UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
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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
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Commission file number 0-11129
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BALCOR PENSION INVESTORS-III
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(Exact name of registrant as specified in its charter)
Illinois 36-3164211
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Balcor Plaza
4849 Golf Road, Skokie, Illinois 60077-9894
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 677-2900
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
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(Title of class)
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>
PART I
Item 1. Business
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Balcor Pension Investors-III (the "Registrant") is a limited partnership formed
in 1982 under the laws of the State of Illinois. The Registrant raised
$118,738,000 from sales of Limited Partnership Interests. The Registrant's
operations consist of investment in wrap-around mortgage loans and, to a lesser
extent, other junior mortgage loans and first mortgage loans. The Registrant
also currently operates three properties acquired through foreclosure, and
holds minority joint venture interests in two additional properties. All
financial information included in this report relates to this industry segment.
The Registrant originally funded thirty-two loans collateralized by
twenty-eight properties. A portion of Mortgage Reductions generated by
repayments was reinvested in five additional loans. The remainder was added to
working capital reserves. As a result of repayments, foreclosures and wrap-
around notes received as a portion of the sale price for three property
dispositions, the Registrant has seven loans in its portfolio as of December
31, 1994. Eleven properties were acquired through foreclosure and two loans
were reclassified to investments in joint ventures with affiliates. The
Registrant sold eight of these properties, including the Crossings Shopping
Center which was sold in January 1995. As of December 31, 1994, the Registrant
had four properties and two investments in joint ventures with affiliates in
its portfolio. See Item 2. Properties for additional information.
During November 1993, the Registrant placed the Bannockburn Executive Plaza
loan in default and the borrower filed for protection under the U.S. Bankruptcy
Code. During February 1995, a plan of reorganization related to this loan was
confirmed by the Bankruptcy Court. See Item 3. Legal Proceedings for additional
information.
During 1994, the Registrant received repayments on two loans receivable. See
Item 7. Liquidity and Capital Resources for additional information.
The Registrant obtained title to The Woods Apartments through a non-judicial
foreclosure in July 1994. See Item 7. Liquidity and Capital Resources for
additional information.
The Registrant sold the Orchards Office Building during 1994 but continues to
own the Orchards Shopping Center. See Item 7. Liquidity and Capital Resources
for additional information.
The Registrant, by virtue of its ownership of real estate acquired through
foreclosure, is subject to federal and state laws and regulations covering
various environmental issues. Management of the Registrant utilizes the
services of environmental consultants to assess a wide range of environmental
issues and to conduct tests for environmental contamination as appropriate.
The General Partner is not aware of any potential liability due to
environmental issues or conditions that would be
material to the Registrant.
The officers and employees of Balcor Mortgage Advisors-II and its affiliates
perform services for the Registrant. The Registrant currently has no employees
engaged in its operations.
OTHER INFORMATION
Crossings Shopping Center
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In 1983, the Registrant funded a $1,400,000 loan collateralized by a wrap-
around mortgage on the Crossings Shopping Center, Smyrna, Georgia ("Center")
and on the leasehold interest in the land underneath the Center (together, the
"Property"). The Registrant obtained title to the Property through a non-
<PAGE>
judicial foreclosure in 1992, subject to the existing first mortgage loan held
by an unaffiliated lender.
On January 31, 1995 ("Closing"), the Registrant sold the Property for a sale
price of $2,650,000 to an unaffiliated entity, Triple N Co., Inc., a Georgia
corporation ("Purchaser"). The Purchaser assumed the first mortgage loan which
had a principal balance of $1,793,760 at Closing and the Registrant received
$776,490 of sale proceeds.
Item 2. Properties
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As of December 31, 1994, the Registrant owns the four properties described
below:
Location Description of Property
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Dallas, Texas Candlewyck Apartments: a 452-unit apartment
complex located on 28 acres.
Smyrna, Georgia * Crossings Shopping Center: a shopping
center containing 153,178 square feet located on
18.8 acres.
Loveland, Colorado Orchards Shopping Center: a shopping center
containing 167,779 square feet located on
24.01 acres.
Austin, Texas The Woods Apartments: a 278-unit apartment
complex located on 13 acres.
* This property was sold during 1995. See Note 11 of Notes to Financial
Statements for additional information.
Certain of these properties are held subject to various mortgages. See Note 5
of Notes to Financial Statements for additional information.
The Registrant also holds minority joint venture interests in the
Brookhollow/Stemmons Office Building located in Dallas, Texas, and the
Perimeter 400 Center Office Building located in Fulton County, Georgia.
In the opinion of the General Partner, the Registrant has provided for adequate
insurance coverage for its real estate properties.
See Notes to Financial Statements for other information regarding real property
investments.
Item 3. Legal Proceedings
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a) Williams class action
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In February 1990, a proposed class-action complaint was filed, Paul Williams
and Beverly Kennedy, et al. vs. Balcor Pension Investors, et al., Case No.: 90-
C-0726 (U. S. District Court, Northern District of Illinois) against the
Registrant, the General Partner, The Balcor Company, Shearson Lehman Hutton,
Inc., American Express Company, other affiliates, and seven affiliated limited
partnerships (the "Related Partnerships") as defendants. The complaint alleges
that the defendants violated Federal securities laws as to the adequacy and
accuracy of disclosure of information in the offering of limited partnership
interests of the Registrant and the Related Partnerships and alleges breach of
fiduciary duty, fraud, negligence and violations under the Racketeer Influenced
and Corrupt Organizations Act. The complaint seeks compensatory and punitive
damages. The defendants filed their answer, affirmative defenses and a
<PAGE>
counterclaim to the complaint. The defendants' counterclaim asserts claims of
fraud and breach of warranty against certain plaintiffs, as well as a request
for declaratory relief regarding the defendants' rights to be indemnified for
their expenses incurred in defending the litigation. The defendants seek to
recover damages to their reputations and business as well as costs and
attorneys' fees in defending the claims.
In May 1993, the Court issued an order denying the plaintiffs' motion for class
certification based principally on the inadequacy of the individual plaintiffs
representing the proposed class. However, the Court gave plaintiffs leave to
propose new individual class representatives. Further, the Court granted the
defendants' motion for sanctions and ordered that plaintiffs' counsel pay
certain of the defendants' attorneys' fees incurred with the class
certification motion. In January 1995, the Court ordered the plaintiffs'
counsel to pay $75,000 to the defendants and $25,000 to the Court.
The plaintiffs retained new co-counsel and proposed new class representatives.
In July 1994, the Court granted plaintiffs' motion certifying a class relating
to the Federal securities fraud claims. The class certified by the Court
includes only the original investors in the Registrant and the Related
Partnerships. The defendants filed a motion for reconsideration in opposition
to the class certification which was denied on December 21, 1994. The Court
has ordered the parties to meet to discuss notice to the class and a schedule
for discovery.
A motion filed by the plaintiffs seeking to dismiss the defendants'
counterclaim for fraud was denied by the Court in August 1994.
The defendants intend to continue vigorously contesting this action. Management
of each of the defendants believes they have meritorious defenses to contest
the claims.
b) Bannockburn Executive Plaza
---------------------------
In September 1982, the Registrant funded a $5,027,736 loan (the "Loan") to an
unaffiliated entity evidenced by a note in the amount of $10,100,000 and
collateralized by a wrap-around mortgage on the Bannockburn Executive Plaza,
Bannockburn, Illinois. The Loan and the underlying first mortgage loan held by
an unaffiliated entity both matured in January 1994. In November 1993, the Loan
was placed in default due to the failure of the borrower to make payments due
and the borrower commenced bankruptcy proceedings under Chapter 11 of the U.S.
Bankruptcy Act in the U.S. Bankruptcy Court, Northern District of Illinois,
Eastern Division, In re Bannockburn Executive Plaza Venture, Case No.: 93-B-
23909. Pursuant to a cash collateral order, cash receipts from the property
have been used for property operating expenses and to make debt service
payments to the Registrant, out of which payments to the underlying first
mortgage lender have been made. All excess cash has been deposited into a
segregated account.
On February 16, 1995, the borrower's plan of reorganization was confirmed by
the Bankruptcy Court and became effective as of March 20, 1995. Pursuant to
the plan, the Bankruptcy Court allowed the Registrant's claim of $13,641,800,
consisting of $10,100,000 in principal and $3,541,800 in previous unpaid
interest. The maturity of the Loan will be extended to December 1, 1997 and
the Loan will continue to bear interest at 14.5% per annum with a pay rate of
9% per annum, payable monthly, based on the principal amount of $10,100,000.
The maturity of the underlying loan was also extended to December 1, 1997. The
borrower is obligated to make certain deposits from property cash flow into
reserves held by an escrow agent, with the remaining cash flow applied to the
principal balance of the underlying loan. If the Loan and underlying loan are
repaid on or prior to maturity, the Registrant will waive payment of the
$3,541,800 in unpaid interest and certain other interest payments due under the
terms of the Loan.
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
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No matters were submitted to a vote of the Limited Partners of the Registrant
during 1994.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
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Matters
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There has not been an established public market for Limited Partnership
Interests and it is not anticipated that one will develop. For information
regarding previous distributions, see Financial Statements, Statements of
Partners' Capital, and "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources", below.
As of December 31, 1994, the number of record holders of Limited Partnership
Interests of the Registrant was 10,765.
Item 6. Selected Financial Data
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Year ended December 31,
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1994 1993 1992 1991 1990
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Total income $7,904,391 $6,125,896 $6,728,618 $8,254,515 $9,109,854
Provision for po-
tential losses on
loans, real estate
and accrued inter-
est receivable 600,000 2,720,000 3,750,000 3,215,500 5,000,000
Income before net
gains on sales
of assets 6,379,013 2,541,797 2,166,157 4,458,722 3,565,665
Net income 6,498,855 3,141,300 2,166,157 4,458,722 3,575,049
Net income per
average number of
Limited Partner-
ship Interests
outstanding 26.35 12.68 8.72 17.87 14.26
Total assets 77,868,675 81,568,277 86,628,240 87,612,905 92,445,765
Mortgage notes
payable 7,153,074 8,436,279 10,997,864 9,234,008 10,920,679
Distributions per
Limited Partner-
ship Interest 34.35 20.00 22.50 30.00 44.00
Item 7. Management's Discussion and Analysis of Financial Condition and
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Results of Operations
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Summary of Operations
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Balcor Pension Investors - III (the "Partnership") decreased its provision for
potential losses on loans, real estate and accrued interest receivable during
1994 as compared to 1993. In addition, during 1993, the Partnership recognized
its share of a loss provision related to a decline in the fair value of a
property in which it holds a minority joint venture interest. The combined
effect of these events resulted in an increase in net income during 1994 as
<PAGE>
compared to 1993.
The Partnership's provision for potential losses on loans, real estate and
accrued interest receivable also decreased during 1993 as compared to 1992.
This decrease and the net gain recognized on the sales of real estate during
1993 were the primary reasons for the increase in net income during 1993 as
compared to 1992. This increase was partially offset by the sale of Partnership
properties which had generated income for financial statement purposes. Further
discussion of the Partnership's operations is summarized below.
Operations
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1994 Compared to 1993
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Increased interest income was received from the borrowers of the Bannockburn
Executive Plaza, Carmel on Providence and The Woods loans during 1994. In
addition, the Partnership purchased The Woods underlying loan in December 1993
which reduced interest expense on loans payable. Finally, the Partnership
received additional interest and a prepayment fee in connection with the North
Morris Estates loan repayment in November 1994. As a result, net interest
income on loans receivable increased during 1994 as compared to 1993. The
prepayment of the Airport III Industrial Park and the Continental Park loans in
November 1993 and June 1994, respectively, reduced interest income which
partially offset this increase.
The Partnership has two non-accrual loans at December 31, 1994 which are
collateralized by Carmel on Providence Apartments and Bannockburn Executive
Plaza. The funds advanced by the Partnership for these two loans total
approximately $6,200,000, representing approximately 6% of original funds
advanced. For non-accrual loans, income is recorded only as cash payments are
received from the borrower. During 1994, the Partnership received cash payments
of net interest income totaling approximately $244,000 on the Carmel on
Providence loan. The Partnership would have received approximately $288,000 of
net interest income under the terms of the original loan agreement. The loan
receivable and underlying first mortgage loan collateralized by the Bannockburn
Executive Plaza matured in January 1994. However, the borrower filed for
protection under the U.S. Bankruptcy Code in November 1993 and did not pay
either amount due. The Partnership has received cash payments of net interest
income totaling approximately $585,000 during 1994 while the Partnership, the
holder of the underlying loan and the borrower negotiated a plan of
reorganization. See Liquidity and Capital Resources for additional information.
Allowances are charged to income when the General Partner believes an
impairment has occurred, either in a borrower's ability to repay the loan or in
the value of the collateral property. Determinations of fair value are made
periodically on the basis of performance under the terms of the loan agreement
and assessments of property operations. Determinations of fair value represent
estimations based on many variables which affect the value of real estate,
including economic and demographic conditions. The Partnership recognized
provisions of $600,000 and $2,000,000 related to its loans in 1994 and 1993,
respectively. In addition, during 1993, the Partnership recognized a provision
of $720,000 related to the Partnership's real estate held for sale to provide
for declines in the fair value of certain properties in the Partnership's
portfolio. During 1994, allowances of $3,715,406 related to the Continental
Park loan were written off in connection with the prepayment of the loan at a
discount.
Operations of real estate held for sale represent the net operations of those
properties acquired by the Partnership through foreclosure. At December 31,
1994, the Partnership was operating the Candlewyck and The Woods apartment
complexes and the Crossings and Orchards shopping centers. Original funds
advanced by the Partnership totaled approximately $14,378,000 for these real
estate investments. Operating expenses decreased at the Crossings Shopping
Center due to decreased maintenance and repair expense and decreased real
<PAGE>
estate tax expense resulting from a reduction in the assessed property value.
Operating expenses also decreased at the Orchards Shopping Center due to the
completion of roof repairs during 1993. In addition, the Partnership acquired
The Woods Apartments in July 1994, which generated income. Finally, the
Riverview Office Building and the Villa Verde Apartments, which generated
income, were sold in September and November 1993, respectively. The combined
effect of these events resulted in an increase in income from real estate held
for sale during 1994 as compared to 1993.
Participation in income (loss) of joint ventures with affiliates represents the
Partnership's 27.5% and 12.68% shares of income (loss) from the
Brookhollow/Stemmons and Perimeter 400 Center office buildings, respectively.
During 1993, the Partnership recognized its share of a loss provision related
to a decline in the fair value of the Brookhollow/Stemmons Office Building.
This, combined with decreased leasing costs and increased average occupancy
levels and rental rates at the Perimeter 400 Center Office Building during
1994, were the primary reasons for the recognition of income during 1994 as
compared to a loss in 1993.
Proceeds were received in 1993 in connection with the settlement of the
Kensington loan, the refinancing of the Villa Verde loan and the sales of the
Riverview Office Building, Villa Verde Apartments and vacant land adjacent to
the Orchards Shopping Center. A portion of these proceeds were distributed in
April 1994. The remainder of these proceeds, along with the proceeds received
in 1994 from the prepayment of the Continental Park and North Morris Estates
loans and the sale of the Orchards Office Building, are invested in short-term
interest-bearing instruments. This, along with higher interest rates resulted
in an increase in interest income on short-term investments during 1994 as
compared to 1993.
