voluntary
Prepayments (as hereinafter defined) are made
under the Pembroke Note Receivable; or (iii) 75
percent of the Mark-to-Market Value of the
Pembroke Note Receivable (as hereinafter defined);
and
C. One hundred (100%) percent of the Reserves and the
Insurance Reserve.
II. Lender reserves the right to perform periodic re-valuations
of the Pembroke Note Receivable at any time at its
discretion (the "Mark-to-Market Value"). Initially, Lender
will value the Pembroke Note Receivable utilizing a discount
rate equal to 350 basis points above the 30 year Treasury
Note Rate, and the initial appraised value at the time of
this Amendment is $28,516,000. However, Lender reserves the
right to modify the mark-to-market discount rate at its sole
discretion based upon market conditions and other criteria,
at any time, as it deems prudent; but in no event shall the
mark-to-market discount rate utilized by Lender herein at
anytime be less than 9 percent. As used in this section 2.9,
Adjusted Principal Balance shall mean $24,475,000, less
Voluntary Prepayments under the Pembroke Note Receivable.
"Voluntary Prepayments" shall mean any payments which reduce
the amount of principal due and owing under the Pembroke
Note Receivable other than through regularly scheduled
payments of principal and interest in accordance with the
terms therein.
III. Provided the Loan Criteria in Section 3.1 are met and the
Maximum Outstanding Facility Amount is not exceeded, for
Newly Acquired Projects, each Loan shall not exceed the
higher of (i) seventy-five (75%) percent of the Appraised
Value, or (ii) one hundred (100%) percent of the Total
Acquisition Costs.
(c) Debt Service Coverage/Outstanding Facility Amount. The
minimum Debt Service Coverage Ratio for the Outstanding
Facility Amount shall be 1.30. The Debt Service
Coverage Ratio will be recalculated quarterly or upon
the making of any Loan utilizing the average interest
rate of the daily closing yield of the benchmark
10-year Treasury Note as published by the Wall Street
Journal for the preceding three months, plus 175 basis
points using a 30-year amortization schedule.
4. Section 3.1(a) is amended and restated as follows:
Debt Service Coverage.
(i) The minimum Debt Service Coverage Ratio for the
Outstanding Facility Amount shall be 1.30, as set forth
in Section 2.9 hereof.
(ii) The minimum Debt Service Coverage Ratio for each
Project for which a Loan is made under this Agreement,
other than the Pembroke Note Advance, shall be 1.20.
(iii) With respect to the Pembroke Note Advance, theowners
("Pembroke Owners") of the property ("Recreation
Mortgaged Property") securing the Pembroke Note
Receivable shall at all times maintain a minimum Lease
Debt Service Coverage Ratio of 1.25. For purposes
hereof, the Lease Debt Service Coverage Ratio shall
mean a ratio derived by dividing the Net Unit Lease
Income for a trailing twelve (12) month period by the
debt service on the Note Receivable for that twelve
(12) month period. Net Unit Lease Income shall mean
the gross proceeds arising from the operations of the
Pembroke Owners, including revenues from unit leases,
social programs and miscellaneous income, less the
Operating Expenses incurred in connection therewith.
Operating Expenses shall mean all expenses annually
incurred by Pembroke Owners with respect to the
ownership, operation, maintenance, repair, leasing and
occupancy of the Recreation Mortgaged Property,
including, but not limited to real estate taxes,
special assessments or similar charges, personal
property taxes, costs of utilities, non-capital
maintenance and repair costs, operating and management
fees, insurance, and all other costs incurred in
connection with leasing commissions and advertising and
professional and administrative general expenses.
Borrower and/or Pembroke Owners shall calculate and
certify (by authorized officer) to Lender on a
quarterly basis the Lease Debt Service Coverage Ratio
for that quarter, which shall be subject to Lender's
review and approval.
5. Article 3 is amended by adding the following section:
3.5 Conditions to Funding Advances under any Loan.
The following shall be conditions precedent to any disbursement
by Lender of any portion of any Loan to Borrower or any Affiliate
(any "Advance") if such Advance is
(i) not made in connection with Borrower or any Affiliate
providing new security or collateral for such Advance; and
(ii) made subsequent to the date of the closing of such
Loan, and provided that all of the conditions set forth in
Sections 3.2 and 3.3 hereof have previously been satisfied with
respect to such Loan (for purposes of this section 3.5, the
closing of any such Loan shall be deemed to be the date of the
Title Insurance Policy for such Loan):
(a) Borrower shall provide to Lender, with respect to all
real property securing the Loan pursuant to which an Advance is
requested, an updated title report, revealing no other liens or
encumbrances other than the exceptions set forth on the Title
Insurance Policy for such Loan, along with such endorsements to
the Title Insurance Policy as Lender shall require to ensure that
the Title Insurance Policy insures the Lender's Mortgage for such
Loan as a first lien on such property to the full extent of the
amount of the Loan disbursed. Notwithstanding the foregoing,
Borrower shall not be required to provide updated title searches
or endorsements with respect to the real property that is
security for the Pembroke Note Receivable.
(b) Borrower shall pay all reasonable fees of Lender in
connection with such Advance, including but not limited to title
search and endorsement fees and reasonable legal fees of Lender's
counsel.
(c) Borrower shall execute a certificate which shall
certify to Lender that:
(i) There exists no Event of Default under any Loan
and there exists no state of facts or circumstances, which with
the passage of time would result in an Event of Default under any
Loan;
(ii) Each Project is in compliance with all
Governmental Requirements, and Borrower and its Affiliates have
received no notices from any governmental entity or any other
party that Borrower or any Affiliate is or may be in violation of
any Governmental Requirements;
(iii) There have been no material changes to the
conditions at any property of Borrower or any Affiliate since the
delivery by Borrower of required engineering and environmental
reports for such property;
(iv) All management agreements for all Projects are
in full force and effect;
(v) All representations and warranties made by
Borrower or any Affiliate in this Agreement or any document
executed in connection with any Loan remain true and are
reaffirmed;
(vi) There has been no material adverse change in the
financial position of Borrower or any Affiliate;
(vii) Borrower and any applicable Affiliate is in
compliance with all of the covenants contained in this Agreement,
including but not limited to the affirmative covenants contained
in Article 4 and the negative covenants contained in Article 5.
Borrower shall attach as an exhibit to such certificate all
calculations necessary to show that Borrower and such affiliates
are in compliance with all the financial covenants of this
Agreement, including but not limited to Debt Service Coverage
Ratios and Loan to Value Ratios.
(d) At Lender's option, all Advances will be disbursed
through the title company insuring Lender's title to the
Projects.
6. Article 4 is amended by adding the following section:
4.15 Borrower's Requirements to Post Cash or Collateral if
Maximum Availability under Pembroke Note Advance is
Exceeded. In the event that the aggregate amount of
the Pembroke Note Advance outstanding exceeds the
maximum allowable availability as set forth in Section
2.9(b)I.B. hereof, then Borrower shall be required to
either pay down the Pembroke Note Advance or provide
cash or pledge other collateral acceptable to Lender to
bring the Pembroke Note Advance outstanding balance
into compliance with the maximum Pembroke Note Advance
amount.
7. The following is added to Section 4.4 of the Agreement
Financial Reporting with respect to Pembroke Note Advance:
(i) Borrower and Pembroke Owners shall, within forty-five
(45) days of the end of each calender quarter, certify to Lender
the outstanding principal balance of the Pembroke Note
Receivable, verify all payments made thereunder through that
calendar quarter and certify to Lender the payment status of real
property taxes, assessments and insurance with respect to the
Recreation Mortgaged Property.
(ii) Borrower and Pembroke Owners shall notify Lender in
writing, within 3 business days of knowledge thereof, of any
pending, contemplated or actual receipt of any prepayment or
premium made in connection with the Pembroke Note Receivable.
(iii) Borrower and Pembroke Owners shall, within forty-five
(45) days of each calendar quarter, certify to Lender the rents
paid under the unit leases for the Recreation Mortgaged Property
("Unit Leases") for said quarter, and shall determine and provide
to Lender the delinquency rate (in terms of dollars and number of
tenants) of payments under the Unit Leases. For purposes of this
certification, lease payments shall be deemed delinquent if made
thirty (30) days after the actual due date thereof. Lender
reserves the right to receive all supporting detail and
documentation, including a list of all tenants in arrears, amount
of delinquency, etc. in connection with said certification.
