<PAGE>
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 October 31, 1994
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _____ to _____
Commission File No. 1-6309
HRE PROPERTIES
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-245-8042
------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
530 FIFTH AVENUE
NEW YORK, NEW YORK 10036
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(Address of principal (Zip code)
executive offices)
Registrant's telephone number, including area code: (212) 642-4800
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- -------------------------- -----------------------------
Common Shares, without par value New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [x] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the 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]
State the aggregate market value of the voting stock held by
non-affiliates of the Registrant ($50,974,477.00 as of January 12, 1995).
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date: 5,341,696 Common
Shares, without par value, as of January 12, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for Annual Meeting of Shareholders to be held on
March 15, 1995 (certain parts as indicated herein) (Part III).
<PAGE>
PART I
Item I. Business.
General Development
HRE Properties (the "Trust") was organized on July 7, 1969 as an
unincorporated business trust under the laws of the Commonwealth of
Massachusetts pursuant to a Declaration of Trust dated July 7, 1969, as amended.
The Trust's headquarters are located in New York, New York.
The Trust has qualified and has elected to be taxed as a real estate
investment trust under Sections 856-858 of the Internal Revenue Code of 1986, as
amended (the "Code"). Pursuant to such provisions of the Code, a trust which
distributes at least 95% of its real estate investment trust taxable income to
its shareholders each year and which meets certain other conditions will not be
taxed on that portion of its taxable income which is distributed to its
shareholders. The Trust intends to continue to qualify as a real estate
investment trust for federal income tax purposes.
Description of Business
The Trust's sole business is the ownership of real estate investments
which consist principally of equity investments in income-producing properties,
with primary emphasis on properties in the eastern part of the United States.
The Trust owns and manages a portfolio of retail properties, office buildings,
and industrial properties. The Trust also seeks to identify desirable properties
for acquisitions which it makes in the normal course of business. In addition,
the Trust regularly reviews its portfolio and from time to time considers and
makes the sale of certain properties.
At October 31, 1994, the Trust owned or had an equity interest in
twenty-three properties comprised of shopping centers, single tenant retail
stores, office buildings and service and distribution facilities located in
fifteen states throughout the United States, containing a total of 3,353,000
square feet of gross leasable space.
In the five year period ended October 31, 1994, the Trust acquired six
real estate properties totalling 504,000 square feet of gross leasable space at
an aggregate purchase price of $47.4 million. The properties were acquired with
the proceeds of $27.2 million of non-recourse first mortgage loan financings and
available cash. During such period, the Trust also spent nearly $12.1 million to
expand, renovate, improve and lease its other properties. Such activities were
funded primarily from cash and cash equivalents. During this same period, the
Trust sold four net leased properties totalling 282,000 square feet of gross
leasable space for proceeds totalling $11.6 million.
At October 31, 1994, of the twenty-three properties in the Trust's
portfolio, ten were retail properties (including six shopping centers),
containing in the aggregate 1,385,000 square feet of gross leasable space. The
Trust's retail properties collectively had approximately 138 tenants providing a
wide range of retail products and services. Major tenants include supermarkets,
national discount department stores and a movie theater. At October 31, 1994,
the Trust's overall occupancy rate in its retail properties was 89%. In January,
1995 , the Trust acquired a 193,000 square foot shopping center located in
Danbury, Connecticut at a purchase price of $19.25 million. The acquisition was
funded with a $11.25 million first mortgage and cash. The property contains 20
tenants.
Five properties in the Trust's portfolio are office buildings,
totalling approximately 421,000 square feet of gross leasable space. The office
properties collectively have more than 50 tenants which offer a wide range of
services and include insurance companies, a major engineering firm and
government agencies. At October 31, 1994, the Trust's overall occupancy rate in
its office properties was 89%. The Trust also held one participating mortgage
note in the amount of $4,836,000, secured by an office building containing
62,000 square feet of gross leasable space. In December 1994, this mortgage note
was sold for net proceeds of $3,750,000. The mortgage note was written down to
its net realizable value in fiscal 1994. In fiscal 1993, the Trust disposed of
three office properties which were owned by joint ventures in which the Trust
held a 50% or more interest. The three office properties totalled 525,000 square
feet and had an aggregate book value net of related liabilities of approximately
$8.4 million. Two of the properties were foreclosed upon by the respective
mortgage lenders after the joint ventures elected not to make required debt
service payments. The Trust sold its 50% interest in the third joint venture
owning an office building in Santa Ana, California for $250,000. For additional
information, see Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations".
Eight properties in the Trust's portfolio are service and distribution
facilities totalling 1,547,000 square feet of gross leasable space, consisting
of six automobile and truck parts distribution warehouses leased to Chrysler
Corporation, one truck sales and service center and one automobile tire
distribution facility. The service and distribution facilities are net leased
under long-term lease arrangements whereby the tenant pays all taxes, insurance,
maintenance and other operating costs of the property during the term of the
lease. Rents paid by Chrysler Corporation to the Trust exceeded 10% of the
Trust's gross rental revenues in fiscal 1994. (See Recent Developments below
regarding contract for sale of certain of the properties leased to Chrysler
Corporation).
At October 31, 1994, the Trust also owned a portfolio of mortgage notes
receivable consisting of fixed rate mortgages aggregating $4,013,000 (excluding
the participating mortgage described above). The fixed rate mortgages are
secured by retail properties sold by the Trust in prior years.
Property Management
The Trust actively manages and supervises the operations and leasing at
six of its retail property and two office locations. Eleven of the Trust's
properties are net leased to single tenants under long-term lease arrangements,
in which case, management is provided by the tenants. The Trust's remaining
properties are managed by independent third party management firms retained by
the Trust. The Trust closely supervises the management firms it engages to
manage its properties.
Recent Developments
During fiscal 1994, the Trust acquired two properties at an aggregate
purchase price of $25.8 million. The Trust also spent $1.8 million for leasing
costs and capital improvements to properties it already owns. Substantially all
such capital improvements were incurred in connection with the Trust's office
and retail leasing activities. The Trust expects to spend similar amounts in
fiscal 1995 for leasing costs and capital improvements at its properties. During
the 1994 fiscal year, the Trust leased over 145,000 square feet of gross
leasable space, compared to 130,000 square feet in the prior year. The square
footage leased in fiscal 1994 comprised 8% of the total gross leasable space of
the Trust's retail and office building properties.
In November 1994, the Trust entered into a contract to sell, to a
single purchaser, four of its service and distribution facilities totalling
626,000 square feet of gross leasable space and net leased to the Chrysler
Corporation. The aggregate sale price is approximately $13.5 million. The Trust
has also entered into a contract to sell its retail property located in
Manassas, Virginia at a sale price of $7.5 million. The property is net leased
to a single tenant occupying 106,000 square feet of gross leasable space. The
transactions are expected to close in fiscal 1995.
The Trust intends to continue to invest substantially all of its assets
in income producing real estate, with a primary emphasis on shopping centers,
although the Trust will retain the flexibility to invest in other types of real
property. While the Trust is not limited to any geographical location, the
Trust's current strategy is to invest in properties located in the Northeastern
United States. The Trust also intends to sell certain of its real estate assets
such as its mortgage notes receivable and certain of its office and industrial
properties.
Competition
The real estate investment business is highly competitive. The Trust
competes for real estate investments with investors of all types, including
domestic and foreign corporations, financial institutions, other real estate
investment trusts and individuals. In addition, the Trust's properties are
subject to local competitors from the surrounding areas.
The Trust's office buildings compete for tenants principally with
office buildings throughout the respective areas in which they are located. In
most areas where the Trust's office buildings are located, competition for
tenants is intense. Leasing space to prospective tenants is generally determined
on the basis of, among other things, rental rates, location, physical quality of
the property and availability of space. The shopping centers compete for tenants
with other regional, community or neighborhood shopping centers in the
respective areas where Trust retail properties are located.
Since the Trust's industrial properties are all net leased under
long-term lease arrangements which are not due to expire in the near future, the
Trust does not currently face any competitive pressures with respect to such
properties.
Employees
The Trust has 16 employees, eight of whom oversee the management of the
Trust's real estate portfolio, analyze potential acquisition properties and
determine which properties, if any, to sell. The Trust's remaining employees
serve in various professional, executive and administrative capacities.
<PAGE>
Item II. Properties.
Retail Properties
The following table sets forth information concerning each retail
property in which the Trust owned an equity interest at October 31, 1994. All
retail properties are 100% owned in fee by the Trust.
<TABLE>
<CAPTION>
Gross Leasable
Year Year Square Number
Location Completed Acquired Feet Acres of Tenants Occupancy Principal Tenant
- ---------------- --------- -------- -------- ------ --------- --------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mesa, Arizona 1971 1971 92,000 7.6 1 100% Mervyn's (Dayton Hudson)
Tempe, Arizona 1970 1970 86,000 8.6 1 100% Mervyn's (Dayton Hudson)
Meriden, Connecticut 1989 1993 296,000 29.2 18 92% Bradlee's
Clearwater, Florida 1983 1985 231,000 21.5 39 80% Albertson's
Springfield,
Massachusetts 1970 1970 284,000 26.0 14 74% Caldor
Newington, New Hampshire 1975 1979 102,000 14.3 10 100% Sears Roebuck Home Life
Store
Wayne, New Jersey 1959 1992 99,000 9.0 31 85% Great Atlantic & Pacific
Tea Co.
Farmingdale, New York 1981 1993 70,000 5.6 11 95% King Kullen
Somers, New York 1989 1992 19,000 4.9 12 100% Putnam County Savings Bank
Manassas, Virginia 1971 1972 106,000 14.1 1 100% The Hecht Company
(May Department Stores)
</TABLE>
<PAGE>
Office Properties
The following table sets forth information concerning each office
property in which the Trust owned an equity interest at October 31, 1994. Except
as otherwise noted, office properties are 100% owned in fee by the Trust.
<TABLE>
<CAPTION>
Rentable
Year Year Square Number
Location Completed Acquired Feet Acres of Tenants Occupancy Principal Tenant
- -------- --------- -------- ------ ----- ---------- --------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Denver, Colorado 1983 1983 122,000 9.1 10 90%* Kemper Insurance Company
Greenwich, Connecticut 1983 1993 10,000 .2 3 100% Multivision Cable TV
Greenwich, Connecticut 1983 1994 9,700 .2 4 100% Prescott Investors, Inc.
Southfield, Michigan12 1973 1983 183,000 7.8 4 100% Giffels Associates
Houston, Texas 1972 1975 96,000 3.1 32 93% Houston Title Company
<FN>
- --------
1 The Trust owns an 85% partnership interest in this property.
* Includes tenant occupying 30,400 square feet of space who took occupancy on December 1, 1994
</TABLE>
<PAGE>
Distribution and Service Properties
The following table sets forth information concerning each distribution
and service property in which the Trust owned an equity interest at October 31,
1994. Distribution and service properties are 100% owned in fee by the Trust.
<TABLE>
<CAPTION>
Rentable
Year Year Square Number
Location Completed Acquired Feet Acres of Tenants Occupancy Tenant
- -------- --------- -------- ------ ----- ---------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Dallas, Texas 1970 1970 253,000 14.5 1 100% Chrysler Corporation
Denver, Colorado 1970 1970 127,000 11.2 1 100% Chrysler Corporation
Memphis, Tennessee 1970 1970 175,000 13.7 1 100% Chrysler Corporation
Orlando, Florida 1970 1970 175,000 23.8 1 100% Chrysler Corporation
Beaverton, Oregon 1970 1970 149,000 11.4 1 100% Chrysler Corporation
St. Louis, Missouri 1970 1970 163,000 16.0 1 100% Chrysler Corporation
Syracuse, New York 1973 1973 29,000 10.0 1 100% Navistar International
Albany, Georgia 1972 1972 476,000 51.3 1 100% Firestone
</TABLE>
<PAGE>
Item III. Legal Proceedings.
No legal proceedings are required to be reported under this Item.
Item IV. Submission of Matters to a Vote of Security Holders.
No matter was submitted to a vote of security holders during the
fourth quarter of the fiscal year ended October 31, 1994.
Item Pursuant to Instruction 3 of Item 401 (b) of Regulation S-K:
Executive Officers of the Trust.
For information regarding Executive Officers of the Trust -- See Item
X.
PART II
Item V. Market for the Registrant's Common Equity and Related Stockholder
Matters.
(a) Price Range of Common Shares
The Common Shares of the Trust are traded on the New York Stock
Exchange under the symbol "HRE". The following table sets forth the high and low
closing sales prices for the Trust's Common Shares during the fiscal years ended
October 31, 1994 and October 31, 1993, as reported on the New York Stock
Exchange:
<TABLE>
<CAPTION>
Fiscal Year Fiscal Year
Ended Ended
October 31, 1994 October 31, 1993
---------------- ----------------
<S> <C> <C> <C> <C>
High Low High Low
Fourth Quarter $15-1/2 - 13-7/8 $15-7/8 - $14-1/4
Third Quarter 16-1/4 - 13-3/4 15-5/8 - 13-3/4
Second Quarter 16 - 13-1/2 16-3/8 - 12-1/4
First Quarter 15-5/8 - 14-1/8 12-3/8 - 11-1/8
</TABLE>
(b) Approximate Number of Equity Security Holders
At December 31, 1994, there were 3,135 shareholders of record of the
Trust's Common Shares.
(c) Dividends Declared on Common Shares and Tax Status
The following table sets forth the dividends declared per Common Share
and tax status for Federal income tax purposes of the dividends paid during the
fiscal years ended October 31, 1994 and October 31, 1993:
<TABLE>
<CAPTION>
Portion of Dividend Designated as:
Fiscal Year Ended Gross Dividend Income Non-Taxable
October 31, 1994: Paid Per Share Distribution Distribution
- -------------------- ---------------- --------------- ---------------
<S> <C> <C> <C>
Fourth Quarter $ .28 $ .14 $ .14
Third Quarter $ .28 $ .14 $ .14
Second Quarter $ .27 $ .14 $ .13
First Quarter $ .27 $ .13 $ .14
----- ----- -----
$1.10 $ .55 $ .55
===== ===== =====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Portion of Dividend Designated as:
Fiscal Year Ended Gross Dividend Income Capital Gain Non-Taxable
October 31, 1993: Paid Per Share Distribution Distribution Distribution
---------------- --------------- ---------------- -------------
<S> <C> <C> <C> <C>
Fourth Quarter $ .27 $ .02 $ .20 $ .05
Third Quarter $ .27 $ .03 $ .20 $ .04
Second Quarter $ .27 $ .03 $ .19 $ .05
First Quarter $ .27 $ .03 $ .19 $ .05
----- ----- ----- -----
$1.08 $ .11 $ .78 $ .19
===== ===== ===== =====
</TABLE>
The Trust made distributions to shareholders aggregating $1.10 per
Common Share during the fiscal year ended October 31, 1994. The Trust has paid
quarterly dividends on its Common Shares since it commenced operations as a real
estate investment trust in 1969.
Although the Trust intends to continue to declare quarterly dividends
on its Common Shares, no assurances can be made as to the amounts of any future
dividends. The declaration of any future dividends by the Trust is within the
discretion of the Board of Trustees, and will be dependent upon, among other
things, the earnings, financial condition and capital requirements of the Trust,
as well as any other factors deemed relevant by the Board of Trustees. Two
principal factors in determining the amounts of dividends are (i) the
requirement of the Code that a real estate investment trust distribute to
shareholders at least 95% of its real estate investment trust taxable income,
and (ii) the amount of the Trust's funds from operations.
The Trust has a Dividend Reinvestment and Share Purchase Plan which
allows shareholders to acquire additional shares by automatically reinvesting
dividends. Shares are acquired pursuant to the Plan at a price equal to the
higher of 95% of the market price of such shares on the dividend payment date or
100% of the average of the daily high and low sales prices for the five trading
days ending on the day of purchase without payment of any brokerage commission
or service charge. Approximately 14% of the Trust's eligible shareholders
currently participate in the Plan.
Item IV. Selected Financial Data.
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended October 31, 1994 1993 1992 1991 1990
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Total Assets $142,559 $119,330 $137,855 $130,727 $135,342
Mortgage Notes and
Other Long-term
Obligations $ 46,386 $ 24,227 $ 31,226 $ 20,534 $ 20,711
Revenues $ 18,969 $ 16,162 $ 16,942 $ 17,136 $ 17,902
Operating Income (Loss) $ 1,262 $(7,293) $ 1,588 $ 892 $ 2,247
Gains on Sales of
Properties $ 82 $ 2,330 $ -- $ 2,205 $ 1,622
Net Income (Loss) $ 1,344 $(4,963) $ 1,588 $ 3,097 $ 3,869
Funds From Operations* $ 7,950 $ 7,036 $ 6,902 $ 7,841 $ 8,998
Per Share Data:
Net Income (Loss) $ .26 $(.94) $.30 $.58 $.70
Cash Dividends $1.10 $1.08 $1.16 $1.40 $1.60
</TABLE>
*Defined as net income, before gains on sales of properties and non-recurring
items, adjusted for noncash charges and credits, recoveries of investment in
properties owned subject to financing leases and cash distributions received
from investments in unconsolidated joint ventures.
<PAGE>
Item VII. Managment's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources
The Trust meets its liquidity requirements primarily by generating funds from
the operations of its properties, sale of real estate investments and collection
of principal and interest on its mortgage notes receivable. Payments of expenses
related to real estate operations, capital improvement programs, debt service,
management and professional fees, and dividend requirements place demands on the
Trust's liquidity.
The Trust believes that the financial resources currently available to it are
sufficient to meet all of its known obligations and commitments and to make
additional real estate investments when appropriate opportunities arise. At
October 31, 1994, the Trust had $8.7 million in cash and cash equivalents. The
Trust also has available $17 million in unsecured lines of credit, (including an
increase of $2 million in one such line of credit subsequent to year end) with
two major commercial banks. Long-term debt consisted of eight mortgage notes
payable totalling $46.4 million, of which $411,000 in principal payments are due
in fiscal 1995. Current liabilities, including current installments of principal
payments of mortgage notes payable, and short-term borrowings under the credit
lines, were approximately $6.4 million. The credit lines are available to
finance the acquisition, management or development of commercial real estate and
a portion of such credit lines is available for working capital purposes. The
credit lines expire at various periods in 1995 and outstanding borrowings, if
any, may be repaid from proceeds of additional debt financings or sales of
properties. The Trust may also request that the time for repayment be extended
by the banks. It is the Trust's intent to renew these credit lines as they
expire in 1995. During fiscal 1994, the Trust obtained proceeds of $22.5 million
from first mortgage loan financings. The loans are collateralized by three of
the Trust's properties having a net carrying value of $34.9 million at October
31, 1994. The mortgage loans bear interest at fixed rates that range from 7.5%
to 9.75% and mature in five to seven years.
In fiscal 1994, the Trust sold its distribution property located in Memphis,
Tennessee, for $450,000, all cash. The Trust realized a gain on the sale of
property of $82,000. In December 1994, the Trust also sold a participating
mortgage note receivable with a face amount of $4,836,000. The mortgage note
receivable was written down to its net realizable value of $3,750,000 in the
1994 consolidated statement of income and sold at such amount.
The Trust has entered into contracts to sell four of its distribution and
service properties to a single purchaser for an aggregate sale price of $13.5
million. The Trust has also contracted to sell a 106,000 square foot retail
property for $7.5 million. The transactions are expected to close in fiscal
1995. The proceeds from such sales may be used to make additional real estate
investments and/or reduce outstanding mortgage loan indebtedness or meet
dividend distribution requirements.
The Trust acquired two properties in fiscal 1994 at a total cost of $25.8
million. Funds for the acquisitions were provided principally from first
mortgage note proceeds of $15 million and available cash, including $5 million
drawn from a credit line. The Trust expects to make additional real estate
investments periodically. The funds for such investments may come from existing
liquid assets, line of credit arrangements, proceeds from property sales,
financing of acquired or existing properties or the sale of mortgage notes
receivable. Subsequent to fiscal 1994, the Trust contracted to acquire a 193,000
square foot shopping center in Danbury, Connecticut. The property will be
acquired at a purchase price of $19.25 million and funded through a first
mortgage loan of $11.25 million and available cash. The first mortgage will bear
interest at 9.5% per annum and mature in five years. The acquisition is
scheduled to be completed in the first quarter of fiscal 1995. The Trust also
invests in its existing properties and, during fiscal 1994, spent approximately
$1.8 million on its properties for capital improvement and leasing costs. The
Trust expects to invest similar amounts in the next fiscal year.
Results of Operations
The Trust defines "funds from operations" as net income (computed in accordance
with generally accepted accounting principles), excluding gains (or losses) on
sales of properties, adjusted for noncash charges and credits, recoveries of
investment in properties owned subject to financing leases, and cash
distributions received from unconsolidated joint ventures. The Trust believes
the level of funds from operations to be an appropriate supplemental financial
measure of its operating performance. In fiscal 1994, funds from operations
increased 13% to $7,950,000 from $7,036,000 in the year ago period. The
improvement is primarily the result of the positive effect of the Trust's new
retail property investments in fiscal 1994 and late 1993.
<PAGE>
Fiscal 1994 vs. Fiscal 1993
Revenues
Total revenues were $18,969,000 in fiscal 1994 compared to $16,162,000 in 1993
and $16,942,000 in 1992. Rental income in fiscal 1994, including the income
portion of rental received in respect of direct finance leases, comprised 94% of
total revenues. Rental income from retail properties increased 53% to $11.5
million from $7.5 million in fiscal 1993. Retail property acquired in fiscal
1994 and late 1993 produced additional rents of $3.9 million in fiscal 1994. The
Trust's overall retail property occupancy levels were generally unchanged from
last year. Gross rents from office property investments decreased nearly 20% to
$4.9 million in fiscal 1994 compared to $6.1 million a year ago, reflecting the
disposition in fiscal 1993 of the Trust's former office building investment in
Portland, Oregon and lower occupancy during the year at the Trust's Denver,
Colorado office building. The Trust recently signed leases totalling 62,000
square feet of leasable space at the Denver property and the building is
currently 95% occupied.
Expenses
Total expenses were $17,727,000 in fiscal 1994, compared to $23,470,000 in
fiscal 1993. Included in expenses in fiscal 1994 and 1993 are write-downs in the
carrying values of investments of $1,086,000 and $8,285,000, respectively.(see
discussion below.)
The largest expense category is operating expenses of the Trust's real estate
operating properties. Operating expenses totalled $7,205,000 in fiscal 1994,
compared to $6,311,000 in 1993. Expenses were generally unchanged for properties
owned during both 1994 and 1993. Operating expenses for the Trust's new retail
properties added expenses of $1,231,000 in fiscal 1994. The prior year's
expenses included $548,000 for operating expenses of the Trust's office building
property in Portland, Oregon that was disposed of during fiscal 1993. Interest
expense rose $1,281,000 in fiscal 1994 due to the addition of three new mortgage
notes payable aggregating $22.5 million. The mortgage notes bear interest at
annual rates ranging from 7.5% to 9.75%. In fiscal 1993, the Trust satisfied in
foreclosure a 10 3/4% mortgage loan with an outstanding principal balance of
$13.5 million.
General and administrative expenses decreased in fiscal 1994 as a result of the
Trust's decision to redeploy certain of its available staff resources from
administrative and asset management functions to direct property management
activities at certain of its retail properties. The properties were managed
previously by third-party management firms under fee arrangements.
The decrease in consulting fee expense resulted from the termination in fiscal
1993 of a consulting arrangement with a trustee.
Fiscal 1993 vs. Fiscal 1992
Revenues
Operating lease income was lower in fiscal 1993 compared to the prior year
primarily as a result of the disposition in that year of the Trust's office
building investment in Portland, Oregon. The Trust discontinued recording the
revenues and expenses of the property after a receiver was appointed for the
property in connection with a foreclosure proceeding. Rents from other office
building investments reflected lower occupancy especially at the trust's office
building in Denver, Colorado where a tenant occupying 34,000 square feet of
space failed to renew its lease upon expiration. Revenues from retail properties
increased by approximately 14.7% reflecting income earned from recent shopping
centers acquisitions by the Trust and improved occupancy at the Trust's
Newington, New Hampshire property.
Interest income decreased principally from lower rates of return on short-term
investments and lower levels of cash and cash equivalents available for
short-term investment. Interest earned from a loan to an unconsolidated joint
venture decreased when the loan in the principal amount of $800,000 became
non-performing and was subsequently written off during the year.
Expenses
Real estate operating expenses include the effect of the additional expenses of
shopping centers acquired by the Trust and the discontinued recording of
expenses of the Portland office building earlier in the year.
The increase in net interest expense resulted from the addition of two mortgage
notes payable totaling $11.65 million at an average annual interest rate of
9.36% and the satisfaction in foreclosure of a nonrecourse mortgage loan with an
outstanding balance of $13.5 million. In light of continued adverse office
market conditions including excess supply of available space, weak tenant demand
and declining rents, the Trust determined in fiscal 1993 that the additional
funds required to meet capital and debt service obligations was not justified by
the near-term prospects for two of its office building investments which were
encumbered with mortgage notes payable totalling $19.1 million. The Trust
commenced discussions with the lenders to the properties, seeking among other
things, modifications to the mortgage notes payable to more closely reflect the
then current market conditions. The office buildings were owned by joint
ventures in which the Trust held a 50% or greater interest. The joint ventures
elected not to make debt service payments on its mortgage loan obligations and
as a result, the mortgagees filed actions seeking foreclosures of the
properties. Subsequently, the mortgagees obtained foreclosure judgments and the
properties were sold. As a result of these developments, the Trust recorded
charges of $2.6 million in fiscal 1993 to reflect one of the property's carrying
value at its estimated fair value and $800,000 to write off the Trust's net
investment in a second mortgage loan to the other joint venture.
For similar reasons discussed above, the Trust also reached an agreement in
principle to sell its 50% interest in a third unconsolidated joint venture to
its partner for $250,000. The joint venture owned an office building located in
Santa Ana, California. In this connection, the Trust recorded a charge of $4.9
million to reflect its investment in the unconsolidated joint venture at net
realizable value.
The Trust recorded a gain on sale of properties of $2.3 million or $.44 per
share in connection with a sale of the Trust's 62,000 square foot retail
property located in Los Angeles, California.
<PAGE>
Item VIII. Financial Statements and Supplementary Data.
The consolidated financial statements required by this Item, together with
the report of the Trust's independent public accountants thereon and the
supplementary financial information required by this Item are included under
Item 14 of this Annual Report.
Item IX. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
No information is required to be reported under this Item.
PART III
Item X. Directors and Executive Officers of the Registrant.
The Trust has filed with the Securities and Exchange Commission its
definitive Proxy Statement for its Annual Meeting of Shareholders to be held on
March 15, 1995. The additional information required by this Item is included
under the caption "Election of Trustees" of such Proxy Statement and is
incorporated herein by reference.
Executive Officers of the Registrant.
The following sets forth certain information regarding the executive
officers of the Trust:
<TABLE>
<CAPTION>
Name Age Offices Held
---- ---- -------------
<S> <C> <C>
Charles J. Urstadt 66 Chairman; President and Chief Executive
Officer (since September 1989)
James R. Moore 46 Senior Vice President and Chief Financial
Officer (since September 1989); Secretary
(since April 1987) and Treasurer (since
December 1987); Vice President-Finance
and Administration (April 1987 to
September 1989); prior to April 1987,
Senior Manager, Ernst & Young
Raymond P. Argila 46 Senior Vice President and Chief Legal
Officer (since June 1990); formerly Senior
Counsel, Cushman & Wakefield, Inc.,
September 1987 to May 1990 and
associated with Finley, Kumble, Wagner,
Heine, Underberg, Manley, Myerson &
Casey from March to June 1987; Vice
President and Chief Legal Officer, Pearce,
Urstadt, Mayer & Greer Realty Corp. from
January 1984 to March 1987
Bryant Young 46 Senior Vice President-Asset Management
(since December, 1992); Vice President
(June 1986 to December 1992); Assistant
Vice President (February 1986 to June
1986); Associate, Merrill Lynch Hubbard
Co. (May 1985 to January, 1986)
</TABLE>
Officers of the Trust are elected annually by the Trustees.
Mr. Urstadt has been the Chairman of the Trustees since 1986, and a
Trustee since 1975. Mr. Urstadt also serves as the President of Urstadt Property
Company, Inc. (formerly Pearce, Urstadt, Mayer & Greer Inc.) and has served in
such capacity for more than five years.
Item XI. Executive Compensation.
The Trust has filed with the Securities and Exchange Commission its
definitive Proxy Statement for its Annual Meeting of Shareholders to be held on
March 15, 1995. The information required by this Item is included under the
caption "Compensation and Transactions with Management and Others" of such Proxy
Statement and is incorporated herein by reference.
Item XII. Security Ownership of Certain
Beneficial Owners and Management.
The Trust has filed with the Securities and Exchange Commission its
definitive Proxy Statement for its Annual Meeting of Shareholders to be held on
March 15, 1995. The information required by this Item is included under the
caption "Security Ownership of Certain Beneficial Owners and Management" of such
Proxy Statement and is incorporated herein by reference.
Item XIII. Certain Relationships and Related Transactions.
The Trust has filed with the Securities and Exchange Commission its
definitive Proxy Statement for its Annual Meeting of Shareholders to be held on
March 15, 1995. The information required by this Item is included under the
caption "Compensation and Transactions with Management and Others" of such Proxy
Statement and is incorporated herein by reference.
PART IV
Item XIV. Exhibits, Financial Statement
Schedules and Reports on Form 8-K.
A. Financial Statements and Financial Statement Schedules
1. Financial Statements --
The consolidated financial statements listed in the
accompanying index to financial statements on Page 18
are filed as part of this Annual Report.
2. Financial Statement Schedules --
The financial statement schedules required by this
Item are filed with this report and are listed in the
accompanying index to financial statements on Page
18. All other financial statement schedules are
inapplicable.
B. Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant during the last
quarter of the fiscal year ended October 31, 1994.
C. Exhibits.
Listed below are all Exhibits filed as part of this report. Certain
Exhibits are incorporated by reference from documents previously
filed by the Trust with the Securities and Exchange Commission
pursuant to Rule 12b-32 under the Securities Exchange Act of 1934,
as amended.
Exhibit
(3) Articles of Incorporation and By-laws.
3.1 Fourth Amended and Restated Declaration of Trust of the Trust,
as amended, to date.
3.2 By-laws of the Trust, as amended (incorporated by reference to
Exhibit 4.2 of the Registrant's Registration Statement on Form
S-8 (No. 33-41408)).