The Partnership's loans generally bear interest at contractually-fixed interest
rates. Some loans also provide for additional interest in the form of
participations, usually consisting of either a share in the capital
appreciation of the property securing the Partnership's loan and/or a share in
the increase of the gross income of the property above a certain level.
Participation income increased during 1994 as compared to 1993 primarily due to
participations received in connection with the North Morris Estates loan
repayment during the fourth quarter of 1994.
The prepayment of the Airport III Industrial Park, Continental Park and North
Morris Estates loans and the foreclosure of The Woods Apartments resulted in a
decrease in mortgage servicing fees during 1994 as compared to 1993.
An increase in accounting and portfolio management fees resulted in an increase
in administrative expenses during 1994 as compared to 1993. This increase was
partially offset by a decrease in legal fees.
During 1994, the Partnership recognized a gain of $119,842 on the sale of the
Orchards Office Building. During 1993, the Partnership recognized a net gain
totaling $599,503 on the sales of the vacant land adjacent to the Orchards
Shopping Center, the Riverview Office Building and the Villa Verde Apartments.
1993 Compared to 1992
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The Partnership had four non-accrual loans at December 31, 1993 which were
collateralized by The Woods Apartments, Continental Park Office Building,
Carmel on Providence Apartments, and Bannockburn Executive Plaza. The funds
advanced by the Partnership for these four loans totaled approximately
$16,800,000, which represented approximately 16% of original funds advanced.
During 1993, the Partnership received cash payments of net interest income
totaling approximately $1,531,000 on the Continental Park, Carmel on Providence
and Bannockburn Executive Plaza loans. The Partnership would have received
approximately $2,702,000 of net interest income during 1993 under the terms of
the original loan agreements for these three loans. (See below for further
information regarding The Woods Apartments loan.)
<PAGE>
During May 1992, an extension of the maturity of the loan receivable and
underlying mortgage loan collateralized by The Woods Apartments was completed.
The maturity dates were extended to June 20, 1993 and July 1, 1993,
respectively. The borrower failed to repay either of the loans and the
Partnership obtained title to the property through a non-judicial foreclosure
in July 1994.
The Partnership recognized a provision for potential losses of $2,000,000 for
its loans during 1993. In addition, during the second quarter of 1993, a
valuation allowance of $720,000 was established to provide for a further
decline in the fair value of the Riverview Office Building which was
subsequently sold in September 1993.
Operations of real estate held for sale represent the net property operations
of those properties acquired by the Partnership through foreclosure. Interest
expense increased at the Orchards Shopping Center due to the placement of a new
first mortgage loan on the property in September 1992. In addition, the
Riverview Office Building and the Villa Verde Apartments, which were generating
income, were sold in September and November 1993, respectively. These events
resulted in a decrease in income from real estate held for sale during 1993 as
compared to 1992. Operations at the Candlewyck Apartments improved during 1993
due to increased rental income which resulted from higher rental rates and due
to decreased repair and maintenance expense. This partially offset the above
decrease.
Proceeds received in 1993 in connection with the settlement of the Kensington
loan, the refinancing of the Villa Verde loan and the sales of the Riverview
Office Building, the Villa Verde Apartments and vacant land adjacent to the
Orchards Shopping Center were retained and invested in short-term interest-
bearing instruments. As a result, interest income on short-term investments
increased during 1993 as compared to the same period in 1992.
Participation in joint ventures with affiliates represents the Partnership's
27.5% and 12.68% share of losses from the Brookhollow/Stemmons and Perimeter
400 Center office buildings. The Partnership recognized its share of a loss
provision related to a decline in the fair value of the Brookhollow/Stemmons
Office Building during 1993. As a result of this and an increase in leasing
costs at this property and at the Perimeter 400 Center Office Building, the
participation in loss of joint ventures with affiliates increased during 1993
as compared to 1992.
During the first quarter of 1992, the Partnership paid mortgage servicing fees,
which had not been previously billed, relating to the loan receivable accepted
by the Partnership in connection with the October 1990 sale of the Rivergate
Apartments. These fees related to the period from October 1990 through March
31, 1992. The Partnership continues to pay a monthly fee to service this loan.
As a result, mortgage servicing fees decreased during 1993 as compared to 1992.
The Partnership incurred significant legal fees during 1993 in connection with
the bankruptcy proceedings on The Woods loan and the borrower's default on the
Carmel on Providence loan. As a result, administrative expense increased during
1993 as compared to 1992.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership increased as of December 31, 1994
compared to December 31, 1993. The Partnership generated cash flow from its
operating activities primarily as a result of the net interest income earned on
its loans receivable, the operations of its properties, and the interest
received on its short-term investments. The payment of administrative costs
partially offset this cash flow. The Partnership also generated cash from its
investing activities primarily as a result of the prepayment of the Continental
Park and North Morris Estates loans and the sale of the Orchards Office
Building. The Partnership used cash to fund its financing activities consisting
<PAGE>
primarily of the payment of distributions to the General Partner and Limited
Partners and the payment of principal on underlying loans and mortgage notes
payable. A portion of the cash reserves is being held for anticipated capital
requirements at the Partnership's properties.
The Partnership classifies the cash flow performance of its properties as
either positive, marginal or a significant deficit, each after consideration of
debt service payments unless otherwise indicated. A deficit is considered to be
significant if it exceeds $250,000 annually or 20% of the property's rental and
service income. The Partnership defines cash flow generated from its properties
as an amount equal to the property's revenue receipts less property related
expenditures, which include debt service payments. During 1994 and 1993, the
Candlewyck Apartments and the Crossings and Orchards shopping centers generated
positive cash flow. The Woods Apartments, which was acquired through
foreclosure in July 1994, also generated positive cash flow during 1994. The
Candlewyck and The Woods apartment complexes and the Crossings and Orchards
shopping centers have occupancy rates of 98%, 91%, 65% and 91%, respectively.
The Crossings Shopping Center was sold in January 1995. The
Brookhollow/Stemmons and Perimeter 400 Center office complexes, properties in
which the Partnership holds minority joint venture interests, generated
positive cash flow during 1994 and 1993. Significant leasing costs were
incurred during 1993 at both properties in order to lease vacant space and
renew existing tenant leases which were scheduled to expire. These costs were
not included in classifying the cash flow performance of the properties since
they are non-recurring expenditures. Had these costs been included, both
properties would have operated at significant deficits during 1993. The General
Partner is continuing its efforts to maintain high occupancy levels, while
increasing rents where possible, and to monitor and control operating expenses
and capital improvement requirements at the properties. The General Partner
will also examine the terms of any mortgage loans collateralized by its
properties, and may refinance or, in certain instances, use Partnership
reserves to repay such loans.
Certain borrowers have failed to make payments when due to the Partnership for
more than ninety days and, accordingly, these loans have been placed on non-
accrual status (income is recorded only as cash payments are received). The
General Partner has negotiated with some of these borrowers regarding
modifications of the loan terms and has instituted foreclosure proceedings
under certain circumstances. Such foreclosure proceedings may be delayed by
factors beyond the General Partner's control such as bankruptcy filings by
borrowers and state law procedures regarding foreclosures. Further, certain
loans made by the Partnership have been restructured to defer and/or reduce
interest payments where the properties collateralizing the loans were
generating insufficient cash flow to support property operations and debt
service.
Because of the weak real estate markets in certain cities and regions of the
country, attributable to local and regional market conditions such as
overbuilding and recessions in local economies and specific industry segments,
certain borrowers have requested that the Partnership allow prepayment of
mortgage loans. The Partnership has allowed some of these borrowers to prepay
such loans, in some cases without assessing prepayment premiums, under
circumstances where the General Partner believed that refusing to allow such
prepayment would ultimately prove detrimental to the Partnership because of the
likelihood that the properties would not generate sufficient revenues to keep
loan payments current. In other cases, borrowers have requested prepayment in
order to take advantage of lower available interest rates. In these cases, the
Partnership has collected prepayment premiums.
In June 1994, the borrower of the $12,767,949 Continental Park wrap-around loan
prepaid the loan at a discount due to the diminished value of the property
collateralizing the loan. The Partnership received proceeds of approximately
$4,873,085 which represented a portion of the funds advanced on the loan and
the borrower repaid the $4,143,890 underlying mortgage loan. See Note 10 of
Notes to Financial Statements for additional information.
<PAGE>
In November 1994, the borrower of the North Morris Estates first mortgage loan
prepaid the loan. The Partnership received proceeds of approximately $7,189,500
which is comprised of the principal balance of the loan ($6,600,000),
additional interest ($202,500), participation income ($189,000) and a
prepayment premium ($198,000).
During February 1995, a plan of reorganization related to the Bannockburn
Executive Plaza loan was confirmed by the Bankruptcy Court. See Item 3. Legal
Proceedings and Note 3 of Notes to Financial Statements for additional
information.
During July 1994, the Partnership acquired The Woods Apartments through a non-
judicial foreclosure. See Note 9 of Notes to Financial Statements for
additional information.
During September 1994 and January 1995, the Partnership sold the Orchards
Office Building and the Crossings Shopping Center in all cash sales for
$1,200,000 and $2,650,000, respectively. The Partnership continues to own the
Orchards Shopping Center. The purchaser of the Crossings Shopping Center took
title subject to the existing $1,793,760 first mortgage loan and the
Partnership repaid $1,000,000 of the Orchards first mortgage loan with proceeds
from the sale. See Note 11 of Notes to Financial Statements for additional
information.
Distributions to Limited Partners can be expected to fluctuate for various
reasons. Generally, distributions are made from Cash Flow generated by interest
and other payments made by borrowers under the Partnership's mortgage loans.
Loan prepayments and repayments can initially cause Cash Flow to increase as
prepayment premiums and participations are paid; however, thereafter
prepayments and repayments will have the effect of reducing Cash Flow. If such
proceeds are distributed, Limited Partners will have received a return of
capital and the dollar amount of Cash Flow available for distribution
thereafter can be expected to decrease. Distribution levels can also vary as
loans are placed on non-accrual status, modified or restructured and, if the
Partnership has taken title to properties through foreclosure or otherwise, as
a result of property operations.
The Partnership made distributions totaling $17.50 of Cash Flow and $16.85 of
Mortgage Reductions in 1994, $20.00 of Cash Flow in 1993 and $22.50 of Cash
Flow in 1992. See Statement of Partners' Capital for additional information.
The distribution of Mortgage Reductions in 1994 resulted from the prepayment of
the Airport III Industrial Park loan, the refinancing of the Villa Verde loan
and the sale of the Riverview Office Building. The distributions made from Cash
Flow decreased in 1994 from 1993 due to property sales and loan prepayments and
in 1993 from 1992 due to increases in working capital reserves.
In January 1995, the Partnership paid $949,904 to Limited Partners representing
the quarterly distribution for the fourth quarter of 1994 of $4.00 of Cash Flow
per Interest. The level of the quarterly distribution is consistent with the
amount distributed for the third quarter of 1994. The Partnership also paid
$79,159 to the General Partner as its distributive share of the Cash Flow
distributed for the fourth quarter of 1994 and $26,386 as its contribution to
the Early Investment Incentive Fund. To date, the Partnership has distributed
$512.80 per $500 Interest, of which $427.80 represents Cash Flow from
operations and $85.00 represents Original Capital.
The Partnership expects to continue making cash distributions from the Cash
Flow generated by the receipt of mortgage payments and Cash Flow from property
operations, less payments on the underlying loans, fees to the General Partner
and administrative expenses. The General Partner believes the Partnership has
retained an appropriate amount of working capital to meet cash or liquidity
requirements which may occur.
During 1994, the General Partner used amounts placed in the Early Investment
Incentive Fund to repurchase 1,316 Interests from Limited Partners at a cost of
$434,007.
<PAGE>
The General Partner has recently completed the outsourcing of the financial
reporting and accounting services, transfer agent and investor records
services, and computer operations and systems development functions that
provided services to the Partnership. All of these functions are now being
provided by independent third parties. Additionally, Allegiance Realty Group,
Inc., which has provided property management services to all of the
Partnership's properties, was sold to a third party. Each of these transactions
occurred after extensive due diligence and competitive bidding processes. The
General Partner does not believe that the cost of providing these services to
the Partnership, in the aggregate, will be materially different to the
Partnership during 1995 when compared to 1994.
Inflation has several types of potentially conflicting impacts on real estate
investments. Short-term inflation can increase real estate operating costs
which may or may not be recovered through increased rents and/or sales prices,
depending on general or local economic conditions. In the long-term, inflation
can be expected to increase operating costs and replacement costs and may lead
to increased rental revenues and real estate values.
Item 8. Financial Statements and Financial Statement Schedules and
- ------------------------------------------------------------------
Supplementary Data
- ------------------
See Index to Financial Statements in this Form 10-K.
The supplemental financial information specified by Item 302 of Regulation S-K
is not applicable.
Item 9. Changes in and Disagreements with Accountants on Accounting and
- -----------------------------------------------------------------------
Financial Disclosure
- --------------------
There have been no changes in or disagreements with accountants on any matter
of accounting principles, practices or financial statement disclosure.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
- -----------------------------------------------------------
(a) Neither the Registrant nor Balcor Mortgage Advisors-II, its General
Partner, has a Board of Directors.
(b, c & e) The names, ages and business experiences of the executive officers
and significant employees of the General Partner of the Registrant are as
follows:
TITLE OFFICERS
----- --------
Chairman, President and Chief Thomas E. Meador
Executive Officer
Executive Vice President, Allan Wood
Chief Financial Officer and
Chief Accounting Officer
Senior Vice President Alexander J. Darragh
First Vice President Daniel A. Duhig
First Vice President Josette V. Goldberg
First Vice President Alan G. Lieberman
First Vice President Brian D. Parker
and Assistant Secretary
First Vice President John K. Powell, Jr.
First Vice President Reid A. Reynolds
First Vice President Thomas G. Selby
Thomas E. Meador (July 1947) joined Balcor in July 1979. He is Chairman,
President and Chief Executive Officer and has responsibility for all ongoing
day-to-day activities at Balcor. He is a Director of The Balcor Company.
Prior to joining Balcor, Mr. Meador was employed at the Harris Trust and
Savings Bank in the commercial real estate division where he was involved in
various lending activities. Mr. Meador received his M.B.A. degree from the
Indiana University Graduate School of Business.
Allan Wood (January 1949) joined Balcor in August 1983 and, as Balcor's Chief
Financial Officer and Chief Accounting Officer, is responsible for the
financial and administrative functions. He is also a Director of The Balcor
Company. Mr. Wood is a Certified Public Accountant. Prior to joining Balcor,
he was employed by Price Waterhouse where he was involved in auditing public
and private companies.
Alexander J. Darragh (February 1955) joined Balcor in September 1988 and has
primary responsibility for the Portfolio Advisory Group. He is responsible for
due diligence analysis and real estate advisory services in support of asset
management, institutional advisory and capital markets functions. Mr. Darragh
has supervisory responsibility of Balcor's Investor Services, Investment
Administration, Fund Management and Land Management departments. Mr. Darragh
received masters' degrees in Urban Geography from Queens's University and in
Urban Planning from Northwestern University.