(i) Pembroke Owners shall, within forty-five (45) days of
the end of each calendar quarter, provide to Lender
financial statements, certified by an authorized
officer, including a balance sheet and operating
statements.
Audits: Lender shall have the right at any time and from time to
time, to audit the books and records of Borrower and Pembroke
Owners at Lender's sole cost and expense. However, such audit
shall be at the cost of Borrower in the event of any of the
following: (i) a material adverse change, in Lender's sole
determination, in the financial condition of Borrower, Pembroke
Owners or the Recreation Mortgaged Property; (ii) any default
under the Pembroke Note Advance; (iii) any Change in Management
or Change in Control of Borrower; or (iv) any default under any
the loan documents made in connection with the Pembroke Note
Receivable.
8. Section 8.1 is amended by adding the following subsections:
(l) A default by Borrower or any Affiliate pursuant to any
of the loan documents executed in connection with any
Loan.
(m) A default by Pembroke Owners under the Pembroke Note
Receivable or a default under the mortgage on the
Recreation Mortgaged Property which secures the
Pembroke Note Receivable, following all applicable cure
periods.
9. Section 8.2 is amended by adding the following subsection:
(a) An Event of Default under this Agreement or under any
Loan shall be an Event of Default under each and every
Loan. Notwithstanding the foregoing, the Mortgage and
Security Agreement from Century Plaza Associates, L.P.
listed as item No. 5 on Schedule 1-1 shall secure only
the note listed as No. 2 on said Schedule 1-1.
10. Section 10.9 is amended and restated as follows:
10.9 Waiver of Jury Trial. BORROWER AND LENDER WAIVE ALL
RIGHTS TO TRIAL BY JURY OF ANY AND ALL CLAIMS,
COUNTERCLAIMS, AND DEFENSES ARISING UNDER THIS
AGREEMENT, THE NOTES, THE OTHER FACILITY LOAN
DOCUMENTS, OR ANY OTHER AGREEMENT OR AGREEMENTS BETWEEN
BORROWER AND LENDER AT ANY TIME, INCLUDING ANY SUCH
AGREEMENTS, WHETHER WRITTEN OR ORAL, MADE OR ALLEGED TO
HAVE BEEN MADE AT ANY TIME PRIOR TO THE DATE HEREOF,
AND ALL AGREEMENTS MADE HEREAFTER OR OTHERWISE. IN
MAKING THIS WAIVER BORROWER AND LENDER ACKNOWLEDGE AND
AGREE THAT ANY AND ALL SUCH CLAIMS, COUNTERCLAIMS, AND
DEFENSES SHALL BE HEARD BY A JUDGE OF A COURT OF
COMPETENT JURISDICTION, WITHOUT A JURY. BORROWER
AND LENDER ACKNOWLEDGE AND AGREE THAT THIS WAIVER OF
TRIAL BY JURY IS A MATERIAL ELEMENT OF THE
CONSIDERATION FOR THIS AGREEMENT. BORROWER AND LENDER
ACKNOWLEDGE THAT THIS IS A WAIVER OF A LEGAL RIGHT AND
THAT THIS WAIVER IS MADE KNOWINGLY AND VOLUNTARILY
AFTER CONSULTATION WITH, OR THE OPPORTUNITY TO CONSULT
WITH, COUNSEL OF ITS CHOICE.
11. Except as expressly amended hereby, the terms and conditions
of the Agreement shall remain unchanged and in full force and
effect, and the parties hereto hereby ratify and confirm the
terms and conditions of the Agreement, as amended hereby.
IN WITNESS WHEREOF, and intending to be legally bound hereby,
Borrower, Guarantors and Lender have executed this Amendment
under seal as of the day and year first above written.
BORROWER:
MONTGOMERY CV REALTY L.P.
By: Montgomery CV Realty Trust, a Delaware business trust,
its sole general partner
/s/ Louis P. Meshon
By:___________________________
Louis P. Meshon, Sr.
President
GUARANTORS:
CENTURY PLAZA ASSOCIATES, L.P.
By: CP General Partner LLC, a Delaware limited liability
company, its sole general partner
By: Montgomery CV Realty L.P., a Delaware limited
partnership, its sole member
By: Montgomery CV Realty Trust, a Delaware business trust,
its sole general partner
/s/ Louis P. Meshon
By: ________________________
Louis P. Meshon, Sr.
President
CV REIT, INC.
/s/ Louis P. Meshon
By:_______________________________
Louis P. Meshon, Sr., President
LENDER:
GMAC COMMERCIAL MORTGAGE CORPORATION, a California corporation
By:___________________________________
Name:
Title:
GUARANTOR:
MARLTON PLAZA ASSOCIATES, L.P.
By: Marlton Plaza, LLC, a Delaware limited liability company,
its sole general partner
By: Montgomery CV Realty L.P., a Delaware limited
partnership, its sole member
By: Montgomery CV Realty Trust, a Delaware business
trust, its sole general partner
/s/ Jeni Fischer /s/ Louis P. Meshon
Witness: __________________ By: ___________________________
Name: Jeni Fischer Louis P. Meshon, Sr.
President
Exhibit "A"
to Amendment to Loan and Credit Facility Agreement Dated March
31, 1998
LIST OF LOAN SCHEDULES
1-1 Century Plaza, Deerfield Beach, Florida
2-1 Marlton Crossing Shopping Center--Phase II, Evesham, New
Jersey
3-1 Assignment of Note secured by Pembroke Pines properties
Exhibit "B"
to Amendment to Loan and Credit Facility Agreement Dated March
31, 1998
Schedule 3-1
[ASSIGNMENT OF NOTE SECURED BY PEMBROKE PINES PROPERTIES]
Location:
Amount of Loan: $ 18,500,000.00
Repair Reserve: $ 0
Replacement Reserve: $ 0
TI/Leasing Commissions
Reserve: $ 0
Insurance Escrow: None from Borrower to Lender
Tax Escrow: None from Borrower to Lender
Facility Loan Documents:
1. Loan and Credit Facility Agreement (Montgomery CV Realty
L.P., Century Plaza Associates, L.P., CV Reit, Inc. and GMAC
Commercial Mortgage Corporation)
2. Amendment to Loan and Credit Facility Agreement Dated March
31, 1998 (Montgomery CV Realty L.P., Century Plaza
Associates, L.P., CV Reit, Inc. and GMAC Commercial Mortgage
Corporation) dated June 24, 1998
3. Second Amendment to Loan and Credit Facility Agreement
(Montgomery CV Realty L.P., Century Plaza Associates, L.P.,
CV Reit, Inc. and GMAC Commercial Mortgage Corporation) dated
March 8, 1999
4. Promissory Note ($18,500,000) from Montgomery CV Realty L.P.
to Lender
5. Allonge to Pledged Note
6. Collateral Pledge, Assignment and Security Agreement
7. UCC-1 Financing Statements
8, Assignment of Mortgage and Security Agreements
9. UCC-3 Financing Statements
10. Assignment of Assignment of Leases and Rents
11. Assignment Regarding Management Agreement and Subordination
of Management Fees
12. Guaranty and Suretyship Agreement of Marlton Plaza
Associates, L.P.
13. Guaranty and Suretyship Agreement of CV Reit, Inc.
14. Certification of Borrower and Affiliates
15. Assignment of Lockbox Contract
16. Certificate of GP of Montgomery CV Realty L.P.
17. Certificate of GP of Century Plaza Associates, L.P.
18. Certificate of CV Reit, Inc.
19. Certification of GP of Marlton Plaza Associates, L.P.
20. Funding Escrow Agreement
21. Owners' Estoppel and Recognition Agreement to Lender
EXHIBIT 10.37
NOTE
$18,500,000 Philadelphia, Pennsylvania
March 8, 1999
FOR VALUE RECEIVED, the undersigned, MONTGOMERY CV REALTY
L.P., a Delaware limited partnership having an address at
Plymouth Plaza, 580 West Germantown Pike, Suite 200, Plymouth
Meeting, Pennsylvania 19462 ("Borrower"), hereby promises to pay
to the order of GMAC COMMERCIAL MORTGAGE CORPORATION, a
California corporation, having an address at 650 Dresher Road,
P.O. Box 1015, Horsham, Pennsylvania 19044-8015 ("Lender"), its
successors and permitted assigns as holder of this Note (Lender,
its successors and permitted assigns, being hereinafter sometimes
referred to collectively as "Holder"), at Lender's address set
forth above or at such other place or to such other person as may
be designated in writing to Borrower by Lender, the principal sum
of Eighteen Million Five Hundred Thousand Dollars ($18,500,000)
or so much thereof which shall be advanced by Lender to Borrower
(the "Loan"), together with interest on the unpaid balance
thereof at the rates hereinafter set forth. The Loan is being
made pursuant to a Loan and Credit Facility Agreement between
Borrower, Century Plaza Associates, L.P., Marlton Plaza
Associates, L.P., CV Reit, Inc., and Lender dated March 31, 1998
and amended June 25, 1998 and as of the date hereof (as amended,
the "Credit Facility").