(4) Instruments Defining the Rights of
Security Holders, Including Indentures:
4.1 Common Shares: See Exhibit 3.1 hereto.
4.2 Preferred Shares: See Exhibit 3.1 hereto.
4.3 Preferred Share Purchase Rights: See Exhibits 3.1 and 10.3
hereto.
(10) Material Contracts.
10.1 Form of Indemnification Agreement entered into between
the Registrant and each of its Trustees and for future
use with Trustees and officers of the Trust
(incorporated herein by reference to Exhibit 10.1 of
the Registrant's Annual Report on Form 10-K for the
year ended October 31, 1989).*
10.2 Amended and Restated Change of Control Agreement
between the Registrant and James R. Moore dated
November 15, 1990 (incorporated herein by reference to
Exhibit 10.3 of the Registrant's Annual Report on Form
10-K for the year ended October 31, 1990).*
10.3 Rights Agreement between the Trust and The First
National Bank of Boston, as Rights Agent, dated as of
October 28, 1988 (incorporated herein by reference to
Exhibit 1 of the Registrant's Current Report on Form
8-K dated October 28, 1988).
10.4 Change of Control Agreement dated as of June 12, 1990
between the Registrant and Raymond P. Argila
(incorporated herein by reference to Exhibit 10.7 of
the Registrant's Annual Report on Form 10-K for the
year ended October 31, 1990).*
10.4.1 Agreement dated December 19, 1991 between the
Registrant and Raymond P. Argila amending the Change of
Control Agreement dated as of June 12, 1990 between the
Registrant and Raymond P. Argila (incorporated herein
by reference to Exhibit 10.6.1 of the Registrant's
Annual Report on Form 10-K for the year ended October
31, 1991).*
10.5 Change of Control Agreement dated as of December 20,
1990 between the Registrant and Charles J. Urstadt
(incorporated herein by reference to Exhibit 10.8 of
the Registrant's Annual Report on Form 10-K for the
year ended October 31, 1990).*
10.6 Amended and Restated HRE Properties Stock Option Plan
(incorporated herein by reference to Exhibit 10.8 of
the Registrant's Annual Report on Form 10-K for the
year ended October 31, 1991).*
10.6.1 Amendments to HRE Properties Stock Option Plan dated
June 9, 1993.*
10.7 Purchase and Sale Agreement between the Registrant and
Aetna Life Insurance Company dated December 22, 1993,
relating to the Registrant's acquisition of Townline
Center Shopping Center, Meriden, Connecticut.
10.8 Second Purchase and Sale Agreement dated January 6,
1995 between the Registrant and Aetna Life Insurance
Company relating to the Registrant's acquisition of
Danbury Square Mall, Danbury, Connecticut (incorporated
herein by reference to Exhibit 1 of the Registrant's
Current Report on Form 8-K dated January 6, 1995).
(21) Subsidiaries.
21.1 List of Trust's subsidiaries (incorporated by reference
to Exhibit 22.1 of the Registrant's Annual Report on
Form 10-K for the year ended October 31, 1988).
(23) Consents of Experts and Counsel.
23.1 The consent of Arthur Andersen LLP to the incorporation
by reference of their reports included or incorporated
by reference herein and in the Registrant's
Registration Statements on Form S-3 (No. 33-57119),
Form S-8 (No.2-93146) and Form S-8 (No. 33- 41408) is
filed herewith as part of this report.
(27) Financial Data Schedule.
27.1 Financial Data Schedule
*Management contract, compensatory plan or arrangement required to be filed as
an exhibit to this Annual Report on Form 10-K pursuant to Item 14(c).
<PAGE>
HRE PROPERTIES
Item 14a.INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Consolidated Balance Sheets at October 31, 1994 and 1993 20
Consolidated Statements of Income for each of the
three years ended October 31, 1994 21
Consolidated Statements of Cash Flows for each of the
three years ended October 31, 1994 22
Consolidated Statements of Shareholders' Equity
for each of the three years ended October 31, 1994 23
Notes to Consolidated Financial Statements 24-30
Report of Independent Public Accountants 30
Schedule
II Amounts Receivable from Related Parties and
Underwriters, Promoters and Employees
Other Than Related Parties - For the
three years ended October 31, 1994 31
IX Short-Term Borrowings - For the
three years ended October 31, 1994 32
X Supplementary Income Statement Information -
For the three years ended October 31, 1994 33
XI Real Estate and Accumulated Depreciation -
October 31, 1994 34-37
XII Mortgage Loans on Real Estate - October 31,
1994 38-39
</TABLE>
<PAGE>
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
October 31,
-----------------
ASSETS 1994 1993
---- ----
<S> <C> <C>
Real Estate Investments:
Properties owned-- at cost, net of accumulated depreciation and recoveries $ 120,631 $ 99,279
Investments in and loans to unconsolidated joint ventures -- 250
Mortgage notes receivable 7,763 8,917
------- --------
128,394 108,446
Cash and cash equivalents 8,738 7,061
Interest and rent receivable 2,343 1,304
Deferred charges, net of accumulated amortization 2,108 1,796
Other assets 976 723
-------- --------
$142,559 $119,330
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable and bank loan $ 51,386 $ 24,227
Accounts payable and accrued expenses 1,024 847
Deferred trustees' fees 521 602
Other liabilities 1,147 958
--------- ---------
54,078 26,634
Shareholders' Equity:
Preferred shares, without par value; 2,000,000 shares authorized; none
issued -- -Common shares, without par value; unlimited shares authorized;
5,520,044
and 5,498,454 issued in 1994 and 1993, respectively 123,507 123,205
Less 178,348 common shares held in treasury, at cost (2,861) (2,861)
Distributions in excess of accumulated net income (32,165) (27,648)
-------- --------
88,481 92,696
$142,559 $119,330
======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these balance sheets.
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended October 31,
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Revenues:
Operating leases $16,498 $13,763 $14,477
Financing leases 1,392 1,520 1,638
Interest 1,079 1,122 1,232
Interest from and equity in losses of unconsolidated
joint ventures -- (243) (405)
------ ------ ------
18,969 16,162 16,942
------ ------ ------
Operating Expenses:
Real estate operations 7,205 6,311 6,426
Interest 3,775 2,494 2,318
Depreciation and amortization 4,075 4,363 4,481
General and administrative expenses 1,423 1,723 1,885
Trustees' fees and expenses 163 149 131
Consulting fee -- 145 138
Write-down in carrying value of investments 1,086 8,285 --
------ ------ ------
17,727 23,470 15,379
------ ------ ------
Operating Income(Loss) before Minority Interests 1,242 (7,308) 1,563
Minority Interests in Results of Consolidated Joint Ventures 20 15 25
------ ------ -----
Operating Income(Loss) 1,262 (7,293) 1,588
Gains on Sales of Properties 82 2,330 ---
------ ------ ------
Net Income(Loss) $ 1,344 $(4,963) $1,588
======= ======== ======
Net Income(Loss) Per Common Share:
Operating income(loss) $ .24 $ (1.38) $ .30
Gains on sales of properties .02 .44 -
------ ------- ------
Net Income(Loss) $ .26 $ (.94) $ .30
====== ======= ======
Weighted Average Number of Common Shares Outstanding 5,330 5,296 5,285
====== ===== =======
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year Ended October 31,
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Operating Activities:
Net income(loss) $ 1,344 $ (4,963) $ 1,588
Adjustments to reconcile net income(loss) to net cash provided
by operating activities:
Depreciation and amortization 4,151 4,448 4,568
Recovery of investment in properties owned
subject to financing leases 1,471 1,342 1,225
Equity in losses of unconsolidated joint venture -- 269 506
Minority interests in results of consolidated joint ventures (20) (15) (25)
Gains on sales of properties (82) (2,330) --
Write-down in carrying value of investments 1,086 8,285 --
------- ------ ------
7,950 7,036 7,862
Changes in operating assets and liabilities:
(Increase) decrease in interest and rent receivable (1039) (286) 142
Increase (decrease) in accounts payable and accrued expenses 97 (463) 114
(Increase) decrease in other assets and other liabilities, net (619) 253 (236)
------- ------ ------
Net Cash Provided by Operating Activities 6,389 6,540 7,882
------- ------ ------
Investing Activities:
Acquisition of properties owned (25,816) (6,197) (15,881)
Improvements to existing properties owned and deferred charges (1,764) (1,521) (1,564)
Investments in and loans to unconsolidated joint ventures -- (100) (1,624)
Proceeds from sales of properties and investment in
unconsolidated joint venture and contract deposit 1,204 3,231 --
Payments received on mortgage notes receivable 68 61 53
Miscellaneous (4) 66 (204)
------- ------- ------
Net Cash Used in Investing Activities (26,312) (4,460) (19,220)
------- ------- ------
Financing Activities:
Proceeds from mortgage notes and bank loan 27,500 6,600 11,650
Dividends paid (5,861) (5,718) (6,129)
Proceeds from sales of additional common shares 302 459 245
Payments on mortgage notes and other (341) (818) (199)
------- ------- -------
Net Cash Provided by Financing Activities 21,600 523 5,567
------- ------- ------
Net Increase (Decrease) In Cash and Cash Equivalents 1,677 2,603 (5,771)
Cash and Cash Equivalents at Beginning of Year 7,061 4,458 10,229
------- ------- -------
Cash and Cash Equivalents at End of Year $ 8,738 $ 7,061 $ 4,458
======= ======== =======
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except shares and per share data)
<TABLE>
<CAPTION>
Common Shares
(Distributions
Treasury In Excess of
Outstanding Issued Shares, Accumulated
Number Amount at Cost Net Income) Total
----------- ------ --------- ------------ --------
<S> <C> <C> <C> <C> <C>
Balances-- October 31, 1991 5,276,569 $122,345 $(2,705) $(12,426) $107,214
Net income -- -- -- 1,588 1,588
Cash dividends declared ($1.16 per share) -- -- -- (6,129) (6,129)
Sale of additional common shares under
dividend reinvestment plan 19,540 245 -- -- 245
--------- -------- -------- --------- --------
Balances-- October 31, 1992 5,296,109 122,590 (2,705) (16,967) 102,918
Net (loss) -- -- -- (4,963) (4,963)
Cash dividends declared ($1.08 per share) -- -- -- (5,718) (5,718)
Sale of additional common shares under
dividend reinvestment plan 32,247 459 -- -- 459
Common shares acquired in cancellation
of stock option loan (8,250) 156 (156) -- --
--------- -------- -------- --------- -------
Balances-- October 31, 1993 5,320,106 123,205 (2,861) (27,648) 92,696
Net Income -- -- -- 1,344 1,344
Cash dividends declared ($1.10 per share) -- -- -- (5,861) (5,861)
Sale of additional common shares under
dividend reinvestment plan 18,048 261 -- -- 261
Common shares issued upon
exercise of stock options 3,542 41 -- -- 41
------- -------- -------- --------- --------
Balances-- October 31, 1994 5,341,696 $123,507 $(2,861) $(32,165) $88,481
========= ======== ======== ========= =======
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of HRE Properties
(the Trust), its wholly-owned subsidiary, and certain joint ventures where the
Trust has the ability to control the affairs of the venture. All significant
intercompany transactions and balances have been eliminated in consolidation.
Accounting for Leases
The Trust accounts for its leases of real property in accordance with the
provisions of Financial Accounting Standards Statement No. 13, "Accounting for
Leases," as amended. This Statement sets forth specific criteria for determining
whether a lease should be accounted for as an operating lease or a direct
financing lease. In general, the financing lease method applies where property
is under long-term lease to a creditworthy tenant and the present value of the
minimum required lease payments at the inception of a lease is at least 90% of
the market value of the property leased. Other leases are accounted for as
operating leases.
Federal Income Taxes
The Trust believes it qualifies and intends to continue to qualify as a real
estate investment trust under the Internal Revenue Code. The Trust has
distributed all of its taxable income for the fiscal years through 1994.
Accordingly, no provision has been made for Federal income taxes in the
accompanying consolidated financial statements.
Taxable income of the Trust prior to the dividends paid deduction for the years
ended October 31, 1994, 1993 and 1992 was approximately $2,200,000, $3,900,000
and $2,000,000, respectively. The difference between net income for financial
reporting purposes and taxable income results from, among other things,
different methods of accounting for leases, depreciable lives related to the
properties owned and accounting differences related to the Trust's investments
in joint ventures. At October 31, 1994, the Trust had available capital loss
carryovers of approximately $5,000,000 which expire in 1999.
Depreciation and Amortization
The Trust uses the straight-line method for depreciation and amortization.
Acquisition costs and general improvement costs are depreciated over the
estimated useful lives of the properties, which range from 30 to 45 years.
Furniture and equipment are depreciated over their estimated useful lives, which
range from 3 to 20 years. Tenant improvements, deferred leasing costs and
leasehold improvements are amortized over the life of the related leases. All
other deferred charges are amortized over the terms of the agreements to which
they relate.
Capitalization
The Trust capitalizes all direct costs relating to the acquisition of real
estate investments and costs relating to improvements to properties. The Trust
also capitalizes all direct costs relating to its successful leasing activities.
Income Recognition
Rental income is generally recognized based on the terms of leases entered into
with tenants. Rental income from leases with scheduled rent increases is
recognized on a straight-line basis over the lease term. Additional rents which
are provided for in leases, are recognized as income when earned and their
amounts can be reasonably estimated. Interest income is recognized as it is
earned. Gains on sales of properties are recorded when the criteria for
recognizing such gains under generally accepted accounting principles have been
met.
Statements of Cash Flows
The Trust considers short-term investments with maturities of 90 days or less to
be cash equivalents.
Allowance For Possible Investment Losses
The Trust's real estate investments are recorded at the lower of depreciated
historical cost or estimated net realizable values. The Trust periodically
reviews each of its investments for declines in net realizable values, to
amounts below recorded balances, based on its present investment strategies.
Future changes in such investment strategies and other circumstances may affect
estimates of net realizable values and therefore the carrying amount of
investments.
Net Income Per Common Share
Computations of net income per common share are based on the weighted average
number of common shares outstanding during the respective periods. The
additional shares issuable upon exercise of stock options (see Note 7) have not
been included in the computations since their effect is immaterial.
<PAGE>
(2) REAL ESTATE INVESTMENTS
The Trust's investments in real estate were composed of the following at October
31, 1994 and 1993 (in thousands):
<TABLE>
<CAPTION>
Mortgage
Properties Notes 1994 1993
Owned Receivable Totals Totals
<S> <C> <C> <C> <C>
Retail $ 80,819 $ 4,013 $ 84,832 $ 61,860
Office 22,947 3,750 26,697 27,862
Distribution and Service 15,361 -- 15,361 17,220
Undeveloped Land 1,504 -- 1,504 1,504
--------- ------- --------- --------
$120,631 $ 7,763 $ 128,394 $108,446
======== ======= ========= ========
</TABLE>
The Trust's investments at October 31, 1994, consisted of equity interests in 23
properties which are located in various regions throughout the United States and
mortgage notes. The following is a summary of the geographic locations of the
Trust's investments at October 31, 1994 and 1993 (in thousands):
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Northeast $66,963 $43,953
Southeast 22,464 23,225
Midwest 13,124 14,321
Rocky Mountain 11,887 11,954
Southwest 10,678 11,295
Pacific Coast 2,070 2,369
Pacific Northwest 1,208 1,329
-------- --------
$128,394 $108,446
</TABLE>
(3) PROPERTIES OWNED
Space at properties owned by the Trust is generally leased to various individual
tenants under short-and intermediate term leases which are accounted for as
operating leases. Certain properties have been leased on a long-term basis to a
single tenant; these leases are generally accounted for as direct financing
leases.
Prior to fiscal 1994, the Trust had a 92% joint venture interest in an office
building, which property was subject to a nonrecourse first mortgage loan with
an outstanding principal balance of $13,540,000. During fiscal 1993, the joint
venture elected not to make required debt service payments in an attempt to
renegotiate the mortgage loan with the lender. Subsequently, the lender refused
to renegotiate the terms of the mortgage loan and foreclosed on the property.
The Trust wrote down the carrying amount in this property to its estimated fair
value which approximated the related mortgage note payable balance at the time
of foreclosure. This write-down amounted to approximately $2.6 million and is
included in "Write-down in carrying value of investments" in the accompanying
1993 consolidated statements of income. The foreclosure of the property and the
satisfaction of the mortgage note payable represented a noncash financing
activity and therefore was not included in the accompanying 1993 consolidated
statement of cash flows.
In 1994, the Trust acquired two properties for an aggregate purchase price of
$25.8 million. The acquisitions were financed principally from available cash
and cash equivalents and a $15 million nonrecourse first mortgage loan.
At October 31, 1994 and 1993, properties owned consisted of the following (in
thousands):
<PAGE>
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Properties owned subject to operating leases $ 105,912 $ 83,089
Properties owned subject to direct financing leases 14,719 16,190
--------- ---------
$ 120,631 $ 99,279
========= =========
Operating Leases
The components of properties owned subject to operating leases were as follows
(in thousands):
1994 1993
Land $ 21,047 $ 16,085
Buildings and improvements 111,038 89,841
--------- ---------
132,085 105,926
Accumulated depreciation (26,173) (22,837)
$ 105,912 $ 83,089
========= =========
</TABLE>
Minimum rental payments on noncancellable operating leases become due as
follows: 1995 - $13,300,000; 1996 - $12,717,000; 1997 - $11,661,000; 1998 -
$10,414,000; 1999 - $9,369,000; and thereafter - $41,719,000.
In addition to minimum rental payments, certain tenants are required to pay
additional rental amounts based on increases in property operating expenses
and/or their share of the costs of maintaining common areas. Certain of the
Trust's leases provide for the payment of additional rent based on a percentage
of the tenant's revenues. Such additional rents are included in rental income
and aggregated approximately $515,000, $559,000, and $529,000 in 1994, 1993 and
1992, respectively.
Direct Financing Leases
The components of properties owned subject to direct financing leases were as
follows (in thousands):
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Total remaining minimum lease payments to be received $11,465 $14,328
Assumed residual values of leased property 6,675 6,675
Unearned income (3,421) (4,813)
------- -------
Investment in property subject to financing leases $14,719 $16,190
======= =======
Original cost of property subject to financing leases $26,737 $26,737
======= =======
</TABLE>
Assumed residual values are based upon a depreciated cost concept using
estimated useful lives and thus do not contain an element of appreciation which
may result by reason of inflation or other factors.
Minimum lease payments receivable on direct financing leases become due at a
rate of $2,810,000 in 1995, $2,454,000 in 1996, $1,734,000 in 1997, $1,468,000
in 1998, $1,468,000 in 1999, and $1,531,000 thereafter.
Annual rental payments of approximately $2.5 million are received from one
tenant which leases distribution space under direct financing lease
arrangements.
(4) INVESTMENTS IN AND LOANS TO UNCONSOLIDATED JOINT VENTURES
In 1993, the Trust sold its 50% interest in an unconsolidated joint venture to
its partner for proceeds of $250,000 and wrote-off an $800,000 loan to another
unconsolidated joint venture which loan became non-performing as to principal
and interest. In this connection, the Trust recorded charges of $5,685,000 to
reflect the Trust's investments in the unconsolidated joint ventures at their
net realizable values which charges are included in "Write-down in carrying
value of investments" in the accompanying 1993 consolidated statement of income.
(5) MORTGAGE NOTES RECEIVABLE
The Trust's portfolio of mortgage notes receivable consists of fixed rate
mortgages and one participating mortgage. The participating mortgage
($4,836,000) entitles the Trust to a fixed rate of interest plus a participation
in increases in the property's income and market value. In December, 1994, the
Trust sold the participating mortgage note receivable for net proceeds of
$3,750,000. In this connection the Trust recorded a charge of $1,086,000 to
reflect the Trust's investment in mortgage note receivable at its net realizable
value which charge is included in "Write-down in carrying value of investments"
in the accompanying consolidated statements of income. The components of the
mortgage notes receivable at October 31, 1994 and 1993 were as follows (in
thousands):
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Remaining principal balance $ 9,946 $10,066
less: Reserve for Uncollectible Mortgage Note Receivable (1,086) --
Unamortized discounts to reflect market interest rates at time of acceptance of
notes (1,097) (1,149)
------- -------
$ 7,763 $ 8,917
======= =======
</TABLE>
Principal payments on mortgage notes receivable become due as follows:
1995 - $132,000; 1996 - $144,000; 1997 - $158,000; 1998 - $172,000; 1999 -
$189,000; thereafter - $ 9,151,000.
At October 31, 1994, the remaining principal balance was due from four
borrowers. The amount due from the largest individual borrower at October 31,
1994 was $4,836,000.
The contractual interest rates on mortgage notes receivable range from 9% to
14%, and the weighted average interest rate of all such mortgages was 12% at
October 31, 1994 and 1993.
(6) MORTGAGE NOTES PAYABLE AND BANK LINE OF CREDIT
Mortgage notes payable consisted of the following at October 31, 1994 and 1993
(in thousands):
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
7 1/2% note with interest only due monthly, until 11/1/95; thereafter installments
of principal and interest of $120,840 due monthly until maturity in 1998. $ 15,000 $ --
7.56% note with principal installments of $12,500 plus interest due monthly until
maturity in 2001. 2,888 --
9 3/4% note with installments of principal and interest of $39,143 due monthly
until maturity in 2001. 4,497 --
8 1/4% note with installments of principal and interest of $4,731 due monthly until
maturity in 1998. 592 599
9 5/8% note with interest only due monthly; the principal is due at maturity
in 1997. 9,100 9,100
8 1/2% note with installments of principal and interest of $19,607 due monthly
until maturity in 1997. 2,506 2,528
9 3/4% note with interest only due monthly; the principal is due at maturity
in 1997. 6,000 6,000
Variable rate note with principal installments of $16,419 plus interest at prime minus
1/4% due monthly until maturity in 2000.(See below). 5,803 6,000
------- -------
$46,386 $24,227
</TABLE>
Mortgage notes payable are collateralized by various real estate investments
having a net carrying value of $73,481,000 as of October 31, 1994. All mortgage
notes payable are nonrecourse except the variable rate note for which the Trust
has guaranteed the repayment of $1.5 million of principal and all unpaid and
accrued interest thereon. In connection with the variable rate note, the Trust
has entered into an interest rate swap agreement in the notional amount of $6
million. Under the terms of the swap agreement, the Trust has agreed to pay
interest at an annual rate of 7.55% on the notional amount in exchange for
interest at prime minus 1/4% on the notional amount. This agreement which
matures in 2000, effectively fixes the interest rate at 7.55% for the term of
the note.
Scheduled principal payments during the next five years are as follows: 1995 -
$411,000; 1996 - $765,000; 1997 - $18,326,000; 1998 - $15,234,000; 1999 -
$394,000; and thereafter -- $11,256,000.
At October 31, 1994, the Trust had available $15 million in unsecured lines of
credit with two commercial banks and in December, 1994, increased one such line
of credit from $5 million to $7 million. The lines of credit expire at various
dates in fiscal 1995 and bear interest at rates tied to the prime rate or LIBOR.
The Trust pays fees of 1/4% per annum on the unused portions of the line of
credit commitments. In connection with one of the commitments, the Trust has
agreed to maintain certain deposit account balances with a bank. At October 31,
1994 the Trust had outstanding borrowings of $5,000,000 under the line of credit
agreements.
Interest paid for the years ended October 31, 1994, 1993 and 1992 was,
$3,775,000, $2,494,000 and $2,318,000 respectively.
(7) STOCK OPTIONS AND SHAREHOLDER RIGHTS PLAN
At October 31, 1994, 460,333 shares of the Trust's authorized but unissued stock
were reserved for issuance to key employees of the Trust and certain
non-employee trustees under the Trust's stock option plan. Options are granted
at fair market value on the date of the grant and are generally exercisable in
installments over a maximum period of four years from the date of grant. A
summary of stock options at October 31, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
Number Option Price
of Shares Per Share
<S> <C> <C>
Outstanding at October 31,
1994 331,082 $11.38-$27.00
1993 270,917 $11.38-$27.00
Exercisable at October 31, 1994 194,729 $11.38-$27.00
</TABLE>
No accounting recognition is given to stock options until they are exercised, at
which time the proceeds are credited to shareholders' equity. During the years
ended October 31, 1994 and 1993, options to purchase 3,542 common shares (none
in 1993) were exercised.
Stock appreciation rights may be issued in tandem with the stock options, in
which case, either the option or the right can be exercised. Such rights entitle
the grantee to payment in cash or a combination of common shares and cash equal
to the increase in the value of the shares covered by the option to which the
stock appreciation right is related. The plan limits the value of the stock
appreciation rights to 150% of the option price for the related shares. The
excess of the market price of the shares over the exercise price of vested
options is charged to expense. For the years ended October 31, 1994, l993 and
1992, there were no amounts charged to expense.
The Board of Trustees adopted a Preferred Share Purchase Rights Plan in 1988. In
this connection, the Board of Trustees declared a dividend distribution of one
preferred share purchase right for each outstanding common share. The rights,
which expire on November 13, 1998, are not currently exercisable. When they are
exercisable, the holder will be entitled to purchase from the Trust one
one-hundredth of a share of a newly-established Series A Participating Preferred
Stock at a price of $65 per one one-hundredth of a preferred share, subject to
certain adjustments. The rights will become exercisable 10 days after a person
or group either acquires 20% ("acquiring person") or more of the Trust's shares,
or announces an offer the consummation of which would result in such person or
group owning 30% or more of the shares. Following any such 20% acquisition,
shareholders other than the acquiring person will be entitled to use the rights
to purchase common shares of the Trust at 50% of market value.
If the Trust is involved in a merger or other business combination at any time
after the rights become exercisable, the rights will be modified to entitle a
holder other than the acquiring person to purchase a number of shares of common
stock of the acquiring company having a market value of twice the exercise price
of each right.
(8) SALES OF PROPERTIES
In fiscal 1994, the Trust sold an industrial property net leased to a single
tenant for a cash price of $450,000 resulting in a gain on sale of property of
$82,000.
In fiscal 1993, the Trust sold a retail property net leased to a single tenant
for a cash price of $3,250,000 resulting in a gain on sale of property of
$2,330,000.
<PAGE>
(9) COMMITMENTS, CONTINGENCY AND OTHER MATTERS
In November 1994, the Trust entered into a contract to purchase a 193,000 square
foot retail shopping center located in Danbury, Connecticut. The property was
acquired at a purchase price of $19,250,000, subject to a nonrecourse first
mortgage of $11,250,000. The mortgage loan will bear interest at 9.5% per annum
for a five-year term.
In November 1994, the Trust entered into a contract to sell four of its
distribution and service facilities to a single purchaser for an aggregate sales
price of approximately $13.5 million. The Trust also entered into a contract to
sell its 106,000 square foot retail property located in Manassas, Virginia at a
sale price of $7.5 million.
The Trust leases its executive office space under an agreement which expires in
1995. Annual base rents are subject to escalation as provided for in the lease.
Minimum annual rentals are $292,700 through the end of the lease. Rent expense
for the fiscal years ended October 31, 1994, 1993 and 1992 was $400,000,
$401,000, and $384,000, respectively.
A consulting fee was paid to a trustee (and former officer) pursuant to an
employment and consulting agreement between the trustee and the Trust which
agreement expired in November 1993. Certain trustees have elected to defer
payment of fees earned as trustees until their termination as a trustee or
revocation of their election. Deferred fees earn interest at rates set annually
by the Board of Trustees, currently 7.5% per annum.
(10) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The unaudited quarterly results of operations for the years ended October 31,
1994 and 1993 are as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
Year Ended October 31, 1994 Year Ended October 31, 1993
Quarter Ended Quarter Ended
Jan 31 Apr 30 July 31 Oct 31 Jan 31 Apr 30 July 31 Oct 31
------ ------ ------- ------ ------ ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 4,362 $ 4,885 $ 4,819 $ 4,903 $ 4,382 $ 4,441 $ 3,497 $3,841
======= ======= ======= ======== ======= ======== ======== ======
Income (loss) before gains
on sales of properties (1) $ 545 $ 571 $ 584 $ (438) $ 94 $(3,060) $(4,648) $ 322
Gains on sales of properties -- 82 -- -- -- 2,330 -- --
Net Income (loss) $ 545 $ 653 $ 584 $ (438) $ 94 $ (730) $(4,648) $ 322
======= ======= ======= ======== ======= ======== ======== ======
Per share:
Income (loss) before gains
on sales of properties $ .10 $ .10 $ .11 $ (.08) $ .02 $ (.58) $ (.88) $ .06
Gains on sales of properties -- .02 -- -- -- .44 -- --
------- ------- ------- ------ -------- -------- -------- ---------
Net Income (loss) $ .10 $ .12 $ .11 $ (.08) $ .02 $ (.14) $ (.88) $ .06
======= ======= ======= ======= ======== ======== ======== =======
<FN>
(1) Quarter ended October 31, 1994 results include a charge of $1,086,000 to
reflect the Trust's investment in a mortgage note receivable at its net
realizable value. The mortgage note was sold subsequent to year end.
</TABLE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of HRE Properties:
We have audited the accompanying consolidated balance sheets of HRE Properties
(the Trust), a Massachusetts voluntary association, and subsidiary as of October
31, 1994 and 1993, and the related consolidated statements of income, cash flows
and shareholders' equity for each of the three years in the period ended October
31, 1994. These financial statements and the schedules referred to below are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and schedules 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 HRE Properties and subsidiary
as of October 31, 1994 and 1993, and the results of their operations and their
cash flows for each of the three years in the period ended October 31, 1994 in
conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in the accompanying
index to financial statements are presented for purposes of complying with the
Securities and Exchange Commission's rules and are not part of the basic
financial statements. These schedules have been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly state in all material respects the financial data required to be
set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
New York, New York
December 14, 1994
<PAGE>
SCHEDULE II -- AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
<TABLE>
<CAPTION>
HRE PROPERTIES
Three Years Ended October 31, 1994
(In thousands)
- ---------------------------------------------------------------------------------------------------------------------------------
- -
Col.A Col.B Col.C Col.D Col.E
- ---------------------------------------------------------------------------------------------------------------------------------
Balance at
Balance at DEDUCTIONS End of Period (c)
Beginning of Amounts Amounts Not
Name of Debtor Period Additions Collected Written off Current Current
- -------------- ------- --------- --------- ----------- -------- -------
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Year Ended October 31, 1992:
Stephen C. Hagen (a) (b) $156 $0 $0 $0 $156 $0
==== == == == ==== ==
Year Ended October 31, 1993:
Stephen C. Hagen (a) (b) $156 $0 $156 $0 $0 $0
==== == ==== == == ==
Year Ended October 31, 1994: $0 $0 $0 $0 $0 $0
- ---------------------------- == == == == == ==
</TABLE>
NOTES:
(a) The amounts receivable are notes that bear interest at a rate equal to the
base rate of the First National Bank of Boston. The interest rate is adjusted
quarterly. Interest is payable each March 31 and September 30.