Daniel A. Duhig (October 1956) joined Balcor in November 1986 and is
responsible for the Asset Management Department relating to real estate
investments made by Balcor and its affiliated partnerships, including
negotiations for modifications or refinancings of real estate mortgage
investments and the disposition of real estate investments.
Josette V. Goldberg (April 1957) joined Balcor in January 1985 and has primary
responsibility for all human resources matters. In addition, she has
supervisory responsibility for Balcor's administrative and MIS departments.
Ms. Goldberg has been designated as a Senior Human Resources Professional
(SHRP).
<PAGE>
Alan G. Lieberman (June 1959) joined Balcor in May 1983 and is responsible for
the Property Sales and Capital Markets Groups. Mr. Lieberman is a Certified
Public Accountant.
Brian D. Parker (June 1951) joined Balcor in March 1986 and is responsible for
Balcor's corporate and property accounting, treasury and budget activities.
Mr. Parker is a Certified Public Accountant and holds an M.S. degree in
Accountancy from DePaul University.
John K. Powell, Jr. (June 1950) joined Balcor in September 1985 and is
responsible for the administration of the investment portfolios of Balcor's
partnerships and for Balcor's risk management functions. Mr. Powell received a
Master of Planning degree from the University of Virginia. He has been
designated a Certified Real Estate Financier by the National Society for Real
Estate Finance and is a full member of the Urban Land Institute.
Reid A. Reynolds (April 1950) joined Balcor in March 1981 and is involved with
the asset management of residential properties for Balcor. Mr. Reynolds is a
licensed Real Estate Broker in the State of Illinois.
Thomas G. Selby (July 1955) joined Balcor in February 1984 and has
responsibility for various Asset Management functions, including oversight of
the residential portfolio. From January 1986 through September 1994, Mr. Selby
was Regional Vice President and then Senior Vice President of Allegiance Realty
Group, Inc., an affiliate of Balcor providing property management services.
Mr. Selby was responsible for supervising the management of residential
properties in the western United States.
(d) There is no family relationship between any of the foregoing officers.
(f) None of the foregoing officers or employees are currently involved in any
material legal proceedings nor were any such proceedings terminated during the
fourth quarter of 1994.
Item 11. Executive Compensation
- -------------------------------
The Registrant has not paid and does not propose to pay any remuneration to the
executive officers and directors of the General Partner. Certain of these
officers receive compensation from The Balcor Company (but not from the
Registrant) for services performed for various affiliated entities, which may
include services performed for the Registrant. However, the General Partner
believes that any such compensation attributable to services performed for the
Registrant is immaterial to the Registrant. See Note 7 of Notes to Financial
Statements for the information relating to transactions with affiliates.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- -----------------------------------------------------------------------
(a) No person owns of record or is known by the Registrant to own beneficially
more than 5% of the outstanding Limited Partnership Interests of the
Registrant.
(b) Balcor Mortgage Advisors-II and its officers own as a group or individually
the following Limited Partnership Interests of the Registrant:
Amount
Beneficially
Title of Class Owned Percent of Class
-------------- ------------- ----------------
Limited Partnership
Interest 5 Interests Less than 1%
Relatives and affiliates of the officers and partners of the General Partner do
not own any additional interests.
<PAGE>
(c) The Registrant is not aware of any arrangement, the operation of which may
result in a change of control of the Registrant.
Item 13. Certain Relationships and Related Transactions
- -------------------------------------------------------
(a, b) See Note 2 of Notes to Financial Statements for information relating to
the Partnership Agreement and the allocation of distributions and profits and
losses.
See Note 7 of Notes to Financial Statements for information relating to
transactions with affiliates.
(c) No management person is indebted to the Registrant.
(d) The Registrant has no outstanding agreements with any promoters.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statements and Financial Statement Schedules,
- --------------------------------------------------------------------------
and Reports on Form 8-K
- -----------------------
(a)
(1 & 2) See Index to Financial Statements in this Form 10-K.
(3) Exhibits:
(3) The Amended and Restated Agreement of Limited Partnership, and the Amended
and Restated Certificate of Limited Partnership of Balcor Pension
Investors-III, previously filed as Exhibits 3(a) and 3(b), respectively, to
Amendment No. 2 to the Registrant's Registration Statement on Form S-11 dated
May 20, 1982 (Registration No. 2-75938), and as Exhibits 3(a) and 3(b),
respectively, to the Registrant's Registration Statement on Form S-11 dated
November 2, 1982 (Registration No. 2-80123), are hereby incorporated herein by
reference.
(4) Form of Subscription Agreement, previously filed as Exhibit 4(a) to
Amendment No. 2 to the Registrant's Registration Statement on Form S-11 dated
May 20, 1982 (Registration Statement No. 2-75938) and as previously filed as
Exhibit 4(a) to Registrant's Registration Statement on Form S-11 dated
November 2, 1982 (Registration No. 2-80123), and Form of Confirmation regarding
Interests in the Registrant set forth as Exhibit 4.2 to the Registrant's Report
on Form 10-Q for the quarter ended June 30, 1992 (Commission File No. 0-011129)
are incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for 1994 is attached hereto.
(28) Agreement of Sale relating to the sale of the Crossings Shopping Center,
Smyrna, Georgia is attached hereto.
(b) Reports on Form 8-K: There were no reports filed on Form 8-K during the
quarter ended December 31, 1994.
(c) Exhibits: See Item 14(a)(3) above.
(d) Financial Statement Schedules: None.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BALCOR PENSION INVESTORS-III
By: /s/Allan Wood
-------------------------------------
Allan Wood
Executive Vice President, and Chief
Accounting and Financial Officer
(Principal Accounting and Financial
Officer) of Balcor Mortgage Advisors-II,
the General Partner
Date: March 24, 1995
--------------
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.
Signature Title Date
- ---------------------- ------------------------------------ ------------
President and Chief Executive
Officer (Principal Executive
Officer) of Balcor Mortgage
/s/Thomas E. Meador Advisors-II, the General Partner March 24, 1995
-------------------- --------------
Thomas E. Meador
Executive Vice President, and Chief
Accounting and Financial Officer
(Principal Accounting and Financial
Officer) of Balcor Mortgage
/s/Allan Wood Advisors-II, the General Partner March 24, 1995
- -------------------- --------------
Allan Wood
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Report of Independent Auditors
Financial Statements:
Balance Sheets, December 31, 1994 and 1993
Statements of Partners' Capital, for the years ended December 31, 1994, 1993
and 1992
Statements of Income and Expenses, for the years ended December 31, 1994, 1993
and 1992
Statements of Cash Flows, for the years ended December 31, 1994, 1993 and 1992
Notes to Financial Statements
Schedules are omitted for the reason that they are inapplicable or equivalent
information has been included elsewhere herein.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Partners of
Balcor Pension Investors-III:
We have audited the accompanying balance sheets of Balcor Pension Investors-III
(An Illinois Limited Partnership) as of December 31, 1994 and 1993, and the
related statements of partners' capital, income and expenses and cash flows for
each of the three years in the period ended December 31, 1994. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements 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 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 financial statements referred to above present fairly, in
all material respects, the financial position of Balcor Pension Investors-III
at December 31, 1994 and 1993, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
March 6, 1995
<PAGE>
BALCOR PENSION INVESTORS-III
(An Illinois Limited Partnership)
BALANCE SHEETS
December 31, 1994 and 1993
ASSETS
1994 1993
------------- -------------
Cash and cash equivalents $ 18,445,509 $ 10,156,355
Cash and cash equivalents - Early Investment
Incentive Fund 21,171 25,783
Escrow deposits 427,562 375,028
Escrow deposits - restricted 899,929 1,238,638
Accounts and accrued interest receivable 286,756 526,698
Deferred expenses, net of accumulated
amortization of $28,120 in 1994 and
$15,622 in 1993 34,368 46,866
------------- -------------
20,115,295 12,369,368
------------- -------------
Investment in loans receivable:
Loans receivable - wrap-around
and first mortgages 75,491,676 102,095,930
Less:
Loans payable - underlying mortgages 42,548,988 47,870,972
Allowance for potential loan losses 5,013,959 8,129,365
------------- -------------
Net investment in loans receivable 27,928,729 46,095,593
Real estate held for sale 23,801,567 17,369,132
Investments in joint ventures with affiliates 6,023,084 5,734,184
------------- -------------
57,753,380 69,198,909
------------- -------------
$ 77,868,675 $ 81,568,277
============= =============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 119,483 $ 222,483
Due to affiliates 110,862 62,601
Other liabilities, principally interest,
real estate taxes and escrow deposits 1,541,327 1,823,666
Security deposits 120,870 73,750
Mortgage notes payable 7,153,074 8,436,279
------------- -------------
Total liabilities 9,045,616 10,618,779
------------- -------------
Partners' capital (237,476 Limited
Partnership Interests issued) 73,437,669 75,130,101
Less Interests held by Early Investment
Incentive Fund (10,208 at December 31, 1994
and 8,892 at December 31, 1993) (4,614,610) (4,180,603)
------------- -------------
68,823,059 70,949,498
------------- -------------
$ 77,868,675 $ 81,568,277
============= =============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-III
(An Illinois Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
for the years ended December 31, 1994, 1993 and 1992
Partners' Capital (Deficit) Accounts
-----------------------------------------
General Limited
Total Partner Partners
------------- ------------- -------------
Balance at December 31, 1991 $ 76,941,929 $ (1,103,856) $ 78,045,785
Repurchase of 914 Limited
Partnership Interests (345,175) (345,175)
Cash distributions to:
Limited Partners (A) (5,177,586) (5,177,586)
General Partner (445,267) (445,267)
Net income for the year
ended December 31, 1992 2,166,157 162,462 2,003,695
------------- ------------- -------------
Balance at December 31, 1992 73,140,058 (1,386,661) 74,526,719
Repurchase of 956 Limited
Partnership Interests (351,782) (351,782)
Cash distributions to:
Limited Partners (A) (4,584,286) (4,584,286)
General Partner (395,792) (395,792)
Net income for the year
ended December 31, 1993 3,141,300 235,598 2,905,702
------------- ------------- -------------
Balance at December 31, 1993 70,949,498 (1,546,855) 72,496,353
Repurchase of 1,316 Limited
Partnership Interests (434,007) (434,007)
Cash distributions to:
Limited Partners (A) (7,844,967) (7,844,967)
General Partner (346,320) (346,320)
Net income for the year
ended December 31, 1994 6,498,855 487,414 6,011,441
------------- ------------- -------------
Balance at December 31, 1994 $ 68,823,059 $ (1,405,761) $ 70,228,820
============= ============= =============
(A) Summary of cash distributions paid per Limited Partnership Interest:
1994 1993 1992
------------- ------------- -------------
First Quarter $ 5.50 $ 5.00 $ 7.50
Second Quarter 20.85 5.00 5.00
Third Quarter 4.00 5.00 5.00
Fourth Quarter 4.00 5.00 5.00
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-III
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the years ended December 31, 1994, 1993 and 1992
1994 1993 1992
------------- ------------- -------------
Income:
Interest on loans receivable $ 10,162,922 $ 10,535,990 $ 10,544,202
Less interest on loans
payable - underlying
mortgages 4,280,261 4,916,217 5,032,431
------------- ------------- -------------
Net interest income on
loans receivable 5,882,661 5,619,773 5,511,771
Income from operations of
real estate held for sale 804,434 599,785 1,121,499
Participation in income (loss)
of joint ventures with
affiliates 438,608 (482,783) (239,537)
Interest on short-term
investments 543,293 283,425 217,438
Participation income 235,395 105,696 117,447
------------- ------------- -------------
Total income 7,904,391 6,125,896 6,728,618
------------- ------------- -------------
Expenses:
Provision for potential
losses on loans, real
estate and accrued interest
receivable 600,000 2,720,000 3,750,000
Mortgage servicing fees 84,798 104,143 124,051
Administrative 840,580 759,956 688,410
------------- ------------- -------------
Total expenses 1,525,378 3,584,099 4,562,461
------------- ------------- -------------
Income before net gain on sales
of real estate 6,379,013 2,541,797 2,166,157
Net gain on sales of real estate 119,842 599,503
------------- ------------- -------------
Net income $ 6,498,855 $ 3,141,300 $ 2,166,157
============= ============= =============
Net income allocated to
General Partner $ 487,414 $ 235,598 $ 162,462
============= ============= =============
Net income allocated to
Limited Partners $ 6,011,441 $ 2,905,702 $ 2,003,695
============= ============= =============
Net income per average number
of Limited Partnership
Interests outstanding (228,132
in 1994, 229,084 in 1993 and
229,880 in 1992) $ 26.35 $ 12.68 $ 8.72
============= ============= =============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-III
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1994, 1993 and 1992
1994 1993 1992
------------- ------------- -------------
Operating activities:
Net income $ 6,498,855 $ 3,141,300 $ 2,166,157
Adjustments to reconcile net
income to net cash provided
by operating activities:
Net gain on sales of real
estate (119,842) (599,503)
Participation in (income)
loss of joint ventures
with affiliates (438,608) 482,783 239,537
Provision for potential
losses on loans, real
estate and accrued
interest receivable 600,000 2,720,000 3,750,000
Amortization of deferred
expenses 12,498 254,853 18,354
Accrued interest income
due at maturity (201,260) (56,434)
Collection of accrued
interest income due
at maturity 449,978 396,873
Net change in:
Escrow deposits (52,534) 309,617 (459,681)
Escrow deposits -
restricted 338,709 (300,814) (374,748)
Accounts and accrued
interest receivable 203,867 258,361 (306,153)
Accounts payable (103,000) (628,108) 764,762
Due to affiliates 48,261 7,298 (8,285)
Other liabilities (178,291) 352,786 285,202
Security deposits 47,120 (39,794) 11,671
------------- ------------- -------------
Net cash provided by
operating activities 6,857,035 6,207,497 6,427,255
------------- ------------- -------------
Investing activities:
Capital contributions to joint
venture partners - affiliates (78,147) (316,577)
Distributions from joint
venture partners - affiliates 227,855 4,294 380,606
Loan fundings (12,379) (53,661)
Collection of principal
payments on loans receivable 11,511,219 2,045,070 33,950
Additions to real estate (256,770) (107,172) (64,574)
Proceeds from sales of
real estate 1,200,000 3,736,019
Costs incurred in connection
with sales of real estate (49,586) (325,277)
Costs incurred in connection
with real estate acquired
through foreclosure (40,471)
------------- ------------- -------------
Net cash provided by
investing activities 12,514,100 5,023,978 296,321
------------- ------------- -------------
Financing activities:
Distributions to Limited
<PAGE>
Partners (7,844,967) (4,584,286) (5,177,586)
Distributions to General
Partner (346,320) (395,792) (445,267)
Decrease in cash and cash
equivalents - Early
Investment Incentive Fund 4,612 54,553 30,255
Payment of deferred expenses (172,580) (79,738)
Repurchase of Limited
Partnership Interests (434,007) (351,782) (345,175)
Principal payments on
underlying loans payable (1,178,094) (1,369,417) (1,116,054)
Repayment of mortgage notes
payable (4,798,550) (746,897)
Proceeds from issuance of
mortgage note payable 4,298,400 2,853,000
Principal payments on mortgage
notes payable (1,283,205) (334,887) (342,279)
------------- ------------- -------------
Net cash used in
financing activities (11,081,981) (7,654,341) (5,369,741)
------------- ------------- -------------
Net change in cash and
cash equivalents 8,289,154 3,577,134 1,353,835
Cash and cash equivalents
at beginning of year 10,156,355 6,579,221 5,225,386
------------- ------------- -------------
Cash and cash equivalents
at end of year $ 18,445,509 $ 10,156,355 $ 6,579,221
============= ============= =============
The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-III
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policies:
(a) The Partnership records wrap-around mortgage loans at the face amount of
the mortgage instrument which includes the outstanding indebtedness of the
borrower under the terms of the underlying mortgage obligations. The underlying
mortgage obligations are recorded as a reduction of the wrap-around mortgage
loan and the resulting balance represents the Partnership's net advance to the
borrower. The Partnership is responsible for making periodic payments to the
underlying mortgage lenders only to the extent that payments as required by the
wrap-around mortgage agreement are received by the Partnership from the
borrower.