ON THE TERMS AND SUBJECT TO THE CONDITIONS which are
hereinafter set forth:
Section 1. Interest Rate and Payment Dates.
1.1 Initial Rate and Initial Payment. Interest shall
accrue on the balance of the principal amount outstanding
hereunder from time to time from and after the date hereof at the
rate of 6.715% per annum until the first Rate Adjustment Date (as
defined below). On each successive Rate Adjustment Date, the rate
of interest at which interest accrues shall be adjusted to the
then applicable LIBOR Rate (as defined below) for the calendar
month commencing on such date. Interest for the period beginning
on the date of the first advance hereunder (the "Funding Date")
and ending on and including the last day of the month in which
the Funding Date occurs shall be payable on the Funding Date.
Interest shall be calculated on the basis of a 360-day year and
shall be charged on the principal balance outstanding from time
to time for the actual number of days elapsed.
1.2 Rate Adjustment Date. The interest rate shall be
adjusted on the dates (each being a "Rate Adjustment Date")
described in this paragraph. The first Rate Adjustment Date
shall be the first day of the month following the Funding Date,
and subsequent Rate Adjustment Dates shall fall on the first day
of each subsequent calendar month thereafter.
1.3 Default Interest Rate. If Borrower fails to make any
payment of principal, interest or fees on the date on which such
payment becomes due and payable, whether at maturity or by
acceleration, such payment shall bear interest beginning on the
eleventh day following the date which such amount became due and
payable until paid at the fluctuating rate (the "Default Rate")
which is four (4) percentage points above the then applicable
LIBOR Rate, but in no event shall the rate of interest payable
hereunder exceed the highest rate allowed by law.
1.4 LIBOR Rate. The LIBOR Rate shall mean the rate per
annum determined solely by Holder as of each Rate Adjustment
Date, and shall be one and seventy-five one-hundredths percent
(1.75%) per annum in excess of one month LIBOR (stated as a
number out to five decimal places), determined in the manner set
forth below. On each Rate Adjustment Date, Holder will determine
one month LIBOR from the appropriate Bloomberg display page,
available as of the close of business on the last business day of
the month immediately preceding the Rate Adjustment Date. In the
event Bloomberg ceases publication or ceases to publish one month
LIBOR, Holder shall select a comparable publication to determine
one month LIBOR and provide notice thereof to Borrower. LIBOR
may or may not be the lowest rate based upon the market for U.S.
Dollar deposits in the London Interbank Eurodollar Market at
which Holder prices loans on the date on which the LIBOR Rate is
determined by Holder as set forth above.
1.5 LIBOR Rate Adjustments. This Note shall bear interest
at the rate set forth above or at the applicable LIBOR Rate until
a new LIBOR Rate is determined on each Rate Adjustment Date in
accordance with the provisions hereof; provided, however, that,
if Holder at any time determines, in its sole discretion, that it
has miscalculated the amount of the monthly payment of interest,
then Holder shall give notice to Borrower of the corrected
amount of such monthly payment (and the corrected amount of the
LIBOR Rate, if applicable) and (a) if the corrected amount of
such monthly payment represents an increase thereof, then
Borrower shall, within ten (10) calendar days thereafter, pay to
Holder any sums that Borrower would have otherwise been obligated
under this Note to pay to Holder had the amount of such monthly
payment not been miscalculated, or (b) if the corrected amount of
such monthly payment represents a decrease thereof and Borrower
is not otherwise in breach or default under any of the terms and
provisions of this Note or the Credit Facility, then Borrower
shall, within (10) calendar days thereafter be paid the sums that
Borrower would not have otherwise been obligated to pay to Holder
had the amount of such monthly payment not been miscalculated.
1.6 LIBOR Unascertainable. Anything herein to the contrary
notwithstanding, if (i) on any date on which the LIBOR Rate would
otherwise be set Holder shall have determined in good faith
(which determination shall be conclusive) that (A) adequate and
reasonable means do not exist for ascertaining one month LIBOR,
or (B) a contingency has occurred which materially and adversely
affects the London Interbank Eurodollar Market at which Holder
prices loans on the date on which the LIBOR Rate is determined by
Holder as set forth above, or (ii) at any time Holder shall have
determined in good faith (which determination shall be
conclusive) that the making, maintenance or funding of any part
of the Loan has been made impracticable or unlawful by compliance
by Holder in good faith with any applicable law, regulation or
guideline or interpretation or administration thereof by any
governmental authority charged with the interpretation or
administration thereof or with any request or directive of any
such governmental authority (whether or not having the force of
law); then, and in any such event, Holder may notify Borrower of
such determination. Upon such date as shall be specified in such
notice (which shall not be earlier than the date such notice is
given) the obligation of Holder to charge interest to Borrower at
the LIBOR Rate shall be suspended until Holder shall have later
notified Borrower of Holder's determination in good faith (which
determination shall be conclusive) that the circumstances giving
rise to such previous determination no longer exist.
1.7 Treasury Rate. If Holder notifies Borrower of a
determination under Section 1.6 hereof, the LIBOR Rate shall
automatically be converted to the Treasury Rate as of the date
specified in such notice (and accrued interest thereon shall be
due and payable on such date). "Treasury Rate" shall mean a rate
equal to the "Index" of the weekly average yield on United States
Treasury Securities adjusted to a constant maturity of one year,
as made available by the Federal Reserve Board 45 days prior to
each Rate Adjustment Date (the "Yield"), plus or minus, as the
case may be, the difference between the Yield and the last
available LIBOR Rate (stated as a number out to five decimal
places).
1.8 Increased Cost and Reduced Return.
(a) If on or after the date hereof, the adoption of any
applicable law, rule, or regulation, or any change therein, or
any change in the interpretation or administration thereof
by any governmental authority, central bank, or comparable agency
charged with the interpretation or administration thereof, or
compliance by the Holder with any request or directive (whether
or not having the force of law) of any such authority, central
bank, or comparable agency shall subject Holder to any tax, duty
or other charge with respect to the Loan, or shall change the
basis of taxation of payments to Holder of the principal of or
interest on the Loan or any other amounts due under the Notes or
in respect of the Loan or its obligation to make the Loan (except
for changes in the rate of tax on the overall net income of the
Holder) and the result of the foregoing is to increase the cost
to Holder of making or maintaining the Loan, or to reduce the
amount of any sum received or receivable by Holder under this
Note with respect thereto, by an amount reasonably deemed by
Holder to be material, then, within fifteen days after demand by
Holder, Borrower shall pay to Holder such additional amount or
amounts as will compensate Holder for such increased cost or
reduction.
(b) Holder will promptly notify Borrower of any
event of which it has knowledge, occurring after the date hereof,
which will entitle Holder to compensation pursuant to this
Section. A certificate of Holder claiming compensation under
this Section, setting forth the additional amount or amounts to
be paid to it hereunder and evidence reasonably substantiating
Holder's claim for compensation shall be conclusive in the
absence of manifest error. In determining such amount, Holder
may use any reasonable averaging and attribution methods.
Section 2. Interest Payments. Commencing on the first day
of the second month following the Funding Date, and continuing on
the first day of each calendar month thereafter through and
including the Maturity Date (as defined below), interest shall be
due and payable by Borrower to Holder hereunder in arrears at the
applicable LIBOR Rate (or the Treasury Rate, if applicable)
determined as of the immediately preceding Rate Adjustment Date,
on the then outstanding principal balance of the Loan. Lender
will use its best efforts to deliver to Borrower prior to the
first of each month an invoice which sets forth the amount of
interest due to Lender.