(b) The notes, as amended in 1990, were nonrecourse, were due in December, 1992
and were secured by an aggregate of 8,250 shares of the Trust's common shares,
issued under the Trust's stock option plan. In December 1992, pursuant to an
arrangement with Mr. Hagen, the notes were cancelled in consideration for the
transfer of such 8,250 common shares to the Trust.
(c) Amounts receivable at end of periods have been deducted from shareholders'
equity in the Trust's consolidated balance sheets.
<PAGE>
HRE PROPERTIES
OCTOBER 31, 1994
SCHEDULE IX - SHORT TERM BORROWINGS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL.D COL. E COL. F
- --------------------------------------------------------------------------------------------------------------------
Maximum Average Weighted
Balance Weighted Amount Amount Average
Category of Aggregate at End of Average Outstanding Outstanding Interest Rate
Short Term Borrowings Period Interest Rate During Period During Period (2) During Period (3)
<S> <C> <C> <C> <C> <C>
Year Ended October 31,1992 $0 ---- $0 $0 ----
Year Ended October 31,1993:
Bank Loan (1) $0 7.00% $2,500,000 $105,200 7.00%
Year Ended October 31,1994:
Bank Loan (1) $5,000,000 6.98% $5,000,000 $4,315,000 6.81%
<FN>
(1) Bank Loan represent borrowings under line of credit borrowing arrangement that matures in fiscal 1995 and is
reviewed annually for renewal .
(2) The average amount outstanding during the period was computed by dividing the total daily
outstanding principal balance by 365.
(3) The weighted average interest rate during the period was computed by dividing the actual interest expense by
the average amount outstanding.
</TABLE>
<PAGE>
SCHEDULE X-SUPPLEMENTARY INCOME STATEMENT INFORMATION
HRE PROPERTIES
Three Years Ended October 31, 1994
(In thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
COL. A COL. B
- -----------------------------------------------------------------------------------------------------
Item Charged to
Costs and Expenses
- -----------------------------------------------------------------------------------------------------
Year Ended October, 31
1994 1993 1992
------ ------- ------
<C> <C> <C> <C>
1. Maintenance and repairs $ 785 $ 619 $ 470
2. Amortization of deferred charges $ 545 $ 866 $ 725
3. Real estate taxes $1,960 $1,735 $1,636
4. Royalties None None None
5. Advertising costs (a) (a) (a)
- -------------------------------------
<FN>
(a) Amounts for advertising are not presented as such amounts are less than 1% of total revenues.
</TABLE>
<PAGE>
HRE PROPERTIES
OCTOBER 31, 1994
SCHEDULE XI- REAL ESTATE AND ACCUMULATED DEPRECIATION
- -------------------------------------------------------------------------------
(In thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- --------------------------------------------------------------------------------------------------------------------------------
Life on which
depreciation
Cost Capitalized Subsequent Amount at Which Carried
Initial Cost to Trust to Acquisition at Close of Period
------------------------ -------------------------- ---------------------------
Building & Carrying Building & Building &
Description and Location Encumbrances Land Improvements Costs Improvements Land Improvements
- ---------------------------- -------------------------------------- -------------------------- -----------------------------
REAL ESTATE SUBJECT TO OPERATING
LEASES (Note (a) ):
- -------------------------------------------------------
OFFICE BUILDINGS:
<S> <C> <C> <C> <C> <C> <C> <C>
Denver, Colorado $0 $1,155 $10,257 $0 $1,257 $1,155 $11,514
Houston, Texas 0 900 2,758 0 2,158 900 4,916
Greenwich, Connecticut 592 199 795 0 0 199 795
Greenwich, Connecticut 0 111 444 0 0 111 444
Southfield, Michigan 0 1,000 10,280 0 675 1,000 10,955
--------- ------- ------- ------- ------- --------- ---------
592 3,365 24,534 0 4,090 3,365 28,624
--------- ------- ------- ------- ------- --------- ---------
SHOPPING CENTERS:
Clearwater, Florida 5,803 3,689 17,273 0 2,753 3,689 20,026
Springfield, Massachusetts 0 1,372 3,656 0 7,380 1,372 11,036
Farmingdale, New York 2888 1,029 4,176 0 39 1,029 4,215
Somers, New York 2,506 821 2,600 0 30 821 2,630
Wayne, New Jersey 9,100 2,492 9,966 0 93 2,492 10,059
Meriden, Connecticut 15,000 5,000 20,309 0 0 5,000 20,309
--------- ------- ------- ------- ------- --------- ---------
35,297 14,403 57,980 0 10,295 14,403 68,275
--------- ------- ------- ------- ------- --------- ---------
DEPARTMENT STORES:
Tempe, Arizona 0 378 1,518 0 970 378 2,488
Mesa, Arizona 0 440 1,631 0 989 440 2,620
Manassas, Virginia 0 283 1,723 0 42 283 1,765
--------- ------- ------- ------- ------- --------- ---------
0 1,101 4,872 0 2,001 1,101 6,873
--------- ------- ------- ------- ------- --------- ---------
</TABLE>
<PAGE>
====================
TABLE CONTINUED
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------- --------------------------- -----------------
COL. A COL. E COL. F COL. G/H COL. I
- ----------------------------------------------------------------------- --------------------------- -----------------
Life on which
depreciation
Amount at Which Carried for buildings
at Close of Period and improvements
---------- Accumulated Date in latest income
Depreciation Constructed statements is
Description and Location Total (Note (b)) or Acquired computed (Note (d))
- ------------------------------------------------------- -------------------------------------------------------------
REAL ESTATE SUBJECT TO OPERATING
LEASES (Note (a) ):
- -------------------------------------------------------
<S> <C> <C> <C> <C>
OFFICE BUILDINGS:
Denver, Colorado $12,669 $2,977 1983 45
Houston, Texas 5,816 2,565 1975 40
Greenwich, Connecticut 555 8 1994 31.5
Southfield, Michigan 11,955 3,470 1983 35
------- -------
31,989 9,043
------- -------
SHOPPING CENTERS:
Clearwater, Florida 23,715 5,204 1985 40
Springfield, Massachusetts 12,408 4,533 1970 40
Farmingdale, New York 5,244 147 1993 31.5
Somers, New York 3,451 176 1992 31.5
Wayne, New Jersey 12,551 515 1992 31.5
Meriden, Connecticut 25,309 555 1993 31.5
------- -------
82,678 11,130
------- -------
DEPARTMENT STORES:
Tempe, Arizona 2,866 1,252 1970 40
Mesa, Arizona 3,060 1,316 1971 40
Manassas, Virginia 2,048 1,150 1972 40
------- -------
7,974 3,718
------- -------
</TABLE>
<PAGE>
HRE PROPERTIES
OCTOBER 31, 1994
SCHEDULE XI- REAL ESTATE AND ACCUMULATED DEPRECIATION
- -------------------------------------------------------------------------------
(In thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D
- ---------------------------------------------------------------------------------------------------------------------------------
Cost Capitalized Subsequent
Initial Cost to Trust to Acquisition
------------------------ --------------------------
Building & Carrying Building &
Description and Location Encumbrances Land Improvements Costs Improvements
---------------------------------------------------------------------------------------
REAL ESTATE SUBJECT TO OPERATING
LEASES (Note (a) ):
- -------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INDUSTRIAL SERVICE CENTER:
Syracuse, New York $0 $253 $530 $0 $0
--------- ------- ------- ------- --------
0 253 530 0 0
--------- ------- ------- ------- --------
MIXED USE FACILITY: RETAIL/OFFICE:
Newington, New Hampshire 4,497 421 1,997 0 4,739
--------- ------- ------- ------- -------
LAND:
Newington, New Hampshire 0 305 0 0 0
Denver, Colorado 0 1,199 0 0 0
--------- ------- ------- ------- -------
0 1,504 0 0 0
--------- ------- ------- ------- -------
TOTAL REAL ESTATE SUBJECT TO --------- ------- ------- ------- -------
OPERATING LEASES.................. $40,386 $21,047 $89,913 $0 $21,125
--------- ------- ------- ------- -------
</TABLE>
<PAGE>
====================
TABLE CONTINUED
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
COL. A COL. E COL. F COL. G/H COL. I
- ----------------------------------------------------------------------------------------------------------------------------------
Life on which
depreciation
Amount at Which Carried for buildings
at Close of Period and improvements
---------------------------------------- Accumulated Date in latest income
Building & Depreciation Constructed statements is or
Description and Location Land Improvements Total (Note (b)) Acquired computed (Note (d))
- ----------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE SUBJECT TO OPERATING
LEASES (Note (a) ):
- --------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INDUSTRIAL SERVICE CENTER:
Syracuse, New York $253 $530 $783 $141 1973/1985 40
--------- --------- ------- --------
253 530 783 141
--------- --------- ------- --------
MIXED USE FACILITY: RETAIL/OFFICE:
Newington, New Hampshire 421 6,736 7,157 2,141 1979 40
--------- --------- ------- --------
LAND:
Newington, New Hampshire 305 0 305 0 1981 -
Denver, Colorado 1,199 0 1,199 0 1988 -
--------- --------- --------- --------- ------- --------
1,504 0 1,504 0
--------- --------- --------- ---------
TOTAL REAL ESTATE SUBJECT TO --------- --------- ------- ---------
OPERATING LEASES.................. $21,047 $111,038 $132,085 $26,173
--------- --------- ------- ---------
</TABLE>
<PAGE>
HRE PROPERTIES
OCTOBER 31, 1994
SCHEDULE XI- REAL ESTATE AND ACCUMULATED DEPRECIATION
- -------------------------------------------------------------------------------
(In thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D
- -------------------------------------------------------------------------------------------------------------------------------
Cost Capitalized Subsequent
Initial Cost to Trust to Acquisition
-------------------------------------- --------------------------
Building & Carrying Building &
Description and Location Encumbrances Land Improvements Costs Improvements
- ------------------------------------------------------- ----------- ----------- ------------- -------------------------
REAL ESTATE SUBJECT TO FINANCING
LEASES (Notes (c) and (e)):
- -------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INDUSTRIAL DISTRIBUTION CENTERS:
(Leased to Chrysler Corporation)
Orlando, Florida $0 $717 $2,206 $0 $0
St. Louis, Missouri 0 523 2,253 0 2,363
Memphis, Tennessee 0 265 2,426 0 0
Dallas, Texas 6,000 193 2,266 0 4,195
Denver, Colorado 0 174 1,783 0 0
Beaverton, Oregon 0 168 2,263 0 0
Deferred Lease Renewal Rights 0 0 0 0 764
--------- ------- ------- ------- --------
6,000 2,040 13,197 0 7,322
--------- ------- ------- ------- --------
INDUSTRIAL DISTRIBUTION CENTER:
(Leased to Firestone Tire and
Rubber Company):
Albany, Georgia 0 835 3,343 0 0
--------- ------- ------- ------- ---------
TOTAL REAL ESTATE SUBJECT TO --------- ------- ------- ------- ---------
FINANCING LEASES.................. $6,000 $2,875 $16,540 $0 $7,322
--------- ------- ------- ------- ---------
</TABLE>
<PAGE>
=============================
TABLE CONTINUED
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
COL. A COL. E
- ------------------------------------------------------------------------------------------------
Amount at Which Carried
at Close of Period
----------------------------------------Net Investment
Remaining in Properties Date
Minimum Lease Residual Unearned Subject to Constructed
Description and Location Payments Value Income Financing Lease or Acquired
- ------------------------------------------------------- ------------- ------------- ----------- ----------- --------------
REAL ESTATE SUBJECT TO FINANCING
LEASES (Notes (c) and (e)):
- -------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INDUSTRIAL DISTRIBUTION CENTERS:
(Leased to Chrysler Corporation)
Orlando, Florida $589 $1,348 ($275) $1,662 1970
St. Louis, Missouri 2,641 1,166 (791) 3,016 1970
Memphis, Tennessee 636 959 (250) 1,345 1970
Dallas, Texas 4,076 841 (1,094) 3,823 1970
Denver, Colorado 412 683 (160) 935 1970
Beaverton, Oregon 511 814 (191) 1,134 1970
Deferred Lease Renewal Rights 0 764 0 764 1981
--------- --------- ------- --------
8,865 6,575 (2,761) 12,679
--------- --------- ------- --------
INDUSTRIAL DISTRIBUTION CENTER:
(Leased to Firestone Tire and
Rubber Company):
Albany, Georgia 2,600 100 (660) 2,040 1972
--------- --------- ------- --------
TOTAL REAL ESTATE SUBJECT TO --------- --------- ------- --------
FINANCING LEASES.................. $11,465 $6,675 ($3,421) $14,719
--------- --------- ------- --------
</TABLE>
<PAGE>
HRE PROPERTIES
OCTOBER 31, 1994
SCHEDULE XI- REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
- -------------------------------------------------------------------------------
(In thousands)
<TABLE>
<CAPTION>
NOTES: 1994 1993 1992
--------- --------- --------
(a) RECONCILIATION OF PROPERTIES OWNED SUBJECT TO OPERATING (In thousands)
LEASES
<S> <C> <C> <C>
Balance at beginning of year $105,926 $124,404 $108,168
Property improvements during the year 907 1,091 1,210
Property acquired during the year 25,816 6,197 15,881
Property sold or disposed of during the year (564) (25,766) (855)
--------- ---------------------
Balance at end of year $132,085 $105,926 $124,404
========= =====================
(b) RECONCILIATION OF ACCUMULATED DEPRECIATION
Balance at beginning of year $22,837 $27,985 $25,170
Provision during the year charged to income 3,531 3,497 3,670
Property sold or disposed of during the year (195) (8,645) (855)
--------- ---------------------
Balance at end of year $26,173 $22,837 $27,985
========= =====================
(c) RECONCILIATION OF PROPERTIES OWNED SUBJECT TO
FINANCING LEASES-
Balance at beginning of year $16,190 $17,532 $18,757
Recovery of investment in property owned subject to
financing leases (1,471) (1,342) (1,225)
--------- --------- --------
Balance at end of year $14,719 $16,190 $17,532
========= ========= ========
<FN>
(d) Tenant improvement costs are depreciated over the life of
the related leases, which range from 3 to 25 years.
(e) The difference between the "Initial Costs to the Trust"
and "Costs Capitalized Subsequent to Acquisition" and the "Amount
at Which Carried at Close of Period" represents accumulated
depreciation for the period prior to classification of these
assets as financing leases and accumulated recoveries for
the period thereafter.
</TABLE>
<PAGE>
HRE PROPERTIES
OCTOBER 31, 1994
SCHEDULE XII- MORTGAGE LOANS ON REAL ESTATE
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL.D COL. E COL. F
- ----------------------------------------------------------------------------------------------------------------------------
Face Amount Carrying Amount
of Mortgages of Mortgages
Interest Rate Final Maturit Periodic (Note (b) ) (Note (a) )
Description Coupon Effective Date Payment Terms (In Thousands) (In Thousands)
- ----------------------------------------------------------------------------------------------------------------------------
I. FIRST MORTGAGE LOANS ON BUSINESS PROPERTIES (NOTE (c) and (d):
<S> <C> <C> <C> <C> <C>
Department Store:
Clayton County, Georgia 9% 9% 10-30-1999 Principal payable $143 $143
In full at maturity.
Retail Store: Interest paid currently.
Fall River, Massachusetts 9% 14% 04-01-2013 Payable in monthly 1,285 943
installments of $11,920.
Retail Store:
Erie, Pennsylvania 9% 14% 07-01-2013 Payable in monthly 1,172 857
installments of $10,787.
Retail Store:
Riverside, California 9% 12% 01-15-2013 Payable in quarterly 2,110 1,702
installments of $54,313.
Office Building:
Syracuse, New York 10.5% 10.5% 04-01-2010 Principal payable 4,836 3,750 (f)
In full at maturity.
Interest is payable
monthly at 8%; an
additional 2.5% is due
monthly under certain
circumstances.
------------- ---------------
Tot First Mortgage Loans 9,546 7,395
------------- ---------------
II. SECOND MORTGAGE LOAN ON BUSINESS PROPERTY (Notes (c) and (e) ):
Retail Store:
Riverside, California 9% 12% 01-15-2001 Payable in quarterly
installments of $21, 400 368
------------- ---------------
TOTAL MORTGAGE LOANS ON REAL ESTATE $9,946 $7,763
============= ===============
</TABLE>
<PAGE>
SCHEDULE XII- MORTGAGE LOANS ON REAL ESTATE (continued)
NOTES TO SCHEDULE XII
<TABLE>
<CAPTION>
Year Ended October 31,
Reconciliation of Mortgage Loans on Real Estate ----------------------------------------------
1994 1993 1992
---------- ---------- -------------
<S> <C> <C> <C>
(a) Balance at beginning of period: $8,917 $8,978 $9,031
Deductions during current period:
Collections of principal and
amortization of discounts (68) (61) (53)
Reserve for Uncollectible Amount (1,086) ---- ----
-------- -------- --------
Balance at close of period: $7,763 $8,917 $8,978
======== ======== ========
<FN>
(b) The aggregate cost basis for Federal income tax purposes is equal to the face amount of the mortgages.
(c) At October 31,1994 no mortgage loans were delinquent in payment of currently due principal or interest.
(d) There are no prior liens for any of the First Mortgage Loans on Real Estate.
(e) The First Mortgage Loan on this property is held by the Trust.
(f) This Mortgage loan was sold in December 1994 at its carrying amount.
</TABLE>
<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.
HRE PROPERTIES
By: /S/ CHARLES J. URSTADT
--------------------------
Charles J. Urstadt
Chairman and President
Dated: January 26, 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 date indicated.
<TABLE>
<S> <C>
/s/ CHARLES J. URSTADT January 26, 1995
- --------------------------------------
Charles J. Urstadt
President and Trustee
(Principal Executive Officer)
/s/ JAMES R. MOORE January 26, 1995
- --------------------------------------
James R. Moore
Senior Vice President - Chief
Financial Officer
(Principal Financial Officer
and Principal Accounting Officer)
/s/ E. VIRGIL CONWAY January 26, 1995
- --------------------------------------
E. Virgil Conway
Trustee
/s/ ROBERT R. DOUGLASS January 26, 1995
- --------------------------------------
Robert R. Douglass
Trustee
/s/ PETER HERRICK January 26, 1995
- --------------------------------------
Peter Herrick
Trustee
/s/ GEORGE H. C. LAWRENCE January 26, 1995
- --------------------------------------
George H. C. Lawrence
Trustee
/s/ PAUL D. PAGANUCCI January 26, 1995
- ---------------------------------------
Paul D. Paganucci
Trustee
/s/ JAMES O. YORK January 26, 1995
- ---------------------------------------
James O. York
Trustee
</TABLE>
<PAGE>
INDEX TO EXHIBITS
Exhibit
(3) Articles of Incorporation and By-laws.
3.1 Fourth Amended and Restated Declaration of Trust of the Trust,
as amended, to date.
3.2 By-laws of the Trust, as amended (incorporated by reference to
Exhibit 4.2 of the Registrant's Registration Statement on Form
S-8 (No. 33-41408)).
(4) Instruments Defining the Rights of
Security Holders, Including Indentures:
4.1 Common Shares: See Exhibit 3.1 hereto.
4.2 Preferred Shares: See Exhibit 3.1 hereto.
4.3 Preferred Share Purchase Rights: See Exhibits 3.1 and 10.3
hereto.
(10) Material Contracts.
10.1 Form of Indemnification Agreement entered into between
the Registrant and each of its Trustees and for future
use with Trustees and officers of the Trust
(incorporated herein by reference to Exhibit 10.1 of
the Registrant's Annual Report on Form 10-K for the
year ended October 31, 1989).*
10.2 Amended and Restated Change of Control Agreement
between the Registrant and James R. Moore dated
November 15, 1990 (incorporated herein by reference to
Exhibit 10.3 of the Registrant's Annual Report on Form
10-K for the year ended October 31, 1990).*
10.3 Rights Agreement between the Trust and The First
National Bank of Boston, as Rights Agent, dated as of
October 28, 1988 (incorporated herein by reference to
Exhibit 1 of the Registrant's Current Report on Form
8-K dated October 28, 1988).
10.4 Change of Control Agreement dated as of June 12, 1990
between the Registrant and Raymond P. Argila
(incorporated herein by reference to Exhibit 10.7 of
the Registrant's Annual Report on Form 10-K for the
year ended October 31, 1990).*
10.4.1 Agreement dated December 19, 1991 between the
Registrant and Raymond P. Argila amending the Change of
Control Agreement dated as of June 12, 1990 between the
Registrant and Raymond P. Argila (incorporated herein
by reference to Exhibit 10.6.1 of the Registrant's
Annual Report on Form 10-K for the year ended October
31, 1991).*
10.5 Change of Control Agreement dated as of December 20,
1990 between the Registrant and Charles J. Urstadt
(incorporated herein by reference to Exhibit 10.8 of
the Registrant's Annual Report on Form 10-K for the
year ended October 31, 1990).*
<PAGE>
10.6 Amended and Restated HRE Properties Stock Option Plan
(incorporated herein by reference to Exhibit 10.8 of
the Registrant's Annual Report on Form 10-K for the
year ended October 31, 1991).*
10.6.1 Amendments to HRE Properties Stock Option Plan dated
June 9, 1993.*
10.7 Purchase and Sale Agreement between the Registrant and
Aetna Life Insurance Company dated December 22, 1993,
relating to the Registrant's acquisition of Townline
Center Shopping Center, Meriden, Connecticut.
10.8 Second Purchase and Sale Agreement dated January 6,
1995 between the Registrant and Aetna Life Insurance
Company relating to the Registrant's acquisition of
Danbury Square Mall, Danbury, Connecticut (incorporated
herein by reference to Exhibit 1 of the Registrant's
Current Report on Form 8-K dated January 6, 1995).
(21) Subsidiaries.
21.1 List of Trust's subsidiaries (incorporated by reference
to Exhibit 22.1 of the Registrant's Annual Report on
Form 10-K for the year ended October 31, 1988).
(23) Consents of Experts and Counsel.
23.1 The consent of Arthur Andersen LLP to the incorporation
by reference of their reports included or incorporated
by reference herein and in the Registrant's
Registration Statements on Form S-3 (No. 33-57119),
Form S-8 (No.2-93146) and Form S-8 (No. 33- 41408) is
filed herewith as part of this report.
(27) Financial Data Schedule.
27.1 Financial Data Schedule
*Management contract, compensatory plan or arrangement required to be filed as
an exhibit to this Annual Report on Form 10-K pursuant to Item 14(c).
<PAGE>
Hubbard Real Estate Investments
Fourth Amended and Restated
Declaration of Trust
Dated April 9, 1974
(Amending and Restating the Declaration of Trust dated July 7, 1969,
as Amended and Restated as of July 29, 1969, October 2, 1969 and
October 31, 1969 and as further amended as of March 30, 1971)
<PAGE>
HUBBARD REAL ESTATE INVESTMENTS
Index to Fourth Amended and Restated Declaration of Trust
<TABLE>
<CAPTION>
PAGE(S)
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<S> <C> <C>
PREAMBLE
ARTICLE 1--Name, etc.
SECTION 1.1. Name 2
SECTION 1.2. Title to Property 2
SECTION 1.3. Trust Only 2
SECTION 1.4. Location of Offices 2
ARTICLE 2--Trustees and Officers.
SECTION 2.1. Number of Trustees 2
SECTION 2.2 Term of Office; Election and Qualification 3
SECTION 2.3. Resignation and Removal 3
SECTION 2.4. Vacancies 3
SECTION 2.5. Officers and Agents 3
SECTION 2.6. By-Laws 4
SECTION 2.7. Meetings of Trustees; Action by Trustees 4
SECTION 2.8. Notice of Meeting; Waiver of Notice 4
SECTION 2.9. Quorum; Action by Trustees at Meetings 4
SECTION 2.10. Action by Unanimous Written Consent 4
SECTION 2.11. Delegation of Powers of One or More Trustees; Execution of Instruments 5
SECTION 2.12. Committees 5
SECTION 2.13. Reports 5
SECTION 2.14. Board of Consultants 5
SECTION 2.15. Ownership by Trustees, etc. of Securities of the Trust 5
ARTICLE 3--Powers of the Trustees.
SECTION 3.1. Absolute and Exclusive Power 6
SECTION 3.2. Investments, etc. 6
SECTION 3.3. Powers With Respect to Real Property 6
SECTION 3.4. Powers With Respect to Other Property 7
SECTION 3.5. Title to Trust Property 7
SECTION 3.6. Borrowings 7
SECTION 3.7. Issuance of Securities of the Trust 7
SECTION 3.8. Exercise Powers of Ownership, etc. 8
SECTION 3.9. Delegation of Powers 8
SECTION 3.10. Miscellaneous Administrative Powers 8
SECTION 3.11. Payment of Debts and Expenses; Power to Employ or Contract 8
SECTION 3.12. Endorsements and Guaranties, etc. 9
SECTION 3.13. Depositaries 9
SECTION 3.14. Discretion in Classification and in Accounting Treatment 9
SECTION 3.15. Valuation, etc. 9
SECTION 3.16. Fiscal Year and Method of Accounting 9
SECTION 3.17. Dividends 9
SECTION 3.18. Payment of Taxes, etc. 9
SECTION 3.19. Seal 9
SECTION 3.20. Conditions of Being FHA Approved Mortgagee 10
SECTION 3.21. Loans 10
SECTION 3.22. Insurance 10
SECTION 3.23. Transactions with Trustees, etc. 10
SECTION 3.24. Acting as Principal or Agent; Participations with Others 11
SECTION 3.25. Charitable Contributions 11
SECTION 3.26. Indemnification 11
SECTION 3.27. Powers not Enumerated, etc. 11
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE(S)
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<S> <C> <C>
ARTICLE 4--Investment Policy.
SECTION 4.1. Definitions 11
SECTION 4.2. Ownership of Income Producing Real Property 13
SECTION 4.3. Financing in Connection with Expected Ownership of Real Property 13
SECTION 4.4. Additional Investments 13
SECTION 4.5. Interim Use of Proceeds 14
SECTION 4.6. Prohibited Investments and Activities 14
SECTION 4.7. Combination of Permitted Investments 15
SECTION 4.8. Exercise of Powers under Article 3 15
SECTION 4.9. Obligor's Default 15
SECTION 4.10. Specifically Permitted Investments 15
ARTICLE 5--Limitations of Liability
of Shareholders, Trustees and Others.
SECTION 5.1. No Personal Liability of Shareholders, Trustees, etc. . 15
SECTION 5.2. Non-Liability of Trustees, etc. 16
SECTION 5.3. Mandatory Indemnification 16
SECTION 5.4. No Bond Required of Trustees 16
SECTION 5.5. No Duty of Investigation; Notice in Trust Instruments, etc. 16
SECTION 5.6. Reliance on Experts, etc. 17
ARTICLE 6--Shares of Beneficial
Interest.
SECTION 6.1. Description of Shares 17
SECTION 6.2. Common Shares 17
SECTION 6.3. Preferred Shares 17
SECTION 6.4. Trust Only 19
SECTION 6.5. Share Certificates 19
SECTION 6.6. Issuance of Shares 19
SECTION 6.7. Register of Shares 20
SECTION 6.8. Transfer Agent and Registrar 20
SECTION 6.9. Transfer of Shares 20
SECTION 6.10. Shareholders of Record by Operation of Law 20
SECTION 6.11. Joint Ownership 21
SECTION 6.12. No Obligation with Respect to Other Instruments 21
SECTION 6.13. Loss, etc. of Certificate 21
SECTION 6.14. Distributions to Shareholders 21
SECTION 6.15. Statement of Source of Funds 21
SECTION 6.16. Notices 22
SECTION 6.17. Purchase of Shares by the Trust; Treasury Shares 22
SECTION 6.18. Purchase, etc. of Shares by Trustees 22
SECTION 6.19. Redemption of Shares; Disclosure of Holding 22
SECTION 6.20. Warrants 22
SECTION 6.21. Issuance of Units 23
SECTION 6.22. Limitation of Pre-emptive Rights 23
SECTION 6.23. Dividend Investment Plan 23
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE(S)
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<S> <C> <C>
ARTICLE 7--Shareholders.
SECTION 7.1. Ownership of Trust Property 23
SECTION 7.2. Shares Deemed Personal Property 24
SECTION 7.3. Meetings 24
SECTION 7.4. Notice of Meeting 24
SECTION 7.5. Quorum 24
SECTION 7.6. Type of Shareholder Action Binding on Trustees 24
SECTION 7.7. Fixing Date For Determination of Shareholders of Record 25
SECTION 7.8. Proxies; Voting 25
SECTION 7.9. Shareholder Action By Unanimous Written Consent 25
SECTION 7.10. Inspection of Records 25
ARTICLE 8--Adviser.
SECTION 8.1. Adviser 25
SECTION 8.2. Advisory Contract 26
SECTION 8.3. Relationship With Trustees 26
SECTION 8.4. Other Activities of the Adviser 26
SECTION 8.5. Increase of Adviser's Fee 27
ARTICLE 9--Compliance with
Provisions of Internal Revenue
Code.
SECTION 9.1. Compliance With Provisions of Internal Revenue Code 27
ARTICLE 10--Amendment or
Termination of Trust.
SECTION 10.1. Amendments or Termination 27
SECTION 10.2. Termination or Amendment by Trustees Prior to First Offering 27
SECTION 10.3. Powers of Trustees Upon Termination 27
SECTION 10.4. Power to Effect Reorganization 28
SECTION 10.5. Limitation on Shareholder Rights 28
SECTION 10.6. Class Voting Rights of Preferred Shares 29
ARTICLE 11--Miscellaneous.
SECTION 11.1. Governing Law; Filing 29
SECTION 11.2. Counterparts 30
SECTION 11.3. Conclusive Evidence 30
SECTION 11.4. Construction of Terms Used 30
ARTICLE 12--Duration of Trust.
</TABLE>
<PAGE>
INDEX TO DEFINITIONS
SECTION
-----------
"Adviser" ....................................... 8.1.
"Annual Meeting" ................................ 7.3.