(b) Income on loans is recorded as earned in accordance with the terms of the
related loan agreements. The accrual of interest is discontinued when a loan
becomes ninety days contractually delinquent or sooner when, in the opinion of
the General Partner, an impairment has occurred in the value of the collateral
property securing the loan. Income on nonaccrual loans or loans which are
otherwise not performing in accordance with their terms is recorded on a cash
basis.
Various loan agreements provide for participation by the Partnership in
increases in value of the collateral property when the loan is repaid or
refinanced. In addition, certain loan agreements allow the Partnership to
receive a percentage of rental income exceeding a base amount. Participation
income is reflected in the accompanying Statements of Income and Expenses when
received.
Income from operations of real estate owned is reflected in the accompanying
Statements of Income and Expenses net of related direct operating expenses.
<PAGE>
(c) Allowances are recorded through charges to income when the General Partner
believes an impairment has occurred, either in a borrower's ability to repay
the loan or in the value of the collateral property. Determinations of
impairment are made periodically on the basis of performance under the terms of
the loan agreement and assessments of property operations.
When the General Partner believes the likelihood of foreclosure is more than
remote, a loss provision is recorded if the loan balance exceeds the estimated
fair value of the collateral property less costs of disposal. Upon foreclosure,
actual losses are charged to the allowance and the fair value of the property
is transferred to real estate held for sale. Determinations of fair value
represent estimations based on many variables which affect the value of real
estate, including economic and demographic conditions. An allowance for loss is
recorded when a decline in the value of a property owned is believed to be
temporary. Impairment in value considered to be permanent results in the direct
writedown of the property's carrying value to its estimated fair value.
(d) Deferred expenses consist of leasing commissions which are amortized over
the term of the respective lease, and refinancing fees which are amortized over
the term of the respective loan agreement.
(e) Income from operating leases with significant abatements and/or scheduled
rent increases is recognized on a straight-line basis over the respective lease
term.
(f) Investment in joint ventures with affiliates represents the Partnership's
percentage interests in joint ventures with affiliated partnerships. The
Partnership records its initial investment at cost and adjusts its investment
account for additional capital contributions, distributions and its share of
income or loss.
(g) The Partnership records repurchases of Interests by the Early Investment
Incentive Fund as a reduction of Partners' Capital (see Note 2 of Notes to
Financial Statements). Cash and cash equivalents not yet utilized to repurchase
Interests, but which are part of the Early Investment Incentive Fund, are
classified as restricted assets of the Partnership.
(h) Cash equivalents include all highly liquid investments with a maturity of
three months or less when purchased.
(i) The Partnership is not liable for Federal income taxes as each partner
recognizes his proportionate share of the Partnership income or loss in his tax
return; therefore, no provision for income taxes is made in the financial
statements of the Partnership.
(j) Several reclassifications have been made in the previously reported 1993
and 1992 financial statements to conform with classifications used in 1994
including the reclassification of "loans in substantive foreclosure" to loans
to conform with the provisions of Statement of Financial Accounting Standards
No.114 which was adopted as of January 1, 1994.
These reclassifications have not changed the 1993 or 1992 operating results.
2. Partnership Agreement:
The Partnership was organized on January 22, 1982. The Partnership Agreement
provides for Balcor Mortgage Advisors-II to be the General Partner and for the
admission of Limited Partners through the sale of Limited Partnership Interests
at $500 per Interest, 237,476 of which were sold on or prior to November 10,
1982, the termination date of the offering.
For financial statement purposes, profits and losses are allocated 92.5% to the
Limited Partners, of which 2.5% relates to the Early Investment Incentive Fund,
and 7.5% to the General Partner.
To the extent that Cash Flow is distributed, distributions will be made as
follows: (i) 90% of such Cash Flow will be distributed to the Limited Partners,
<PAGE>
(ii) 7.5% of such Cash Flow will be distributed to the General Partner, and
(iii) 2.5% of such Cash Flow will be set aside in a separate account for
repurchase of Interests and for payment on dissolution of the Partnership to
investors who subscribed prior to December 31, 1982 ("Early Investors") if
necessary for them to receive an amount equal to their Original Capital plus a
specified cumulative return based on the date of investment. Amounts, if any,
remaining in the account after the Early Investors have received their
cumulative return will be distributed 90% to all Limited Partners and 10% to
the General Partner.
Amounts placed in the Early Investment Incentive Fund may, at the sole
discretion of the General Partner and subject to certain limitations, be used
to repurchase Interests from existing Limited Partners. During 1994, 1,316
Interests were repurchased at a cost of $434,007. All repurchases of Interests
have been made at 95% of the then current valuation of such Limited Partnership
Interests at the previous quarter end less any distributions made after the
previous quarter end. Distributions of Cash Flow and Mortgage Reductions
pertaining to any repurchased Interests are paid to the Early Investment
Incentive Fund. To the extent that amounts in the Early Investment Incentive
Fund are not utilized to repurchase Interests, such amounts are invested in
short-term interest-bearing instruments with earnings thereon credited to this
account.
<PAGE>
3. Investment in Loans Receivable:
Loans receivable and loans payable at December 31, 1994 consisted of the
following:
Loans Receivable
---------------------------------------------------------
Current Current Original Final
Mortgage Monthly Interest Funding Maturity Additional
Property Balances(A) Payments Rate Date Date Interest
- -------------- ----------- -------- -------- ------- ------ ----------
First and Wrap-around
Mortgages:
Apartments:
Carmel on
Providence (B) $ 3,200,000 $ 34,333 12.875% 1982 1997
Chicago Colony 16,750,000 157,031 11.25 1985 1995 (C)
Pepper Square 3,300,000 27,500 10.00 1989 1996
Rivergate 5,289,051 47,718 10.00 1990 1995
Office Buildings:
Bannockburn
Executive Plaza(D) 8,727,625 75,750 9.00 1982 1997
Seafirst Financial
Center 32,425,000 268,955 9.95 1982 1997 (C)
Corporate Campus I
(E) 5,800,000 44,467 9.20 1988 1998
-----------
Total $75,491,676
===========
Loans Payable
---------------------------------------
Underlying Current Current Due
Mortgage Monthly Interest Date of
Property Balances Payments Rate Loan
- --------------- ---------- -------- -------- -------
Apartments:
Carmel on Providence $1,334,265 $17,777 9.50% 1997
Chicago Colony 3,120,208 37,762 8.75 1995
2,743,070 33,042 8.75 1995
1,698,238 21,875 9.75 1995
Pepper Square 1,886,820 19,760 9.25 1996
Office Buildings:
Bannockburn
Executive Plaza 4,097,678 44,677 9.75 1997
Seafirst Financial
Center 24,958,067 231,196 9.75 1997
Corporate Campus I 2,710,642 29,934 9.50 1999
-----------
Total $42,548,988
===========
(A) All loans are wrap-around mortgage loans except for Rivergate Apartments
which is a first mortgage loan.
(B) A plan of reorganization was approved by the Bankruptcy Court in June 1993
which extended the maturity date of this loan and the underlying mortgage loan
to December 1997. In addition, the interest rate on the underlying loan was
increased from 9.0% to 9.5% effective July 1993.
(C) The Partnership may receive additional payments from the borrower
representing participation in the operating results of the collateral property
which exceed specified levels and a share in the appreciation of the collateral
property upon repayment or refinancing.
<PAGE>
(D) A plan of reorganization was confirmed by the Bankruptcy Court in February
1995 which extended the maturity date of this loan and the underlying mortgage
loan to December 1997. This loan will continue to bear interest at 14.5% per
annum with a pay rate of 9% per annum based on the outstanding principal.
Unpaid interest will be waived by the Partnership if this loan is repaid on or
prior to maturity assuming no previous uncured defaults.
(E) In August 1993, the loan was modified. Effective January 1, 1993, the
interest rate was reduced from 10.5% to 9.2% and the maturity date of the loan
was extended five years to September 1998. In addition, the borrower delivered
a $500,000 letter of credit to the Partnership as additional security for the
loan.
Loans which have been classified as nonaccrual as a result of delinquency or
other noncompliance with terms of loan agreements aggregated $11,927,625 and
$31,893,745 at December 31, 1994 and 1993, respectively.
Under certain circumstances, the General Partner has entered into negotiations
with borrowers which resulted in a reduction of interest rates, periodic
payments or the modification of other loan terms. Loans whose monetary terms
have been restructured amounted to $38,225,000 at December 31, 1994 and 1993.
Nonaccrual loans and loans which have been restructured are hereinafter
referred to as impaired loans.
Net interest income relating to all of the impaired loans except for the Woods
Apartments loan would have been approximately $1,915,000 in 1994, $3,787,000 in
1993 and $3,281,000 in 1992. Net interest income from impaired loans included
in the accompanying Statements of Income and Expenses amounted to approximately
$1,958,000 ($1,877,000 cash basis) in 1994, $2,375,000 in 1993 and $2,129,000
in 1992.
The Woods Apartments loan was placed on non-accrual status in 1988. During May
1992, an extension of the maturity of the loan receivable and underlying loan
was completed. The maturity dates were extended to June 20, 1993 and July 1,
1993, respectively. The borrower failed to repay either of the loans and the
Partnership obtained title to the property through a non-judicial foreclosure
in July 1994. The Partnership received net interest income of approximately
$653,000, $301,000 and $385,000 in 1994, 1993 and 1992, respectively.
Included in the impaired loan balances of $50,152,625 at December 31, 1994 is
$38,225,000 of impaired loans for which the related allowance for losses is
$3,654,000. The average recorded investment in impaired loans during the year
ended December 31, 1994 was approximately $60,136,000.
4. Allowances for Losses on Loans and Real Estate Held for Sale:
Activity recorded in the allowances for losses on loans and real estate held
for sale during the three years ended December 31, 1994 is described in the
table below.
1994 1993 1992
------------ ------------- ------------
Loans:
Balance at beginning of
year $ 8,129,365 $ 8,129,365 $ 10,401,365
Provision charged to
income 600,000 2,000,000 224,000
Charge-off of losses (3,715,406) (2,000,000) (2,496,000)
----------- ----------- ------------
Balance at the end of
the year $ 5,013,959 $ 8,129,365 $ 8,129,365
=========== =========== ============
Real Estate Held for Sale:
<PAGE>
Balance at beginning of
year None None $ 8,825,000
Provision charged to
income None $ 720,000 3,526,000
Charge-off of losses None (720,000) (12,351,000)
----------- ----------- ------------
Balance at the end of
the year None None None
=========== =========== ============
Included in the 1992 charge-off of losses are amounts reflecting the
Partnership's adoption of Statement of Position 92-3, "Accounting for
Foreclosed Assets" which required the Partnership to adjust the carrying
amounts of its real estate held for sale and loans previously classified as in
substantive foreclosure to the lower of fair value of the asset less estimated
costs to sell, or the cost of the asset. This change had no effect on the
results of operations of the Partnership in 1992 since the Partnership had
previously recorded these allowances to reflect declines in the value of the
real estate and loans.
5. Mortgage Notes Payable:
The mortgage notes payable at December 31, 1994 and 1993 consisted of the
following:
Carrying Carrying
Amounts Amounts
of Notes of Notes Current Current Final Estimated
at at Monthly Interest Maturity Balloon
Property 12/31/94 12/31/93 Payments Rate Date Payment
- ---------------- ---------- --------- -------- -------- ------ ---------
Apartments:
Candlewyck $1,313,768 $1,371,443 $15,598 9.625% 1996 $1,233,000
1,065,228 1,127,628 13,217 8.75 1996 979,000
1,274,175 1,325,227 14,835 9.75 1996 1,203,000
Shopping Centers:
Crossings(A) 1,793,760 1,845,849 18,768 9.50 1995 1,780,000
Orchards 1,706,143 2,766,132 16,334 9.25 1997 1,587,000
---------- ----------
Total $7,153,074 $8,436,279
========== ==========
(A) In January 1995, this mortgage note payable was assumed by the purchaser
in connection with the sale of the property.
Real estate held for sale with an aggregate carrying value of $16,338,560 at
December 31, 1994 was pledged as collateral for repayment of mortgage notes.
During the years ended December 31, 1994, 1993 and 1992, the Partnership
incurred interest expense on mortgage notes payable of $780,047, $1,531,785 and
$1,302,291, respectively, and paid interest of $780,047, $1,526,182 and
$1,279,853, respectively.
Future maturities of the above mortgage notes payable are approximately as
follows:
1995 $2,021,000
1996 3,509,000
1997 1,623,000
6. Management Agreements:
As of December 31, 1994, all of the properties owned by the Partnership are
managed by a third-party management company. These management agreements
provide for annual fees of 5% of gross operating receipts for residential
<PAGE>
properties and 3% to 6% of gross operating receipts for commercial properties.
7. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates are:
Year Ended Year Ended Year Ended
12/31/94 12/31/93 12/31/92
-------------- -------------- --------------
Paid Payable Paid Payable Paid Payable
------ ------- ------ ------- ------ -------
Mortgage servicing fees $88,396 $4,839 $104,581 $8,437 $123,214 $8,875
Property management fees 238,090 None 333,195 18,262 311,150 26,433
Reimbursement of expenses
to the General Partner
at cost:
Accounting 74,803 30,698 71,203 5,880 74,411 5,710
Data processing 41,023 9,216 41,726 10,010 44,027 3,598
Investor communica-
tion 27,664 8,893 20,499 1,693 30,743 2,359
Legal 16,094 9,316 14,911 1,231 13,452 1,032
Portfolio management 84,441 38,103 62,738 16,384 80,545 5,755
Other 26,381 9,797 8,518 704 20,076 1,541
Allegiance Realty Group, Inc., an affiliate of the General Partner, managed all
of the Partnership's properties until the affiliate was sold to a third-party
in November 1994.
The Partnership participates in an insurance deductible program with other
affiliated partnerships in which the program pays claims up to the amount of
the deductible under the master insurance policies for its properties. The
program is administered by an affiliate of the General Partner who receives no
fee for administering the program. The Partnership's premiums to the deductible
insurance program were $46,538, $31,861 and $46,573 for 1994, 1993 and 1992,
respectively.