Section 3. Application of Payments. Payments made by
Borrower on account hereof shall be applied first toward any Late
Fees (as defined below) or other fees and charges due hereunder,
second toward payment of any interest due at the Default Rate,
third toward payment of any interest due at the then applicable
LIBOR Rate set forth in Section 1.4 hereof (or the Treasury Rate,
if applicable), and fourth toward payment of principal.
Notwithstanding the foregoing, if any advances made by Holder
under the terms of any instruments securing this Note have not
been repaid, any payments made may, at the option of Holder, be
applied first to repay such advances, and interest thereon, with
the balance, if any, applied as set forth in the preceding
sentence.
Section 4. Maturity Date. Anything in this Note to the
contrary notwithstanding, the entire unpaid balance of the
principal amount thereof and all interest accrued thereon
(including, without limitation, interest accruing at the Default
Rate), all Late Fees (hereinafter defined) and all other amounts
due hereunder and under any other instrument or document
evidencing or securing the Loan which has been executed by
Borrower and/or others and by or in favor of Holder
(collectively, the "Loan Documents"), shall, unless sooner paid,
and except to the extent that payment thereof is sooner demanded
in accordance with the terms of the Loan Documents, be and become
due and payable on the Maturity Date, as defined below. The
"Maturity Date" shall be December 1, 2000 if the Funding
Date occurs on or before March 31, 1999; and the Maturity Date
shall be April 1, 2001 if the Funding Date occurs after March 31,
1999.
Section 5. Prepayment. Prepayment of the Loan in full or
in part shall be permitted only in accordance with the Credit
Facility as the Credit Facility may be amended, supplemented,
replaced or otherwise modified from time to time.
Section 6. Method of Payment. All payments to be made
under this Note shall be paid directly to Holder in lawful tender
of the United States of America. Each such payment shall be paid
by 1:00 p.m. at Horsham, Pennsylvania, time on the date such
payment is due, except if such date is not a business day such
payment shall then be due on the first business day after such
date, but interest shall continue to accrue until the date
payment is received. Any payment received after 1:00 p.m.
Horsham, Pennsylvania, time shall be deemed to have been received
on the immediately following business day for all purposes,
including, without limitation, the accrual of interest
on principal.
Section 7. Security. The debt evidenced by this Note is
secured by, among other things, a Collateral Pledge, Assignment
and Security Agreement dated as of the date hereof (the "Pledge")
between Borrower and Lender, and certain Collateral Assignments
(the "Assignments") of the Mortgages and Assignments of Leases
set forth on Exhibit A to the Pledge, which Assignments are
intended to be recorded in the office of the Recorder of Deeds of
Broward County, Florida and which cover the real property in such
county more particularly described on Exhibit A to such
Assignments.
Section 8. Default.
8.1 Events of Default.
The entire outstanding principal sum of this Note,
together with all interest accrued and unpaid thereon and all
other sums due under the Pledge, the Loan Documents and this Note
(all such sums hereinafter collectively referred to as the
"Debt"), or any portion thereof, shall without notice become
immediately due and payable at the option of Holder if any
payment required under this Note is not paid within ten (10) days
of the date when due or on the happening of any other default,
after the expiration of any applicable notice and grace periods,
herein or under the terms of the Loan Documents, the Credit
Facility or any document executed in connection with any loan
made pursuant to the Credit Facility (hereinafter each an "Event
of Default"). Time is of the essence in this Note, the Pledge
and the Credit Facility. All of the terms, covenants and
conditions contained in the Pledge and the Loan Documents are
hereby made part of this Note to the same extent and with the
same force as if they were fully set forth herein. In the
event that Holder employs counsel to collect the Debt or to
protect or foreclose the security hereof, Borrower also agrees to
pay on demand all costs of collection incurred by Holder,
including reasonable attorneys' fees for the services of counsel
whether or not suit be brought.
Borrower does hereby agree that upon the occurrence of
an Event of Default which is not cured within any applicable
grace or notice period, or upon the failure of Borrower to pay
the Debt in full on the Maturity Date, Holder shall be entitled
to receive and Borrower shall pay interest on the entire unpaid
principal sum at "Default Rate". The Default Rate shall be
computed from the occurrence of the Event of Default until the
actual receipt and collection of the Debt. This charge shall be
added to the Debt, and shall be deemed secured by the Pledge and
the Assignments. This clause, however, shall not be construed as
an agreement or privilege to extend the date of the payment of
the Debt, nor as a waiver of any other right or remedy accruing
to Holder by reason of the occurrence of any Event of Default.
In the event the Default Rate would otherwise exceed the maximum
rate permitted by applicable law, the Default Rate shall be the
maximum rate permitted by applicable law.
8.2 No Impairment of Rights; Premium Due. Nothing in this
Section shall be deemed in any way to alter or impair any right
which Holder has under this Note, the Pledge or the
Assignments, or any of the other Loan Documents or at law or in
equity, to accelerate such debt on the occurrence of any Event of
Default provided herein or therein, whether or not relating to
this Note. Upon the acceleration of this Note because of an
Event of Default, Holder shall be entitled to receive, in
addition to all other amounts due Holder, the Exit Fee (as
defined in the Credit Facility).
8.3 Late Fees. Without limiting the generality of the
foregoing provisions of this Section, if any sum payable under
this Note is not paid within ten (10) days after the date on
which it becomes due and payable, Borrower shall thereupon
automatically become obligated immediately to pay to Holder a
late charge equalling five (5%) percent of the amount of such
payment ("Late Fees"), which shall be due and payable immediately
thereupon, to defray the expenses incurred by Holder in handling
and processing such delinquent payment and to compensate Holder
for the loss of the use of such delinquent payment and such
amount shall be secured by the Pledge, the Assignments and the
Loan Documents.
Section 9. Costs of Enforcement. Borrower shall pay to
Holder on demand by the latter the amount of any and all expenses
incurred by Holder in enforcing its rights hereunder or under the
Pledge, the Assignments and/or the other Loan Documents following
an Event of Default, including but not limited to the expense of
collecting any amount owed hereunder, and of any and all
reasonable attorneys' fees incurred by Holder in connection with
such default, whether suit be brought or not, or in protecting
the security hereof. Such expenses shall be added to the
principal amount hereof, shall be secured by the Pledge, the
Assignments and the Loan Documents and shall accrue interest at
the Default Rate.
Section 10. Borrower's Waiver of Certain Rights. Borrower
hereby waives the exercise of any and all exemption rights which
it holds at law or in equity with respect to the debt evidenced
by this Note, and of any and all rights which it holds at law or
in equity to have or receive any presentment, protest, demand and
notice of dishonor, protest, demand and nonpayment as a condition
to Holder's exercise of any of its rights under this Note or the
Loan Documents.
Section 11. Extensions. The Maturity Date and/or any other
date by which any payment is required to be made hereunder may be
extended by Holder from time to time in the exercise of its sole
discretion, without in any way altering or impairing Borrower's
liability hereunder.
Section 12. General.
12.1 Applicable Law. This Note shall be given effect and
construed by application of the laws of the Commonwealth of
Pennsylvania, and any action or proceeding arising hereunder, and
each of Holder and Borrower submits (and waives all rights to
object) to non-exclusive personal jurisdiction in the
Commonwealth of Pennsylvania, for the enforcement of any and all
obligations under this Note and the Loan Documents except that if
any such action or proceeding arises under the Constitution, laws
or treaties of the United States of America, or if there is a
diversity of citizenship between the parties thereto, so that it
is to be brought in a United States District Court, it shall be
brought in the United States District Court for the Eastern
District of Pennsylvania or any successor federal court having
original jurisdiction.
12.2 Headings. The headings of the Sections, subsections,
paragraphs and subparagraphs hereof are provided herein for and
only for convenience of reference, and shall not be considered in
construing their contents.
12.3 Construction. As used herein, (a) the term "person"
means a natural person, a trustee, a corporation, a limited
liability company, a partnership and any other form of legal
entity, and (b) all references made (i) in the neuter, masculine
or feminine gender shall be deemed to have been made in all such
genders, (ii) in the singular or plural number shall be deemed to
have been made, respectively, in the plural or singular number as
well, and (iii) to any Section, subsection, paragraph or
subparagraph shall, unless therein expressly indicated to
the contrary, be deemed to have been made to such Section,
subsection, paragraph or subparagraph of this Note.