"Annual Report" ................................. 2.13.
"Appraisal" ..................................... 4.1.
"Board of Consultants" .......................... 2.14.
"Common Shares" ................................. 6.1.
"Construction Loans" ............................ 4.1.
"Conventional Loans" ............................ 4.1.
"Declaration of Trust" .......................... Preamble
"Development Loans" ............................. 4.1.
"Executive Committee" ........................... 2.12.
"FHA" ........................................... 4.1.
"FHA Loans" ..................................... 4.1.
"First Mortgage" ................................ 4.1.
"First Mortgage Loans" .......................... 4.1.
"Hubbard Real Estate Investments" ............... 1.1.
"Independent Contractor" ........................ 3.23.
"Individual" .................................... 6.19.
"Internal Revenue Code" ......................... Preamble
"Junior Mortgage" ............................... 4.1.
"Junior Mortgage Loans" ......................... 4.1.
"Majority of Trustees" .......................... 2.1.
"Mortgage Loans" ................................ 4.1.
"Mortgages" ..................................... 4.1.
"Ownership" ..................................... 6.19.
"Person" ........................................ 3.1.
"Preferred Shares" .............................. 6.1.
"President" ..................................... 2.5.
"Real Estate Investment Trust" .................. Preamble
"Real Property" ................................. 4.1.
"REIT Provisions of the Internal Revenue Code" . Preamble
"Secretary" ..................................... 2.5.
"Securities" .................................... 4.1.
"Securities of the Trust" ....................... 4.1.
"Shareholders" .................................. 6.1.
"Shares" ........................................ 6.1.
"Special Meeting" ............................... 7.3.
"Total Assets of the Trust Estate" .............. 4.1.
"Treasurer" ..................................... 2.15.
"Trust" ......................................... 1.1.
"Trustee" ....................................... 2.1.
"Trust Estate" .................................. 4.1.
"Trust Property" ................................ 4.1.
"Two-Thirds of Trustees" ........................ 2.1.
"VA" ............................................ 4.1.
"VA Loans" ...................................... 4.1.
"Warrants" ...................................... 6.20.
<PAGE>
FOURTH AMENDED AND RESTATED
DECLARATION OF TRUST
--------------------
HUBBARD REAL ESTATE INVESTMENTS
--------------------
The undersigned, a Trustee of Hubbard Real Estate Investments (the "Trust"),
hereby certifies pursuant to Section 11.3 of the Third Amended and Restated
Declaration of Trust, as amended by the Amendment dated March 30, 1971, that at
a meeting of shareholders of the Trust duly called and held on April 9, 1974 in
accordance with such Third Amended and Restated Declaration of Trust, as so
amended, at which a quorum of shareholders was present and voting throughout,
the holders of not less than two-thirds of the outstanding shares of beneficial
interest of the Trust vote that such Third Amended and Restated Declaration of
Trust, as theretofore amended, be amended in certain respects and authorized the
filing with Secretary of The Commonwealth of Massachusetts of a Fourth Amended
and Restated Declaration of Trust restating in a single instrument such Third
Amended and Restated Declaration of Trust as theretofore amended and as amended
at such meeting, and (ii) further certifies that the present Trustees of the
Trust, at a meeting duly called and held on April 9, 1974, at which a quorum was
present and voting throughout, by vote of majority of the Trustees present, duly
authorized the filing of this instrument with the Secretary of The Commonwealth
of Massachusetts restating such Third Amended and Restated Declaration of Trust,
as so amended, in its entirety to read as follows:
THIS FOURTH AMENDED AND RESTATED DECLARATION OF TRUST made this 9th day of
April, 1974.
This instrument amends and restates the Declaration of Trust made as of July
7, 1969, by the Trustees named therein, as amended and restated by the First
Amended and Restated Declaration of Trust dated as of July 29, 1969, and as
amended and restated by the Second Amended and Restated Declaration of Trust
dated as of October 2, 1969, and as amended and restated by the Third Amended
and Restated Declaration of Trust dated as of October 31, 1969, and as further
amended by the Amendment dated March 30, 1971, which Declaration of Trust as so
amended is hereby amended and restated in its entirety pursuant to Section 10.1
thereof to read as hereinafter provided.
The Trustees desire to form a trust for the principal purpose of investing in
Real Property and interests therein.
The Trustees desire that such Trust qualify as a "real estate investment
trust" under the provisions of Sections 856, 857, and 858 of the Internal
Revenue Code of 1954, as from time to time amended, and successor Sections
thereto, and the Regulations issued thereunder (hereinafter in this Declaration
of Trust a real estate investment trust as so qualified is referred to as a
"Real Estate Investment Trust" and said Code and Regulations and said Sections
and Regulations issued thereunder as amended to the time in question and any
successor Sections thereto, are referred to as the "Internal Revenue Code" and
the "REIT Provisions of the Internal Revenue Code", respectively).
The Trustees as trustees may hereafter require, hold, manage, and dispose of
certain assets and divide the gains therefrom, in the manner hereinafter stated.
It is proposed that the beneficial interest in the Trust shall be divided
into transferable shares of such class or classes as shall from time to time be
established, and evidenced by certificates therefor, as hereinafter provided.
THEREFORE, the Trustees hereby declare that they will hold all property of
every type and description which they are acquiring or may hereafter acquire as
such Trustees, together with the proceeds thereof, in trust, to manage and
dispose of the same for the benefit of the holders from time to time of the
Shares being issued and to be issued and to be issued hereunder and in the
manner and subject to the stipulations contained herein, which are:
<PAGE>
ARTICLE 1.
NAME, ETC.
SECTION 1.1. Name. The trust created by this Declaration of Trust is herein
referred to as the "Trust" and shall be known by the name "Hubbard Real Estate
Investments"; so far as may be practicable, legal and convenient, the affairs of
the Trust shall be conducted and transacted under such name, which name (and the
word "Trust" whenever used in this Declaration of Trust, except when the context
otherwise requires) shall refer to the Trustees as trustees and not individually
or personally and shall not refer to the beneficiaries or Shareholders of the
Trust, or to any officers, employees, or agents of the Trust or of such
Trustees. Under circumstances in which the Trustees determine that the use of
the name "Hubbard Real Estate Investments" is not practicable, legal or
convenient, they may as appropriate use their names with suitable reference to
their trustee status, or some other suitable designation, or they may adopt
another name under which the Trust may hold property or operate in any state,
which name shall not refer to the beneficiaries or Shareholders of the Trust, or
any officers, employees, or agents of the Trust or of such Trustees.
If Hubbard, Westervelt & Mottelay, Inc., or any successor of such
corporation, shall cease, for any reason, to render for the Trust the services
of Adviser, as defined in Section 8.1 hereof, to be rendered pursuant to the
contract referred to in Section 8.2 hereof, and any renewal or extension of such
contract, then the Trustees shall, upon request of said Hubbard, Westervelt &
Mottelay, Inc. or its successor and without any vote or consent of the
Shareholders being required, promptly amend this Declaration of Trust to change
its name to one which does not include "Hubbard" or any approximation thereof.
SECTION 1.2. Title to Property. Legal title to all of the Trust Property
shall be transferred to, vested in, and held by the Trustees, as joint tenants
with right survivorship as Trustees of this Trust, except as provided in Section
3.5. Where legal title is transferred (whether to or by the Trust) in the name
Hubbard Real Estate Investments, such name shall be deemed to refer to the
Trustee as aforesaid.
SECTION 1.3. Trust Only. The Trust shall be of the type commonly termed a
Massachusetts business trust and shall not be a general partnership, limited
partnership, joint stock association, or corporation. The Shareholders shall be
beneficiaries and their relationship to the Trustees shall be solely in that
capacity in accordance with the rights conferred upon them hereunder. Neither
the Trustees nor the Shareholders, nor any of them, shall for any purpose be, or
be deemed to be, partners or members of a joint stock association.
SECTION 1.4. Location of Offices. The principal office of the Trust in
Massachusetts shall be in Boston, Massachusetts, unless changed by the Trustees
to another location in Massachusetts. The Trust shall have such other offices or
places of business within or without The Commonwealth of Massachusetts as the
Trustees may from time to time determine.
ARTICLE 2.
TRUSTEES AND OFFICERS.
SECTION 2.1. Number of Trustees. The signatories to this Declaration of
Trust, so long as they shall continue in office in accordance with the terms
hereof, and all other persons who at the time in question have been duly elected
or appointed and have qualified as trustees in accordance with the provisions
hereof and are then in office, are herein referred to as the "Trustees", and
reference in this Declaration of Trust to a Trustee or Trustees shall refer to
such person or persons in their capacity as Trustees hereunder. Subject to the
provisions of any series of Preferred Shares at the time outstanding, there
shall be no less than three (3) nor more than fifteen (15) Trustees. Subject to
any such provisions, within the foregoing limitations, the number of Trustees
may be altered from time to time by vote of a Majority of the Trustees. Whenever
a vacancy in the number of Trustees shall occur, until such vacancy is filled as
provided in Section 2.4, the Trustee or Trustees continuing in office regardless
of their number shall have all the powers granted to the Trustees and shall
discharge all the duties imposed upon the Trustees by this Declaration of Trust.
The terms "Two-thirds of the Trustees" and "Majority of the Trustees" whenever
used herein shall mean two-thirds and more than one-half, respectively, of the
total number of Trustees then in office when three or more Trustees are then in
office, and shall mean one Trustee if only one Trustee is at the time in office,
and shall mean both Trustees if only two Trustees are at the time in office.
SECTION 2.2. Term of Office; Election and Qualification. Subject to the
provisions of Sections 2.3 and 2.4, each Trustee shall hold office until the
expiration of his term and until the election and qualification of his
successor. The persons who have executed the original Declaration of Trust are
the original Trustees and the term of each of them and of each Trustee appointed
prior to the First Annual Meeting of Shareholders shall expire at such Annual
Meeting of Shareholders and upon the election and qualification of his
successor. Except as otherwise required by the provisions of any series of
Preferred Shares at the time outstanding, thereafter, the term of each Trustee
shall expire at the Annual Meeting of Shareholders held in the year following
the election of such Trustee and upon the election and qualification of his
successor. Trustees may succeed themselves in office. Except as otherwise
required by the provisions of any series of Preferred Shares at the time
outstanding, the election of Trustees at any meeting of Shareholders shall be by
the affirmative vote of the holders of majority of the Shares present in person
or by proxy at such meeting and then entitled to vote in the election of
Trustees. A Trustee shall be an individual at least twenty-one (21) years of age
who is not under a legal disability. Such individual shall qualify as a Trustee
by signing this Declaration of Trust, as amended to the time in question, or by
agreeing in writing to be bound by the terms of this Declaration of Trust, as so
amended. Trustees continuing in office by re-election or re-appointment need not
requalify as Trustees. Trustees may but need not own Shares.
SECTION 2.3. Resignation and Removal. Any Trustee may resign his trusteeship
by instrument in writing signed by him and delivered or mailed to the President
or Secretary, and such resignation shall take effect immediately on receipt by
the President or Secretary or at a later date according to the terms of the
instrument. Subject to the provisions of any series of Preferred Shares at the
time outstanding, the Shareholders, by action of the holders of a majority of
the Shares then outstanding and entitled to vote in the election of Trustees
(which action shall be taken only by vote at a meeting called for the purpose in
accordance with Section 7.3), may remove any Trustee with or without cause.
SECTION 2.4. Vacancies. The term of office of a Trustee shall terminate and a
vacancy shall occur in the event of the bankruptcy, adjudicated incompetence,
death, resignation or removal (pursuant to Section 2.3) of a Trustee. No such
vacancy shall operate to annul the Trust or to revoke any existing agency
created pursuant to the terms of this Declaration of Trust. Subject to the
provisions of any series of Preferred Shares at the time outstanding, vacancies
in the office of Trustee, including a vacancy resulting from an increase in the
number of Trustees, may be filled by a written appointment signed by a Majority
of the Trustees. Upon such appointment and the qualification of such Trustee,
the Trust Property shall vest in the new Trustee jointly with the continuing or
surviving Trustees without the necessity of any further act or conveyance.
SECTION 2.5. Officers and Agents. The Trustees shall annually elect a
President, who shall be the principal executive officer of the Trust, and a
Treasurer and a Secretary. The President, Treasurer and Secretary shall serve
until the first meeting of Trustees after then next Annual Meeting of
Shareholders and until their successors are elected and qualified or until their
sooner resignation or removal, with or without cause, by the affirmative vote of
a Majority of Trustees. The President shall be and the Treasurer and Secretary
may, but need not, be a Trustee. The Trustees may elect or appoint, from among
their number or otherwise, such other officers or agents, who shall have such
powers, duties and responsibilities, as to the Trustees may seem advisable, and
who shall hold office for such periods as may be determined by the Trustees or
by the by-laws. The Trustees shall fix the compensation of all officers, may
receive reasonable compensation fixed by the Trustees in good faith for their
general services as Trustees and officers hereunder, and may pay themselves or
any one or more of themselves such compensation for special services, legal or
otherwise, as they in good faith may deem reasonable.
Any person may hold two or more offices.
SECTION 2.6. By-Laws. A Majority of the Trustees may adopt and from to time
to time amend or repeal by-laws for the conduct of the business of the of the
Trust, and in such by-laws may define the duties of their officers, employees,
agents and representatives.
SECTION 2.7. Meetings of Trustees; Action by Trustees. Meetings of the
Trustees may be held from time to time upon call by the President, the Secretary
or any two Trustees. Meetings of the Trustees shall be held within or without
The Commonwealth of Massachusetts at such place as may be specified in or
determined in accordance with the by-laws and the notice of a meeting shall
state the place, as well as the time thereof.
Unless otherwise restricted by the by-laws, all or any one or more Trustees
may participate in a meeting of the Trustees or any committee thereof by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other and participation
in a meeting pursuant to such communications shall constitute presence in person
at such meeting.
SECTION 2.8. Notice of Meeting; Waiver of Notice. Notice of a meeting shall
be given by mail or by telegram or delivered personally. If notice is given by
mail, it shall be mailed not later than the third business day preceding the
meeting (excluding from such computation the day of the meeting itself) and if
given by telegram or personal delivery such telegram shall be sent or delivery
made not later than the business day preceding the meeting.
<PAGE>
Notice of a meeting of Trustees may be waived before or after such meeting by
signed written waivers. Not notice need be given of action taken by unanimous
written consent. The attendance of a Trustee at a meeting shall constitute a
waiver of notice of such meeting except where a Trustee attends a meeting for
the express purpose of objecting to the transaction of any business on the
ground that the meeting has not been lawfully called or convened.
SECTION 2.9. Quorum; Action by Trustees at Meetings. A Majority of the
Trustees shall constitute a quorum for the transaction of business at any
meeting of the Trustees but if less than such Majority is present at a meeting,
a majority of the Trustees present may adjourn the meeting from time to time
without further notice. The act of the majority of the Trustees present at a
meeting at which a quorum is present shall be the act of the Trustees and shall
have the same effect as if assented to by all except that any action which by
the terms of any provision of this Declaration of Trust other than this Section
2.9 is required to be taken by a Majority of the Trustees or by Two-thirds, of
the Trustees shall require the affirmative vote of such Majority or Two-thirds,
as the case may be, and thereupon shall constitute the act of the act of the
Trustees and shall have the same effect as if assented to by all.
SECTION 2.10. Action by Unanimous Written Consent. Except as otherwise
authorized by this Declaration of Trust, any action which could be taken by the
Trustees only at a meeting may be taken without a meeting only if all the
Trustees consent to the action in writing and the written consents are filed
with the records of the meetings of Trustees. Such consents shall be deemed for
all purposes to be action taken at a meeting.
SECTION 2.11. Delegation of Powers of One or More Trustees; Execution of
Instruments. Subject to their ultimate responsibilities as set forth in Section
8.1, the Trustees may delegate from time to time to such one or more of their
number, or to such one or more officers or agents, the doing of such things and
the execution of such deeds or other instruments either in the names of the
Trustees or as their attorney or attorneys or otherwise as the Trustees may from
time to time deem expedient.
Any deed, mortgage, evidence of indebtedness or other instrument or agreement
executed by one or more of the Trustees, officers of agents of the Trust, shall
be valid and binding upon the Trustees and the Trust when authorized or ratified
(pursuant to specific or general authorization or ratification) at a meeting or
by written authorization or ratification without a meeting in accordance with
the provisions of Section 2.9 and Section 2.10.
SECTION 2.12. Committees. The Trustees, by vote of a Majority of Trustees,
may appoint from among their own number committees, including an Executive
Committee of two or more persons to whom the Trustees may delegate such of the
powers herein given to the Trustees as that may deem expedient, except that
powers requiring the vote of a Majority or Two-thirds of the Trustees may not be
so delegated.
SECTION 2.13. Reports. With respect to fiscal years commencing with the first
full fiscal year of the Trust, the Trustees shall cause to be prepared and
mailed to each Shareholder, within 120 days after the end of every fiscal year,
an annual report of the affairs of the Trust, including a statement of the
income and expenses of the Trust based on the books of account of the Trust. If,
in the opinion of the Trustees, such statement fails to meet the requirements of
any governmental authority or agency having jurisdiction over the Trust, or of
any securities exchange on which the Shares are listed or to be listed , the
Trustees shall in addition include in such annual report a statement of income
and expenses which will, in their sole discretion, meet such requirements. Such
annual report shall also contain a balance sheet and statement of surplus, both
as of the end of the fiscal year consistent with either of such statements of
income and expenses, as determined by the Trustees. Such annual report shall
also include an opinion on the financial statements of an independent certified
accountant or independent public accountant based on an examination of the books
and records of the Trust not materially limited in scope made in accordance with
generally accepted auditing standards and procedures. In addition, commencing
after the close of the first full quarter of the first full fiscal year of the
Trust, the Trustees shall mail to the Shareholders within 60 days after the
close of that quarter and of each quarter thereafter (or as soon thereafter as
may be practicable), other than the end of the fiscal year, an interim report
containing a summary statement of income and expenses of the trust for such
fiscal quarter, which a may be unaudited, and such other pertinent information
regarding the trust and its activities in the quarter covered by the report as
the trustees may deem appropriate.
SECTION 2.14. Board of Consultants. The trustees may appoint a Board of
Consultants to provide the Trustees with such advice as they may request in the
performance of their duties as Trustees. Members of such Board of Consultants
shall be appointed in any number and shall be removed by the vote of a Majority
of the Trustees, and shall meet at such time and place as may be determined from
time to time by the Trustees or the by-laws. The Board of Consultants shall have
no power or authority over the Trust. Members of the Board of Consultants may be
reasonably compensated for their services by the Trustees.
<PAGE>
SECTION 2.15. Ownership by Trustees, etc. of Securities of the Trust. Any
Trustee, officer or agent may on his personal account acquire, hold and sell
Securities of the Trust either in his individual name, or in a fiduciary
capacity or jointly with other persons, or as a member of a firm or association
or otherwise, without being thereby disqualified as a Trustee, officer or agent,
and while so holding any such Securities of the Trust on his personal account
shall be entitled to the same rights and privileges as other holders thereof.
Without limiting the foregoing, but subject to any applicable requirements of
Section 3.23, any Person, including any Person specified in Section 3.23, may
purchase as underwriter Securities of the Trust.
ARTICLE 3.
POWERS OF THE TRUSTEES.
SECTION 3.1. Absolute and Exclusive Power. The Trustees, subject only to the
specific limitations expressly stated in this Declaration of Trust, shall have,
without other or further authorization, continuing full, absolute and exclusive
power, control and authority over and management of the Trust Property and of
the affairs of the Trust, to the same extent as if the Trustees were the sole
owners of such property and the sole persons interested in such Trust in their
own right. Such powers of the Trustees may be exercised only on behalf of or for
the advantage of the Trust; and all payments or reimbursements made by the
Trustees shall be made only from Trust Property. Such powers of the Trustees may
be exercised without the necessity of applying to any court or to the
Shareholders for leave to do so. No Person (the word "Person" whenever used in
this Declaration of Trust, except where the context otherwise requires, being
deemed to mean any individual, individuals, association, trust, partnership,
corporation, or other entity) shall in any event be bound to see to the
application of any money or property paid to or delivered to the Trustees or
their authorized representative. In the exercise of the powers given by this
Article 3, the Trustees shall not be limited to obligations maturing before the
possible termination of the Trust. The Trustees shall not be bound or limited by
any law now or hereafter in force limiting the investments of trustees or other
fiduciaries, but they shall have full authority and power to make any and all
investments, within the limitations of this Article 3 and Article 4 that they,
in their absolute discretion, shall deem proper in order to accomplish the
purposes of this Trust, all to such extent as to them shall seem proper, even
though such investments shall investments shall be of a character or in an
amount not customarily considered proper for the investment of trust funds or
which do not or may not produce income. The Trustees shall have power to enter
into commitments to make any investment, purchase or acquisition authorized by
this Article 3. Without restricting or limiting the generality of the foregoing,
such powers of the Trustees shall include among others the powers enumerated in
the ensuing Sections of this Article 3.
The exercise of the powers of the Trustees in this Article 3 shall be subject
at all times to the investment policy set forth in Article 4 hereof.
SECTION 3.2. Investments, etc. The Trustees shall have power, for such
consideration as they may deem proper, to invest in, purchase or otherwise
acquire, for cash or other property or through the issuance of Securities of the
Trust or for other consideration, and hold for investment, the entire or any
participating interest in real, personal or mixed, tangible or intangible,
property (including stocks, bonds, debentures, notes, certificates of
indebtedness and securities of every nature) and obligations secured thereby and
interests therein and rights thereto, including, without limiting the generality
of the foregoing, the entire or any participating interest in notes, bonds or
other obligations secured by Mortgages or other interests in Real Property. In
connection with any such investment, purchase or acquisition, the Trustees shall
have the power to acquire a share of rents, lease payments, or other income
from, or a share of the profits from, or a share in the equity or ownership of
Real Property. The Trustees shall also have power invest in loans secured by the
pledge or transfer of mortgage obligations.
SECTION 3.3. Powers With Respect to Real Property. Without limiting the
powers expressed in Section 3.2, the Trustees shall have the power to (a)
acquire, construct, hold, own, manage, subdivide, improve, develop, alter, tear
down, lease from or to others (including building leases, part of the
consideration for which is the building on or adding to the premises by the
lessee) for terms which may extend beyond the possible termination of the Trust,
or otherwise deal in Real Property of any type and description, including any
type of interest therein or right pertaining thereto, wherever situated in the
United States or any territory or possession thereof or in Canada; and
(b) to sell, exchange, or otherwise dispose of, or grant participations in,
any Real Property or interest therein at any time held or acquired hereunder,
free and clear from any and all trusts, at public or private sale, for cash or
on terms, without advertisement, and subject to such restrictions, stipulations,
agreements and reservations as they shall deem proper, including the power to
take back mortgages to secure the whole or any part of the purchase price of any
of the Trust Property sold or transferred by them, and to execute and deliver
any deed, or other instrument in connection with the foregoing; and
<PAGE>
(c) to grant easements, give consents, and make contracts relating to Real
Property or its use; and
(d) to release or dedicate any interest in Real Property.
SECTION 3.4. Powers With Respect to Other Property. Without limiting the
powers expressed in Section 3.2 the Trustees shall have with respect to all
types of property, real, personal or mixed, tangible or intangible or any
interest therein the powers set forth in Section 3. 3 with respect to Real
Property.
SECTION 3.5. Title to Trust Property. The Trustees shall have the power to
cause legal title to any Trust Property to be held in the name of one or more of
the Trustees, or any other person as nominee, on such terms, in such manner, and
with such powers as the Trustees may determine, provided that the interest of
the Trust is appropriately protected. The Trustees shall have the power to hold
securities in bearer form. In furtherance of the forgoing provisions of this
Section, the Trustees may form for the purposes of furthering the interests of
the Trust, a corporation, partnership, trust or other business association,
owned by the Trustees or by their nominees, for the purpose of holding title to
the property of the Trust or managing the property of the Trust.
SECTION 3.6. Borrowings. The Trustees shall have power to borrow or in any
other manner raise such sum or sums of money or other property as they shall
deem advisable in any manner and on any terms and to evidence the same by notes,
debentures, bonds or other evidences of indebtedness of the Trust, subordinated
or otherwise, which may mature at any time or times even beyond the possible
termination of the Trust, to reacquire such evidences of indebtedness, to enter
into other contracts on behalf of the Trust, to reacquire such evidences of
indebtedness, to enter into other contracts on behalf of the Trust, and to
execute and deliver any Mortgage, pledge or other instrument to secure any such
indebtedness or other obligations or contracts. Subject to the provisions of any
series of Preferred Shares at the time outstanding, any such notes, debentures,
bonds, instruments or other evidences of indebtedness of the Trust may, at the
discretion of the Trustees, without vote of the Shareholders, be convertible
into Shares of any class or series at such time and on such terms as the
Trustees may prescribed.
SECTION 3.7. Issuance of Securities of the Trust. Subject to the provisions
of any series of Preferred Shares at the time outstanding, the trustees shall
have power to issue any type of Securities of the Trust, without vote of or
other action by the Shareholders, to such Persons (except to the extent provided
in Section 6.22) for such cash, property or other consideration (including
Securities issued or created by, or interests in any Person) at such time or
times and on such terms as the Trustees may deem advisable (provided, however,
except as may be provided in the resolutions governing any series of Preferred
Shares and except in connection with a dividend investment plan generally
available to all holders of Common Shares, the purchase price for Shares
purchased through exercise of Warrants, rights or options shall be not less than
the fair market value of such Shares (determined in the manner provided in
Section 6.19) on the date of, or prior to, the issuance of such Warrants, rights
or options fixed by the trustees for such determination) and to list any of the
foregoing Securities of the Trust on any securities exchange and to purchase or
otherwise acquire, hold, cancel, reissue, sell and transfer any such Securities
of the Trust. The Trustees may authorize the use facsimile signatures and/or a
facsimile seal of the Trust on Securities of the Trust, provided that where
facsimile signatures are so used, one of the authorized signatures be manual or
the Security be manually countersigned or authenticated by an authenticating
agent or trustee or similar Person. In case any Person who shall have signed (or
whose facsimile signature shall appear on) Securities of the Trust shall have
ceased to occupy the office or perform the function with respect to which such
signature was authorized before such Securities shall have been actually issued,
such Securities may nevertheless be issued with the same effect as though such
Person had not ceased to occupy such office or perform such function.
SECTION 3.8. Exercise Powers of Ownership, etc. The Trustees shall have power
to exercise all the rights, powers and privileges appertaining to the ownership
of all or any Securities forming part of the Trust Property to the same extent
that an individual might, and, without limiting the generality of the foregoing,
to vote or give any consent, request, or notice or waive any notice either in
person or by proxy or power of attorney with or without power of substitution,
to one or more Persons, which proxies and powers of attorney may be for meetings
or action generally or for any particular meetings or action, and may include
the exercise of discretionary powers.
SECTION 3.9. Delegation of Powers. The Trustees shall have the power to
delegate their powers to one or more Trustees, officers or agents, or to
committees of Trustees and to the Adviser, as provided in Sections 2.11, 2.12
and 8.1, respectively.
SECTION 3.10. Miscellaneous Administrative Powers. The Trustees shall have
power to collect, sue for, receive and receipt for all sums of money or other
property coming due to this Trust, to consent to the extension of the time for
payment, or to the renewal, of any bonds or other securities or obligations, and
to engage or intervene in, prosecute, defend, compound, compromise, abandon, or
adjust by arbitration or otherwise any actions, suits, proceedings, disputes,
claims, demands or things relating to the Trust Property; to foreclose any
Mortgage or other security securing any notes, debentures, bonds, obligations or
contracts, by virtue of which any sums of money are owed to the Trust, to
exercise any power of sale held by them and exercise all rights pertaining to
any Security or instrument held by or for the Trust, and to convey good title
thereunder free of any and all trusts, and in connection with any such
foreclosure or sale, to purchase or otherwise acquire title to any property,
whether or not such property meets the requirements of this Article 3 with
respect to investments; to be parties to reorganizations and to transfer to and
deposit with any Person any stocks, shares, or bonds, or other securities or
obligations of any corporation, trust, association, or other organization, the
securities of which form a part of the Trust Property, for the purpose of any
reorganization of any such corporation, trust, association, or other
organization, or otherwise to participate in any arrangement for enforcing or
protecting the interests of the Trustees as the owners or holders of such stock,
shares, bonds, or other securities or obligations and to pay any assessment
levied in connection with such reorganization or arrangement; and to give time
with or without security for the payment or delivery of any debts or property
and to execute and enter into releases, agreements, and other instruments; and
to pay or satisfy any debts or claims upon any evidence that the Trustee shall
think sufficient.
SECTION 3.11. Payment of Debts and Expenses; Power to Employ or Contract. The
Trustees shall have power to incur and pay any charges or expenses in the
opinion of the Trustees necessary or incidental to or proper for carrying out
any of the purposes of this Trust and to employ or contract with any Persons in
accordance with the provisions of Section 8.1 and to pay appropriate fees to
such Persons from the funds of the Trust.
SECTION 3.12. Endorsements and Guaranties, etc. The trustees shall have power
to endorse, guarantee or act as surety for, the payment or performance of any
obligations of any Person in whose affairs or prosperity the Trust has an
interest; to make contracts of guaranty or suretyship, or enter into other
obligations therefor; and to mortgage and pledge the real and personal property
of this Trust or any part thereof to secure any or all of such obligations.
SECTION 3.13. Depositaries. The Trustees shall have power to deposit any
money or securities included in the Trust Property with any one or more banks,
trust companies , or other banking institutions deemed by the Trustees to be
responsible, such money or securities to be subject to withdrawal on notice or
upon demand and in such manner as the Trustees may determine, and the Trustees
shall have no responsibility for any loss which may occur by reason of the
failure of the Person with whom the money or securities have been deposited
properly to account for the money or securities so deposited.
SECTION 3.14. Discretion in Classification and in Accounting Treatment. The
Trustees shall have power to determine conclusively whether any money,
securities, or other properties of the Trust are for the purposes of the Trust
to be considered as capital or income and in what manner any expenses or
disbursements are to be borne as between capital and income whether or not in
the absence of this provision such money, securities, or other properties would
be regarded as capital or as income and whether or not in the absence of this
provision such expense or disbursement would ordinarily be charged to capital or
to income; and to determine what constitutes net earnings, profits and surplus;
and to allocate to capital stock less than all of the consideration for any
Share, in which case the balance of such consideration shall be paid-in surplus
and, subject to the provisions of any series of Preferred Shares at the time
outstanding, to utilize all surplus, including paid-in surplus for any purpose,
including the payment of dividends, all as the Trustees may reasonably deem
proper.