8. Investments in Joint Ventures with Affiliates:
The Partnership owns a 27.5% joint venture interest in the Brookhollow/Stemmons
Office Center and a 12.68% joint venture interest in the Perimeter 400 Center
Office Building. During 1994, 1993 and 1992, the Partnership received
distributions totaling $227,855, $4,294 and $380,606, respectively, from the
joint ventures. During 1994 and 1993, the Partnership also made contributions
totaling $78,147 and $316,577 to the joint ventures, respectively. In addition,
during 1993 and 1992, the joint ventures recognized provisions for loss
totaling $3,165,000 and $6,988,000, respectively, due to a decline in the fair
value of the properties. The Partnership's participation in loss of joint
ventures with affiliates includes the Partnership's share of the provisions of
$771,873 and $757,498, respectively.
The following information has been summarized from the financial statements of
the joint ventures:
1994 1993 1992
------------ ----------- ------------
Net investment in
real estate as
of December 31 $ 34,174,946 $34,008,955 $34,487,647
Total liabilities
as of December 31 391,765 510,366 348,805
Total income 7,319,405 6,834,797 7,681,487
Net income before
provision 2,733,148 1,295,097 3,329,866
Provision for
potential loss None (3,165,000) (6,988,000)
Net income (loss) 2,733,148 (1,869,903) (3,658,134)
9. Real Estate Held for Sale:
The Partnership acquired The Woods Apartments through foreclosure in July 1994
and the Crossings Shopping Center in March 1992. The Partnership recorded the
costs of the properties at $7,198,171 and $4,248,350 in 1994 and 1992,
respectively. These amounts represented the outstanding loan balances plus any
accrued interest receivable. In 1994 the Partnership increased the basis of The
Woods Apartments by $8,066 for certain receivables, escrows and costs incurred
in connection with the foreclosure.
At the date of foreclosure, the property was transferred to real estate held
for sale at its fair value.
10. Discounted Prepayment of Loan Receivable:
In June 1994, the borrower of the $12,767,949 Continental Park wrap-around loan
prepaid the loan at a discount. The Partnership received proceeds of
approximately $4,873,085 and the borrower repaid the $4,143,890 underlying
mortgage loan. The remaining wrap-around loan receivable balance, net of the
underlying mortgage payable balance, and escrow liabilities of $35,568 were
written off in connection with the prepayment of the loan.
11. Sale of Real Estate:
The Partnership sold the Crossings Shopping Center during 1995, the Orchards
Office Building during 1994, and the Villa Verde Apartments, Riverview Office
Building and vacant land adjacent to the Orchards Shopping Center during 1993
in separate all cash sales for $2,650,000, $1,200,000 and $8,025,000,
respectively. From the proceeds of the 1994 sale, the Partnership repaid
$1,000,000 of the Orchards first mortgage loan. The Partnership continues to
own the Orchards Shopping Center. The purchasers of the Crossings Shopping
Center and the Villa Verde Apartments took title subject to the existing first
mortgage loans which had balances of $1,793,760 and $4,288,981, respectively.
The carrying value of the real estate sold during 1995, 1994 and 1993 totaled
$1,852,350, $1,030,572 and $7,100,220, respectively. For financial statement
purposes, the Partnership recognized net gains of $119,842 and $599,503 from
the sale of the real estate during 1994 and 1993, respectively. The Partnership
expects to recognize a gain of $717,900 on the sale of the Crossings Shopping
Center during the first quarter of 1995.
12. Contingencies:
The Partnership is currently involved in a lawsuit whereby the Partnership and
certain affiliates have been named as defendants alleging certain federal
securities law violations with regard to the adequacy and accuracy of
disclosures of information concerning the offering of the Limited Partnership
Interests of the Partnership. The defendants continue to vigorously contest
this action. While a plaintiff class has been certified, no determinations of
the merits have been made. Although the outcome of these matters is not
presently determinable, it is management's opinion that the ultimate outcome
should not have a material adverse affect on the financial position of the
Partnership. Management of the defendants believes they have meritorious
defenses to contest the claims.
13. Subsequent Event:
In January 1995, the Partnership paid $949,904 to Limited Partners representing
the regular quarterly distribution of available Cash Flow of $4.00 per Interest
for the fourth quarter of 1994.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 18467
<SECURITIES> 0
<RECEIVABLES> 28215
<ALLOWANCES> 5014
<INVENTORY> 0
<CURRENT-ASSETS> 20081
<PP&E> 23802
<DEPRECIATION> 0
<TOTAL-ASSETS> 77869
<CURRENT-LIABILITIES> 1893
<BONDS> 7153
<COMMON> 0
0
0
<OTHER-SE> 68823
<TOTAL-LIABILITY-AND-EQUITY> 77869
<SALES> 0
<TOTAL-REVENUES> 8024
<CGS> 0
<TOTAL-COSTS> 85
<OTHER-EXPENSES> 840
<LOSS-PROVISION> 600
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6499
<INCOME-TAX> 0
<INCOME-CONTINUING> 6499
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6499
<EPS-PRIMARY> 26.35
<EPS-DILUTED> 26.35
</TABLE>
AGREEMENT OF SALE EXHIBIT 28
THIS AGREEMENT OF SALE (this "Agreement"), entered into as of the __ day of
January, 1995, by and between TRIPLE N CO., INC., a Georgia corporation
("Purchaser"), and CROSSINGS PARTNERS LIMITED PARTNERSHIP, an Illinois limited
partnership ("Seller").
WITNESSETH:
1. PURCHASE AND SALE. Purchaser agrees to purchase and Seller agrees to sell
at the price of TWO MILLION SIX HUNDRED FIFTY THOUSAND AND NO/100 Dollars
($2,650,000.00) (the "Purchase Price"), the following: (i) All of Seller's
right, title and interest in and to that certain Indenture of Lease by and
between Southland Life Insurance Company, as ground lessor, and The Considine
Company, Inc., as ground lessee, dated August 28, 1979, filed for record August
31, 1979, recorded in Deed Book 2068 commencing at Page 546, in the Office of
the Clerk of the Superior Court of Cobb County, Georgia, as transferred by
Limited Warranty Deed and Assignment of Lease from The Considine Company, Inc.
to South Cobb Associates, Ltd., a Georgia limited partnership by instrument
dated May 6, 1982, filed for record May 7, 1982, recorded in Deed Book 2513,
Page 541, in the office of the Clerk of the Superior Court of Cobb County,
Georgia as modified by First Modification of Lease between Southland Life
Insurance Company, as ground lessor and South Cobb Associates, Ltd., a Georgia
limited partnership, as ground lessee, dated April 25, 1983, filed for record
April 26, 1983, recorded in Deed Book 2739, Page 12, in the Office of the Clerk
of the Superior Court of Cobb County, Georgia, as transferred by Limited
Warranty Deed and Assignment of Lease from South Cobb Associates, Ltd., a
Georgia limited partnership to CSC Partners, a Georgia limited partnership by
instrument dated April 25, 1983, filed for record April 26, 1983, recorded in
Deed Book 2739, Page 17, in the Office of the Clerk of the Superior Court of
Cobb County, Georgia, as transferred by Deed Under Power of Sale from Balcor
Pension Investors, III, an Illinois limited partnership, as agent and attorney
in fact for CSC Partners to Crossings Partners Limited Partnership, dated March
5, 1992, recorded at Deed Book 6511, commencing at page 345, aforesaid records,
as corrected by Corrective Deed Under Power of Sale, dated June 11, 1992,
recorded at Deed Book 6696, commencing at page 117, aforesaid records,
including the option to purchase the Fee Parcel (as defined below) contained
therein (collectively, the "Ground Lease") which Ground Lease affects that
certain property legally described on Exhibit A attached hereto (the "Fee
Parcel"); (ii) the improvements located on the Fee Parcel which are commonly
referred to as The Crossings Shopping Center, Smyrna, Georgia (the
"Improvements"); (iii) all of the personal property set forth in Exhibit B (the
"Personal Property"); (iv) all of Seller's right, title and interest in and to
all leases, subleases and other rental arrangements demising space or otherwise
granting a possessory interest in the Property; (v) all of the Seller's right,
title and interest in and to the trade name "Crossings" and "The Crossings" and
any telephone numbers assigned to said trade names and (vi) to the extent they
are assignable and in Seller's possession, all right, title and interest, if
any, in and to any plans, building permits and certificates of occupancy
relating to the construction of the Improvements and all licenses and permits
relating to ownership and operation of the Improvements. Seller's interest in
the Ground Lease ("Seller's Ground Lease Interest"), the Improvements, the
Personal Property and the remaining aforesaid Property are hereinafter referred
to as the "Property".
2. PURCHASE PRICE. The Purchase Price shall be paid by Purchaser as follows:
(a) Upon the execution of this Agreement, the sum of ONE HUNDRED FIFTY
THOUSAND AND No/100 DOLLARS ($150,000.00) to be held in escrow by and in
accordance with the provisions of the Escrow Agreement ("Escrow
Agreement") attached hereto as Exhibit C which sum and all interest and
earnings thereon is collectively referred to as "Earnest Money"; and
(b) On the "Closing Date" (hereinafter defined), the Purchaser will
assume the obligations of borrower contained in the Purchase Money Real
<PAGE>
Estate Note from The Considine Company, Inc. to Southland Life Insurance
Company, dated August 28, 1979, in the original principal amount of
$2,185,000.00, secured by Purchase Money Deed to Secure Debt and Security
Agreement from The Considine Company, Inc. to Southland Life Insurance
Company, dated August 28, 1979, and recorded at Deed Book 2096, commencing
at Page 7, Records of the Clerk of the Superior Court, Cobb County,
Georgia, as modified by Agreement and First Modification of Purchase Money
Real Estate Note, First Modification of Renovation Note, First
Modification of Purchase Money Deed to Secure Debt and Security Agreement
and First Modification of Renovation Deed to Secure Debt and Security
Agreement, between South Cobb Associates, Ltd., CSC Partners and Southland
Life Insurance Company, dated April 25, 1983 and recorded at Deed Book
2739, Page 12, Cobb County, Georgia records (the "Loan") encumbering the
Property securing the original principal amount of TWO MILLION ONE HUNDRED
EIGHTY-FIVE THOUSAND AND No/100 DOLLARS ($2,185,000.00) in favor of
Southland Life Insurance Company ("Southland") and with a current
outstanding principal balance of approximately ONE MILLION EIGHT HUNDRED
THOUSAND AND No/100 DOLLARS ($1,800,000.00); and
(c) At Closing, Purchaser will pay to Seller the balance of the Purchase
Price (i.e., $2,650,000 less the principal amount of the Loan), inclusive
of all Earnest Money deposited, adjusted in accordance with the
prorations, by federally wired "immediately available" funds. The parties
agree that the balance shall be released simultaneously with the release
of the documents set forth in Section 10 and at such time to enable Seller
to invest the funds on the day of Closing.
3. TITLE COMMITMENT AND SURVEY.
A. Attached hereto as Exhibit D is a copy of a title commitment for a leasehold
standard title insurance policy issued by Chicago Title Insurance Company,
(hereinafter referred to as "Title Insurer") dated November 7, 1994 for the
Property and perpetual easements and other easement rights which are
appurtenant to and run with the Property (the "Title Commitment"). For
purposes of this Agreement, "Permitted Exceptions" shall mean: (a) the general
printed exceptions contained in the jacket of the standard title policy to be
issued by Title Insurer based on the Title Commitment; (b) general real estate
taxes not yet due and payable; (c) matters shown on the "Existing Survey"
(hereinafter defined); (d) matters caused by the actions of Purchaser; (e) all
documents evidencing or securing the Loan, including those set forth on Exhibit
E (all of said documents being referred to as the "Existing Loan Documents");
(f) the Ground Lease; and (g) the title exceptions set forth in Schedule B,
Section 2 of the Title Commitment as Numbers 1 through 15 inclusive, to the
extent that same effect the Property. All the other exceptions to title shall
be referred to as "Unpermitted Exceptions". The Title Commitment shall be
conclusive evidence of good title as therein shown as to all matters to be
insured by the title policy, subject only to the exceptions therein stated. On
the Closing Date, Title Insurer shall deliver to Purchaser a standard leasehold
title policy in conformance with the previously delivered Title Commitment,
subject only to Permitted Exceptions and Unpermitted Exceptions waived by
Purchaser (the "Title Policy"). Purchaser at Closing shall pay for the costs
of the Title Commitment and Title Policy, in accordance with the statement of
Slutzky, Wolfe and Bailey's statement dated November 21, 1994, reasonable out
of pocket expenses, and title premiums at standard metropolitan rates ("Title
Agent").
Notwithstanding any provision herein to the contrary, exception No. 7 to
Schedule B, Section 2 of Chicago Title Commitment No. 529.82-LHO shall be
deleted in its entirety prior to Closing; provided, however, Seller shall not
be required to expend up to $25,000 to remove exception No. 7 from title and
Seller's failure to so remove exception No. 7 from title shall be treated as a
failure to obtain the Southland Consent (hereinafter defined) as set forth in
Paragraph 8 herein. The option of Lessee to purchase the Leased Land contained
in the Ground Lease shall be set forth as an appurtenance to the legal
description contained in Schedule A, Paragraph 3 of said Commitment; provided,
<PAGE>
Purchaser shall bear any additional costs thereof at standard metropolitan
rates.
B. Purchaser has received a survey of the Fee Parcel prepared by Ben McLeroy &
Associates dated July 23, 1979 and updated April 5, 1983 (the "Existing
Survey"). Purchaser hereby acknowledges that all matters disclosed by the
Existing Survey are acceptable to Purchaser. The Existing Survey was updated
by Ben McLeroy & Associates on December 2, 1994 (the "Updated Survey").
Purchaser hereby acknowledges that all matters disclosed by the Updated Survey
are acceptable to Purchaser. Purchaser shall pay the cost of the Updated
Survey and any additional reasonable costs which may be incurred with respect
thereto. As of the date hereof, the cost of the Updated Survey is $4,500.00.
4. PAYMENT OF CLOSING COSTS.
A. In addition to the costs set forth in Paragraphs 3A and B, Seller shall pay
for the costs of the documentary or transfer stamps to be paid with reference
to any conveyances hereunder and all other stamps, intangible, transfer,
documentary, recording, sales tax and surtax imposed by law with reference to
any other sale documents delivered in connection with the sale of the Property
to Purchaser. Purchaser shall pay for all other charges of the Title Insurer
in connection with this transaction.
5. CONDITION OF TITLE.
A. If, prior to Closing, a date-down to the Title Commitment or the Updated
Survey disclose an Unpermitted Exception, Seller shall have thirty (30) days
from the date of the date-down to the Title Commitment or the Updated Survey,
as applicable, at Seller's expense, to (i) bond over, cure and/or have any
Unpermitted Exceptions which, in the aggregate, do not exceed $25,000.00,
removed from the Title Commitment or to have the Title Insurer commit to insure
against loss or damage that may be occasioned by such Unpermitted Exceptions,
or (ii) have the right, but not the obligation, to bond over, cure and/or have
any Unpermitted Exceptions which, in the aggregate, equal or exceed $25,000.00,
removed from the Title Commitment or to have the Title Insurer commit to insure
against loss or damage that may be occasioned by such Unpermitted Exceptions.