12.4 Severability. No determination by any court,
governmental body or otherwise that any provision of this Note or
any amendment hereof is invalid or unenforceable in any
instance shall affect the validity or enforceability of (a) any
other such provision, or (b) such provision in any circumstance
not controlled by such determination. Each such provision shall
be valid and enforceable to the fullest extent allowed by, and
shall be construed wherever possible as being consistent with,
applicable law.
12.5 No Waiver. Holder shall not be deemed to have waived
the exercise of any right which it holds hereunder unless such
waiver is made expressly and in writing. No delay or omission by
Holder in exercising any such right (and no allowance by Holder
to Borrower of an opportunity to cure a default in performing its
obligations hereunder) shall be deemed a waiver of its future
exercise. No such waiver made as to any instance involving the
exercise of any such right shall be deemed a waiver as to any
other such instance, or any other such right. Further,
acceptance by Holder of all or any portion of any sum payable
under, or partial performance of any covenant of, this Note, the
Pledge, the Assignment or any of the other Loan Documents,
whether before, on, or after the due date of such payment or
performance, shall not be a waiver of Holder's right either to
require prompt and full payment and performance when due of all
other sums payable or obligations due thereunder or hereunder or
to exercise any of Holder's rights and remedies hereunder or
thereunder.
12.6 Waiver of Jury Trial; Service of Process; Court Costs.
BORROWER HEREBY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING
TO WHICH BORROWER AND HOLDER MAY BE PARTIES ARISING OUT OF, IN
CONNECTION WITH, OR IN ANY WAY PERTAINING TO, THIS NOTE AND/OR
ANY OF THE LOAN DOCUMENTS. IT IS AGREED AND UNDERSTOOD THAT
THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS
AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING
BUT NOT LIMITED TO CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES
TO THIS NOTE. THIS WAIVER IS KNOWINGLY, WILLINGLY AND
VOLUNTARILY MADE BY BORROWER, AND BORROWER HEREBY
REPRESENTS THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE
BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY
JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. BORROWER
FURTHER REPRESENTS AND WARRANTS THAT IT HAS BEEN REPRESENTED
IN THE SIGNING OF THIS NOTE AND IN THE MAKING OF THIS WAIVER BY
INDEPENDENT LEGAL COUNSEL, OR HAS HAD THE OPPORTUNITY TO BE
REPRESENTED BY INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN
FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS
WAIVER WITH COUNSEL. BORROWER AGREES TO PAY ALL COURT COSTS
AND REASONABLE ATTORNEY'S FEES INCURRED BY HOLDER IN
CONNECTION WITH ENFORCING ANY PROVISION OF THIS NOTE.
12.7 Offset. Upon the occurrence of an Event of Default,
Holder may set-off against any principal and interest owing
hereunder, any and all credits, money, stocks, bonds or other
security or property of any nature whatsoever on deposit with, or
held by, or in the possession of, Holder, to the credit of or for
the account of Borrower, without notice to or consent of
Borrower or any guarantor, provided that Holder shall give
subsequent notice to Borrower of any such set-off.
12.8 Non-Exclusivity of Rights and Remedies. None of the
rights and remedies herein conferred upon or reserved to Holder
is intended to be exclusive of any other right or remedy
contained herein or in any of the Loan Documents and each and
every such right and remedy shall be cumulative and concurrent,
and may be enforced separately, successively or together, and may
be exercised from time to time as often as may be deemed
necessary or desirable by Holder.
12.9 Incorporation by Reference. All of the agreements,
conditions, covenants and provisions contained in each of the
Loan Documents are hereby made a part of this Note to
the same extent and with the same force and effect as if they
were fully set forth herein. Borrower covenants and agrees to
keep and perform, or cause to be kept and performed, all
such agreements, conditions, covenants and provisions strictly in
accordance with their terms.
12.10 Joint and Several Liability. If Borrower consists of
more than one person and/or entity, each such person and/or
entity agrees that its liability hereunder is joint and several.
12.11 Business Purpose. Borrower represents and warrants
that the Loan is being obtained solely for the purpose of
acquiring or carrying on a business, professional or commercial
activity and is not for personal, agricultural, family or
household purposes.
12.12 Interest Limitation. This Note is subject to the
express condition that at no time shall Borrower be obligated or
required to pay interest on the Loan and other sums due
hereunder or any portion thereof at a rate which could subject
Lender to either civil or criminal liability as a result of being
in excess of the maximum interest rate which Borrower is
permitted by applicable law to contract or agree to pay. If by
the terms of this Note, Borrower is at any time required or
obligated to pay interest on the Loan and other sums due
hereunder or any portion thereof at a rate in excess of such
maximum rate, the rate of interest under this Note shall be
deemed to be immediately reduced to such maximum rate and the
interest payable shall be computed at such maximum rate and all
prior interest payments in excess of the maximum rate shall be
deemed to have been payments in reduction of principal
and not on account of the interest due hereunder.
12.13 Modification. This Note may not be modified,
amended, extended, changed, discharged, terminated or waived
orally or by any act or failure to act on the part of Borrower
or Holder, but only by an agreement in writing signed by the
party against whom enforcement of any modification, amendment,
extension, change, discharge, termination or waiver is
sought.
12.14 Time of the Essence. Time is strictly of the essence
of this Note.
12.15 Negotiable Instrument. Borrower agrees that this
Note shall be deemed a negotiable instrument, even though this
Note may not otherwise qualify, under applicable law,
absent this paragraph, as a negotiable instrument. Borrower
agrees that Holder shall have the right to transfer, sell and
assign this Note, the Pledge, the Assignments and the other Loan
Documents, and the obligations hereunder, provided that Holder
shall promptly give Borrower subsequent notice of such transfer,
sale or assignment.
12.16 Interest Rate After Judgment. If judgment is entered
against Borrower on this Note, the amount of the judgment entered
(which may include principal, interest, fees, Late Fees and
costs) shall bear interest at the Default Rate, to be determined
on the date of the entry of the judgment.
12.17 Relationship. Borrower and Holder intend that the
relationship between them shall be solely that of creditor and
debtor. Nothing contained in this Note or in any of the
other Loan Documents shall be deemed or construed to create a
partnership, tenancy-in-common, joint tenancy, joint venture or
co-ownership by or between Borrower and Holder.
12.18 Waiver of Automatic Stay. BORROWER HEREBY AGREES
THAT, IN CONSIDERATION OF HOLDER'S AGREEMENT TO MAKE THE LOAN AND
IN RECOGNITION THAT THE FOLLOWING COVENANT IS A MATERIAL
INDUCEMENT FOR HOLDER TO MAKE THE LOAN, IN THE EVENT THAT
BORROWER SHALL (I) FILE WITH ANY BANKRUPTCY COURT OF
COMPETENT JURISDICTION OR BE THE SUBJECT OF ANY PETITION UNDER
ANY SECTION OR CHAPTER OF TITLE 11 OF THE UNITED STATES CODE, AS
AMENDED ("BANKRUPTCY CODE"), OR SIMILAR LAW OR STATUTE; (II) BE
THE SUBJECT OF ANY ORDER FOR RELIEF ISSUED UNDER THE
BANKRUPTCY CODE OR SIMILAR LAW OR STATUTE; (III) FILE OR BE THE
SUBJECT OF ANY PETITION SEEKING ANY REORGANIZATION,
ARRANGEMENT, COMPOSITION, READJUSTMENT, LIQUIDATION,
DISSOLUTION, OR SIMILAR RELIEF UNDER ANY PRESENT OR FUTURE
FEDERAL OR STATE ACT OR LAW RELATING TO BANKRUPTCY,
INSOLVENCY, OR OTHER RELIEF FOR DEBTORS; (IV) HAVE SOUGHT OR
CONSENTED TO OR ACQUIESCED IN THE APPOINTMENT OF ANY TRUSTEE,
RECEIVER, CONSERVATOR, OR LIQUIDATOR; OR (V) BE THE SUBJECT OF AN
ORDER, JUDGMENT OR DECREE ENTERED BY ANY COURT OF COMPETENT
JURISDICTION APPROVING A PETITION FILED AGAINST ANY BORROWER
FOR ANY REORGANIZATION, ARRANGEMENT, COMPOSITION,
READJUSTMENT, LIQUIDATION, DISSOLUTION, OR SIMILAR RELIEF UNDER
ANY PRESENT OR FUTURE FEDERAL OR STATE ACT OR LAW RELATING TO
BANKRUPTCY, INSOLVENCY OR RELIEF FOR DEBTORS, THEN, SUBJECT TO
COURT APPROVAL, HOLDER SHALL THEREUPON BY ENTITLED AND
BORROWER HEREBY IRREVOCABLY CONSENTS TO, AND WILL NOT
CONTEST, AND AGREES TO STIPULATE TO RELIEF FROM ANY AUTOMATIC
STAY OR OTHER INJUNCTION IMPOSED BY SECTION 362 OF THE
BANKRUPTCY CODE, OR SIMILAR LAW OR STATUTE (INCLUDING, WITHOUT
LIMITATION, RELIEF FROM ANY EXCLUSIVE PERIOD SET FORTH IN
SECTION 1121 OF THE BANKRUPTCY CODE) OR OTHERWISE, ON OR
AGAINST THE EXERCISE OF THE RIGHTS AND REMEDIES OTHERWISE
AVAILABLE TO HOLDER AS PROVIDED IN THIS NOTE AND THE LOAN
DOCUMENTS, AND AS OTHERWISE PROVIDED BY LAW, AND BORROWER
HEREBY IRREVOCABLY WAIVES ITS RIGHTS TO OBJECT TO SUCH RELIEF.