SECTION 3.15. Valuation, etc. The Trustees shall have power to determine
conclusively the value of any of the Real Property, securities or other
properties of this Trust and of any services, securities, property or other
consideration hereafter to be acquired by this Trust; and to revalue the real
estate, securities, or other properties of the Trust from time to time in
accordance with appraisals made by one or more of the Trustees deem responsible
and experienced.
SECTION 3.16. Fiscal year and Method of Accounting. The Trustees shall have
power to determine the fiscal year of the Trust and the method or form in which
its accounts shall be kept and from time to time to change the fiscal year or
method or form of accounts.
SECTION 3.17. Dividends. The Trustees shall have power to declare and pay
dividends and make other distributions to Shareholders as provided in Section
6.14.
SECTION 3.18. Payment of Taxes, etc. The Trustees shall have the power to pay
all taxes or assessments, of whatever kind or nature, imposed upon or against
the Trustees individually or collectively in connection with the Trust Property
or income, or upon or against the Trust Property or income or any part thereof,
to settle and compromise disputed tax liabilities, and for the foregoing
purposes to make such returns and do all such other acts and things as may be
deemed by the Trustees necessary or desirable.
SECTION 3.19. Seal. The Trustees shall have the power to adopt a seal for the
Trust in such form or forms as the Trustees may approve, which form or forms may
be revised from time to time by the Trustees. Unless otherwise required by law
or by the Trustees, the use of the Trust seal on Securities, agreements and
other instruments and papers of the Trust shall not be a condition to their
validity or effectiveness.
SECTION 3.20. Conditions of Being FHA Approved Mortgagee. If the Trust shall
be a so-called "FHA Approved Mortgage", then during such times or times, the
Trustees shall not have the power to sell or otherwise dispose of any mortgage
or mortgages or partial interest in such mortgage or mortgages insured by the
FHA which the Trust owns unless such transfer is to a mortgagee approved by the
FHA or is otherwise in accordance with the provisions of The National Housing
Act, as amended, or regulations promulgated thereunder. The provision shall also
apply in the event of dissolution or winding-up of the Trust. The Trustees shall
have the power to execute on behalf of this Trust, in connection with any rental
project on which the FHA has insured the indebtedness the Regulatory Agreement
(FHA Form 2466), Application for Transfer of Physical Assets (FHA Form 2266),
deed of trust or mortgage, and any and all other agreements, documents and forms
which may be required by the FHA in connection with and approval by that
Administration of the transfer of physical assets from any entity to the
Trustees or the insurance by that Administration of any indebtedness or any
rental project as to which the Trustees are or shall become owners for the
benefit of this Trust. The provisions of such Regulatory Agreement shall be
binding upon the Trust notwithstanding any conflict with or limitation of this
Declaration of Trust.
SECTION 3.21. Loans. The Trustees shall have power to lend money on behalf of
the Trust to such Persons and on such terms as the Trustees shall deem
advisable, subject to any applicable requirements of Section 3.23.
SECTION 3.22. Insurance. Nowithstanding any other provision of this
Declaration of Trust, the Trustee shall have power to purchase and pay for out
of assets of the Trust insurance contracts and policies insuring the Trustees,
officers and agents of the Trust individually against all claims and liabilities
of every nature arising be reason of holding, being or having held any such
office or position or by reason of any action alleged to have been taken or
omitted by any such person as Trustee, officer or agent of the Trust, whether or
not the Trust would have the power to indemnify such Person against such
liability.
SECTION 3.23. Transactions with Trustees, etc. The Trustees may contract or
engage in transactions with any Person; provided, however, that the Trustees
shall not knowingly, directly or indirectly, contract or engage in any
transaction (other than transactions involving the holding of title as an
accommodation to the Trust) with (1) and Trustee, officer or employee or member
of any Board of Consultants of the Trust or (2) any officer, director or
employee of the Adviser or of any Affiliate of the Adviser, or (3) the Adviser
or independent contractor or (4) any corporation, partnership, trust or other
organization of which a Trustee, any officer or employee of the Trust, the
Adviser or any officer, director or employee of the Adviser is an Affiliate,
unless (i) such contract or transaction has been approved or ratified, after
disclosure of such an affiliation, by 75% of all the Trustees who are not
parties to, or Affiliates of any Person (other than the Trust) who is a party
to, such contract or transaction, and (ii) the Trustees approving the
transaction have determined that such contract or transaction is on terms which
are fair and reasonable to the Trust and the Shareholders, and (iii) the
acquisition by the Trust of Real Property or Mortgages from any of the foregoing
Persons in such transactions involves:
(A) the acquisition by the Trust of federally insured or guaranteed Mortgages
at prices not exceeding the currently quoted prices at which the Federal
National Mortgage Association is purchasing comparable Mortgages; or
(B) the acquisition by the Trust of other Mortgages on terms determined by
the Trustees approving the transaction to be comparable to those available for
similar transactions, if any, known to the Trustees with others who are not so
affiliated; or
(C) the acquisition by the Trust of Real Property at prices not exceeding the
fair value thereof as set forth in an Appraisal.
The Trustees and the Adviser shall disclose any interest, including expected
commissions, which they have and any interest known to them which any of their
Affiliates have, in any investment or contract or other transaction involving
the Trust. Any interested Trustee or Trustees within the meaning of this Section
3.23 may be counted in determining the existence of a quorum and may vote at any
meeting of the Trustees which shall authorize or ratify the matter in question.
The Trustees in their capacity as Trustees shall not be required to devote
their full time to the affairs of the Trust. Except as the Trustees may from
time to time otherwise determine, Trustees, officers, agents, or members of the
Board of Consultants, any Adviser and independent contractors of the Trust may
engage individually or with or on behalf of other Persons in business activities
of the types to be conducted by the Trust.
For the purposes of this Section 3.23 (i) the term "independent contractor"
shall mean an independent contractor as defined in the REIT Provisions of the
Internal Revenue Code, which furnishes or renders services to tenants of, or
manages or operates, Real Property owned by the Trust and (ii) the term
"Affiliate" shall mean as to any corporation, partnership or trust any Person
who (a) holds beneficially, directly or indirectly, 1% or more of the
outstanding capital stock, shares or equity interests of such corporation,
partnership or trust, (b) is an officer, director, employee, partner or trustee
of such corporation, partnership or trust or of any Person which controls, is
controlled by, or is under common control with, such corporation, partnership or
trust, or (c) controls, is controlled by, or is under common control with, such
corporation, partnership or trust.
SECTION 3.24. Acting as Principal or Agent; Participations with Others.
The Trustees shall have power to acquire, manage or dispose of any property,
real, personal or mixed, tangible or intangible and take any action as
principal or as agent and may participate with others in any corporation,
partnership, limited partnership, joint venture, or other association of any
kind.
SECTION 3.25. Charitable Contributions. The Trustees shall have power to make
donations, irrespective of benefit to the Trust, for the public welfare or for
community fund, hospital, charitable, religious, educational, scientific, civic
or similar purpose, and in time of war or other national emergency in aid
thereof.
SECTION 3.26. Indemnification. In addition to the mandatory indemnification
provided for in Section 5.3, the Trustees shall have power to the extent
permitted by law to indemnify or enter into agreements with respect to
indemnification with any person or entity with whom this Trust has dealings,
including, without limitation, any Adviser or independent contractor, to such
extent as the Trustees shall determine.
SECTION 3.27. Powers not Enumerated, etc. The Trustees shall have power to do
all such things and execute all such instruments as they deem necessary, proper
or desirable in order to carry out, promote or advance the purposes of this
Trust although such matters or things are not herein specifically mentioned. Any
determination of the purposes of the Trust made by the Trustees in good faith
shall be conclusive. In construing the provisions of this Declaration of Trust,
the presumption shall be in favor of the grant of power to the Trustees.
ARTICLE 4
INVESTMENT POLICY
SECTION 4.1. Definitions. As used in this Declaration of Trust the term:
"REAL PROPERTY" shall mean land, rights in land (including, without
limitation, leaseholds), and any buildings, structures, improvements,
furnishings, fixtures and equipment located on or used in connection with land,
leasehold interests and rights in land, or interests therein, but does not
include Mortgages, Mortgage Loans, or interests therein;
"MORTGAGES" shall mean mortgages, deeds of trust or other evidences of
indebtedness secured by a lien on Real Property or on or in rights or interests
in Real Property;
"FIRST MORTGAGE" shall mean a mortgage which takes priority or precedence
over all other charges or encumbrances upon the same property, and which must be
satisfied before such other charges are entitled to participate in the proceeds
of any sale. Such encumbered property may include a lesseen's interest therein.
However, such priority shall not be deemed as abrogated by liens for taxes,
assessments which are not due or remain payable without penalty, contracts
(other than contracts for repayment of borrowed money); by leases, mechanics'
and materialmen's liens for work performed and materials furnished which are not
in default or are in food faith being contested; nor by other claims normally
deemed in the same local jurisdiction, not to abrogate the priority of a first
mortgage;
"JUNIOR MORTGAGE" shall mean a Mortgage which (1) has the same priority or
precedence over all charges or encumbrances upon Real Property as that required
for a First Mortgage except that it is subject to the priority of one or more
the other Mortgages and (2) must be satisfied before such other charges or
encumbrances (other than prior Mortgages) are entitled to participate in the
proceeds of any sale or other disposition of such Real Property;
"MORTGAGE LOANS" shall mean loans evidenced by notes, debentures, bonds, and
other evidences of indebtedness or obligations, which are negotiable or
non-negotiable, and which are secured or collateralized by Mortgages;
"FIRST MORTGAGE LOANS" shall mean Mortgage Loans secured or collateralized,
at the time of acquisition thereof, by First Mortgages;
"JUNIOR MORTGAGE LOANS" shall mean Mortgage Loans secured or collateralized,
at the time of acquisition thereof, by Junior Mortgages;
"TRUST ESTATE" or "TRUST PROPERTY" shall mean as of any particular time any
and all property; real, personal or otherwise, tangible or intangible, which is
transferred, conveyed or paid to the Trust or Trustees and all rents, income,
profits and gains therefrom and which at such time is owned or held by or for
the Trust or the Trustees;
"TOTAL ASSETS OF THE TRUST ESTATE" shall mean the aggregate amount of all of
the assets of the Trust Estate appearing on the most recent quarterly balance
sheet or more recent interim balance sheet of the Trust, if any, available to
the Trustees (increased, for purposes of computing restrictions under Sections
4.6(a), (b), (c) and (e) applicable to proposed Trust investments, by the
aggregate amount of assets proposed to be acquired in such transaction), without
deduction for mortgages or other security interest to which such assets are
subject but after deduction for depreciation and other assets valuation
reserves;
"SECURITIES" shall mean any stock, shares, voting trust certificates, bonds,
debentures, notes, or other evidences of indebtedness, secured or unsecured,
convertible, subordinated or otherwise or in general any instruments commonly
known as "securities" or any certificates of interest, shares or participations
in temporary or interim certificates for, receipts for guarantees of, or
warrants, options or rights to subscribe to, purchase or acquire any of the
foregoing;
"SECURITIES OF THE TRUST" shall mean any Securities issued by the Trust;
"FHA" and "VA" shall mean respectively the Federal Housing Administration and
the Veterans Administration, and any successors thereto;
"FHA LOANS" shall mean Mortgage Loans which are insured under the provisions
of the National Housing Act of 1934, as amended, or any analagous successor
legislation;
"VA LOANS" shall mean Mortgage Loans which are guaranteed under the
provisions of the Servicemen's Readjustment Act of 1944, as amended, or any
analagous successor legislation;
"DEVELOPMENT LOANS" shall mean Mortgage Loans incurred to finance all or part
of the cost of acquiring and improving vacant land and developing it into sites
suitable for the construction of dwellings, including multi-family dwellings,
and other income-producing properties, such as shopping centers and office and
industrial buildings, and other structures, or suitable for other residential,
commercial, industrial or public uses;
"CONSTRUCTION LOANS" shall mean Mortgage Loans incurred to finance all or
part of the cost of acquiring and improving land and the construction or
improvement of dwellings, including multi-family dwelling, and other
income-producing properties, such as shopping centers and office and industrial
buildings, thereon; and
"APPRAISAL" shall mean the value, as of the date of the Appraisal, of Real
Property (or the aggregate of Real Property subject to a single Mortgage) in its
existing state or in a state to be created, as determined by the Trustees or by
a disinterested person having no economic interest in the Real Property, who, in
the sole judgement of the Trustees, is properly qualified to make such a
determination. The Trustees may in good faith rely on a previous Appraisal made
on behalf of other Persons provided it meets the aforesaid standards and was
made in connection with a Mortgage Loan in which the Trust acquires an entire or
participating interest or which was prepared not earlier than two years prior to
the acquisition by the Trust of its interest in the Real Property or Mortgage
Loan.
SECTION 4.2. Ownership of Income Producing Real Property. It shall be the
policy of the Trustees to invest the Trust Estate primarily in entire or
participating ownerships in Real Property which is income producing or which at
the time of acquisition of such ownership the Trustees reasonably expect (by
development, improvement, construction, alteration, lease or otherwise) to
become income-producing within three years. The consideration given by the Trust
for income-producing Real Property or Real Property which the Trustees
reasonably expect to become income-producing within three years shall not exceed
the value thereof set forth in an Appraisal by a disinterested person, except
that the Trust may acquire at cost undeveloped or newly-constructed property
which has not been in use for more than one year.
SECTION 4.3. Financing in Connection with Expected Ownership of Real
Property. In furtherance of the primary policy stated in Section 4.2, the
Trustees may (by loan, secured or unsecured, by lease, by guarantee, by issuance
of obligations of the Trust or by any combination thereof or by commitment, with
or without fee, to do any of the foregoing or by commitment to purchase) finance
the acquisition, improvement or development of, or the construction or
alteration of stuctures on, any Real Property which within three years from the
time of such financing, (a) the Trustees reasonably expect to acquire the entire
or participating ownership of and (b) the Trustees reasonably expect to be
income-producing. Any such financing shall not be subject to nor constitute part
of any other investment limitation in this Article 4.
SECTION 4.4. Additional Investments. In addition to investments pursuant to
Sections 4.2 and 4.3. the Trustees may, subject to Section 9.1, also invest in
entire or participating interests in any Mortgage Loan (including without
limitation Construction, Development and other Mortgage Loans) or any other
investment and may make commitment to make any such investment, unless such
investment or commitment would result in the aggregate of all such additional
investments (including amounts with respect to which commitments are
outstanding), determined in accordance with the procedure for determining Total
Assets of the Trust Estate, exceeding 40% of the Total Assets of the Trust
Estate.
SECTION 4.5. Interim Use of Proceeds. Pending utilization thereof in
accordance with the investment policies of this Article 4 the proceeds from (a)
any public or private offering of Securities of the Trust, (b) any borrowing or
financing arrangement by the Trust, or (c) the sale of any capital asset may be
invested subject to Section 9.1, in investments permitted under Section 4.4
(without being limited to 40% of Total Assets of the Trust Estate).
SECTION 4.6. Prohibited Investments and Activities. It shall be the policy of
the Trustees not to invest in the following investments or engage in the
following activities:
(a) Entire or participating ownership of non-income producing Real Property
in excess of 10% of the Total Assets of the Trust Estate, except as permitted in
Section 4.2 and Section 4.3.
(b) Obligations secured by Mortgages other than First Mortgages, except as
expressly permitted by Sections 4.3 and 4.4 and except that such Mortgages may
be taken as additional collateral for First Mortgage Loans, or as part of the
proceeds of the sale by the Trust of Real Property; provided, however, that in
any event the Trustees may not invest in obligations secured by mortgages other
than first mortgages (including "warehousing loans" collateralized by
obligations other than First Mortgages) pursuant to any authorization in this
Declaration of Trust in an aggregate amount exceeding 15% of the Total Assets of
the Trust Estate.
(c) Junior Mortgage Loans (excluding wrap-around loans) if as a result if
such investment, the aggregate amount of Junior Mortgage Loans (determined in
accordance with the procedure for determining Total Assets of the Trust Estate)
would exceed 10% of the Total Assets of the Trust Estate. Notwithstanding the
foregoing, Junior Mortgages may be taken as additional collateral for the First
Mortgage Loans, as part of the proceeds of the sale by the Trust of Real
Property or in any other transaction not involving a Junior Mortgage Loan.
(d) Commodities, foreign currencies, bullion, or chattels, except such as
required in the day-to-day business of the Trust or in connection with its Real
Property or Mortgage Loans.
(e) Real estate contracts of sale for purchase prices aggregating in excess
of 1% of the Total Assets of the Trust Estate; provided, however, that nothing
in this Section 4.6 shall prevent the holding of contracts of sale as security
for loans made by the Trust and the ownership of such contracts of sale upon
foreclosure of, or realization upon, such security interests and contracts of
sale so held or owned shall not be counted in computing the percentage of assets
invested in contracts of sale.
(f) Engage in any short sale.
(g) Incur indebtedness, whether secured or unsecured, in excess of 75% of the
Total Assets of the Trust Estate (increased by the consideration received by the
Trust for such indebtedness) at the time of such incurrence.
(h) Encumber the aggregate of the Real Property of the Trust (excluding Real
Property acquired by the Trust as a result of or in connection with foreclosure
of any mortgages, or conveyed to the Trustees in full or partial satisfaction of
indebtedness to the Trust and excluding Real Property of the Trust subject to
FHA and VA or other governmentally insured or guaranteed encumbrances) in excess
of 66 2/3 % of the aggregate fair market value of all and said Real Property not
so excluded at the time of such encumbrance as determined under Section 3.15
hereof.
(i) Issue "redeemable securities" as defined in Section 2(a)(32) of the
Investment Company Act of 1940 as amended.
(j) Invest in Securities in any real estate investment trust except upon the
affirmative vote of at least 75% of the Trustees then in office.
(k) Engage in trading as compared with investment activities, or engage in
the business of underwriting or agency distribution of securities issued by
others, but this prohibition shall not prevent the Trust from selling
participations in Mortgage Loans or interests in real estate.
SECTION 4.7. Combination of Permitted Investments. The Trustees may make any
investment permitted under any provision of Article 4 in combination with any
other investment or investments permitted under any other provision of this
Article 4.
SECTION 4.8. Exercise of Powers Under Article 3. Nothing in this Article 4
shall be deemed to prohibit or limit the exercise by the Trustees of the powers
set forth in Article 3 except to the extent expressly provided in this Article
4.
SECTION 4.9. Obligor's Default. Notwithstanding any provision in any Article
of this Declaration of Trust, when an obligor to the Trust is in default under
the terms of any obligation to the Trust (or in the good faith judgment of the
Trustees, there is a significant risk that such default may occur), the Trustees
shall have the power to pursue any remedies permitted by law which, in their
sole judgment, are in the interest of the Trust, and the Trustees shall have the
power to hold property of a type or in an amount not permitted hereunder and to
enter into any desirable investment commitment or obligation of the Trust
resulting from the pursuit of such remedies as may be necessary or desirable in
the sole judgment of the Trustees to dispose of property acquired in the pursuit
of such remedies.
SECTION 4.10. Specifically Permitted Investments. Nothing contained in this
Declaration of Trust shall preclude the Trustee from investing funds of the
Trust, and notwithstanding any other provision of this Declaration of Trust the
Trustees are specifically authorized and empowered to invest funds of the Trust,
in any investments specifically referred to in the Registration Statement
described in Section 10.2.
ARTICLE 5.
LIMITATIONS OF LIABILITY OF SHAREHOLDERS, TRUSTEES AND OTHERS.
SECTION 5.1. No Personal Liability of Shareholders, Trustees, etc. No
Shareholder shall be subject to any personal liability whatsoever to any other
Person in connection with Trust Property or the affairs of the Trust and no
Trustee, officer or agent of the Trust, or member of the Board of Consultants
shall be subject to any personal liability whatsoever, in tort, contract or
otherwise, to any other Person in connection with Trust Property of the affairs
of the Trust, save only that arising from his bad faith, willful misfeasance,
gross negligence or reckless disregard of his duties or for his failure to act
in good faith in the reasonable belief that his action was in the best interests
of the Trust; and all such other Persons shall look solely to the Trust Property
for satisfaction of claims of any nature arising in connection with the affairs
of the Trust. If any Shareholder, Trustee, officer, agent, or member of the
Board of Consultants, as such, of this Trust, is made a party to any suit or
proceeding to enforce any such liability, he shall not on account thereof be
held to any personal liability. The Trust shall indemnify and hold each
Shareholder harmless from and against all claims and liabilities, to which such
Shareholder may become subject by reason of his being or having been a
Shareholder, and shall reimburse such Shareholder for all legal and other
expenses reasonably incurred by him in connection with any such claim or
liability. The rights accruing to a Shareholder under this Section 5.1 shall not
exclude any other right to which such Shareholder may be lawfully entitled, nor
shall anything herein contained restrict the right of the Trust to indemnify or
reimburse a Shareholder in appropriate situation even though not specifically
provided herein.
SECTION 5.2. Non-Liability of Trustees etc. No trustee, officer or agent of
the Trust or member of the Board of Consultants, shall be liable to the Trust or
to any Shareholder, Trustee, officer agent or member of the Board of Consultants
thereof for any action of failure to act (including without to limitation the
failure to compel in any way any former or acting Trustee to redress any breach
of trust) except for his own bad faith, willful misfeasance, gross negligence or
reckless disregard of his duties or for his failure to act in good faith in the
reasonable belief that his action was in the best interests of the Trust.
SECTION 5.3. Mandatory Indemnification. The Trust shall indemnify each of its
Trustees, officers, agents and members of the Bord of Consultants, if any
(including persons who serve at its request as directors, officers or trustees
of another organization in which it has any interest, as a shareholder, creditor
or otherwise) against all liabilities and expenses, including amounts paid in
satisfaction of judgements, in compromise or as fines and penalties, and counsel
fees, reasonably incurred by him in connection with the defense or disposition
of any action, suit or other proceeding, whether civil or criminal, in which may
be involved or with which he may be threatened, while in office or thereafter,
by reason of his being or having been such a Trustee, officer, agent or member
of the Board of Consultants, except with respect to any matter as to which he
shall have been adjudicated to have acted in bad faith, willful misfeasance,
reckless disregard of his duties or gross negligence or not to have acted in
good faith in the reasonable belief that his action was in the best interests of
the Trust; provided, however, that as to any matter disposed of by a compromise
payment by such person, pursuant to a consent decree or otherwise, no
indemnification either for said payment or for any other expenses shall be
provided unless the Trust shall have received a written opinion from independent
legal counsel approved by the Trustees to the effect that if either the matter
or willful misfeasance, reckless disregard of duty or gross negligence, or the
matter of good faith and reasonable belief as to the best interests of the
Trust, had been adjudicated, it would have been adjudicated in favor of such
Person. The rights accruing to any Person under these provisions shall not
exclude any other right to which he may be lawfully entitled; provided, that no
Person may satisfy any right of indemnity or reimbursement granted herein or in
Section 5.1 or to which he may be otherwise entitled except out of the property
of the Trust, and no Shareholder shall be personally liable to any Person with
respect to any claim for indemnity or reimbursement or otherwise. The Trustees
may make advance payments in connection with indemnification under this Section
5.3, provided that the indemnified person shall have given a written undertaking
to reimburse the Trust in the event it is subsequently determined that he is not
entitled to such indemnification.
SECTION 5.4. No Bond Required of Trustees. No Trustee shall, as such, be
obligated to give any bond or surety or other security for the performance of
any of his duties hereunder.
SECTION 5.5. No Duty of Investigation; Notice in Trust Instruments, etc. No
purchaser, lender, transfer agent or other person dealing with the Trustees or
any officer or agent of the Trust shall be bound to make any inquiry concerning
the validity of any transaction purporting to be made by the Trustees or by said
officer or agent or be liable for the application of money or property, paid,
loaned, or delivered to or on the order of the Trustees or of said officer or
agent. Every note, debenture, bond, obligation, contract, instrument,
certificate, Share or undertaking, and every other act or thing whatsoever
executed in connection with the Trust shall be conclusively taken to have been
executed or done by the executors thereof only in their capacity as Trustees
under this Declaration of Trust or in their capacity as officers or agents of
the Trust. Every written such note, debenture, bond, obligation, contract,
instrument, certificate, Share or undertaking made or issued by the Trustees or
by any officers or agents of the Trust, in their capacity as such, shall contain
an appropriate recital to the effect that the Shareholders, Trustees, officers
and agents of the Trust shall not be personally liable thereunder, nor shall
resort be had to their private property for the satisfaction of any obligation
or claim thereunder, and appropriate references shall be made therein to the
Declaration of Trust, and may contain any further recital which they may deem
appropriate, but the omission of such recital shall not operate to impose
personal liability on any of the Trustees, Shareholders, officers or agents of
the Trust. The Trustees shall, at all times, maintain insurance for the
protection of the Trust Property, its Shareholders, Trustees, officers and
agents in such amount as the Trustees shall deem adequate to cover possible tort
liability, and such other insurance as the Trustees in their sole judgement
shall deem advisable.
SECTION 5.6. Reliance on Experts, etc. Each Trustee and officer of the Trust
shall, in the performance of his duties, be fully protected in relying in good
faith upon the books of account of the Trust, reports made to the Trust by any
of its officers or employees or by the Adviser or by counsel, accountants,
appraisers or other experts or consultants selected with reasonable care by the
Trustees or officers, or upon other records of the Trust.
ARTICLE 6.
SHARES OF BENFICIAL INTEREST
SECTION 6.1. Description of Shares. The interest of the Shareholders
hereunder shall be divided into shares of beneficial interest which shall be
known collectively as "Shares", all of which shall be without par value and
shall be fully paid and no assessment shall ever be made upon Shareholders.
There shall be two classes of Shares; one such class shall be known as "Common
Shares" and the other shall be known as "Preferred Shares". The number of Common
Shares which the Trust shall have authority to issue is unlimited, and the
number of Preferred Shares which the Trust shall have authority to issue is
2.000,000 Preferred Shares. Holders of record at any time of outstanding Shares
of any class are herein referred to as "Shareholders".
SECTION 6.2. Common Shares. Subject to the provisions of any series of
Preferred Shares which may at the time be outstanding, the holders of Common
Shares shall be entitled to receive, when and as declared from time to time by
the Trustees out of any funds legally available for the purpose, such dividends
as may be declared from time to time by the Trustees in accordance with Section
6.12. In the event of the termination of the Trust pursuant to Section 10.1, or
upon the distribution of its assets, after the payment in full or the setting
apart for payment of such preferential amounts, if any, as the holders of
Preferred Shares at the time outstanding shall be entitled, the remaining assets
of the Trust available for payment and distribution to Shareholders shall,
subject to any participating or similar rights of Preferred Shares at the time
outstanding, be distributed ratably among the holders of Common Shares at the
time outstanding in accordance with Section 10.3. All Common Shares shall have
non-cumulative voting rights, and shall have no preference, conversion, exchange
or redemption rights.
SECTION 6.3. Preferred Shares. The Trustees are hereby expressly authorized
at any time, and from time to time, upon the affirmative vote of at least 75% of
the Trustees then in office, to provide for the issuance of Preferred Shares in
one or more series, with such voting powers, full or limited, or without voting
powers, and with such designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, as shall be stated and expressed in the resolution or
resolutions providing for the issue thereof adopted by the Trustees, and as are
not stated and expressed in the Declaration of Trust, including (without
limiting the generality thereof) the following as to each such series:
(a) the designation of such series,
(b) the dividends payable with respect to such series, the rates or basis
for determining such dividends, any conditions and dates upon which such
dividends shall be payable, the preferences, if any, of such dividends over, or
the relation of such dividends, shall be payable on any other class or series of
Shares of the Trust, whether such dividends shall be non-cumulative or
cumulative and, if cumulative, the date or dates from which such dividends shall
be cumulative,
(c) whether, subject to Section 4.6(i), Preferred Shares of shall be
redeemable (in addition to the Trust's right of redemption as set forth in
Section 6.19) at the option of the Trust or the holder or both or upon the
happening of a specified event and, if redeemable, whether for cash, property or
rights, including Securities of the Trust, the times, prices or rates and any
adjustment and other terms and conditions of such redemption,
(d) the terms and amount of any sinking, retirement or purchase fund
provided for the purchase or redemption of Preferred Shares of such series,
(e) whether or not Preferred Shares of such series shall be convertible
into or exchangeable for Shares of another class or series, at the option of the
Trust or of the holder or both or upon the happening of a specified event and,
if provision be made for such conversion or exchange, the terms, prices, rates,
adjustments and any other terms and conditions thereof,
(f) the extent, if any, to which the holders of the Preferred Shares of
such series shall be entitled to vote with respect to the election of Trustees
or otherwise, including, without limitation, the extent, if any, to which such
holders shall be entitled, voting as a series or as part of a class, to elect
one or more Trustees upon the happening of a specified event or otherwise,
(g) the restrictions, if any, on the issue or reissue of Preferred Shares
of such series or any other series,
(h) the extent, if any, to which the holders of the Preferred Shares of
such series shall be entitled to preemptive rights, and
(i) the rights of the holders of the Preferred Shares of such series upon
the termination of the Trust or any distribution of its assets.
Before the Trust shall issue any Preferred Shares of any series, a certificate
setting forth the resolution or resolutions of the Trustees fixing the voting
powers, designations, preferences and rights of such series, the qualifications,
limitations or restrictions thereof, and the number of Preferred Shares of such
series authorized by the Trustees, shall be signed by a Trustee or the Secretary
of the Trust and filed in accordance with Section 11.1.
Unless otherwise provided in any such resolution or resolutions, the number of
Preferred Shares of the series authorized by such resolution or resolutions may
be increased or decreased (but not below the number of Preferred Shares of such
series then outstanding) by a certificate, setting forth a resolution or
resolutions adopted by at least 75% of the Trustees then in office authorizing
such increase or decrease, signed by a Trustee or the Secretary of the Trust and
filed in accordance with Section 11.1. Unless otherwise provided in the
resolution or resolutions creating such series, the number of Preferred Shares
specified in any such decrease shall be restored to the status of authorized but
unissued Preferred Shares (without designation as to series). Unless otherwise
provided in such resolution or resolutions, any other amendment to such
resolution or resolutions may be effected by a certificate, setting forth a
resolution adopted by at least 75% of the Trustees then in office authorizing
such amendment and certifying that such amendment has been approved by such
votes, if any, as may be required pursuant to Section 10.6, signed by a Trustee
or the Secretary of the Trust and filed in accordance with Section 11.1. Any
such amendment may, without limitation, cancel or otherwise affect the right of
the holders of Preferred Shares of such series to receive dividends which have
accrued but have not been declared. Holders of Common Shares shall not be
entitled to vote on such amendments to any such resolutions.