In such event, the time of Closing shall be delayed, if necessary, to give
effect to said aforementioned time periods. If Seller fails to cure or have
said Unpermitted Exception removed or have the Title Insurer commit to insure
as specified above within said thirty (30) day period or if Seller elects not
to exercise its rights under (ii) in the preceding sentence, Purchaser may, at
its option, terminate this Agreement upon notice to Seller within five (5) days
after the expiration of said thirty (30) day period. Absent notice from
Purchaser to Seller in accordance with the preceding sentence, Purchaser shall
be deemed to have elected to take title subject to said Unpermitted Exception.
If Purchaser terminates this Agreement in accordance with the terms of this
Paragraph 5A, this Agreement shall become null and void without further action
of the parties and all Earnest Money theretofore deposited into the escrow by
Purchaser together with any interest accrued thereon, shall be returned to
Purchaser, except $100.00 which shall be retained by Seller as option money and
neither party shall have any further liability to the other, except for
Purchaser's obligation to indemnify Seller and restore the Property, as more
fully set forth in Paragraph 7.
B. Seller agrees to convey all of its right, title and interest to the Ground
Lease and Improvements to Purchaser by an assignment and assumption of the
obligations of tenant contained in ground lease ("Assignment of Ground Lease")
(in form attached hereto as Exhibit F) in recordable form subject only to the
Permitted Exceptions and any Unpermitted Exceptions waived by Purchaser.
6. CONDEMNATION, EMINENT DOMAIN, DAMAGE AND CASUALTY.
A. Except as provided in any indemnity provisions of this Agreement, Seller
shall bear all risk of loss with respect to the Improvements up to the earlier
of the dates upon which either possession or title is transferred to Purchaser
in accordance with this Agreement. Notwithstanding the foregoing, in the event
<PAGE>
of damage to the Improvements by fire or other casualty prior to the Closing
Date, repair of which would cost less than or equal to $75,000.00 (as
determined by Seller in good faith) Purchaser shall not have the right to
terminate its obligations under this Agreement by reason thereof, but Seller
shall have the right to elect to either repair and restore the Property (in
which case the Closing Date shall be extended until completion of such
restoration) or to assign and transfer to Purchaser on the Closing Date all of
Seller's right, title and interest in and to all insurance proceeds paid or
payable to Seller on account of such fire or casualty and Seller shall pay to
Purchaser the amount of Seller's deductible. Seller shall promptly notify
Purchaser in writing of any such fire or other casualty and Seller's
determination of the cost to repair the damage caused thereby. In the event of
damage to the Improvements by fire or other casualty prior to the Closing Date,
(i) repair of which would cost in excess of $75,000.00 (as determined by Seller
in good faith) or (ii) which is not covered by Seller's insurance, then this
Agreement may be terminated at the option of Purchaser, which option shall be
exercised, if at all, by Purchaser's written notice thereof to Seller within
five (5) business days after Purchaser receives written notice of such fire or
other casualty and Seller's determination of the amount of such damages, and
upon the exercise of such option by Purchaser this Agreement shall become null
and void, the Earnest Money deposited by Purchaser shall be returned to
Purchaser together with interest thereon less $100.00 paid to Seller as option
money, and neither party shall have any further liability or obligations
hereunder except for Purchaser's obligations to indemnify Seller and restore
the Property, as set forth more fully in Paragraph 7. In the event that
Purchaser does not exercise the option set forth in the preceding sentence, the
Closing shall take place on the Closing Date and Seller shall assign and
transfer to Purchaser on the Closing Date all of Seller's right, title and
interest in and to all insurance proceeds paid or payable to Seller on account
of the fire or casualty and Seller shall pay to Purchaser the amount of
Seller's deductible. Closing shall be delayed, if necessary, until Purchaser
makes such election.
B. If between the date of this Agreement and the Closing Date, any condemnation
or eminent domain proceedings are initiated which might result in the taking of
any part of the Fee Parcel, Improvements or the taking or closing of any right
of access to the Improvements, Seller shall immediately notify Purchaser of
such occurrence. In the event that the taking of any part of the Fee Parcel or
Improvements shall: (i) materially impair access to the Improvements; (ii)
cause any material non-compliance with any applicable law, ordinance, rule or
regulation of any federal, state or local authority or governmental agencies
having jurisdiction over the Improvements or any portion thereof; or (iii)
materially and adversely impairs the use of the Improvements as it is currently
being operated (hereinafter collectively referred to as a "Material Event"),
Purchaser may, at its option:
(a) terminate this Agreement by written notice to Seller, in which event
the Earnest Money deposited by Purchaser, together with interest thereon less
$100.00 paid to Seller as option money, shall be returned to Purchaser and all
rights and obligations of the parties hereunder with respect to the closing of
this transaction will cease, except for Purchaser's obligations to indemnify
Seller and restore the Property, as set forth more fully in Paragraph 7; or
(b) proceed with the Closing, in which event Seller shall assign to
Purchaser all of Seller's right, title and interest in and to any award made in
connection with such condemnation or eminent domain proceedings.
Purchaser shall then notify Seller, within five (5) business days after
Purchaser's receipt of Seller's notice, whether Purchaser elects to exercise
its rights under subparagraph (a) or subparagraph (b) of this Paragraph 6B.
Closing shall be delayed, if necessary, until Purchaser makes such election.
If Purchaser fails to make an election within such five (5) business day
period, Purchaser shall be deemed to have elected to exercise its rights under
subparagraph (b).
<PAGE>
If between the date of this Agreement and the Closing Date, any condemnation or
eminent domain proceedings are initiated which do not constitute a Material
Event, Purchaser shall be required to proceed with the Closing, in which event
Seller shall assign to Purchaser all of Seller's right, title and interest in
and to any award made in connection with such condemnation or eminent domain
proceedings of the Property.
7. INSPECTION AND AS-IS CONDITION.
A. During the period commencing on the date hereof and ending at 5:00 p.m.
Chicago time on December 30, 1994 (said period being herein referred to as the
"Regular Inspection Period"), Purchaser and the agents, engineers, employees,
contractors and surveyors retained by Purchaser may enter upon the Fee Parcel
and Improvements, at any reasonable time and upon reasonable prior notice to
Seller, to inspect the Fee Parcel and Improvements, including a review of
leases located at the Property, and to conduct and prepare such studies, tests
and surveys as Purchaser may deem reasonably necessary and appropriate (other
than any environmental studies, tests or surveys, which shall be governed by
Paragraph 7B). In connection with Purchaser's review of the Property, Seller
agrees to deliver to Purchaser copies of the current rent roll for the
Property, the most recent tax and insurance bills, utility account numbers,
leases, service contracts, and unaudited year end 1992 and 1993 operating
statements and operating statements through October, 1994 and November and
December, 1994 as soon as the same becomes available.
As a condition precedent to Purchaser's obligations hereunder, on or prior to
January 24, 1995, Seller shall deliver to Purchaser the following: Exhibits C,
D, E, F, G, H, I and K to the Lease Agreement with Big "B" Drugs, Inc.; Letter
Agreement dated July 6, 1970 and Exhibit "A" to the Fifth Amendment, to Winn-
Dixie Atlanta, Inc. Lease; Exhibits "A" and "C" to Ground Lease Agreement with
Georgia Federal.
B. During the period commencing on the date hereof and ending at 5:00 p.m.
Chicago time on December 30, 1994 (said period being herein referred to as the
"Environmental Inspection Period"), Purchaser and the agents, engineers,
employees, contractors and surveyors retained by Purchaser may enter upon the
Fee Parcel and Improvements, at any reasonable time and upon reasonable prior
notice to Seller, to conduct and prepare such environmental studies, tests,
inspections, investigations and surveys as Purchaser may deem reasonably
necessary and appropriate.
Notwithstanding any provision herein to the contrary, upon receipt of the
Updated Survey, Purchaser shall have 10 calendar days to furnish Seller any
objection thereto; provided, however, Purchaser shall only have the right to
object to survey matters not disclosed on the Existing Survey and which
adversely affect the current use or marketability of the Property. Seller
shall thereupon have 5 days to furnish Purchaser notice that it will, prior to
Closing, cure such objection. In the event the Seller fails within 5 days
after receipt of Purchaser's objections to agree to cure such objection prior
to Closing, then Purchaser, at its option, upon written notice to Seller, may:
Accept title to the Property notwithstanding such objection, or terminate this
Agreement whereupon $100.00 of the Earnest Money shall be paid to Seller as
option money and the balance thereof refunded to Purchaser and neither party
shall have any further liability to the other, except for Purchaser's
obligation to indemnify Seller and restore the Property, as more fully set
forth in Paragraph 7.
C. All of the foregoing tests, investigations and studies to be conducted under
this Paragraphs 7A and 7B by Purchaser shall be at Purchaser's sole cost and
expense and Purchaser shall restore the Fee Parcel and the Property to the
condition thereof prior to the performance of such tests or investigations by
or on behalf of Purchaser. Purchaser shall defend, indemnify and hold Seller
and any affiliate, parent of Seller, and all shareholders, employees, officers
and directors of Seller or Seller's affiliate or parent (hereinafter
collectively referred to as "Affiliate of Seller") harmless from any and all
liability, cost and expense (including without limitation, reasonable
<PAGE>
attorney's fees, court costs and costs of appeal) suffered or incurred by
Seller or Affiliates of Seller for injury to persons or property caused by
Purchaser's investigations and inspection of the Fee Parcel and Improvements.
Purchaser shall undertake its obligation to defend set forth in the preceding
sentence using attorneys selected by Seller, in Seller's reasonable
determination. Prior to commencing any such tests, studies and investigations,
Purchaser shall furnish to Seller a certificate of insurance evidencing
comprehensive general public liability insurance insuring the person, firm or
entity performing such tests, studies and investigations and listing Seller and
Purchaser as additional insureds thereunder.
If Purchaser, in its sole and absolute discretion, is dissatisfied with the
results of the tests, studies or investigations performed or information
received pursuant to Paragraph 7A, Purchaser shall have the option to terminate
this Agreement by giving written notice of such termination to Seller at any
time prior to the expiration of the Regular Inspection Period, which notice of
termination may be given to Seller and Escrow Agent by Purchaser's counsel on
behalf of Purchaser. If written notice is not given by Purchaser pursuant to
this Paragraph 7C prior to the expiration of the Regular Inspection Period,
then the right of Purchaser to terminate this Agreement pursuant hereto shall
be waived. If Purchaser, in its sole and absolute discretion, is dissatisfied
with the results of the tests, studies or investigations performed or
information received pursuant to Paragraph 7B, Purchaser shall have the option
to terminate this Agreement by giving written notice of such termination to
Seller at any time prior to the expiration of the Environmental Inspection
Period. If written notice is not given by Purchaser pursuant to this Paragraph
7C prior to the expiration of the Environmental Inspection Period, then the
right of Purchaser to terminate this Agreement pursuant hereto shall be waived.
If Purchaser terminates this Agreement by written notice to Seller in
accordance with the terms of this Paragraph 7 prior to the expiration of either
the Regular Inspection Period or the Environmental Inspection Period (whichever
is applicable): (i) Purchaser shall, at the option of Seller, promptly deliver
to Seller copies of all studies, reports and other investigations obtained by
Purchaser in connection with its due diligence during either the Regular
Inspection Period or the Environmental Inspection Period (whichever is
applicable) upon reimbursement by Seller to Purchaser of Purchaser's total
costs of any such studies, reports and other investigations obtained by
Purchaser; and (ii) the Earnest Money shall be immediately paid to Purchaser,
together with any interest earned thereon, less $100.00 paid to Seller as
option money, and neither Purchaser nor Seller shall have any right, obligation
or liability under this Agreement, except for Purchaser's obligation to
indemnify Seller and restore the Property, as more fully set forth in this
Paragraph 7.
D. Seller's predecessor-in-interest acquired title to the Property by
foreclosure and, therefore, Seller can make no representations or warranties
relating to the condition of the Property or Fee Parcel, except as otherwise
expressly stated herein. Purchaser acknowledges and agrees that, except as
otherwise expressly stated herein, it will be purchasing the Property based
solely upon its inspections and investigations of the Fee Parcel and
Improvements, and that Purchaser will be purchasing the Property "AS IS" and
"WITH ALL FAULTS", based upon the condition of the Property and Fee Parcel as
of the date of this Agreement, wear and tear and loss by fire or other casualty
or condemnation excepted. Without limiting the foregoing, Purchaser
acknowledges that, except as may otherwise be specifically set forth elsewhere
in this Agreement, neither Seller nor its consultants, brokers or agents have
made any representations or warranties of any kind upon which Purchaser is
relying as to any matters concerning the Property or Fee Parcel, including, but
not limited to, the condition of the land or any improvements comprising the
Property or Fee Parcel, the existence or non-existence of toxic waste and/or
any hazardous materials or substances, economic projections or market studies
concerning the Property or Fee Parcel, any development rights, taxes, bonds,
covenants, conditions and restrictions affecting the Property or Fee Parcel,
water or water rights, topography, drainage, soil, subsoil of the Property or
Fee Parcel, the utilities serving the Property or Fee Parcel or any zoning,
environmental or building laws, rules or regulations affecting the Property or
<PAGE>
Fee Parcel. Seller makes no representation or warranty that the Property
complies with Title III of the Americans with Disabilities Act or any fire code
or building code. Purchaser hereby releases Seller and the Affiliates of
Seller from any and all liability in connection with any claims which Purchaser
may have against Seller, and Purchaser hereby agrees not to assert any claims
for contribution, cost recovery or otherwise, against Seller, relating directly
or indirectly to the existence of asbestos or hazardous materials or substances
on, or environmental conditions of, the Property or Fee Parcel, whether known
or unknown. As used herein, the term "hazardous materials or substances" means
(i) hazardous wastes, hazardous substances, hazardous constituents, toxic
substances or related materials, whether solids, liquids or gases, including
but not limited to substances defined as "hazardous wastes," "hazardous
substances," "toxic substances," "pollutants," "contaminants," "radioactive
materials," or other similar designations in, or otherwise subject to
regulation under, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), 42 U.S.C. Section 9601 et seq.;
the Toxic Substance Control Act ("TSCA"), 15 U.S.C. Section 2601 et seq.; the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1802; the Resource
Conservation and Recovery Act ("RCRA"), 42 U.S.C. Section 9601. et seq.; the
Clean Water Act ("CWA"), 33 U.S.C. Section 1251 et seq.; the Safe Drinking
Water Act, 42 U.S.C. Section 300f et seq.; the Clean Air Act ("CAA"), 42 U.S.C.
Section 7401 et seq.; and in any permits, licenses, approvals, plans, rules,
regulations or ordinances adopted, or other criteria and guidelines promulgated
pursuant to the preceding laws or other similar federal, state or local laws,
regulations, rules or ordinance now or hereafter in effect relating to
environmental matters (collectively the "Environmental Laws"); and (ii) any
other substances, constituents or wastes subject to any applicable federal,
state or local law, regulator or ordinance, including any Environmental Law,
now or hereafter in effect, including but not limited to (A) petroleum, (B)
refined petroleum products, (C) waste oil, (D) waste aviation or motor vehicle
fuel and (E) asbestos.