12.19 Notices. All notices or other written communications
hereunder shall be given and become effective as provided in the
Credit Facility
IN WITNESS WHEREOF, Borrower has executed this Note or
caused it to be executed on its behalf by its duly authorized
representatives, the day and year first above written, and the
obligations under this Note shall be binding upon Borrower's
successors and assigns.
MONTGOMERY CV REALTY L.P., a Delaware
limited partnership
By: Montgomery CV Realty Trust, a
Delaware business trust, its sole general partner
/s/ Louis P. Meshon
By:____________________________
Louis P. Meshon, Sr.
President
EXHIBIT 10.38
[Pembroke Pines]
COLLATERAL PLEDGE, ASSIGNMENT AND SECURITY AGREEMENT
THIS COLLATERAL PLEDGE AND ASSIGNMENT (this "Assignment"),
is made this 8th day of March, 1999 by MONTGOMERY CV REALTY L.P.
("Pledgor"), a Delaware limited partnership, with its principal
offices located at Plymouth Plaza, 580 W. Germantown Pike, Suite
200, Plymouth Meeting, Pennsylvania 19426, to and for the benefit
of GMAC COMMERCIAL MORTGAGE CORPORATION, a California corporation
("Lender"), with offices located at 650 Dresher Road, Horsham,
Pennsylvania, 19044 to secure obligations of the Pledgor.
BACKGROUND:
a. Pursuant to a certain Loan and Credit Facility
Agreement (the "Credit Facility") between Lender,
Pledgor, Century Plaza Associates, L.P., Marlton Plaza
Associates, L.P. and CV Reit, Inc. dated March 31,
1998, amended June 25, 1998 and as of the date hereof,
Lender has agreed to make loans up to an aggregate
amount of $100,000,000 to the Pledgor and/or its
affiliates on the terms and conditions set forth in the
Credit Facility. Lender has agreed to make
non-revolving line of credit facility of up to the
maximum principal sum of $18,500,000 (the "Note
Advance") to Pledgor pursuant to the Credit Facility.
The Loan is evidenced by a certain Promissory Note (the
"Note") of even date herewith from Pledgor to Lender.
The Note and all the other documents executed by
Pledgor or any other party in connection with the Loan
are hereinafter referred to as the "Loan Documents".
b. Pursuant to the Credit Facility, Lender made a
loan to Pledgor in an amount not to exceed $7,650,000,
(the "Century Plaza Loan"), evidenced by a Promissory
Note dated April 9, 1998 from Pledgor in favor of
Lender, and Lender made a loan to Marlton Plaza
Associates, L.P. in an amount not to exceed $9,300,000
(the "Marlton Crossing Loan"), evidenced by a
Promissory Note dated June 24, 1998. The note and all
the documents executed by Pledgor or any other party in
connection with the Century Plaza Loan are hereinafter
referred to as the "Century Plaza Loan Documents", and
the note and all the documents executed by Pledgor or
any other party in connection with the Marlton
Crossing Loan are hereinafter referred to as the
"Marlton Crossing Loan Documents."
c. Pledgor is the holder of a Consolidated Term Note
dated July 31, 1992 in the original principal sum of
$35,672,941.33, executed in connection with that
certain Restated Loan Agreement dated July 31, 1992
among Century Village West, Inc., F.W.D.C., Inc. and
Wynmoor Limited Partnership, others and CV Reit, Inc.
(collectively, the "Note Receivable"), which Note
Receivable was assigned to Pledgor by assignment dated
February 2, 1999. The Note Receivable is secured by
certain mortgages encumbering real estate, which
mortgages and real estate are more particularly
described on Exhibit A attached hereto and made a part
hereof (each a "Mortgage" and collectively, the
"Mortgages"), by a certain Assignment of Recreation
Lease and a certain Assignment of Leases, Rents,
Profits, Purchase and Sale Contracts and Other
Agreements, as more particularly described on Exhibit B
attached hereto and made a part hereof (each an
"Assignment" and collectively, the "Assignments"), and
by certain UCC-1 financing statements (the "Financing
Statements") executed by Collateral Owners (as
hereinafter defined), copies of which appear on Exhibit
D attached hereto. The owners of all the collateral
securing the Note Receivable are CVP Community Center,
Inc., a Florida corporation, and Newcen Golf Course,
Inc., a Florida corporation, and are hereinafter
referred to as the "Collateral Owner".
d. As security for the payment and performance by
Pledgor of all of its obligations (whether monetary or
non-monetary) owed to Lender pursuant to the Loan
Documents, the Marlton Crossing Loan Documents, the
Century Plaza Loan Documents and all other obligations
of Pledgor to Lender pursuant to the Credit Facility
(individually and collectively, the "Pledgor
Obligations"), Lender has required the execution and
delivery of this Assignment and Pledgor has agreed to
assign to Lender, all of Pledgor's right, title and
interest in and under the Note Receivable, the
Mortgages and the Assignments and all other collateral
securing the Note Receivable.
NOW, THEREFORE, for value received and intending to be
legally bound, Pledgor agrees as follows:
i. Pledge and Assignment. As security for the
payment and performance of all of the Pledgor
Obligations, Pledgor hereby pledges, assigns,
transfers and grants to Lender a security interest
in, all of Pledgor's right, title and interest in
and to the Note Receivable, the Mortgages, the
Assignments and the Financing Statements
(collectively, the "Assigned Instruments")
including the right to receive and retain all
payments or sums due and payable thereunder, all
cash and other monies and property paid thereon
and all other proceeds and substitutions thereof.
Simultaneously with the execution hereof, Pledgor
shall execute an allonge in favor of Lender and
shall deliver to Lender the original Note
Receivable. Pledgor shall also execute collateral
assignments of each Mortgage and Assignment of
Leases and all other instruments, in recordable
form, as shall be necessary to assign to Lender
the Assigned Instruments.
ii. Payments Prior to Event of Default. All
payments made under the Note Receivable or any of
the other Assigned Instruments shall be applied as
provided in the Note Receivable and the Assigned
Instruments, and Collateral Owners shall continue
to make all such payments to Pledgor thereunder,
and may rely conclusively on the authority of
Pledgor to make all decisions, take all actions
and exercise all rights that can be made, taken or
exercised, until Collateral Owner is given written
notice by Lender to do otherwise following the
occurrence of an Event of Default or by court
order. Pledgor shall cause Collateral Owner to
execute the Estoppel and Recognition Agreement
attached hereto as Exhibit C to evidence its
agreement to act in accordance with any such
notice from Lender specifying that an Event of
Default has occurred.