SECTION 6.4. Trust Only. It is the intention of the Trustees to create on]y
the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time, and to give to each Shareholder only such rights
and to impose upon him only such obligations as are conferred or imposed upon
him as a beneficiary hereunder. It is not the intention of the Trustees to
create a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust.
Nothing in this Declaration of Trust or in the certificates of Shares shall
be construed to make the holders of said certificates, either by themselves or
with the Trustees, partners or members of a joint stock association.
SECTION 6.5. Share Certificates. Every Shareholder shall be entitled to
receive a certificate specifying the number of Shares of the applicable class or
series held by him. Such certificates shall be treated as negotiable and title
thereto, and to the Shares represented thereby, shall be transferred by delivery
thereof to the same extent in all respects as stock certificates, and the shares
represented thereby of a Massachusetts business corporation. Unless otherwise
determined by the Trustees such certificates shall be signed by the President
and Treasurer or Secretary, and shall be countersigned by a transfer agent, if
any and registered by a registrar, if any. There shall be filed with each
transfer agent and registrar, if any, a copy of the authorized form of
certificate, certified by the President or Secretary and such form shall
continue to be used unless and until the Trustees approve some other form. In
case any one or more officers of the Trust who shall have signed (or whose
facsimile signature shall appear on ) certificates shall cease to be such
officer or officers before such certificates shall have been actually issued,
such certificates may nevertheless be issued with the same effect as though the
persons who signed such certificates (or whose facsimile signature appears
thereon) had not ceased to be such officers of the Trust. The Trustees may, in
their discretion, authorize certificates to be signed or authenticated by the
facsimile signature of an officer or officers of the Trust provided that any
certificate signed or authenticated by the facsimile signature of an officer
shall not be valid unless manually countersigned by either a transfer agent or a
registrar.
Each certificate issued by the Trust after April 9, 1974 to represent any
Shares shall include, on the face or back thereof, a statement that the Trust
will furnish to the holder therof, upon written request without charge, the
powers, designations, preferences and relative, participating, optional or other
special rights of each class of Shares or series thereof and the qualifications,
limitations or restrictions thereof.
SECTION 6.6. Issuance of Shares. Subject to the provisions of any series of
Preferred Shares at the time outstanding, the Trustees, in their discretion, may
from time to time without vote of the Shareholders issue Shares, in addition to
the then issued and outstanding Shares and Shares held in the treasury, to such
party or parties and for such amount and type of consideration, including cash,
property or services, at such time or times, and on such terms as the Trustees
may deem best, and may in such manner acquire other assets (including the
acquisition of assets subject to, and in connection with the assumption, of
liabilities) and businesses. In connection with any issuance of Shares, the
Trustees may issue fractional Shares or may provide for the issuance of scrip
for fractions of Shares and determine the terms of such scrip including, without
limiting the generality of the foregoing, the time which any such scrip must be
surrendered for exchange into Shares and the rights if any, of holders of scrip
upon the expiration of the time so fixed, the rights, if any, to receive
proportional distributions, and the rights, if any, to redeem scrip for cash, or
the Trustees may, in their discretion, or if they see fit at the option of each
holder, provide in lieu of scrip for the adjustment of fractions in cash. The
provisions of Section 6.5 hereinabove relative to certificates for Shares shall
apply so far as appropriate to such scrip, except that such scrip may in the
discretion of the Trustees be signed by a transfer agent alone notwithstanding
that there is then a registrar for the Shares and need not be signed by any
officer of the Trust.
SECTION 6.7. Register of Shares. A register shall be kept by or on behalf of
the Trustees under the direction of the Trustees which shall contain the names
and addresses of the Shareholders and the number of Shares of each class and
series thereof held by them respectively and the numbers of the certificates
representing such Shares and a record of all transfers thereof. Only
Shareholders whose certificates are so recorded shall be entitled to receive
dividends or distributions applicable to the respective classes or series of
Shares held by them, or otherwise to exercise or enjoy the rights of
Shareholders. No Shareholder shall be entitled to receive payment of any
dividend or distribution, nor to have notice given to him as herein provided,
until he has give his address to a transfer agent or such other officer or agent
of the Trustees as shall keep the said register for entry thereon.
SECTION 6.8. Transfer Agent and Registrar. The Trustees shall have power to
employ a transfer agent or transfer agents, and a registrar or registrars for
any one or more classes or series of Shares. The transfer agent or transfer
agents may keep the said register and record therein the original issues and
transfers, if any, of the said Shares and countersign certificates of Shares
issued to the persons entitled to the same. Any such transfer agents and
registrars shall perform the duties usually performed by transfer agents and
registrars of certificates of stock in a corporation, except as modified by the
Trustees. In accordance with the usual custom of corporations having a transfer
agent, certificates for Shares in blank (signed or bearing facsimile signatures)
may be deposited with any transfer agent of the Trust, to be used by the
transfer agent in accordance with the authority conferred upon it as occasion
may require, and in so doing the signers of such certificates shall not be
responsible for any loss resulting therefrom.
SECTION 6.9. Transfer of Shares. Shares shall be transferable on the records
of the Trust (other than pursuant to Section 6.10) only by, the record holder
thereof or by his agent thereunto duly authorized in writing, upon delivery to
the Trustees or a transfer agent of the Trust of the certificate therefor,
properly endorsed or accompanied by a duly executed instrument of transfer,
together with such evidence of the genuineness of each such endorsement,
execution, and authorization and of other matters as may reasonably be required.
Upon such delivery the transfer shall be recorded on the register of the Trust
and a new certificate for the Shares so transferred shall be issued to the
transferee, and in case of a transfer of only a part of the Shares represented
by any certificate, a new certificate for the residue thereof, shall be issued
to the transferor. But until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes hereof and
neither the Trustees nor any transfer agent or registrar nor any officer or
agent of the Trust shall be affected by any notice of the proposed transfer.
SECTION 6.10. Shareholders of Record by Operation of Law. Any person becoming
entitled to any Shares in consequence of the death, bankruptcy, or incompetence
of any Shareholder, or otherwise by operation of law, shall be recorded as the
holder of such Shares and receive a new certificate therefor upon production of
the proper evidence thereof and delivery of the existing certificate to the
Trustees or a transfer agent of the Trust. But until such record is made, the
Shareholder of record shall be deemed to be the holder of such Shares for all
purposes hereof and neither the Trustees nor any transfer agent or registrar nor
any officer or agent of the Trust shall be affected by any notice of such death,
bankruptcy or incompetence, or other operation of law.
SECTION 6.11. Joint Ownership. The Trustees may treat two or more Persons
holding any Shares as joint tenants of the entire interest therein unless their
ownership is expressly otherwise recorded on the register of the Trust, but no
entry shall be made in the register or in any certificate that any Person is in
any other manner entitled to any future, limited, or contingent interest in any
Share; provided, however, that any Person recorded as a holder of any Share may,
subject to the provisions hereinafter contained, be described in the register or
in any certificate as a fiduciary of any kind and any customary words may be
added to the description of the holder to identify the nature of such fiduciary
relationship.
SECTION 6.12. No Obligation with the Respect to Other Instruments. The
Trustees shall not, nor shall the Shareholders, or any officer, transfer agent
or other agent of the Trust or of the Trustees, be bound to see to the execution
of any trust, express, implied or constructive, or of any charge, pledge, or
equity to which any of the Shares or any interest therein are subject, or to
ascertain or inquire whether any sale or transfer or any such Shares or
interests therein by any such Shareholder or his personal representatives is
authorized by such trust, charge, pledge or equity, or to recognize any Person
as having any interest therein except for the Persons recorded as such
Shareholders. The receipt of the Person in whose name any Share is recorded, or,
if such Share is recorded in the names of more than one Person, the receipt of
any one of such Persons or the receipt of the duly authorized agent of any such
Person shall be sufficient discharge for all dividends and other money and for
all Shares, notes, debentures, bonds, obligations, scrip, and other property
payable, issuable, or deliverable in respect of any such Share and from all
liability to see to the application thereof.
SECTION 6.13. Loss, etc. of Certificate. In case of the loss, mutilation or
destruction of any certificate of Shares hereunder, the Trustees may issue or
cause to be issued a new certificate on such terms as they may see fit.
SECTION 6.14. Distributions to Shareholders. Subject to the provisions of any
series of Preferred Shares at the time outstanding, the Trustees shall from time
to time distribute such proportion of the net profits, surplus (including
paid-in surplus), capital, or assets held by the Trustees as they may deem
proper. Subject to any such provisions, the holders of Common Shares shall be
entitled to receive, in proportion to their respective ownership of Common
Shares, any such dividends or distributions. Subject to any such provisions,
such distribution may be made in cash or property (including without limitation
any type of obligations of the trust or any assets thereof), and the Trustees
may distribute to the holders of Shares of any class or series, in proportion to
their respective ownership thereof, additional Shares of such class or series,
as the case may be, or of any other class or series, in such manner and on such
terms as the Trustees may deem proper. Subject to any such provisions, and such
distributions may be made even though the paid-in capital of this Trust at the
time of any distribution exceeds the net assets of the Trust based either on the
market value or the book value, and such distributions may be among the
Shareholders or record at the time of declaring a distribution or among the
Shareholders of record at such other date (not more than thirty days prior to
payment of such distribution) as the Trustees shall determine. Subject to any
such provisions, the Trustees may always retain from the net profits such amount
as they may deem necessary to pay the debts or expenses of the Trust or to meet
obligations of the Trust, or as they deem desirable to use in the conduct of its
affairs or to retain for future requirements or extensions of the business.
SECTION 6.15. Statement of Source of Funds. In connection with each
distribution to Shareholders, the Trustees shall furnish the Shareholders with a
statement in writing advising as to the source of the funds so distributed or,
if the source thereof has not then been determined, the communication shall so
state, and in such event, the statement as to source shall be forwarded to
Shareholders not later than sixty (60) days after the close of the fiscal year
in which the distribution was made.
SECTION 6.16. Notices. Any and all notices to which any Shareholder hereunder
may be entitled and any and all communications shall be deemed duly served or
given if mailed, postage prepaid, addressed to any Shareholder of record at his
last known address as recorded on the register of the Trustee.
SECTION 6.17. Purchase of Shares by the Trust; Treasury Shares. Subject to
the provisions of any series of Preferred Shares at the time outstanding the
Trustees may, on behalf of the Trust, at any time purchase or otherwise acquire
outstanding Shares of the Trust for such consideration and on such terms as they
may deem proper. Shares so purchased or acquired by the Trustees on behalf of
the Trust shall not, so long as they belong to the Trust, receive dividends or
distributions or be entitled to any voting rights or be deemed outstanding for
any purpose hereunder. Subject to any such provisions, such Shares may in the
discretion of the Trustees be cancelled or such Shares may in the discretion of
the Trustees be transferred at such times, to such parties, and for such
consideration as the Trustees may determine.
SECTION 6.18. Purchase etc. of Shares by Trustee. The Trustee, or any of
them, may in their individual capacity, purchase and otherwise acquire or sell
and otherwise dispose of Shares issued hereunder and in so doing shall be
subject to the same limitations as a director of a Massachusetts business
corporation at the time of the exercise of such power.
SECTION 6.19. Redemption of Shares; Disclosure of Holding. If the Trustee
shall, at any time and in good faith be of the opinion that direct or indirect
ownership of Shares of the Trust has or may become concentrated in any
individual or individuals to an extent which would disqualify the Trust as a
Real Estate Investment Trust then the Trustees shall have the power by lot or
other means deemed equitable to them (i) to call for redemption a number of
concentrated Shares sufficient, in the opinion of the Trustees, to maintain or
bring the direct or indirect ownership of Shares of the Trust into conformity
with the requirements of such qualification and (ii) to refuse to transfer
Shares to any person whose acquisition of the Shares in question would in the
opinion of the Trustees result in such disqualification. The redemption price
for a class or series shall be equal to the fair market value of the Shares as
reflected in the latest bid quotation for the Shares (if then traded
over-the-counter) or the closing sale price (if then listed on a national
securities exchange) of such class or series as of the business day preceding
the day on which notice of redemption is sent, or, if no quotations or closing
sale price for the Shares are available, as determined in good faith by the
Trustees. From and after the date fixed for redemption by the Trustee, the
holder of any Shares so called for redemption shall cease to the entitled to
dividends, voting rights and other benefits with respect to such Shares
expecting only the right to payment of the redemption price fixed as aforesaid.
For the purpose of this Section 6.19, the terms "individual" and "ownership" of
Shares shall be defined in accordance with or by reference to the qualification
requirements of the REIT Provisions of the Internal Revenue Code.
The Shareholders shall upon demand disclose to the Trustees in writing such
information with respect to direct and indirect ownership of Shares as the
Trustee deem necessary to comply with the provisions of the Internal Revenue
Code, or to comply with the requirements of any other taxing authority.
SECTION 6.20. Warrants. Subject to the provisions of any series of Preferred
Shares at the time outstanding, the Trustees, in their discretion, may from time
to time without vote of the Shareholders issue share purchase warrants (herein
referred to as "Warrants") which shall entitle the holders thereof to subscribe
to Shares and/or fractional Shares of such class or series or scrip at such time
or times and on such terms as the Trustees may prescribe including, without
limiting the generality of the foregoing, the times within which any such
Warrants must be exercised, any provision for redemption of Warrants by the
Trust and the consideration to be paid for such Shares. Subject to any such
provisions, warrants may be issued to such parties (but subject to Shareholder
preemptive rights to the extent provided in Section 6.22) and for such
consideration (subject to Section 3.7) as the Trustees may from time to time
determine (including the issuance of detachable or non-detachable Warrants as an
inducement to persons acquiring or underwriting any Securities of the Trust).
The provisions of this Article 6 relative to certificates for Shares shall apply
so far as appropriate to such Warrants, except that such Warrants may in the
discretion of the Trustee, be signed by the Transfer Agent or Warrant Agent
only.
SECTION 6.21. Issuance of Shares in Units. Notwithstanding any other
provision of this Declaration of Trust, the Trustees may issue from time to time
Units containing multiple Shares, with or without detachable or non-detachable
Warrants. Each Share issued in any such Unit shall have the same characteristics
and entitle the registered holder thereof to the same rights as any other Share
of the same class or series issued by the Trustees, except that the Trustees may
provide (and may cause a notation to be placed on the certificate representing
such Unit or the Shares issued in any such Unit) that for a specified period not
to exceed one year after issuance, Shares and/or Warrants issued in any such
Unit may be transferred upon the books of the Trust only in such Unit.
SECTION 6.22. Limitation of Pre-emptive Rights. Holders of Common Shares
shall have no pre-emptive rights with respect to any Shares of any class or
series or any Securities of the Trust which evidence indebtedness (or any Shares
into which such Securities of the Trust may be converted) sold, offered or
issued by the Trust at any time and shall have no pre-emptive rights with
respect to Warrants, rights and options of the Trust sold, offered or issued by
the Trust at any time as part of a public offering of such Warrants, rights or
options or as part of a private financing or borrowing arrangement or pursuant
to a stock option plan providing for the issuance of Shares pursuant to
"qualified stock options", as defined in the Internal Revenue Code, as from time
to time amended. Subject to the provisions of any series of Preferred Shares at
the time outstanding, and subject to the foregoing limitations, holders of
Common Shares shall have pre-emptive rights solely with respect to the sale,
offering or issuance of Warrants, rights and options to acquire Common Shares
issued by the Trust. Holders of any series of Preferred Shares shall have
pre-emptive rights only to the extent, if any, provided in the provisions of
such series.
SECTION 6.23. Dividend Investment Plan. Subject to the provisions of any
series of Preferred Shares at the time outstanding, the Trustees may establish
from time to time a plan for holders of Common Shares permitting the investment
of dividends in Common Shares and may amend, modify, alter and terminate any
such plan. Any such dividend investment plan may include a provision fixing the
purchase price at market price or book value or at the lower of market price or
the book value of the Common Shares.
ARTICLE 7
SHAREHOLDERS.
SECTION 7.1. Ownership of Trust Property. The ownership of all Trust Property
and the control of the affairs of the Trust are vested exclusively in the
Trustees, and the Shareholders shall have no interest therein other than the
beneficial interest conferred by their Shares issued hereunder, and they shall
have no right to call for any partition or division of any property, profits,
rights, or interests. Notwithstanding any other provisions hereof, all real
estate at any time forming part of the Trust Property shall be held upon trust
for sale and conversion into personal estate at such time or times and in such
manner and upon such terms as the Trustees shall approve, but the Trustees shall
have power, until the termination of this Trust, to postpone such conversion so
long as they in their uncontrolled discretion shall think fit, and for the
purpose of determining the nature of the interest of the Shareholders therein,
all such real estate shall at all time be considered as personal estate; and the
real estate and personal property comprised in the trust estate shall constitute
a single fund.
SECTION 7.2 Shares Deemed Personal Property. The Shares issued hereunder
shall be personal property giving only the rights in this Declaration of Trust
and in the certificates thereof specifically set forth. The death of a
Shareholder during the continuance of this Trust shall not terminate the Trust
nor give his legal representatives a right to an accounting or to take any
action in the courts or otherwise against other Shareholders or the Trustees or
the property held hereunder, but shall simply entitle the legal representatives
of the deceased Shareholder to demand and receive a new certificate held by the
deceased Shareholder, and upon the acceptance of which new certificate such
legal representatives shall succeed to all the rights of the deceased
Shareholder under this Trust.
SECTION 7.3. Meetings. The Annual Meeting of Shareholders shall be held each
year after mailing to the Shareholders of the annual Report described in Section
2.13 at a place, within or without the Commonwealth of Massachusetts, and on a
date to be fixed, from time to time, by the Trustees or by the By-laws.
Special Meetings of the Shareholders shall be called at any time when ordered
by the President or by two Trustees, or, subject to the provisions of any series
of Preferred Shares then outstanding, upon the written request of the holders of
25% of the Shares of all classes then outstanding and entitled to vote at such
meeting, specifying the nature of the business for which said meeting is called
and no other business shall be considered at such meeting. In the event an
Annual Meeting is not held in a year as above provided in this Section 7.3, a
Special Meeting of Shareholders may be held in lieu thereof with all the force
and effect of an Annual Meeting.
SECTION 7.4. Notice of Meeting. Notice of all meetings of the Shareholders
shall be mailed or delivered by a Trustee or Trustees or an officer or agent of
the Trust to each Shareholder entitled to vote thereat at his registered address
at least ten (10) days before the meeting. No business shall be transacted at
any Special Meeting of Shareholders unless notice of such business has been
given in the call for the meeting. Any adjourned meeting may be held as
adjourned without further notice.
SECTION 7.5. Quorum. Subject to the provisions of any series of Preferred
Shares at the time outstanding, the presence, in person or by proxy, of the
holders of record of Shares (of any class) entitled to vote at the meeting
aggregating a majority of the total number of Shares of all classes then issued
and outstanding and entitled to vote on any question shall be necessary and
sufficient to constitute a quorum for action on such question at any Annual or
Special Meeting of Shareholders. If a quorum shall not be present a majority of
the Shareholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn from time to time the meeting until quorum
shall be present or represented. At any adjourned meeting at which a quroum
shall be present or represented any business may be transacted which might have
been transacted at the meeting as originally notified.
SECTION 7.6. Type of Shareholder Action Binding on Trustees. Subject to the
provisions of any series of Preferred Shares then outstanding, only action taken
by the Shareholders of the type specified in Section 2.2, 2.3, 7.3, 8.5, 10.1,
10.4, 10.5 and 10.6 hereof (and then only if such action receives the requisite
Shareholder approval) shall in any way bind the Trustees. Subject to Section
10.6, the holders of Preferred Shares of any series shall be entitled to vote
upon the matters referred to in the preceding sentence or any other matters only
to the extent specified in the Trustee resolutions providing for such series.
SECTION 7.7. Fixing Date For Determination of Shareholders of Record. Except
as may be provided in the provisions of any series of Preferred Shares at the
time outstanding, for the purpose of determining the Shareholders who are
entitled to vote or act at any meeting or any adjournment thereof, or who are
entitled to participate in any dividend, or for the purpose of any other action
the Trustees may from time to time close the transfer books for such period not
exceeding sixty (60) days as the Trustees may determine; or without closing the
transfer books the Trustees may fix a date not more than sixty (60) days prior
to the date of any meeting of Shareholders or dividend payment or other action
as a record date for the determination of Shareholders entitled to vote at such
meeting or any adjournment thereof or to receive such dividend or to be treated
as Shareholders of record for purposes of such other action and any Shareholder
who was a Shareholder at the time so fixed shall be entitled to vote at such
meeting or any adjournment thereof or to receive such dividend or to be treated
as a Shareholder of record for purposes of such other action even though he has
since that date disposed of his Shares, and no Shareholder becoming such after
said date shall be so entitled to vote at said meeting or any adjournment
thereof or to receive such dividend or to be treated as a Shareholder of record
for purposes of such other action.
SECTION 7.8. Proxies; Voting. At any meeting of the Shareholders, any
Shareholder entitled to vote thereat may vote by proxy, provided that no proxy
shall be voted on any matter unless it shall have been filed prior to the vote
on such matter with the Secretary or with such other officer or agent of the
Trust as the Secretary may direct. A proxy purporting to be executed by or on
behalf of a Shareholder shall be deemed valid unless challenged at or prior to
its exercise and the burden of proving invalidity shall rest on the challenger.
Pursuant to a resolution adopted by a Majority of the Trustees, proxies may be
solicited in the name of one or more Trustees or one or more officers of the
Trust. Only Shareholders of record shall be entitled to vote and each full Share
having voting power shall be entitled to one vote or, in the case of Preferred
Shares having voting power, such greater or lesser vote as may have been
provided in the Trustees' resolutions providing for such Preferred Shares. When
any full Share is held jointly by several persons, any one of them may vote at
any meeting in person or by proxy in respect of such Share, but if more than one
of them shall be present at such meeting in person or by proxy in respect of
such Share, and such joint owners or their proxies so present disagree as to any
vote to be cast, such vote shall not be received in respect of such Share. If
the holder of any such Share is a minor or a person of unsound mind, and subject
to guardianship or to the legal control of any other person as regards the
charge or management of such Share, he may vote by his guardian or such other
person appointed or having such control, and such vote may be given in person or
by proxy.
SECTION 7.9. Share Action by Unanimous Written Consent. Any action taken by
Shareholders may be taken without a meeting if all Shareholders entitled to vote
on the matter consent to the action in writing and the written consents are
filed with the records of the meetings of Shareholders. Such consent shall be
treated for all purposes as a vote taken at a meeting of Shareholders.
Shareholder action by less than unanimous written consent or authorization may
be taken only as expressly provided in this Declaration of Trust.
SECTION 7.10. Inspection of Records. Shareholders and any Federal or state
securities or "blue sky" administrator or other similar authority shall have the
right and for proper purposes, to inspect the records of the Trust at such
office or offices as the records may be regularly maintained to the same extent
as is permitted to shareholders of a Massachusetts business corporation.
ARTICLE 8
ADVISER.
SECTION 8.1. Adviser. The Trustees are responsible for the general policies
of the Trust and for such general supervision of the business of the Trust
conducted by all officers, agents, employees, advisers, managers, or independent
contractors of the Trust as may be necessary to ensure that such business
conforms to the provisions of this Declaration of Trust. However, the Trustees
are not required personally to conduct the business of the Trust and, consistent
with their ultimate responsibility as stated above, the Trustees shall have the
power to appoint, employ, or contract with such Persons including one or more of
themselves and any corporation, partnership, or trust in which one or more of
them may be directors, officers, stockholders, partners or trustees, subject to
any applicable requirements of Section 3.23i as the Trustees may deem necessary
or desirable for the transaction of the business of the Trust. The Trustees may
also employ or contract with a corporation, partnership, trust, or individual
(herein referred to as the "Adviser"), to whom, consistent with their ultimate
responsibility as stated above the Trustees may grant or delegate such authority
as the Trustees may, in their sole discretion, deem necessary or desirable,
without regard to whether such authority is normally granted or delegated by
trustees. The Trustees may exercise broad discretion in allowing the Advisor to
administer the operations of the Trust, to act as agent for the Trust, to
execute documents on behalf of the Trustees, and to make executive decisions
which conform to general policies and general principles previously established
by the Trustees. The Trustees shall have the power to determine the terms of
compensation of the Adviser (subject to the provisions of Section 8.5 hereof) or
any other such Person or Persons whom they may employ or with whom they may
contract.
SECTION 8.2. Advisory Contract. The first contract with the Adviser entered
into by the Trustees may have an initial term which expires at the end of the
first fiscal year of the Trust which commences after the first public offering
of Shares; thereafter, the Trustees shall not enter into any contract (or
extension thereof) with the Adviser unless such contract has an initial term of
no more than one year and provides for annual renewal or extension thereafter.
The initial contract with the Adviser and any extension or renewal thereof shall
be terminable by either party on sixty (60) days notice. The Trustees shall not
enter into such a contract with any corporation, trust or partnership in which a
Trustee is a director, officer, Trustee or holder of more than 1% of the
outstanding capital stock or participating or beneficial interest unless such
contract requires for renewal or extension thereof the affirmative vote of a
majority of the disinterested Trustees.
SECTION 8.3 Relationship With Trustees. Not more than 49% of the total number
of Trustees may be affiliated (i.e., may be a director, officer, partner,
trustee, employee or holder of more than a one percent ownership interest) with
the Adviser and its affiliates, provided, however, that if at any time the
percentage of Trustees who are so affiliated becomes by reason of one or more
vacancies in the Trustees more than 49% of the total number of Trustees then in
office, then within 60 days of such vacancy occurring the continuing Trustees or
Trustee then in office shall appoint, pursuant to Section 2.4 hereof, a
sufficient number of other individuals as Trustees so that there is again not
more than 49% of the total number of Trustees then in office who are so
affiliated. The Trustees shall at all times endeavor to comply with the
requirements of this Section 8.3 but failure to so comply shall not invalidate
any action taken by the Trustees, the office of any Trustee or any act, or the
authority to act, of the Advisor.
SECTION 8.4. Other Activities of the Adviser. The Adviser which the Trustees
employ or with which they contract and any officer, director, employee or
shareholder of the Adviser who may also be a Trustee, officer or employee of the
Trust, may engage in other activities, including acquiring, managing, operating,
disposing of and otherwise dealing in property of all types, real, personal and
mixed, tangible and intangible, and acting as a broker for, and/or rendering
advice and other services to, other Persons in connection with the sale or
purchase of real estate or Mortgages and the management of its or his own
investments and the investments of other Persons and may be compensated for any
such advice or services by such other Person. Where the Adviser originates or
arranges the acquisition or disposition of a Trust investment, it may receive a
brokerage commission or other compensation therefor from the seller or buyer or
other Person, provided that except upon termination or non-renewal of the
contract with the Adviser, such commission or other compensation is required to
be deducted from future advisory fees otherwise payable by the Trust to the
Adviser. The Adviser may also receive a brokerage commission or other
compensation from a participant for services rendered to such participant in a
real estate, mortgage or other investment in which the Trust has invested.
SECTION 8.5. Increase of Adviser's Fee. The affirmative written consent or
vote of the holders of a majority of the aggregate number of Shares then
outstanding and entitled to vote thereon shall be required for any increase in
the Adviser's rate of compensation contained in the first contract executed with
the Adviser subsequent to the date thereon.
ARTICLE 9
COMPLIANCE WITH PROVISIONS OF INTERNAL REVENUE CODE.
SECTION 9.1. Compliance With Provisions of Internal Revenue Code. The
Trustees, in exercising the powers herein granted to them, shall exercise due
diligence to so conduct the affairs of the Trust as to qualify the Trust, as
promptly as possible consistent with their investment objectives and
requirements, and continue its qualification, as a Real Estate Investment Trust;
provided, however, that no Trustee, officer or agent of this Trust shall be
liable for any act or omission resulting in the loss of tax benefits under that
law, except for that arising from his own bad faith, willful misfeasance, gross
negligence, or reckless disregard of his duties.
ARTICLE 10
AMENDMENT OR TERMINATION OF TRUST.
SECTION 10.1. Amendments or Termination. Except for amendments effected
pursuant to the final paragraph of Section 6.3 and except as provided in the
provisions of any series of Preferred Shares at the time outstanding, the
provisions of this Declaration of Trust maybe amended or altered (except as to
the limitation of personal liability of the Shareholders, Trustees and members
of the Board of Consultants, if any, and the prohibition of assessments upon
Shareholders) or the Trust may be terminated, at any meeting of Shareholders
called for the purpose, by the affirmative vote of the holders of not less than
a majority of the aggregate number of Shares then outstanding and entitled to
vote thereon or by an instrument in writing, without a meeting, signed by a
Majority of the Trustees and the holders of not less than a majority of such
Shares; provided, however, that after fifteen (15) days' written notice to the
Shareholders of the proposed action, the Trustees may, from time to time by vote
of Two-thirds of the Trustees, amend or alter the provisions of this Declaration
of Trust (except for provisions subject to Section 10.5), without the vote or
assent of the Shareholders, to the extent deemed by the Trustees in good faith
to be necessary to meet the requirements for qualification as a Real Estate
Investment Trust under the provisions of the Internal Revenue Code.
Notwithstanding the foregoing, no amendment may be made pursuant to this Section
10.1 which would change any rights with respect to any outstanding Common Shares
of the Trust by reducing the amount payable thereon upon liquidation of the
Trust or by diminishing or eliminating any voting rights pertaining thereto,
except with the vote or written consent of the holders of two-thirds ( 2/3 ) of
the outstanding Common Shares entitled to vote thereon.
SECTION 10.2. Termination or Amendment by Trustees Prior to First Offering.
Notwithstanding any other provision hereof until such time as a Registration
Statement under the Securities Act of 1933 as amended, covering the first public
offering of Shares of the Trust shall have become effective this Declaration of
Trust may be terminated or amended in any respect by a vote of a Majority of the
Trustees or by unanimous written consent of the Trustees.