E. Seller has provided to Purchaser certain unaudited historical financial
information regarding the Property relating to certain periods of time in which
Seller owned the Property. Seller and Purchaser hereby acknowledge that such
information has been provided to Purchaser at Purchaser's request solely as
illustrative material. Seller makes no representation or warranty that such
material is complete or accurate or that Purchaser will achieve similar
financial or other results with respect to the operations of the Property, it
being acknowledged by Purchaser that Seller's operation of the Property and
allocations of revenues or expenses may be vastly different than Purchaser may
be able to attain. Purchaser acknowledges that it is a sophisticated and
experienced purchaser of real estate and further that Purchaser has relied upon
its own investigation and inquiry with respect to the operation of the Property
based in part on the rent rolls furnished by Seller to Purchaser, and Purchaser
releases Seller from any liability with respect to such historical information
except to the extent of Seller's express representations contained herein.
F. Seller has provided to Purchaser the following existing report: Phase I
Environmental Site Assessment and Limited Asbestos Survey, dated March 17,
1992, prepared by Law Associates, Inc. ("Existing Report"). Seller makes no
representation or warranty concerning the accuracy or completeness of the
Existing Report. Purchaser hereby releases Seller from any liability
whatsoever with respect to the Existing Report, or, including, without
limitation, the matters set forth in the Existing Report, and the accuracy
and/or completeness of the Existing Report. Furthermore, Purchaser
acknowledges that it will be purchasing the Property with all faults disclosed
in the Existing Report, subject to Purchaser's option to terminate this
Agreement as contained in Section 7 hereof.
G. Upon expiration of the Regular Inspection Period and the Environmental
Inspection Period, Purchaser, and its agents, engineers, employees,
contractors, and surveyors, retained by Purchaser may continue to enter the Fee
Parcel and Improvements, at any time after 24 hour advance notice to Seller to
conduct such studies, environmental studies, tests, surveys, investigations and
<PAGE>
inspections as Purchaser may deem necessary and appropriate; provided, however,
that Purchaser has not exercised any option to terminate this Agreement.
8. ASSUMPTION OF LOAN AND GROUND LEASE.
A. Purchaser's and Seller's obligations under this Agreement are contingent
upon Southland delivering to the Title Agent prior to Closing, the Closing
Documents described in the Agreement re: Exercise of Option attached hereto as
EXHIBIT G (the "Southland Closing Documents") and upon the occurrence of the
following on or before January 24, 1995: (i) Southland consenting, in writing,
to the sale of the Property to Purchaser; (ii) Southland consenting, in
writing, to the assignment and assumption of the obligations of borrower
contained in the Loan by Purchaser; (iii) Southland consenting, in writing, to
the assignment and assumption of Seller's interest in the Ground Lease, (iv)
Southland delivering to Purchaser an estoppel certificate regarding the
Existing Loan Documents and the Ground Lease reasonably satisfactory to
Purchaser substantially in the form attached hereto as Exhibit G; and (v)
Southland releasing Seller from any and all obligations and liabilities
accruing after the Closing Date under the Existing Loan Documents and the
Ground Lease and (vi) Southland executing that certain Agreement Re: Exercise
of Option substantially in the form attached hereto as Exhibit M (items [i]
through [vi] above inclusive being hereinafter collectively referred to as the
"Southland Consent"). If Southland does not deliver to the Title Agent prior
to Closing the Southland Closing Documents or if Southland does not deliver the
Southland Consent to Purchaser and Seller on or before January 24, 1995, or if
Southland delivers the Southland Consent on or before January 24, 1995 but
requires conditions which are unacceptable to Purchaser or Seller in their
reasonable discretion, either Purchaser or Seller shall have the option upon
written notice to the other exercised no later than 10 days after Southland
either (a) fails to deliver to the Title Agent the Southland Closing Documents
or requires conditions which are not acceptable to Purchaser or Seller,
whichever is applicable, to terminate this Agreement on or before the Closing
Date, in which case, the Earnest Money deposited by Purchaser shall be
immediately returned to Purchaser, together with any interest earned thereon,
less $100.00 paid to Seller as option money and neither Purchaser nor Seller
shall have any right, obligation or liability under this Agreement, except for
Purchaser's obligations to indemnify Seller and restore the Property, as set
forth in Paragraph 7, which shall survive the termination of this Agreement.
The parties acknowledge and agree that Seller shall be responsible for
obtaining the Southland Consent and Purchaser shall not unreasonably interfere
with the obtaining of said consent. Purchaser and Seller further acknowledge
and agree that each will execute all customary and necessary documents
reflecting such assumptions (and not changing the terms of the Loan or the
Ground Lease) reasonably required by Southland in order to obtain the Southland
Consent; (said documents being hereinafter referred to as the "Assumption
Documents").
9. CLOSING.
A. The closing of this transaction (the "Closing") shall be on January 31, 1995
(the "Closing Date"), at the office of Title Agent, Atlanta, Georgia, or at the
option of Purchaser, upon advance written notice to Seller, at the offices of
Purchaser's counsel in Atlanta, Georgia, at which time Seller shall deliver
possession of the Property to Purchaser. This transaction shall be closed
through an escrow with Title Agent or its agent, in accordance with the general
provisions of the usual and customary form of deed and money escrow for similar
transactions in Georgia, or at the option of either party, the Closing shall be
a "New York style" closing at which the Purchaser shall wire the Purchase Price
to Title Agent on the Closing Date and prior to the release of the Purchase
Price to Seller, Purchaser shall receive the Title Policy or marked up
commitment dated the date of the Closing Date. In the event of a New York
style closing, Seller shall deliver to Title Agent any customary affidavit in
connection with a New York style closing. All closing and escrow fees shall be
divided equally between the parties hereto.
<PAGE>
B. Until the Closing Date:
(1) Seller shall operate, maintain and manage the Property in
substantially the same manner as it is presently being operated, such that at
the Closing Date the Property shall be in substantially the same physical
condition as on the date Purchaser executes this Agreement, normal wear and
tear and damage or destruction by fire or other casualty excepted as provided
herein;
(2) Seller shall not remove any material items of personal property
from the Property unless the same is obsolete or is replaced by tangible
personal property of equal or greater utility and value;
(3) Seller shall not, without Purchaser's prior written consent, (i)
change the existing zoning of the Property, (ii) place on or remove from the
Fee Parcel any buildings or other Improvements or (iii) excavate the Property
(except to the extent required to perform routine maintenance or repairs);
(4) Seller shall continue in effect all insurance coverage relative
to the Property including full replacement cost casualty insurance;
(5) Seller shall not enter into any lease or any modification or
amendment of a lease or termination thereof without the prior written consent
of Purchaser, which consent shall not be unreasonably withheld or delayed. In
the event Purchaser has not responded within three (3) business days of receipt
of request by Seller, Purchaser's consent shall be deemed given; and
(6) Seller shall not, without the prior written consent of
Purchaser, enter into any new property agreement or servicing contract which
could bind Purchaser or the Property after the Closing except those which can
be terminated by Seller without a penalty or liability being paid by Purchaser.
10. CLOSING DOCUMENTS.
A. At Closing, Purchaser shall deliver to Seller an executed closing statement,
the balance of the Purchase Price (with due credit given for the Earnest Money
and prorations and adjustments as expressly provided in this Agreement), an
assumption of the obligations contained in the documents set forth in Paragraph
10.B.(i), (ii), (iii) and (vi) and such other documents as may be reasonably
required by the Title Insurer in order to consummate the transaction as set
forth in this Agreement.
B. At Closing, Seller shall deliver to Purchaser the following:
(i) the Assignment of Ground Lease, subject to Permitted Exceptions
and those Unpermitted Exceptions waived in writing;
(ii) assignment and assumption of intangible property (in the form
attached hereto as Exhibit I);
(iii) an assignment and assumption of leases and security deposits (in
the form attached hereto as Exhibit J), and all security and other
deposits held by Seller;
(iv) non-foreign affidavit (in the form of Exhibit K attached hereto);
(v) an assignment of tax and insurance escrows, if applicable;
(vi) Assumption Documents;
(vii) the Southland Consent;
(viii) original, and/or copies of, leases affecting the Property in
Seller's possession;
<PAGE>
(ix) all documents and instruments reasonably required by the Title
Insurer to issue the Title Policy;
(x) possession of the Property to Purchaser;
(xi) an executed closing statement;
(xii) notice to the tenants of the Property of the transfer of title and
assumption by Purchaser of the landlord's obligation under the
leases and the obligation to refund the security deposits (in the
form of Exhibit L); and
(xiii) an updated rent roll.
(xv) Affidavit pursuant to Section 48-7-128 of the Official Code of
Georgia Annotated that Seller is a resident of Georgia or that
Seller is not otherwise subject to Georgia tax withholding;
(xvi) If necessary, a Georgia Transfer Tax Declaration signed by Seller,
together with a check for the State of Georgia transfer tax;
(xvii) Certified copy of certificate of limited partnership by Seller;
(xviii) Certified copy of statement of Articles of Limited Partnership
of Seller;
(xix) Copy of Limited Partnership Agreement, certified to be true and
correct by the Secretary of the General Partner of Seller;
(xx) Original Certificate of Authority of Seller to do business in
Georgia;
(xxi) Corporate Resolution of General Partner of Seller, authorizing
officer(s) of general partner to act;
(xxii) Seller's Affidavit stating that there are no persons having the
right to be in possession of the property other than the Seller
and other than tenants under leases, and that Seller has no
knowledge of any disputes concerning the lines and corners of the
Property, that there have been no improvements or repairs made to
the Property within the preceding of ninety-five (95) days for
which full payment has not been made, and being otherwise in a
form reasonably satisfactory to Title Insurer;
(xxiii) Affidavit that there are no real estate brokers other than the
Brokers named herein, claiming a real estate commission through or
under Seller in connection with the sale of the Property, or in
connection with any lease of the Property;
(xxiv) Such other documents as may be required by Title Insurer to issue
a title policy to Purchaser subject to the Permitted Exceptions
and Unpermitted Exceptions, if waived by Purchaser; and
(xxv) Termination of existing management agreement.
On or before January 24, 1995 Seller agrees to deliver to Purchaser (i)
certificates addressed to Purchaser from Winn Dixie, Big B Drugs, Holiday
Fitness Center and Dollar General ("Major Tenants") in the form of Exhibit M
attached hereto or, at Seller's election, substantially in the form required by
said tenant's lease (together, the "Major Tenant Certificates") and (ii)
certificates addressed to Purchaser from the following: World Photo & Video,
Becky Jones School of Dance, the Herb Shop, Kelly & Co. Hair Salon, Gulf State
Mortgage Co. and Bed & Bath Fair and other tenants at the Property (other than
the Major Tenants) which, when added to the Major Tenants, equal 80% of the
leased square footage of the Property (such tenants are collectively, the
"Minor Tenants" and such Minor Tenant's certificates are collectively the
<PAGE>
"Minor Tenant Certificates") in the form of EXHIBIT M, or, at Seller's
discretion, substantially in the form required by said Minor Tenant's leases
(the Major Tenant Certificates and the Minor Tenant Certificates are referred
to together hereinafter as the "Tenant Certificates"); provided, however, if
any Minor Tenant fails to execute and return a Minor Tenant Certificate, Seller
shall have the option to execute a Minor Tenant Certificate on behalf of said
Minor Tenant (which Minor Tenant Certificate shall be limited to the knowledge
of Seller's Representative as set forth in Paragraph 17A herein and shall
survive Closing only in accordance with Paragraph 17D). Upon receipt after
Closing by Purchaser of a certificate containing the information herein
required from a Minor Tenant under a lease for whom Seller has executed and
delivered a Minor Tenant Certificate at Closing, the Minor Tenant Certificate
executed and delivered by Seller at Closing shall become null and void and the
Minor Tenant Certificate received from the Minor Tenant shall be substituted
therefor. In the event the Tenant Certificates delivered to Purchaser reveal
tenant offsets or delinquent obligations of Seller as landlord under said
leases or adverse discrepancies with the leases reviewed by Purchaser
aggregating in an amount not to exceed $10,000 (excluding physical defects, the
presence of which in said Tenant Certificates will not effect Purchaser's
obligation to close hereunder) Seller shall be deemed to have satisfied its
obligations under this paragraph and Seller shall have no liability for said
adverse conditions raised in the Tenant Certificates. If (i) the Tenant
Certificates delivered to Purchaser reveal tenant offsets or delinquent
obligations of Seller as landlord under said leases or adverse discrepancies
with the leases reviewed by Purchaser aggregating in an amount in excess of
$10,000 (excluding physical defects) or (ii) Seller fails to deliver the
requisite number of Tenant Certificates on or before January 24, 1995,
Purchaser shall have, as its sole and exclusive remedy, the right to terminate
this Agreement by delivering written notice to Seller at any time prior to the
Closing Date in which event the Earnest Money shall be returned to Purchaser
less the $100.00 paid to Seller as option money. If Purchaser does not so
terminate this Agreement in accordance with the terms hereof, Purchaser's
contingency set forth in this paragraph shall be deemed satisfied and Seller
shall have no liability for said adverse conditions raised in the Tenant
Certificates. If Purchaser exercises its rights to terminate in accordance
with the terms of this Paragraph, this Agreement shall be null and void without
further action of the parties and all Earnest Money theretofore deposited into
the escrow by Purchaser together with any interest accrued thereon, shall be
returned to Purchaser, and neither party shall have any further liability to
the other, except for Purchaser's obligation to indemnify Seller and restore
the Property, as more fully set forth in Paragraph 7. Notwithstanding anything
contained herein to the contrary, Seller will deliver a Tenant Certificate to
all tenants of the Property and request that said tenants execute and return a
Tenant Certificate to Seller.
11. DEFAULT BY PURCHASER. ALL EARNEST MONEY DEPOSITED INTO THE ESCROW IS TO
SECURE THE TIMELY PERFORMANCE BY PURCHASER OF ITS OBLIGATIONS AND UNDERTAKINGS
UNDER THIS AGREEMENT. IN THE EVENT OF A DEFAULT OF THE PURCHASER UNDER THE
PROVISIONS OF THIS AGREEMENT, SELLER SHALL RETAIN ALL OF THE EARNEST MONEY AND
THE INTEREST THEREON AS SELLER'S SOLE RIGHT TO DAMAGES OR ANY OTHER REMEDY,
EXCEPT FOR PURCHASER'S OBLIGATIONS TO INDEMNIFY SELLER AND RESTORE THE PROPERTY
AS SET FORTH IN PARAGRAPH 7 HEREOF. THE PARTIES HAVE AGREED THAT SELLER'S
ACTUAL DAMAGES, IN THE EVENT OF A DEFAULT BY PURCHASER, WOULD BE EXTREMELY
DIFFICULT OR IMPRACTICAL TO DETERMINE. THEREFORE, BY PLACING THEIR INITIALS
BELOW, THE PARTIES ACKNOWLEDGE THAT THE EARNEST MONEY HAS BEEN AGREED UPON,
AFTER NEGOTIATION, AS THE PARTIES' REASONABLE ESTIMATE OF SELLER'S DAMAGES.