iii. Limitation of Lender's Liability. This
Assignment is executed only as security for the
payment and performance of the Pledgor Obligations
and, therefore, the execution and delivery of this
Assignment shall not subject Lender to, or
transfer or pass to Lender, or in any way affect
or modify, any liability or obligation of Pledgor
as a party to or beneficiary of any of the
Assigned Instruments, it being understood and
agreed that, notwithstanding this Assignment, all
of Pledgor's liabilities and obligations as a
party to the Assigned Instruments shall be and
remain enforceable only against Pledgor. Pledgor
agrees to pay and perform all such liabilities and
obligations. Except in the event of Lender's
fraudulent acts, Pledgor agrees to indemnify
Lender against and hold it harmless from any and
all liability, loss or damage which it may incur
under any of the Assigned Instruments or under or
by reason of this Assignment and of and from any
and all claims and demands whatsoever which may be
asserted against it by reason of any alleged
obligation or undertaking on its part to perform
or discharge any of the terms of any of the
Assigned Instruments.
iv. Representations and Warranties. Pledgor,
further represents and warrants to Lender that:
(i) Pledgor is a limited partnership, duly organized,
validly existing and in good standing under the laws of
the State of Delaware with full power and authority to
execute and deliver and perform its obligations under
this Assignment;
(ii) This Assignment has been duly executed and delivered by
Pledgor and is a valid and binding obligation of
Pledgor enforceable in accordance with its terms;
(iii) All of Pledgor's right, title and interest in the
Assigned Instruments is now owned, or upon receipt
thereof by by Pledgor will be owned, by
Pledgor free and clear of all Security interests,
liens, encumbrances or other restrictions; and
(iv) Pledgor has full and complete right, authority and
power to assign all of Pledgor's right, title and
interest which Pledgor has or may have in the Assigned
Instruments and to endorse and deliver the Note
Receivable to Lender.
(e) The outstanding principal balance of
the Note Receivable is $24,902,623.89, and the date amount of the
last payment received is February 4, 1999 and $245,028.07.
(f) There are no existing defenses to
payment of the Note Receivable that Owner may assert against
Pledgor, and Pledgor knows of no existing state of facts which
would give rise to a defense to the Note Receivable.
(g) There are no oral or written agreements
which modify the terms of the Note Receivable.
(h) All Florida Documentary Stamp Taxes and
Florida Intangible Taxes have been paid in connection with the
execution of the Note Receivable and the recordation of the
Mortgages.
v. Covenants. Pledgor will, unless Lender
consents in writing to the contrary, (a) fulfill
or perform every condition and covenant of the
Assigned Instruments to be fulfilled or performed
by Pledgor; (b) give to Lender prompt notice of
the receipt of any notice of default under any of
the Assigned Instruments, together with a copy of
such notice of default; (c) enforce the
performance or observance of every covenant and
condition of the Assigned Instruments to be
performed or observed by Collateral Owner; (d) not
modify, release or terminate nor in any way alter
the terms of any of the Assigned Instruments; (e)
neither waive nor release Collateral Owner from
any obligations or conditions under any of the
Assigned Instruments; and (f) deliver to Lender,
upon written demand, a statement specifying the
payments received under the Assigned Instruments
for the period specified in such demand, together
with such other similar information as Lender may
require. Pledgor hereby covenants that Pledgor
will not sell, convey, assign, transfer, or
otherwise dispose of any of the Assigned
Instruments or any interest therein or create,
incur or permit to exist any pledge, mortgage,
lien, charge or encumbrance or any security
interest whatsoever in or with respect to any of
the Assigned Instruments other than that created
hereby, without the prior written consent of
Lender which may be withheld at the Lender's sole
discretion.
vi. Warrant of Attorney.
(i) Pledgor hereby irrevocably constitutes and appoints Lender
and any officer or agent thereof, with full power of substitution
coupled with an interest, as its true and lawful attorney-in-fact
with full irrevocable power and authority in the place and stead
of Pledgor and in the name of Pledgor or in its own name
effective as long as an Event of Default is continuing, for
the purpose of carrying out the terms of this Assignment, to take
any and all appropriate action and to execute any and all
documents and instruments which may be necessary or appropriate
to accomplish the purpose of this Assignment and the other Lender
Loan Documents, and, without limiting the generality of the
foregoing, Pledgor hereby grants Lender the power and rights on
behalf of Pledgor, without notice to or assent by Pledgor, to do
the following:
(i) During the existence of any Event of
Default, in the name of Pledgor or in its own name, or
otherwise, to take possession of and indorse and
collect any checks, drafts, notes, acceptances, or
other instruments for the payment of monies due under,
or with respect to, the Note Receivable, and to file
any claim or to take any other action or proceeding in
any court of law or equity or otherwise deemed
appropriate by Lender for the purpose of collecting any
and all such moneys due under or with respect to the
Note Receivable whenever payable; and
(ii) During the existence of any Event of
Default, (A) to direct Collateral Owner to make payment
of any and all monies due or to become due under the
Note Receivable directly to Lender; (B) to ask or
demand for, collect, receive payment of and receipt
for, sign and indorse, any and all monies, drafts,
claims, and other amounts due or to become due at any
time in respect of or arising out of the Note
Receivable and (C) generally, to sell, transfer,
pledge, and make any agreement with respect to or
otherwise deal with any Assigned Instrument as fully
and completely as though Lender were the absolute owner
thereof for all purposes, and to do, at Lender's option
and Pledgor's expense, all acts and things which Lender
deems necessary to protect, preserve, or realize upon
the Assigned Instruments, all as fully and effectively
as Pledgor might do.
vii. Remedies of Lender Upon Default. Upon the occurrence of
an Event of Default under the Note Advance or any of the loans
made by Lender to Pledgor or Pledgor's affiliates under the
Credit Facility, Lender, in its sole discretion, may:
(i) Exercise all or some or any of its rights and remedies
under this Assignment or as may otherwise be
available to Lender at law or in equity, in such order
as Lender may elect;
(ii) Exercise, on its behalf or on behalf of Pledgor, all or
some or any of the rights and remedies of Pledgor under
the Assigned Instruments, including, without
limitation, the right to ask or demand for, collect,
receive payment of and receipt for, any and all monies,
claims, and other amounts due or to become due at any
time in respect of or arising under any of the Assigned
Instruments; and
(iii) Exercise all such rights as a secured party under the
Uniform Commercial Code (the "U.C.C.") as now enacted
or hereinafter applicable under the laws of
Pennsylvania or Delaware, as the case may be, as
Lender, in Lender's sole judgment, shall deem necessary
or appropriate, without demand of performance or other
demand, advertisement, or notice of any kind (except
the notice of time and place of public or private sale)
to or upon or any other person (all of which are to the
extent permitted by law, hereby expressly waived),
including without limitation the right to sell all or
any part of the Assigned Instruments at one or more
public or private sales; and any such sale or sales may
be made for cash, upon credit, or for future delivery.
Lender may resort first to the security created by this
Assignment or first to the security afforded by any other
instruments, in any such case without affecting Lender's rights
under this Assignment. Pledgor expressly waives and agrees not to
assert: (i) any right to require Lender to proceed against
Pledgor or any affiliate of Pledgor in any particular order or
manner; and (ii) any right to require Lender to proceed against
or exhaust any security for the Pledgor Obligations in any
particular order or manner. Pledgor waives any and all right to
require the marshalling of assets or to require that any of the
security be sold in inverse order of alienation or that any of
the security be sold in parcels or as an entirety in connection
with the exercise of any of the remedies permitted by applicable
law or provided in this Agreement, the Mortgages or the
Assignments.
viii. Perfection of Security Interests.
Pledgor shall deliver to Lender, at the time of
execution of this Assignment and from time to time
thereafter as required by Lender, such executed
financing and continuation statements as are required
to perfect Lender's security interest in the Assigned
Instruments.
ix. Release of Assigned Instruments. Upon all of the
Pledgor Obligations having been satisfied in full, (a)
this Assignment and all rights of Lender hereunder
shall terminate and be of no further force and effect,
and (b) Lender shall endorse the Note Receivable to the
order of Pledgor and return it to Pledgor and execute
and deliver to Pledgor such termination statements
with respect to Lender's security interest in the
Assigned Instruments as Pledgor may reasonably request.
x. Notices. All notices shall be sent to the parties
hereto at the addresses set forth in the heading
section of this Assignment. All notices to the parties
to the Assigned Instruments, other than those parties
who are a party hereto, shall be sent to the addresses
set forth in the Assigned Instruments. All notices
under the provisions of this Assignment shall be in
writing (including telex or facsimile communication)
and shall be effective (i) in the case of telex or
facsimile, when received, (ii) in the case of hand
delivered notice, when hand delivered, (iii) if given
by United States mail, three (3) days after such
communication is deposited in the mail with first
class postage prepaid, return receipt requested,
and (iv) if given by any other means (including by
overnight courier), when delivered.
xi. Miscellaneous.