SECTION 10.3. Powers of Trustees Upon Termination. Upon the Termination of
the Trust, the Trustees may sell and convert into money the whole of the Trust
Property, or any part thereof, and after paying, retiring, or providing for the
payment of, all known liabilities and obligations of the Trustees and providing
for indemnity against any other outstanding liabilities and obligations, shall
divide the proceeds thereof among, and distribute in kind, at valuations made by
them which shall be conclusive, all other property then held by them in trust
hereunder to, the Shareholders ratably according to the respective rights of the
class or series of Shares held by them. In making any sale under this provision
the Trustees shall have power to sell by public auction or private contract and
to buy in or rescind or vary any contract of sale and to resell without being
answerable for loss and for said purposes, to do all things, including the
execution and delivery of instruments, as may by their performance thereof be
shown to be in their judgment necessary or desirable in connection therewith.
The powers of sale and all other powers herein given to the Trustees shall
continue as to all property at any time remaining in their hands or ownership
even though all times herein fixed for distribution of Trust Property may have
passed.
SECTION 10.4. Power to Effect Reorganization. Except as provided in the
provisions of any series of Preferred Shares at the time outstanding, the
Trustees, by vote of, or written instrument signed by, a Majority of the
Trustees, may direct the organization of a corporation, association, trust or
other organization into which the Trust, if permitted by law, may merge, or
which shall take over the Trust Property and carry on the affairs of the Trust,
and after receiving an affirmative vote of the holders of not less than a
majority of the aggregate number of Shares then outstanding and entitled to vote
thereon, at a meeting of Shareholders called for the purpose, or after receipt
of an instrument in writing, without a meeting, signed by the holders of not
less than a majority of such Shares, the Trustees may effect such merger or may
sell, convey and transfer the Trust Property to any such corporation,
association, trust or organization in exchange for shares or securities thereof,
or beneficial interest therein, and the assumption by such transferee of the
liabilities of the Trust and thereupon terminate this Trust and deliver such
shares, securities or beneficial interest to Shareholders in accordance with the
terms of the merger or other agreement governing the transaction; provided,
however, that no such merger into or sale, conveyance or transfer of the Trust
Property shall be made to any corporation, association, trust or other
organization unless and until the Trustees shall be furnished with the opinion
of counsel selected by the Trustees that (i) such transferee will qualify for
benefits with respect to the federal income tax which are substantially equal to
the benefits for which this Trust qualifies at such time, or will qualify under
the Federal Income Tax Law as enacted although not then in effect, (ii) such
transferee has a primary purpose substantially the same as the principal purpose
of this Trust, as stated in the Preamble to this Declaration of Trust, and (iii)
the shares, securities, or beneficial interest which will be issued to holders
of each class or series of Shares in exchange for such property will constitute
an investment substantially equal in quality and substantially the same as an
investment in such Shares.
SECTION 10.5. Limitation on Shareholder Rights. The provisions of Sections
2.2, 2.3, 7.3, 8.5, 10.1, 10.4, and 10.6 shall be subject to the requirements of
the Internal Revenue Code. If any provision granting limiting the voting rights
and rights to consent of Shareholders in such Sections shall conflict with the
requirements for qualification as a Real Estate Investment Trust, such
provisions shall be deemed to be void and without any force or effect ab initio
(except that any action taken pursuant to any such provision prior to the
express determination by the Trustees of such conflict shall be valid) and the
Trustees, without Shareholder consent shall promptly amend the Declaration of
Trust to conform to the aforesaid requirements. In the event that any provision
relating to the election of Trustees by the Shareholders of the Trust shall be
deemed to be without force or effect, the Trustee then in office shall be deemed
to be the qualified and acting Trustees until such time as the successor
Trustees have been named and qualified. At the next meeting of Shareholders
after the determination of such conflict, there shall be submitted to the
Shareholders the question as to whether such Shareholder's right or rights
should be restored. If the holders of a majority of the Shares outstanding and
entitled to vote on the matter and voting, vote to restore such right or rights,
the Trustees, without further Shareholder consent, shall promptly make any
amendments to the Declaration of Trust necessary to restore such right or
rights.
SECTION 10.6. Class Voting, Right of Preferred Shares. The holders of the
outstanding Preferred Shares shall be entitled to vote a class upon any proposed
amendment or alteration of this Declaration of Trust pursuant to Section 10.1 or
any proposed reorganization pursuant to Section 10.4, or upon any proposed
amendment to be offered pursuant to the third sentence of the final paragraph of
Section 6.3 whether or not otherwise entitled to vote thereon separately or
together with other classes, if the proposed amendment alteration or
reorganization would alter or change the powers, preferences or special rights
expressly applicable to the Preferred Shares so as to affect them adversely. If
any such proposed amendment, alteration or reorganization would alter or change
the powers, preferences or special rights expressly applicable to the Preferred
Shares of any series so as to affect them adversely in a manner different from
other series of Preferred Shares, then only the Preferred Shares of such series
together with any other series of Preferred Shares adversely affected in the
same manner, shall be considered a separate class for purposes of this Section
10.6. Any vote pursuant to this Section 10.6 shall require the affirmative vote
of the holders of not less than two-thirds of the outstanding Preferred Shares
or series thereof, as the case may be, or an instrument or instruments in
writing, without a meeting signed by at lease 75% of the Trustees then in office
and the holders of not less than two-thirds of the outstanding Preferred Shares
or series thereof as the case may be. Any resolution adopted by the Trustees
pursuant to Section 6.3 providing for any series of Preferred Shares may specify
amendments, alterations or reorganizations which shall not, for purposes of this
Section 10.6 be deemed to change the powers, preferences or special rights
expressly applicable to the Preferred Shares of such series so as to affect them
adversely, but the absence of such specification as to any one or more
amendments, alterations, or reorganizations shall not create any inference that
such unspecified amendments, alterations or reorganizations would adversely
affect such series.
ARTICLE 11
MISCELLANEOUS
SECTION 11.1. Governing Law; Filing. This Declaration of Trust is executed by
the Trustees and is delivered in the City of Boston, Massachusetts and with
reference to the laws of The Commonwealth of Massachusetts, and the rights of
all parties and the validity, construction and effect of every provision hereof
and the administration of the Trust created hereby shall be subject to and
construed according to the laws of said Commonwealth. This Declaration of Trust
and any amendment hereof (including any resolution adopted pursuant to Section
6.3) shall as soon as reasonably practicable after its execution or adoption, be
filed in the office of the Secretary of The Commonwealth of Massachusetts, which
filing shall be a condition precedent to the effectiveness of any such
amendment. The Trustees shall also cause to be filed in the aforementioned
office and in all other offices in which recording of the amendment or
instrument in question shall be required from time to time by the laws of The
Commonwealth of Massachusetts or by any other applicable laws or in which such
recording shall seem desirable to the Trustees, all amendments to this
Declaration of Trust and appropriate instruments disclosing changes in the
persons who are Trustees of the Trust but such filing shall not be deemed a
condition to the effectiveness of, and (except as to the required filing or
amendments in the office of the Secretary of The Commonwealth of Massachusetts)
the failure to so file shall not be deemed to invalidate any such amendment or
any election or appointment of any person as a Trustee or the resignation or
removal of any Trustee. In the event the filing under this Section 11.1 of any
such amendment or instrument is not at the time permitted to be made in the
office of the Secretary of The Commonwealth of Massachusetts, the recording of
such amendment or instrument in the Registry of Deeds for Suffolk County,
Massachusetts shall have the same effect as such filing.
SECTION 11.2. Counterparts. This Declaration of Trust and any amendment
hereof may be simultaneously executed in several counterparts each of which so
executed shall be deemed to be an original and such counterparts together shall
constitute one and the same instrument, which shall be sufficiently evidenced by
any such counterpart.
SECTION 11.3. Conclusive Evidence. Any certificate signed by a person who
according to the records in the office of the Secretary of The Commonwealth of
Massachusetts or in any recording office wherein instruments affecting local
real estate are customarily recorded appears to be a Trustee hereunder
certifying the number of identity of Trustees, the due authorization of the
execution of any instrument or writing the form of any vote passed at a meeting
of Trustees or Shareholders, the fact that the number of Trustees present at any
meeting or executing any written instrument satisfied the requirements of this
Declaration of Trust the form of any by-law adopted by or the identity of any
officer elected by the Trustees or the existence or non-existence of any fact or
facts which in any manner relate to the affairs of the Trust shall be conclusive
evidence as to the matters so certified in favor of any person dealing with the
Trustees or any one or more or them and the successors or assigns of such
person.
SECTION 11.4. Construction of Terms Used. In the construction of this
Declaration of Trust whether or not so expressed, words used in the singular or
in the plural respectively include both the plural and singular, word denoting
males include females and words denoting persons including individuals, firms,
associations, companies (joint, stock or otherwise), trusts and corporations
unless a contrary intention is to be inferred from or required by the subject
matter or context. The cover, title, heading of different parts hereof, the
tables of contents, the index of definitions and the marginal notes, if any, are
inserted only for convenience of reference and are not to be taken to be any
part hereof or to control or affect the meaning, construction, interpretation or
effect hereon.
<PAGE>
ARTICLE 12
DURATION OF TRUST
Subject to possible earlier termination in accordance with the provisions of
Article 10 hereof the Trust shall continue until the expiration of twenty (20)
years after the death of the last survivor of the following named persons,
whichever first occurs:
July 18, 1966 Gordon
A. Carpenter Concord
born: son of: Circle Arlington,
Bradford C. Carpenter....... address: Mass.
May 6, 1969 C. Dean
born: son of: Dusseault 16 Edgemoor
Christopher D. Dusseault ... address: Road Belmont, Mass.
April 2, 1968 Arthur
born: daughter G. Siler 40 Heath Hill
Juliet Siler................ of: address: Brookline, Mass
March 28, 1966 Jerome
M. Leonard 65
born: son of: Coronation Drive
Jerome M. Leonard, Jr. ..... address: Dedham, Mass
May 5, 1966 Fred R.
born: daughter Becker 27 Albion
Marth Kerr Becker........... of: address: Street Newton, Mass
July 27, 1967 John A.
born: son of: Ritsher 36 Upland Road
Walter D. Ritsher........... address: Cambridge, Mass.
January 4, 1969 Nelson
born: son of: G. Ross 16 Michael
Douglas M. Ross............. address: Road Hingham, Mass.
January 27, 1966 John
born: son of: L. Worden 8 Kensington
Andrew B. Worden............ adress: Road Arlington, Mass.
April 24, 1967 John L.
born: son of: Worden 8 Kensington
James D. Worden............. address: Road Arlington, Mass.
IN WITNESS WHEREOF, BRINLEY M. HALL, as a Trustee as aforesaid, has signed
these presents this 11th day of April, 1974.
/s/ BRINLEY M. HALL
-------------------------
BRINLEY M. HALL
April 11, 1974
COMMONWEALTH OF MASSACHUSETTS |
> ss
COUNTY OF SUFFOLK |
Then personally appeared before me, BRINLEY M. HALL, who acknowledged the
foregoing instrument to be his free act and deed and the free act and deed of
the Trustees of Hubbard Real Estate Investments.
/s/ Ann Adams Hurley
--------------------------
Notary Public
ANN ADAMS HURLEY, Notary Public
My Commission Expires: June 16, 1975
[NOTARY SEAL]
<PAGE>
Exhibit 9 (a)(1)
A true Copy Witnessed under the Great
Seal of the Commonwealth of Massachusetts.
/s/ Paul Guzzi
-------------------
Paul Guzzi
Secretary of the Commonwealth.
/s/ John Grace
-------------------
Deputy Secretary.
<PAGE>
HUBBARD REAL ESTATE INVESTMENTS
Certificate of Amendment of Fourth
Amended and Restated Declaration of Trust
The undersigned, a Trustee of Hubbard Real Estate Investments (the
"Trust"), hereby certifies pursuant to Section 1.3 of the Fourth Amended and
Restated Declaration of Trust (the "Declaration of Trust"), that at a meeting of
shareholders of the Trust duly called and held on March 29, 1977 in accordance
with said declaration of Trust, at which a quroum of shareholders was present
and voting throughout, the holders of not less than a majority of the aggregate
number of shares of beneficial interest of the Trust then outstanding and
entitled to vote thereon voted to amend the Declaration of Trust by amending
Section 8.4 thereof to read as follows:
SECTION 8.4. Other Activities of the Advisor. The Advisor which the
Trustees employ or with which they contract and any office director, employee or
shareholder of the Adviser who may also be a Trustee, officer or employee of the
Trust, may engage in other activities, including acquiring, managing, operating,
disposing of and otherwise dealing in property of all types, real, personal and
mixed, tangible and intangible, and acting as a broker for, and/or rendering
advice and other services to, other Persons in connection with the sale of
purchase of real estate of Mortgages and the management of its or his own
investments and the investment of other Persons and may be compensated for any
such advice or service by such other Person. Where the Adviser originates or
arranges the acquisition or disposition of a Trust investment, it may receive a
brokerage commission or other compensation therefor from the seller or buyer or
other Person, provided that except upon termination or non-renewal of the
contract with the Adviser, such commission or other compensation is required to
be deducted from future advisory fees otherwise payable by the Trust to the
Adviser. The Adviser may also receive a brokerage commission or other
compensation from a participant for services rendered to such participant in a
real estate, mortgage or other investment in which the Trust has invested
Affiliates of the Adviser may receive compensation from the Trust or other
Persons in connection with investments and activities of the Trust and such
compensation shall not be required to be deducted form advisory fees otherwise
payable by the Trust to the Adviser.
The undersigned further certifies that, pursuant to Section 10 thereof,
such Declaration of Trust has bee amended as aforesaid, effective upon the
filing of this Certificate of Amendment in the Office of the Secretary of the
Commonwealth of Massachusetts.
WITNESS may hand this 29th day of March, 1977.
/s/ Brinley M. Hall
----------------------
Brinley M. Hall - Trustee
<PAGE>
COMMONWEALTH OF MASSACHUSETTS |
> ss:
COUNTY OF SUFFOLK |
On this 29th day of March, 1977, before me personally appeared Brinley M.
Hall, who executed the foregoing instrument and acknowledged that he executed
the same as his free act and deed and the free act and deed of the Trustee of
Hubbard Real Estate Investments.
/s/ Ann Adams Hurley
---------------------
Notary Public
SEAL
My Commission Expires:
ANN ADAMS HURLEY
NOTARY PUBLIC
My commission expires June 18, 1978
<PAGE>
HUBBARD REAL ESTATE INVESTMENTS
Certificate of Amendment of
Fourth Amended and Restated
Declaration of Trust
The undersigned, a Trustee of Hubbard Real Estate Investments (the
"Trust") hereby certifies pursuant to Section 11.3 of the Fourth Amended and
Restated Declaration of Trust (the "Declaration of Trust"), of the Trust, that
at a meeting of shareholders of the Trust duly called and held on March 9, 1982
in accordance with said Declaration of Trust, at which a quorum of shareholders
was present and voting throughout, the holders of not less than a majority of
the aggregate number of shares of beneficial interest of the Trust then
outstanding and entitled to vote thereon voted to amend the Declaration of Trust
in the following respects:
SECTION 6.19. To amend Section 6.19 of the Declaration of Trust to read in
its entirety as follows:
SECTION 6.19. Redemption of Shares; Disclosure of Holding. In the
event that any Person, or Persons acting as a group, shall at any time
acquire ownership in the aggregate of more than 9.9% of the outstanding
Common Shares of this Trust, the Trustees may redeem such shares in excess
of 9.9% (the "Excess Shares"). Any such redemption right may be exercised
at any time but in no event later than 60 days after the Trustees shall
have received written notice from such Person or Persons regarding such
acquisition. After such 60 day period, the foregoing redemption right
shall extend only to any Excess Shares not referred to in such notice and
may be exercised at any time but in no event later than 60 days after the
Trustees shall have received a similar notice regarding such additional
Excess Shares. The redemption price shall be equal to the fair market
value of the Shares as reflected in the latest bid quotation for the
Shares (if then traded over-the-counter) or the closing sale price (if
then listed on a national securities exchange) of such Shares as of the
business day, preceding the day on which notice of redemption is sent, or,
if no quotations or closing sale price for the Shares are available, as
determined in good faith by the Trustees. From and after the date fixed
for redemption by the Trustees, the holder of any Shares so called for
redemption shall cease to be entitled to dividends, voting rights and
other benefits with respect to such Shares excepting only the right to
payment of the redemption price fixed as aforesaid. The right of
redemption in this Section shall not apply to Excess Shares or additional
Excess Shares acquired as a result of an offer for all outstanding Common
Shares of the Trust. For the purpose of this Section 6.19, the term
"ownership" of Shares shall be defined in accordance with or by reference
to the qualfication requirements of the REIT Provisions of the Internal
Revenue Code and shall also mean ownership as defined under Rule 13(d), as
in effect on January 15, 1982, promulgated by the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934; and the term
"group" shall have the same meaning as that term has for purposes of such
Rule 13(d), as in effect on January 15, 1982.
The Shareholders shall upon demand disclose to the Trustees in
writing such information with respect to direct and indirect ownership of
Shares as the Trustees deem necessary to comply with the provisions of the
Internal Revenue Code, or to comply with the requirements of any other
taxing authority.
SECTION 6.22. To amend Section 6.22 of the Declaration of Trust to read in
its entirety as follows:
SECTION 6.22. Limitation of Pre-emptive Rights. Holders of Common
Shares shall have no pre-emptive rights with respect to any Shares of any
class or series or any Securities of the Trust which evidence indebtedness
(or any Shares into which such Securities of the Trust may be converted)
sold, offered or issued by the Trust. Holders of any series of Preferred
Shares shall have pre-emptive rights only to the extent, if any, provided
in the provisions of such series.
SECTION 6.23. To amend Section 6.23 of the Declaration of Trust to read in
its entirety an follows:
<PAGE>
SECTION 6.23. Dividend Investment and Share Purchase Plans. Subject
to the provisions of any series of Preferred Shares at the time
outstanding, the Trustees may establish from time to time one or more
plans for holders of Common Shares which may permit Shareholders to invest
dividends in Common Shares and which may also permit Shareholders to
purchase additional Common Shares. The Trustees may amend, modify, alter
and terminate any such plans. Any such plans may include a provision
fixing the purchase price at such price as the Trustees shall from time to
time determine, which price may be below market price or book value, or
both, of the Common Shares.
The undersigned further certifies that, pursuant to Section 10.1 thereof,
such Declaration of Trust has been amended as aforesaid, effective upon filing
of this Certificate of Amendment in the Office of the Secretary of The
Commonwealth of Massachusetts.
WTTNESS my hand this 9th day of March, 1982.
/s/ Brinley M. Hall
----------------------------
Brinley M. Hall - Trustee
<PAGE>
HUBBARD REAL ESTATE INVESTMENTS
Certificate of Amendement of
Fourth Amended and Restated
Declaration of Trust
The undersigned, a Trustee of Hubbard Real Estate Investments (the
"Trust") hereby certifies pursuant to Section 11.3 of the Fourth Amended and
Restated Declaration of Trust (the "Declaration of Trust"), of the Trust, that
at a meeting of shareholders of the Trust duly called and held on March 12, 1985
in accordance with said Declaration of Trust, at which a quorum of shareholders
was present and voting throughout, the holders of not less than a majority of
the aggregate number of shares of beneficial interest of the Trust then
outstanding and entitled to vote thereon voted to amend the Declaration of Trust
in the following respect:
To amend the second paragraph of Section 1.1 of the Declaration of Trust
to read in its entirety as follows:
Upon the written request of Hubbard Advisory Corporation ("HAC") or
any successor to HAC made no later than 30 days after termination or
expiration of the Advisory Agreement dated as of May 1, 1981 between the
Trust and HAC, as the same may be amended from time to time (such
termination or expiration being hereinafter referred to as the
"termination"), the Trustees shall not later than the earlier of (a) 9
months following the termination or 9 months following the date of such
request, whichever is later, or (b) following the termination, offering
securities in a firm commitment or best efforts underwritten public
offering registered with the Securities and Exchange Commission or in a
firm commitment or best efforts underwritten private offering of equity
securities of the Trust involving more than 35 purchasers, without any
vote or consent of the Shareholders being required, amend the Declaration
of Trust of the Trust to change the name of the Trust to "HRE Properties"
or other name selected by the Trustees which does not' include "Hubbard"
or any approximation thereof including any name using the three or four
letters "Hub" or "Hubb." Upon the effectiveness of such name change, HAC
or its successor shall promptly pay the Trust $50,000 in lieu and in full
discharge of any reimbursement by HAC or its successor of any and all
expenses incurred by the Trust in operation with such name change. In no
event shall the Trust be required to change its name less that 60 days
following the later of the foregoing written request or the termination.
The undersigned further certifies that, pursuant to Section 10.1 thereof,
such Declaration of Trust has been amended as aforesaid, effectve uoon filing of
this Certificate of Amendment in the Office of the Secretary of The Commonwealth
of Massachusetts.
WITNESS my hand this 29th day of March, 1985.
/s/ William F. Murdoch, Jr.
----------------------------
William F. Murdoch, Jr.
<PAGE>
HRE PROPERTIES
Certificate of Amendment of
Fourth Amended and Restated
Declaration of Trust
The undersigned, a Trustee of HRE Properties (formerly named Hubbard Real
Estate Investments) (the 'Trust") hereby certifies pursuant to Section 11.3 of
the Fourth Amended and Restated Declaration of Trust (the "Declaration of
Trust"), of the Trust, that at a meeting of shareholders of the Trust duly
called and held on March 18, 1987 in accordance with said Declaration of Trust,
at which a quorum of shareholders was present and voting throughout, the holders
of not less than a majority of the aggregate number of shares of beneficial
interest of the Trust then outstanding and entitled to vote thereon voted' to
amend Sections 5.1, 5.2 and 5.3 of the Declaration of Trust to read as set forth
in Appendix A to this certificate.
The undersigned further certifies that, pursuant to Section 10.1 thereof,
such Declaration of Trust has been amended as aforesaid, effective upon filing
of this Certificate of Amendment in the Office of the Secretary of The
Commonwealth of Massachusetts.
WITNESS my hand this 19th day of March, 1987.
/s/ William F. Murdoch, Jr.
-----------------------------------
William F. Murdoch, Jr. - Trustee
<PAGE>
APPENDIX A
Amendments to Sections 5.1, 5.2 and 5.3 of
Declaration of Trust of HRE Properties
Adopted at Meeting of Shareholders
Held on March 18, 1987
-------------------------------------------
VOTED: That Sections 5.1, 5.2 and 5.3 of the Declaration of Trust of HRE
Properties be and they hereby are amended to read in their entirety
as set forth below, and that invalidity or unenforceability of any
of the provisions set forth below shall not affect the validity or
enforceability of the remainder of such provisions:
Section 5.1. No Personal Liability of Shareholders, Trustees, etc.. No
Shareholder shall be subject to any personal liability whatsoever to any other
Person in connection with Trust Property or the affairs of the Trust and no
Trustee, officer, employee or agent of the Trust, or member of the Board of
Consultants, shall be subject to any personal liability whatsoever, in tort,
contract, or otherwise, to any other Person, in connection with Trust Property
or the affairs of the Trust, save only that arising from his bad faith, willful
misfeasance, gross negligence or reckless disregard of his duties or for his
failure to act in good faith in the reasonable belief that his action was in the
best interests of the Trust; and all such other Persons shall look solely to the
Trust Property for satisfaction of claims of any nature arising in connection
with the affairs of the Trust. If any Shareholder, Trustee, officer, employee,
agent, or member of the Board of Consultants, as such, of this Trust, is made a
party to any suit or proceeding to enforce any such liability, he shall not on
account thereof be hold to any personal liability. The Trust shall indemnify and
hold each Shareholder harmless from and against all claims and liabilities, to
which such may become subject by reason of his being or having been a
Shareholder, and shall reimburse such Shareholder for all legal and other
expenses reasonably him in connection with any such claim or liability. The
rights accruing to a Shareholder under this Section 5.1 shall not exclude any
other right to which such Shareholder may be lawfully entitled, nor shall
anything herein contained restrict the right of the Trust to indemnify or
reimburse a Shareholder in any appropriate situation even though not
specifically provided herein.
Section 5.2. Non-Liability of Trustees, etc. No Trustee, officer or
employee or agent of he Trust or member of the Board of Consultants, shall be
liable to the Trust or to any Shareholder, Trustee, officer, employee, agent or
member of the Board of Consultants thereof for any action or failure to act
(including without limitation the failure to compel in any way any former or
acting Trustee to redress any breach of trust) except for his own bad faith,
willful misfeasance, gross negligence or reckless disregard of his duties or for
his failure to act in good faith in the reasonable belief that his action was in
the best interests of the Trust. Notwithstanding anything in this Article 5 or
in Article 9 or elsewhere in this Declaration of Trust to the contrary and
without in any way increasing the liability of the Trustees beyond that
otherwise provided in this Declaration of Trust, no Trustee of the Trust shall
be liable to the Trust or to any Shareholder, Trustee, officer, employee, agent
or member of the Board of Consultants for monetary damages for breach of
fiduciary duty as a Trustee; provided that such provision shall not eliminate or
limit the liability of a Trustee (i) for any breach of the Trustee's duty of
loyalty to the Trust or its Shareholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or knowing violation of law, or
(iii) for any transaction from which the Trustee derived an improper personal
benefit.
Section 5.3. Mandatory Indemnification. The Trust shall indemnify each of
its Trustees, officers, employees, agents and members of the Board of
Consultants, if any (including persons who serve at its request as directors,
officers, trustees, employees or agents of any Trust employee benefit plan or
another organization in which it has any interest, as a shareholder, creditor or
otherwise) against all liabilities and expenses, including amounts paid in
satisfaction of judgments, in compromise or as fines and penalties, and counsel
fees, reasonably incurred by him in connection with the defense or disposition
of any action, suit or other proceedings, whether civil or criminal, in which he
may be involved or with which he may be threatened, while in office or
thereafter, by reason of his being or having been such a Trustee, officer,
employee, agent or member of the Board of Consultants, except with respect to
any matter as to which he shall have been adjudicated to have acted in bad
faith, willful misfeasance, reckless disregard of his duties or gross negligence
or not to have acted in good faith in the reasonable belief that his action was
in the best interests of the Trust (however, notwithstanding the foregoing
exception, such indemnification shall extend to Trustees who shall have no
personal liability for monetary damages to the Trust or its Shareholders
pursuant to the last sentence in Section 5.2); provided, however, that as to any
matter disposed of by a compromise payment by such person, pursuant to a consent
decree or otherwise, no indemnification either for said payment or for any other
expenses shall be provided unless .the Trust shall have received a written
opinion from independent legal counsel approved by the Trustees to the effect
either (i) that if the matter of bad faith, willful misfeasance, gross
negligence or reckless disregard of duty or good faith and reasonable belief as
to the best interests of the Trust, had been adjudicated, it would have been
adjudicated in favor of such Person or (ii) if the matter of the personal
liability of a Trustee to the Trust or any Shareholder, Trustee, officer,
employee, agent or member of the Board of Consultants for monetary damages for
breach of fiduciary duty pursuant to the last sentence of Section 5.2, had been
adjudicated, it would have been adjudicated in favor of such Person. A Person
shall be entitled to indemnification if such counsel opines favorably as to
either the matter in clause (i) or the matter in clause (ii).
The rights accruing to any Person under the provisions of this Section 5.3
shall not exclude any other right to which he may be lawfully entitled,
including any provision of the By-laws of the Trust consistent with this Section
5.3, nor shall anything contained herein restrict the right of this Trust to
indemnify or reimburse any Person in any proper case even though not
specifically provided for herein, nor shall anything contained herein restrict
such rights of any Person to contribution as may be available under applicable
law, provided, that no Person may satisfy any right of indemnity or
reimbursement granted herein or in Section 5.1 or to which he may be otherwise
entitled except out of the property of the Trust, and no Shareholder shall be
personally liable to any Person with respect to any claim for indemnity or
reimbursement or otherwise. The Trust may make advance payments (and may agree
in advance to make such advance payments generally or in particular cases) in
connection with indemnification under this Section 5.3, provided that the
indemnified Person shall have given a written undertaking to reimburse the Trust
in the event it is subsequently determined that such Person is not entitled to
such indemnification.
In order to carry out the intent and purposes of this Section 5.3, and to
assure the Trust's performance of its obligations hereunder, the Trust shall
have the power to enter into agreements with Trustees, officers, employees,
agents or members of the Board of Consultants designated by the Trustees,
without specific approval thereof by the shareholders of this Trust. The terms
of any such agreements need not be identical to the terms of any other such
agreement and any such agreement which had been entered into may subsequently be
amended or changed by mutual agreement of the parties thereto, without specific
approval thereof by the shareholders of the Trust.
The Trust shall have the power to dedicate the assets of the Trust to
establish arrangements for funding its indemnification obligations under this
Section 5.3, including but not limited to depositing assets in trust funds,
obtaining bank letters of credit in favor of indemnified Persons, establishing
specific reserve accounts and otherwise funding special self-insurance
arrangements for these purposes.
<PAGE>
HRE PROPERTIES
Certificate of Vote of the Trustees
Designating a Series of Preferred Shares
The undersigned, a Trustee of HRE Properties (formerly named Hubbard Real
Estate Investments) (the "Trust") hereby certifies pursuant to Section 11.3 of
the fourth amended and restated Declaration of Trust (the "Declaration of
Trust"), of the Trust, that at a meeting of the Trustees of the Trust duly
called and held on October 27, 1988 in accordance with said Declaration of
Trust, at which a quorum of Trustees were present and voting throughout, no less
than seventy-five percent of the Trustees then in office voted to designate a
series of Preferred Shares pursuant to Section 6.3 of the Declaration of Trust
as set forth in Appendix A to this Certificate.
WITNESS my hand this day of October 27th, 1988.
/s/ William F. Murdoch, Jr.
-----------------------------------
William F. Murdoch, Jr.
Trustee
<PAGE>
APPENDIX A
VOTE OF THE TRUSTEES OF HRE PROPERTIES
DESIGNATING A SERIES OF
PREFERRED SHARES
VOTED: That pursuant to the authority vested in the Trustees in accordance
with Section 6.3 of the Declaration of Trust, as amended, a series of Preferred
Shares be and it hereby is created, and that the designation and amount thereof
and the voting powers, preferences and relative, participating, optional and
other special rights of the shares of such series, and the qualifications,
limitations and restrictions thereof are as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Participating Preferred Shares" (the "Series A Shares")
and the number of shares constituting such series shall be 150,000.