12. SELLER'S DEFAULT. IF THIS SALE IS NOT COMPLETED BECAUSE OF SELLER'S
DEFAULT, PURCHASER'S SOLE REMEDY SHALL BE THE RETURN OF ALL EARNEST MONEY
TOGETHER WITH ANY INTEREST ACCRUED THEREON AND UP TO 25,000$ FOR ACTUAL
DOCUMENTED THIRD PARTY EXPENSES INCURRED BY PURCHASER ("THIRD PARTY EXPENSES"),
AND THIS AGREEMENT SHALL THEN BECOME NULL AND VOID AND OF NO EFFECT AND THE
PARTIES SHALL HAVE NO FURTHER LIABILITY TO EACH OTHER AT LAW OR IN EQUITY,
EXCEPT FOR PURCHASER'S OBLIGATIONS TO INDEMNIFY SELLER AND RESTORE THE PROPERTY
AS SET FORTH MORE FULLY IN PARAGRAPH 7. NOTWITHSTANDING ANYTHING CONTAINED
HEREIN TO THE CONTRARY, IF SELLER'S DEFAULT IS ITS REFUSAL TO DELIVER THE DEED,
<PAGE>
THEN PURCHASER WILL BE ENTITLED TO SUE FOR SPECIFIC PERFORMANCE IN LIEU OF A
CLAIM FOR THIRD PARTY EXPENSES.
13. PRORATIONS.
A. Rents under the leases (exclusive of delinquent rents, but including prepaid
rents); rent under the Ground Lease; interest accruing under the Existing Loan
Documents attributable to the period prior to and at Closing; refundable
security deposits under the leases (which will be assigned to and assumed by
Purchaser and credited to Purchaser at Closing); water and other utility
charges; fuels; prepaid or accrued operating expenses; real and personal
property taxes prorated on a "net" basis (i.e. adjusted for all tenants'
liability, if any, for such items); all other income and operating expenses
which are reimbursable by the tenants for the period prior to the Proration
Date less any amount previously paid by the tenants shall be credited to
Seller; and other similar items shall be adjusted ratably as of 11:59 p.m. on
the later of: (a) the Closing Date or the actual date of the closing of this
transaction ("Proration Date"), and credited to the balance of the cash due at
Closing. Assessments payable in installments which are due subsequent to the
Closing Date shall be paid by Purchaser after proration for that portion of the
assessment attributable to the period prior to closing. If the amount of any
of the items to be prorated is not then ascertainable, the adjustments thereof
shall be on the basis of the most recent ascertainable data. Seller will
receive a credit for any balances in escrow accounts established pursuant to
the Existing Loan Documents and Ground Lease. All prorations will be final
except as to delinquent rent referred to in Paragraph 13B below.
B. All sums paid following the Closing Date by any tenant of the Property who
is indebted under a lease for any period prior to and including the Closing
Date, and which delinquency is stated in the rent roll, after the payment of
all current obligations after the Closing Date, and provided that any such sums
paid are specified by the Tenant to be an indebtedness for a period prior to
Closing, shall be deemed a "Post-Closing Receipt" until such time as all such
indebtedness is paid in full. Within ten (10) days following each receipt by
Purchaser of a Post-Closing Receipt, Purchaser shall pay such Post-Closing
Receipt to Seller. Purchaser agrees that, for 90 days after Closing, it will
not release any tenant from any amounts for which such tenant is indebted for
any period prior to and including the Closing Date. Within 120 days after the
Closing Date, Purchaser shall deliver to Seller a reconciliation statement of
Post-Closing Receipts through the first 90 days after the Closing Date. Upon
the delivery of the Post-Closing Receipts reconciliation, Purchaser shall
deliver to Seller any Post-Closing Receipts owing to Seller and not previously
delivered to Seller in accordance with the terms hereof. Seller retains the
right to conduct an audit, at reasonable times and upon reasonable notice, at
its sole cost and expense, of Purchaser's books and records to verify the
accuracy of the Post-Closing Receipts reconciliation statement and upon the
verification of additional funds owing to Seller, Purchaser shall pay to Seller
said additional Post-Closing Receipts. Paragraph 13B of this Agreement shall
survive the Closing and the delivery and recording of the deed.
14. RECORDING. This Agreement shall not be recorded and the act of recording
by Purchaser shall be an act of default hereunder by Purchaser and subject to
the provisions of Paragraph 11 hereof.
15. ASSIGNMENT. This Agreement may be assigned by Purchaser to an entity in
which Lee Najjar has general management responsibility. In such event,
Purchaser shall give written notice to Seller of same and shall furnish Seller
with a copy of said assignment and in no event shall Purchaser be released from
its obligations hereunder. At Closing, Purchaser, or its assignee, shall
certify to the Seller that it is the holder and assignee of all of Purchaser's
rights hereunder.
16. BROKER. Each party hereto acknowledges that CB Commercial Real Estate
Group, Inc., Ben Carter Properties and Brown Realty Advisors shall be paid a
commission by Seller equal to one percent of the purchase price to Brown Realty
Advisors, one percent of the purchase price to Ben Carter Properties and one
<PAGE>
percent of the purchase price to CB Commercial Real Estate Group, Inc.
Purchaser and Seller represent and warrant to the other that no other Brokers
are due a real estate commission from the sale of the Property. Said
commissions shall be payable only out of the proceeds of the Property in the
event the transaction set forth herein closes. Each party agrees to indemnify
and hold harmless the other party from all liabilities, expenses, loss, cost or
damage, including reasonable attorneys fees, that may arise by reason of any
claim, demand or suit or of other agent or broker arising out of acts
constituting a breach of the foregoing representations and warranties contained
in this Paragraph 16. Purchaser and Seller shall undertake their obligations
set forth in the preceding sentence using attorneys approved by the other party
in the other party's reasonable determination. The provisions of this
Paragraph 16 shall survive the Closing.
At Closing, each Broker shall deliver to Seller and Purchaser a Broker's Lien
Waiver, sufficient to waive their lien rights under O.C.G.A. Section 44-14-601,
et. seq.
17. SELLER'S REPRESENTATIONS AND WARRANTIES.
A. Any reference herein to Seller's knowledge, representation, warranty or
notice of any matter or thing shall only mean such knowledge or notice that has
actually been received by Phillip Schechter (hereinafter referred to as the
"Seller's Representative"), and any representation or warranty of the Seller is
based upon those matters of which the Seller's Representative has actual
knowledge after discussion of the representations with Charlotte Sweetland.
Any knowledge of notice given, had or received by any of Seller's agents,
servants or employees shall not be imputed to Seller, the general partner or
limited partners of Seller, the subpartners of the general partner or limited
partners of Seller or Seller's Representative.
B. Subject to the limitations set forth in Paragraph A of this Paragraph 17,
Seller hereby makes the following representations and warranties, which
representations and warranties are made to Seller's knowledge:
(a) Except as is disclosed in the Phase I Environmental Site Assessment
and Limited Asbestos Survey, dated March 17, 1992, prepared by Law Associates,
Inc., Seller, to the best of its knowledge, has not received any notice from
any governmental authority having jurisdiction over the Property regarding an
uncured violation with respect to the Property.
(b) That Seller has no knowledge of any pending or threatened litigation,
claim, cause of action or administrative proceeding concerning the Property.
(c) That Seller has not received any notice of any defaults in the Loan or
Ground Lease, or any Existing Loan Documents or documents relating to the
Ground Lease which have not been cured.
(d) That Seller is an Illinois limited partnership validly existing and
authorized to do business in Georgia;
(e) That Crossings Partners, Inc., an Illinois corporation, is the general
partner of Seller and is duly authorized to enter into this Agreement on behalf
of Seller without the consent or approval of any other person or entity;
(f) That the person signing on behalf of the general partner of Seller is
duly authorized to enter into this Agreement on behalf of Seller without the
consent or approval of any other person or entity;
(g) That the documents comprising the Ground Lease and the Loan are true
and correct and have not been amended or modified except as expressly noted in
this Agreement.
(h) There is no pending action or proceeding (including but not limited to
any condemnation or eminent domain action or proceeding) affecting Seller or
the Property in any court, governmental agency or arbitrator which may
<PAGE>
adversely affect Seller's ability to perform this Agreement or which will or
materially affect the Property.
(i) It has not received any notice of any claims regarding surface water
drainage affecting the Property.
(j) Other than the Existing Report, it has no knowledge of any
environmental reports in its possession regarding the Property.
(k) The only service contracts ("Service Contracts") pertaining to the
Property are: (i) City of Smyrna (verbal contract) for trash removal; (ii)
Jonquil Sweeping Services dated November 16, 1994; (iii) Peachtree Pest Control
dated October 16, 1991; (iv) Peachtree Pest Control dated August 11, 1989; and
(v) Seller's management contract.
D. Except as specifically stated herein to the contrary, the representations
and warranties contained in this Paragraph 17 shall be deemed re-made and re-
published on and as of the Closing Date and shall survive the Closing hereunder
and the delivery of the documents and instruments required to be delivered
pursuant hereto; provided, however, that any claim of a breach of a
representation or warranty hereunder shall be deemed to have been waived unless
(i) written notice thereof, setting forth the nature of such alleged breach in
detail, is given within sixty (60) days after the Closing Date and (ii) a claim
is filed with the court of competent jurisdiction or other applicable
governmental agency sixty (60) days after the aforesaid notice. If either
Seller or Purchaser becomes aware of information which makes a representation
or warranty contained herein to become untrue prior to the Closing Date, said
party shall immediately disclose said information to the other party hereto.
Provided Seller did not take any deliberate actions to cause the representation
or warranty in question to become untrue, Seller shall not be in default
hereunder and the sole right of the Purchaser shall be to terminate this
Agreement. Said right shall be exercised by written notice to Seller within
three (3) days after Purchaser receives knowledge of a representation or
warranty being untrue and in the event Purchaser fails to make an election,
Purchaser's right to terminate the Agreement shall be waived and the
transaction shall be closed as of the Closing Date. In the event said party
does exercise its right to terminate the Agreement in accordance with the terms
hereof, the Earnest Money together with all interest earned thereon shall be
returned to the Purchaser, and neither Purchaser nor Seller shall have any
right, obligation or liability under this Agreement, except for Purchaser's
obligation to indemnify Seller and restore the Property, as more fully set
forth in Paragraph 7. Purchaser and Seller are prohibited from making any
claims against the other party hereto after the Closing with respect to any
breaches of the other party's representations and warranties contained in this
Agreement that the claiming party has actual knowledge of prior to the Closing.
18. LIMITATION OF LIABILITY. Neither Seller, nor any of its respective
beneficiaries, shareholders, partners, officers, agents or employees, heirs,
successors or assigns shall have any personal liability of any kind or nature
for or by reason of any matter or thing whatsoever under, in connection with,
arising out of or in any way related to this Agreement and the transactions
contemplated herein, and Purchaser hereby waives for itself and anyone who may
claim by, through or under Purchaser any and all rights to sue or recover on
account of any such alleged personal liability.
19. TIME OF ESSENCE. Time is of the essence of this Agreement.
20. NOTICES. Any notice or demand which either party hereto is required or
may desire to give or deliver to or make upon the other party shall be in
writing and may be personally delivered or given or made by overnight courier
such as Federal Express or made by United States registered or certified mail
addressed as follows:
TO SELLER: c/o The Balcor Company
4849 West Golf Road
Skokie, Illinois 60077
<PAGE>
Attention: Ilona Adams
with copies to: The Balcor Company
4849 Golf Road
Skokie, Illinois 60077
Attention: Alan Lieberman
(708) 677-2900
(708) 982-4027 (FAX)
and to: Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
Attention: Daniel J. Perlman, Esq.
(312) 902-5532
(312) 902-1061 (FAX)
TO PURCHASER: Triple N Co., Inc.
10705 Aviary Drive
Alpharetta, Georgia 30202
Attention: Mr. Lee Najjar
(404) 343-8567
(404) 343-8567 (FAX)
and one copy to: Jones & Jones, Attorneys at Law, P.C.
1117 Perimeter Center West
Suite N-307
Atlanta, Georgia 30338
Attention: Mr. Greg Walling
(404) 671-1730
(404) 671-8137 (FAX)
subject to the right of either party to designate a different address for
itself by notice similarly given. Any notice or demand so given shall be
deemed to be delivered on the next business day if sent by overnight courier,
or on the next business day after the same is deposited in the United States
Mail as registered or certified matter, addressed as above provided, with
postage thereon fully prepaid. Any such notice, demand or document not given,
delivered or made by registered or certified mail or by overnight courier as
aforesaid shall be deemed to be given, delivered or made upon receipt of the
same by the party to whom the same is to be given, delivered or made. Copies
of all notices shall be served upon the Escrow Agent.
21. EXECUTION OF AGREEMENT AND ESCROW AGREEMENT. Purchaser will execute three
(3) copies of this Agreement and four (4) copies of the Escrow Agreement and
forward them to Seller for execution, accompanied with the Earnest Money
payable to the Escrow Agent set forth in the Escrow Agreement. Seller will
forward one (1) copy of the executed Agreement to Purchaser and will forward
the following to the Escrow Agent:
(1) Earnest Money;
(2) One (1) fully executed copy of this Agreement; and
(3) Three (3) copies of the Escrow Agreement signed by the
parties with a direction to execute two (2) copies of the
Escrow Agreement and deliver a fully executed copy to each
of the Purchaser and the Seller.
22. GOVERNING LAW. The provisions of this Agreement shall be governed by the
laws of the State of Georgia.
23. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties and supersedes all other negotiations, understandings and
representations made by and between the parties and the agents, servants and
employees.
<PAGE>
24. COUNTERPARTS. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same instrument.
25. CAPTIONS. Paragraph titles or captions contained herein are inserted as a
matter of convenience and for reference, and in no way define, limit, extend or
describe the scope of this Agreement or any provision hereof.
[EXECUTION PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have put their hand and seal as of
the ____ day of January, 1995.
PURCHASER:
TRIPLE N CO., INC., a Georgia corporation
By:/s/Lee Najjar
---------------------------
Name:Lee Najjar
--------------------------
Its: President
--------------------------
SELLER:
CROSSINGS PARTNERS LIMITED PARTNERSHIP, an Illinois limited partnership
By: Crossings Partners, Inc., an Illinois
corporation, its general partner
By:/s/ Phillip Schechter
------------------------------
Name: Phillip Schechter
-------------------------
Title: Authorized agent
-------------------------
<PAGE>
Exhibits
A - Legal
B - Personal Property
C - Escrow Agreement
D - Title Commitment
E - Existing Loan Documents
F - Assignment and Assumption of Ground Lease and Conveyance of Improvements
G - Ground Lessor/Lender Estoppel and Consent
H - Assignment and Assumption of Intangible Property
I - Assignment and Assumption of Leases, Rents and Security Deposits
J - Non-Foreign Affidavit
K - Notice to Tenants
L - Tenant Estoppel Certificate
M - Agreement Re: Exercise of Option
<PAGE>