(i) Pledgor, at its expense, will execute,
acknowledge and deliver all such instruments in form
satisfactory to Lender and take all such action as
Lender from time to time may reasonably require in
order further to effectuate the purposes of this
Assignment and to carry out the terms hereof.
(ii) This Assignment shall inure to the benefit of
and shall be binding upon the successors and assigns of
the parties hereto.
(iii) This Assignment and the rights and obligations
hereunder shall be construed in accordance with and
governed by the laws of the Commonwealth of
Pennsylvania without regard to principles of conflicts
of law.
(iv) The paragraph headings used herein are for
convenience only and do not affect or modify the terms
and conditions hereof.
(v) If any provision hereof is found by a court of
competent jurisdiction to be prohibited or
unenforceable, it shall be ineffective only to the
extent of such prohibition or unenforceability, and
such prohibition or unenforceability shall not
invalidate the balance of such provision to the extent
it is not prohibited or enforceable, nor invalidate the
other provisions hereof.
xii. Waiver of Jury Trial. PLEDGOR AND LENDER WAIVE
ALL RIGHTS TO TRIAL BY JURY OF ANY AND ALL CLAIMS,
COUNTERCLAIMS, AND DEFENSES ARISING UNDER THIS
AGREEMENT, THE NOTES, THE OTHER FACILITY LOAN
DOCUMENTS, OR ANY OTHER AGREEMENT OR
AGREEMENTS BETWEEN PLEDGOR AND LENDER AT ANY
TIME, INCLUDING ANY SUCH AGREEMENTS, WHETHER
WRITTEN OR ORAL, MADE OR ALLEGED TO HAVE BEEN
MADE AT ANY TIME PRIOR TO THE DATE HEREOF, AND ALL
AGREEMENTS MADE HEREAFTER OR OTHERWISE. IN MAKING THIS
WAIVER PLEDGOR AND LENDER ACKNOWLEDGE AND AGREE THAT
ANY AND ALL SUCH CLAIMS, COUNTERCLAIMS, AND DEFENSES
SHALL BE HEARD BY A JUDGE OF A COURT OF COMPETENT
JURISDICTION, WITHOUT A JURY. PLEDGOR AND LENDER
ACKNOWLEDGE AND AGREE THAT THIS WAIVER OF TRIAL BY JURY
IS A MATERIAL ELEMENT OF THE CONSIDERATION FOR THIS
AGREEMENT. PLEDGOR AND LENDER ACKNOWLEDGE THAT THIS
IS A WAIVER OF A LEGAL RIGHT AND THAT THIS WAIVER IS
MADE KNOWINGLY AND VOLUNTARILY AFTER CONSULTATION WITH,
OR THE OPPORTUNITY TO CONSULT WITH, COUNSEL OF ITS
CHOICE.
IN WITNESS WHEREOF, Pledgor has caused this Assignment
to be executed the day and year first above written.
MONTGOMERY CV REALTY L.P., a Delaware
limited partnership
[CORP SEAL]
By: Montgomery CV Realty Trust, its sole
general partner
/s/ Louis P. Meshon
By:_________________________________
Louis P. Meshon, Sr.
President
COMMONWEALTH OF PENNSYLVANIA :
: SS.
COUNTY OF :
On the _____ day of March, 1999, before me, a Notary
Public in and for the State and County aforesaid, the
undersigned, personally appeared Louis P. Meshon, who
acknowledged himself to be the President of Montgomery CV Realty
Trust, the general partner of MONTGOMERY CV REALTY L.P., a
Delaware limited partnership, and that he, being authorized to do
so, executed the foregoing instrument for the purposes therein
contained by signing as President of such general partner.
IN WITNESS WHEREOF, I have hereunto set my hand and
official seal.
______________________________
Notary Public
My commission expires:
EXHIBIT A
[Mortgage and Security Agreement from __________ in favor of
CV Reit, Inc., dated _____________ and recorded in the office of
the [Recorder of Deeds] of __________ County, Florida,
("Recorder's Office") on ___________, 1992 in Book ______, Page
______, and assigned to Pledgor by assignment dated
_________________ and recorded in the Recorder's Office on
_______________, 19__, in Book _____, Page _____.]
EXHIBIT B
[Assignment of Rents and Leases from ____________ in favor of
CV Reit, Inc., dated _____________ and recorded in the office of
the [Recorder of Deeds] of __________ County, Florida,
("Recorder's Office") on ___________, 1992 in Book ______, Page
______, and assigned to Pledgor by assignment dated
_________________ and recorded in the Recorder's Office on
_______________, 19__, in Book _____, Page _____.]
EXHIBIT 21
Subsidiaries of the Company
and State of Incorporation or Formation
CV Warehouse 75, Inc. Florida
CV Warehouse 76, Inc. Florida
CV Warehouse 78, Inc. Florida
W.X. Properties, Inc. Florida
D.X. Properties, Inc. Florida
GRX Corp. Florida
Montgomery CV Realty Trust Delaware
Montgomery CV Realty L.P. Delaware
Recreation Mortgages L.P. Delaware
Recreation Mortgages LLC Delaware
Drexel Realty, Inc. Pennsylvania
Royce Realty, Inc. Pennsylvania
MGA Payroll Company, Inc. Pennsylvania
Rio Grande Associates, L.P. Pennsylvania
Rio Grande Associates LLC Delaware
Danville Plaza Associates, L.P. Delaware
Danville Plaza LLC Delaware
Woodbourne Square Associates, L.P. Delaware
Woodbourne Square LLC Delaware
Chesterbrook Village Center Associates, L.P. Delaware
Chesterbrook Village Center LLC Delaware
Mount Carmel Plaza Associates, L.P. Delaware
Mount Carmel Plaza LLC Delaware
Glenmont Associates, L.P. Pennsylvania
Glenmont LLC Delaware
Plymouth Plaza Associates, L.P. Delaware
Plymouth Plaza LLC Delaware
County Line Plaza Realty Associates, L.P. Delaware
County Line Plaza Realty, LLC Delaware
555 Scott Street Associates, L.P. Delaware
555 Scott Street LLC Delaware
Route 6 Office Max Center Associates, L.P. Delaware
Route 6 Office Max Center LLC Delaware
Century Plaza Associates, L.P. Delaware
CP General Partner, LLC Delaware
Collegeville Plaza Associates, L.P. Delaware
Collegeville Plaza, LLC Delaware
Gilbertsville Plaza Associates, L.P. Delaware
Gilbertsville Plaza, LLC Delaware
Marlton Plaza Associates, L.P. Delaware
Marlton Plaza, LLC Delaware
Marlton Plaza Associates II, L.P. Delaware
Marlton Plaza II, LLC Delaware
New Holland Plaza Associates, L.P. Delaware
New Holland Plaza, LLC Delaware
Newtown Village Plaza Associates, L.P. Delaware
Newtown Village Plaza, LLC Delaware
North Penn Marketplace Associates, L.P. Delaware
North Penn Marketplace, LLC Delaware
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 4,775<F1>
<SECURITIES> 0
<RECEIVABLES> 64,988
<ALLOWANCES> 2,401
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 153,414
<DEPRECIATION> 3,142
<TOTAL-ASSETS> 225,422
<CURRENT-LIABILITIES> 0
<BONDS> 121,933
0
0
<COMMON> 80
<OTHER-SE> 79,477
<TOTAL-LIABILITY-AND-EQUITY> 225,422
<SALES> 0
<TOTAL-REVENUES> 26,009
<CGS> 0
<TOTAL-COSTS> 5,184
<OTHER-EXPENSES> 1,693
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,355
<INCOME-PRETAX> 8,809
<INCOME-TAX> (7,041)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,850
<EPS-PRIMARY> 1.99
<EPS-DILUTED> 1.99
<FN>
<F1>Includes $930 of restricted cash.
</FN>
</TABLE>