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Shares ranking prior and superior to the
Series A Shares with respect to dividends, the holders of Series A Shares
shall be entitled to receive, when, as and if declared by the Trustees out
of funds legally available for the purpose, quarterly dividends payable in
cash to holders of record on the 15th day of March, June, September and
December in each year (each such date being referred to herein as a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly
Dividend Payment Date after the first issuance of a share or fraction of a
share of Series A Shares, in an amount per share (rounded to the nearest
cent) equal to the greater of (a) $.25 or (b) subject to the provision for
adjustment set forth in Section 7 hereof, 100 times the aggregate per
share amount of all cash dividends, and 100 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other distributions
other than a dividend payable in Common Shares or a subdivision of the
outstanding Common Shares (by reclassification or otherwise), declared on
the Common Shares of the Trust (the "Common Shares") since the immediately
preceding Quarterly Dividend Payment Date or, with respect to the first
Quarterly Dividend Payment Date, since the first issuance of any share of
fraction of a share of Series A Shares.
(B) The Trust shall declare a dividend or distribution on the Series
A Shares as provided in paragraph (A) of this Section 2 immediately after
it declares a dividend or distribution on the Common Shares (other than a
dividend payable in shares of or subdivision with respect to Common
Shares); provided, however, that, in the event no dividend or distribution
shall have been declared on the Common Shares during the period between
any Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $.25 per share on the Series A Shares
shall nevertheless be payable on such subsequent Quarterly Dividend
Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Shares from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Shares, unless the
date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares
shall begin to accrue from the date of issue of such shares, or unless the
date of issue is a Quarterly Dividend Payment Date or is a date after the
record date for the determination of holders of shares of Series A Shares
entitled to receive a quarterly dividend and before such Quarterly
Dividend Payment Date, in either of which events such dividends shall
begin to accrue and be cumulative from such Quarterly Dividend Payment
Date. Accrued but unpaid dividends shall not bear interest. Dividends paid
on the shares of Series A Shares in an amount less than the total amount
of all such dividends at the time accrued and payable on such shares shall
be allocated pro rata on a share-by-share basis among all such shares at
the time outstanding. The Trustees may fix a record date for the
determination of holders of shares of Series A Shares entitled to receive
payment of a dividend or distribution declared thereon, which record date
shall be no more than 60 days prior to the date fixed for the payment
thereof.
Section 3. Voting Rights. The holders of shares of Series A Shares shall
have the following voting rights:
(A) Subject to the provision for adjustment set forth in Section
7 hereof, each share Of Series A Shares shall entitle the holder thereof
to 100 votes on all matters submitted to a vote of the shareholders of the
Trust.
(B) Except as otherwise provided herein, in the Declaration of
Trust, as amended, of the Trust (the "Declaration of Trust") or by law,
the holders of shares of Series A Shares and the holders of shares of
Common Shares shall vote together as one class on all matters submitted to
a vote of shareholders of the Trust.
(C)
(i) If at the time of any annual meeting of shareholders for
the election of trustees a default in preferred dividends (as
hereinafter defined) shall exist, the holders of shares of Preferred
Shares voting separately as a class without regard to series (with
each share of Preferred Shares being entitled to that number of
votes to which it is entitled on matters submitted to shareholders
generally, or, if it is not entitle to vote with respect to such
matters, to one vote), shall have the right to elect two members of
the Trustees of the Trust. The holders of Common Shares shall not be
entitled to vote in the election of the two Trustees so to be
elected by the holders of shares of Preferred Shares. Any trustee
elected by the holders of shares of Preferred Shares, voting as a
class as aforesaid, shall continue to serve as such trustee for the
full term for which he shall have been elected notwithstanding that
prior to the end of such term a default in preferred dividends shall
cease to exist. If, prior to the end of the term of any trustee
elected by the holders of the Preferred Shares, voting as a class as
aforesaid, a vacancy in the office of such trustee shall occur by
reason of death, resignation, removal or disability, or for any
other cause, such vacancy shall be filled for the unexpired term in
the manner provided in the Declaration of Trust, provided that, if
the Declaration of Trust provides that such vacancy shall be filled
by election by the shareholders at a meeting thereof, the right to
fill such vacancy shall be vested in the holders of Preferred
Shares, voting as a class as aforesaid, unless, in any such case, no
default in preferred dividends shall exist at the time of such
election.
(ii) For the purposes of paragraph (C)(i) of this Section 3, a
default in preferred dividends shall be deemed to have occurred
whenever the amount of dividends in arrears upon any series of
Preferred Shares shall be equivalent to six full quarterly dividends
or more and, having so occurred, such default in preferred dividends
shall be deemed to exist thereafter until all accrued dividends on
all shares of Preferred Shares then outstanding shall have been paid
to the end of the last preceding quarterly dividend period. Nothing
herein contained shall be deemed to prevent an amendment of the
Declaration of Trust, in the manner therein provided, which shall
increase the number of Trustees so as to provide as additional
places on the Trustees either or both the trusteeships to be filled
by the two Trustees so to be elected by the holders of the Preferred
Shares or to prevent any other change in the number of trustees of
the Trust.
(D) Except as set forth herein, holders of Series A Shares shall
have no special voting rights and their consent shall not be required
(except to the extent they are entitled to vote with holders of Common
Shares as set forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Shares as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions,
whether or not declared, on shares of Series A Shares outstanding shall
have been paid in full, the Trust shall not
(i) declare of pay dividends on, make any other distribution
on, or redeem or purchase or otherwise acquire for consideration any
beneficial shares ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Shares;
(ii) declare or pay dividends on or make any other
distributions of any beneficial shares ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding up) with
the Series A Shares, except dividends paid ratably on the Series A
Shares and all such parity shares on which dividends are payable or
in arrears in proportion to the total amounts to which the holders
of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration any beneficial shares ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with
the Series A Shares, provided that the Trust may at any time redeem,
purchase or otherwise acquire such parity shares in exchange for any
beneficial shares of the Trust ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to the
Series A Shares; or
(iv) purchase or otherwise acquire for consideration any
shares of Series A Shares, or any beneficial shares ranking on a
parity with the Series A Shares, except in accordance with a
purchase offer made in writing or by publication (as determined by
the Trustees) to all holders of such shares upon such terms as the
Trustees, after consideration of the respective annual dividend
rates and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result in
fair and equitable treatment among the respective series or classes.
(B) The Trust shall not permit any subsidiary of the Trust to
purchase or otherwise acquire for consideration any beneficial shares of
the Trust unless the Trust could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation (voluntary or otherwise), dissolution or
winding up of the Trust, no distribution shall be made to the holders of
beneficial shares ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Shares unless,
prior thereto, the holders of shares of Series A Shares shall have
received $100 per share plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date
of such payment (the "Series A Liquidation Preference"). Following the
payment of the full amount of the Series A Liquidation Preference, no
additional distributions shall be made to the holders of shares of Series
A Shares unless, prior thereto, the holders of shares of Common Stock
(which term shall include, for the purposes only of this Section 5, any
series of the Trust's Preferred Shares ranking on a parity with the Common
Shares upon liquidation, dissolution or winding up) shall have received an
amount per share (the "Common Adjustment") equal to the quotient obtained
by dividing (i) the Series A Liquidation Preference by (ii) 100 (as
appropriately adjusted as set forth in Section 7 hereof to reflect such
events as share splits, share dividends and recapitalizations with respect
to the Common Shares; such number in clause (ii), the "Adjustment
Number"). In the event, however, that there are not sufficient assets
available to permit payment in full of the Common Adjustment, then such
remaining assets shall be distributed ratably to the holders of Common
Shares. Following the payment of the full amount of the Series A
Liquidation Preference and the common Adjustment in respect of all
outstanding shares of Series A Shares and Common Shares, respectively,
holders of Series A Shares and holders of shares of Common Shares shall
receive their ratable and proportionate share of the remaining assets to
be distributed in the ratio of the Adjustment Number to one (1) with
respect to such Series A Shares and Common Shares, on a per share basis,
respectively.
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference
and the liquidation preferences of all other series of Preferred Shares,
if any, which rank on a parity with the Series A Shares, then such
remaining assets shall be distributed ratably to the holders of such
parity shares in proportion to their respective liquidation preferences.
Section 6. Consolidation, Merqer, etc. In case the Trust shall enter into
any consolidation, merger, combination or other transaction in which the Common
Shares are exchanged for or changed into other stock or securities, cash and/or
any other property, then in any such case the Series A Shares shall at the same
time be similarly exchanged or changed in an amount per share (subject to the
provision for adjustment set forth in Section 7 hereof) equal to 100 times the
aggregate amount of stock, securities, cash and/or any other property (payable
in kind), as the case may be, into which or for which each Common Share is
changed or exchanged.
Section 7. Certain Adjustments. In the event the Trust shall at any time
declare or pay any dividend on common Shares payable in Common Shares, or effect
a subdivision or combination or consolidation of the outstanding Common Shares
(by reclassification or otherwise than by payment of a dividend in common
Shares) into a greater or lesser number of shares of Common Shares, then, in
each such case, the amounts set forth in Sections 2(A), 3(A), 5(A) and 6 hereof
with respect to the multiple of (i) cash and non-cash dividends, (ii) votes,
(iii) the Series A Liquidation Preference and (iv) an aggregate amount of stock,
securities, cash and/or other property referred to in Section 6 hereof, shall be
adjusted by multiplying such amount by a fraction the numerator of which is the
number of Common Shares outstanding immediately after such event and the
denominator of which is the number of Common Shares that were outstanding
immediately prior to such event.
Section 8. Ranking. The Series A Shares shall rank pari passu with (or if
determined by the Trustees in any vote establishing any other series of
Preferred Shares, either, senior or preferred to or junior and subordinate to as
the case may be) each other series of Preferred Shares of the Trust with respect
to dividends and/or preference upon liquidation, dissolution or winding up.
Section 9. Redemption. Series A Shares may be redeemed by the Trust at
such times and on such terms as may be agreed to between the Trust and the
redeeming shareholder, subject to any limitations which may be imposed by law or
the Declaration of Trust.
Section 10. Amendment. The Declaration of Trust, shall not be amended in
any manner which would materially alter or change the powers, preferences or
special rights of the Series A Shares so as to affect them adversely without the
affirmative vote of the holders of two-thirds or more of the outstanding shares
of Series A Shares, if any, voting together as a single class.
Section 11. Fractional Share. Series A Shares may be issued by fractions
of a share which shall entitle the holder, in proportion to such holder's
fractional shares, to exercise voting rights, receive dividends, participate in
distributions and to have the benefit of all other rights of holders of Series A
Shares.
<PAGE>
Certificate Of Amendment
Of Fourth Amended and
Restated Declaration of Trust
The undersigned, a Trustee of Hubbard Real Estate Investments (the
"Trust"), hereby certifies pursuant to Section 11.3 of the Fourth Amended and
Restated Declaration of Trust (the "Declaration of Trust") of the Trust, that at
a meeting of Trustees of the Trust duly called and held on December 17, 1985, in
accordance with said Declaration of Trust, at which a quorum of Trustees
was present and voting throughout, the Trustees unanimously voted to amend the
Declaration of Trust, effective February 1, 1966, in the following respect:
To amend Section 1.1 of the Declaration of Trust to read in its
entirely as follows:
SECTION 1.1. Name. The trust created by this Declaration of Trust is
herein referred to as the "Trust" and shall be known by the name "HRE
Properties"; so far as may be practicable, legal and convenient, the affairs of
the Trust shall be conducted and transacted under such name, which name (and
the word "Trust" whenever used in this Declaration of Trust, except when the
context otherwise requires) shall refer to the trustees as trustees and not
individually or personally and shall not refer to the beneficiaries or
Shareholders of the Trust, or to any officers, employees, or agents of the Trust
or of such Trustees. Under circumstances in which the Trustees determine that
the use of the name "HRE Properties" is not practicable, legal or convenient,
they may as appropriate use their names with suitable reference to their trustee
status, or some other suitable designation, or they may adopt another name under
which the Trust may hold property or operate in any state, which name shall not
refer to the beneficiaries or Shareholders of the Trust, or any officers
employees, or agents of the Trust or of such Trustees.
To amend Section 1.2 of the Declaration of Trust to read in its entirety
as follows:
SECTION 1.2. Title to Property. Legal title to all of the Trust Property
shall be transferred to, vested in and held by the Trustees, as joint tenants
with right of survivorship as Trustees of this Trust, except as provided in
Section 3.5. Where legal title is transferred (whether to or by the Trust) in
the name HRE Properties, such name shall be deemed to refer to the Trustees as
aforesaid.
The undersigned further certifies that pursuant to Section 10.1. thereof,
such Declaration of Trust has been amended as aforesaid, effective February 1,
1986.
WITNESS my hand this 15 day of January, 1986.
/s/ William F. Murdoch, Jr.
-----------------------------------
William F. Murdoch, Jr.
Trustee
<PAGE>
HRE PROPERTIES
Certificate of Amendment
Fourth Amended and Restated
Declaration of Trust
The undersigned, a Trustee of HRE Properties (fomerly named Hubbard Real
Estate Investments) (the "Trust") hereby certifies pursuant to Section 11.3 of
the Fourth Amended and Restated Declaration of Trust (the "Declaration of
Trust"), of the Trust, that at a meeting of shareholders of the Trust duly
called and held on March 3, 1994 in accordance with said Declaration of Trust,
at which a quorum of shareholders was present and voting throughout, the holders
of not less than a majority of the aggregate number of shares of beneficial
interest of the Trust then outstanding and entitled to vote thereon voted to
amend the Declaration of Trust in the following respect:
To amend Section 2.2 of the Declaration of Trust to read in its entirety
as follows:
Section 2.2 Terms of Office; Election and Qualification. Subject to
the provisions of Sections 2.3 and 2.4, each Trustee shall hold office
until the expiration of his term and until the election and qualification
of his successor. Except as otherwise required by the provisions of any
series of Preferred Shares at the time outstanding, commencing at the
Annual Shareholders Meeting held in 1994, the terms of office of the Board
of Trustees shall be divided into three classes, Class 1, Class II and
Class III. All classes shall be as nearly equal in number as possible, and
no class shall include fewer than one or more than five Trustees.
The terms of office of the Trustees initially classified shall be as
follows: (i) that of Class I shall expire at the Annual Meeting of
Shareholders to be held in 1995, (ii) that of Class II shall expire at the
Annual Meeting of Shareholders to be held in 1996, and (iii) that of Class
III shall expire at the Annual Meeting of Shareholders to be held in 1997,
and in all cases until a successor shall have been duly elected and shall
have qualified. At each Annual Meeting of Shareholders after the
aforementioned classification, the successor to Trustees whose terms shall
then expire shall be elected to serve from the time of election and
qualification until the third Annual Meeting of Shareholders following
election and until a successor shall have been duly elected and shall have
qualified. Trustees may succeed themselves in office.
Except as otherwise required by the provisions of any series of
Preferred Shares at the time outstanding, the election of Trustees at any
meeting of Shareholders shall be by the affirmative vote of the holders of
a majority of the shares present in person or by proxy at such meeting and
then entitled to vote in the election of Trustees. A Trustee shall be an
individual at least twenty-one (21) years of age who is not under legal
disability. Such individual shall qualify as a Trustee by signing this
Declaration of Trust, as so amended. Trustees continuing in office by
re-election or re-appointment need not re-qualify as Trustees. Trustees
may, but need not, own shares.
The undersigned further certifies that, pursuant to Section 10.1 thereof,
such Declaration of Trust has been amended as aforesaid, effective upon filing
of this Certificate of Amendment in the Office of the Secretary of The
Commonwealth of Massachusetts.
WITNESS my hand this 3rd day of March, 1994.
/s/ Charles J. Urstadt
--------------------------
Charles J. Urstadt
<PAGE>
NO. 30
AMENDMENT RE: TRUSTEES TERMS OF OFFICE
HRE PROPERTIES
<PAGE>
EXHIBIT 10.6.1
Amendments to HRE Properties
Stock Option Plan
Dated June 9, 1993
Section 7 of the Stock Option Plan of HRE Properties (the "Plan") is
modified as follows:
(I) A new subsection (h) is added, as follows:
(h) No stock appreciation right held by a
Trustee or officer of the Trust may be
exercised, if such exercise would result in
full or partial settlement of the stock
appreciation right in cash, unless:
(A.) such stock appreciation right has
been held for at least six months
from date of grant; and
(B.) such stock appreciation right is
exercised during the period begin-
ning on the third business day
following the date of release of
quarterly or annual statements of
revenues and net income of the
Trust and ending on the twelfth
business day following such date,
unless a different period is speci-
fied by Rule 16b-3(e) or any suc-
cessor rule.
(II) Subsequent subsections in Section 7 and all references
to existing paragraph (h) would be relettered or
adjusted accordingly.
(III) The first sentence of relettered paragraph (i) is
revised to read as follows:
(i) Upon a Change of Control, all stock
appreciation rights granted in relation to
non-statutory op- tions, or to statutory
options granted on or after January 8, 1985,
shall become fully exercisable for cash and
shall remain so exercisable for 60 days
after the date of such Change of Control;
provided, however, that, notwithstanding the
fore- going, stock appreciation rights held
by a Trustee or officer of the Trust shall
be subject to the provisions of paragraph
(h) above.
<PAGE>
PURCHASE AND SALE AGREEMENT
SELLER:
AETNA LIFE INSURANCE COMPANY
c/o Aetna Investment Group
242 Trumbull Street
Hartford, Connecticut 06156
PURCHASER:
HRE PROPERTIES
530 Fifth Avenue
New York, New York 10036
PROPERTY:
TOWNLINE CENTER
Meriden/Wallingford, Connecticut
December 22, 1993
<PAGE>
INDEX
ARTICLE I THE PROPERTY 1
ARTICLE II PURCHASE PRICE 3
ARTICLE III PRIOR TO CLOSING 5
ARTICLE IV REPRESENTATIONS AND WARRANTIES 8
ARTICLE V COSTS 9
ARTICLE VI DESTRUCTION OR CONDEMNATION OF PROPERTY 14
ARTICLE VII NOTICES 16
ARTICLE VIII CLOSING AND ESCROW 17
ARTICLE IX DEFAULT 19
ARTICLE X CONDITIONS TO OBLIGATIONS OF PURCHASER 20
ARTICLE XI DEFINITIONS 22
ARTICLE XII MISCELLANEOUS 26
<PAGE>
PURCHASE AND SALE AGREEMENT
THIS AGREEMENT, dated as of the 22nd day of December, 1993, is made by and
between AETNA LIFE INSURANCE COMPANY, a Connecticut corporation (the "Seller"),
with an office in care of Aetna Investment Group, 242 Trumbull Street, Hartford,
Connecticut 06156, and HRE PROPERTIES, a voluntary association commonly known as
a Massachusetts business trust (the "Purchaser"), with an office at 530 Fifth
Avenue, New York, New York 10036.
RECITALS:
Seller desires to sell and transfer certain improved real property known
as Townline Center located at South Broad Street and Old Stagecoach Road,
Meriden and Wallingford, Connecticut along with certain related personal
property, and Purchaser desires to purchase and acquire such real and personal
property.
NOW THEREFORE, in consideration of the foregoing, of the mutual covenants,
promises and undertakings set forth herein and for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Seller and Purchaser hereby agree s follows:
ARTICLE I
THE PROPERTY
A. Subject to all the terms, conditions and provisions of this Agreement,
and for the consideration herein set forth, Seller agrees to sell and transfer,
and Purchaser agrees to purchase and acquire, all of Seller's right, title, and
interest in and to certain land (the "Land") located in New Haven County;
Connecticut and more specifically described in Exhibit A which is attached
hereto and incorporated herein by reference, together with all of Seller's
right, title and interest in and to the following:
1. The buildings, parking areas, improvements, and fixtures now
situated on the Land (the "Improvements");
2. All furniture, personal property, machinery, apparatus, and
equipment currently used in the operation, repair and maintenance of the Land
and Improvements and situated thereon (collectively, the "Personal Property"),
listed in the inventory attached hereto as Exhibit B and incorporated herein by
reference. The Personal Property to be conveyed is subject to depletions,
replacements and additions in the ordinary course of Seller's business;
3. All easements, hereditaments, and appurtenances belonging to or
inuring to the benefit of Seller and pertaining to the Land, if any; and
4. Any street or road abutting the Land to the center lines thereof,
and in and to any strips and gores of land therein or adjacent to the Property.
All of the above is hereinafter referred to as the "Property".
The Property is being sold subject to (i) the lien of real and personal
property taxes and assessments for the calendar year 1993 which are not yet due
and payable, (ii) any state of facts shown on that certain survey dated December
1, 1993, by Kasper Group, Inc. (the "Survey"), (iii) unrecorded leaseholds
listed in Exhibit D attached hereto and incorporated herein by reference, to the
extent the same are in force and effect at Closing (hereafter defined), and
those entered into after the date hereof in accordance with the provisions of
Article III.4, and rights of vendors and holders of security interests on
personal property installed upon the Property by tenants and rights of tenants
to remove trade fixtures at the expiration of the term of the leases of tenants,
(vii) exceptions shown on Schedule B of Lawyers Title Insurance Corporation
Commitment No. B93-3526 (the "Title . Commitment"), and (viii) governmental
laws, codes, ordinances and restrictions now or hereafter in effect so far as
these affect the Property, (collectively, the "Permitted Encumbrances"). The
Title Commitment is attached hereto as Exhibit C and incorporated herein
by reference.
B. The Property is being sold in an "AS IS" condition and with "ALL
FAULTS" as of the date of this Agreement. Except as specifically set forth in
this Agreement, no representations or warranties have been made or are made and
no responsibility has been or is assumed by Seller or by any partner, officer,
person, firm, agent or representative acting or purporting to act on behalf of
Seller as to the condition or repair of the Property or the value, expense of
operation, or income potential thereof or as to any other fact or condition
which has or might affect the Property or the condition, repair, value, expense
of operation or income potential of the Property or any portion thereof. The
parties agree that all understandings and agreements heretofore made between
them or their respective agents or representatives are merged in this Agreement
and the Exhibits hereto annexed, which alone fully and completely express their
agreement, and that this Agreement has been entered into after full
investigation, neither party relying upon any statement or representation by the
others unless such statement or representation is specifically embodied in this
Agreement or the Exhibits annexed hereto.
<PAGE>
C. Seller agrees to convey, and Purchaser agrees to accept,title to the
Land and Improvements by special warranty deed inthe condition described in
Articles I(A) above and VIII(B)(1) below, and title to the Personal Property, by
bill of sale, without warranty as to the title to or the condition of such
personalty.
D. Capitalized terms not immediately defined are defined in Article XI
below.
ARTICLE II
PURCHASE PRICE
----------------
A. The purchase price (the "Purchase Price") which Seller agrees to accept
and Purchaser agrees to pay as full compensation for the Property is TWENTY FIVE
MILLION DOLLARS ($25,000,000.00) U.S., payment of which is to be made in cash,
as follows:
1. (a) Contemporaneous with the execution of this Agreement by
Purchaser, Purchaser has made an earnest money deposit in the amount of ONE
HUNDRED THOUSAND DOLLARS ($100,000.00) (the "Initial Deposit").
(b) On or before December 15, 1993, the Purchaser shall make an
additional deposit in the amount of THREE HUNDRED THOUSAND DOLLARS ($300,000.00)
(the "Additional Deposit") (collectively, the Initial Deposit and the Additional
Deposit shall be referred to hereinafter as the "Deposit).
Except as otherwise provided in this Agreement, the Deposit will be
applied to the Purchase Price at the Closing of this transaction.
2. At the Closing, the Purchaser shall pay Seller TEN MILLION DOLLARS
($10,000,000.00), inclusive of the Deposit and subject to adjustment for the
prorations as provided herein, to a bank account designated by Seller no less
than three (3) days prior to Closing, via wire transfer in immediately available
funds.
3. The balance of the Purchase Price in the amount of FIFTEEN MILLION
DOLLARS ($15,000,000.00) shall be represented by and paid according to the terms
of a secured promissory note (the "Note") in the face amount of such balance, in
form and substance satisfactory to Purchaser and Seller which satisfaction shall
be evidenced by execution and acceptance of said document.
(a) The Note shall be secured by:
(i)a recorded first mortgage on the Property in form
and substance satisfactory to Purchaser and Seller which satisfaction shall be
evidenced by execution and acceptance of said document (the "Mortgage,,); (ii)
an assignment of rents and leases in form and substance satisfactory to
Purchaser and Seller which satisfaction shall be evidenced by execution and
acceptance of said document (the "Assignment of Rents"); and (iii) financing
statements under the Uniform Commercial Code.
(b) At Closing, Purchaser shall submit to Seller current written
opinions of counsel for Purchaser in form and substance satisfactory to
Purchaser and Seller which satisfaction shall be evidenced by execution and
acceptance of said document which in the aggregate cover matters concerning the
organization and existence of Purchaser and to the effect that the loan is not
usurious or otherwise illegal and that all loan documents have been duly
authorized, executed and delivered by Purchaser, are valid and binding upon
Purchaser and are enforceable in accordance with their terms, together with
certified copies of Purchaser's organizational documents, authorizing
resolutions, and other similar due diligence materials.
(c) At closing, Purchaser shall provide Seller with a mortgagee
title insurance policy in the amount of $15,000,000 consistent with and
containing only those exceptions set forth in the Title Commitment.
B. Payment of the Purchase Price and closing hereunder (the "Closing")
will take place pursuant to an escrow closing on or before December 22, 1993
(the "Closing Date"), at the offices of Day, Berry & Howard, CityPlace,
Hartford, Connecticut 06103 or at such other time and place as may be agreed
upon in writing by Seller and Purchaser.
<PAGE>
ARTICLE III
PRIOR TO CLOSING
A. Seller will terminate all agreements relating to service, management,
supply and maintenance of the Property (the "Contracts") on or before the
Closing Date.
B. Until Closing, Seller or Seller's agent shall:
1. Keep the Property insured against fire and other hazards covered by
extended coverage endorsement and comprehensive public liability insurance
against claims for bodily-injury, death and property damage occurring in, on or
about the Property.
2. Operate and maintain the Property in a businesslike manner,
substantially in accordance with Seller's past practices, and make any and all
repairs and replacements reasonably required, in accordance with Seller's past
practices, to deliver the Property to Purchaser at closing in its present
condition, normal wear and tear excepted, provided that in the event of any loss
or damage to the Property covered by Article VI, Seller shall have an obligation
to Purchaser to repair the Property only if Seller so elects and then shall be
obligated only to the extent of available insurance proceeds.
3. Enter into only those third party contracts which are necessary to
carry out its obligations under this Article III and which in any case shall be
cancelable on thirty (30) days written notice and as of the Closing.
4. Continue its present rental program and efforts at the Property to
rent vacant space, provided that (i) except as hereinafter provided, Seller will
not execute any new leases or amend, terminate or accept the surrender of any
existing tenancies or approve any subleases without the prior written 'consent
of Purchaser, which consent shall not be unreasonably withheld with respect to
the foregoing dated on or prior to December 17, 1993, except that the Seller is
authorized to accept the termination of leases at the end of their existing
terms; and (ii) in the event that Seller, with Purchaser's consent, executes any
new lease after the date of this Agreement and such lease requires the
construction of tenant fixtures or improvements or the payment of leasing or
brokerage commissions at the expense of the landlord, Purchaser at the Closing
of the transaction contemplated in this Agreement will pay the cost of such
improvements and leasing or brokerage commissions. Failure of Purchaser to
consent or expressly withhold its consent stating with specificity the basis of
its objection within seventy-two (72) hours after receipt by Purchaser of
written request for such consent shall be deemed to constitute consent.
Purchaser hereby consents to the execution by Seller of an amendment to the WFC-
1 Realty Corp. lease in form and substance satisfactory to Purchaser and Seller
which satisfaction shall be evidenced by execution and acceptance of said
document. Seller will use its best efforts to perform all of Seller's material
obligations under the Leases.
5. Seller shall not remove from the Property, nor otherwise deplete,
any of the Personal Property, as they exist on the date of this Agreement,
except for items used or consumed in the ordinary course of business, and Seller
shall restore or replace such Personal Property with replacements at least equal
in value and quality.
6. Seller will not, without the prior consent of Purchaser, (i) permit
any structural modifications or additions to the Property, except in accordance
with Leases affecting the Property, or (ii) sell or permit to be sold or
otherwise dispose of any item or group of items constituting a portion of the
Property other than as authorized by Subsection 5 above.
7. Seller shall not consent to any zoning changes, or sell, transfer,
assign, dispose of, or consent to the utilization of, any Development Rights, or
modify or amend or consent to any modification or amendment of the certificates
of occupancy for the Property without the prior written consent of Purchaser.
C. Subject to the conditions hereinafter set forth, Purchaser, at
Purchaser's sole cost and expense, shall have until December 17, 1993 to inspect
and review the Property and all matters relating to the Property (the "Due
Diligence Review"), including without limitation, the physical condition
(including, environmental conditions) of the Property. Seller shall provide
reasonable access to the Property to Purchaser and Purchaser's agents for such
inspections, including engineering and environmental phase I investigations and
inspections, during normal business hours. Seller shall make available to
Purchaser all Contracts, Leases, Plans, books and records relating to income
from and operating expenses of the Property, surveys, title examinations, and
any other material document, instrument or writing relating to the Property in
Seller's possession or under Seller's reasonable control (other than materials
containing confidential or proprietary information, materials relating to
valuation, and materials the disclosure of which is subject to the consent or
approval of third parties) at Seller's offices or at the Property, during normal
business hours. Seller hereby consents to Purchaser's making reasonable written
and/or oral inquiries of any and all managers, Tenants, contractors and/or
suppliers to the Property and all Governmental Entities of any information
Purchaser may reasonably request in its investigation of the Property and
relations between such parties and Seller. In the event any such party requests
or requires the written consent of Seller in order for such party to make any
disclosures to Purchaser, then, upon the request of Purchaser, Seller shall, in
writing and at Purchaser's expense, request such parties to cooperate with
Purchaser and answer such inquiries to the fullest extent they are able, subject
to the limitations set forth above. Purchaser's rights and Seller's duties in
the immediately preceding three sentences shall exist from the date of
this Agreement until the Closing Date or earlier termination of this Agreement.
D. If Purchaser, at its sole and exclusive discretion, choosesnot to
proceed to Closing, then Purchaser shall give writtennotice (the "Termination
Notice") to Seller of such fact. If theTermination Notice is given to Seller by
Purchaser on or before the close of business on December 15, 1993 (the "Cutoff
Date"), then the Deposit shall be immediately returned to Purchaser, less and
with the exception of One Hundred and No/100 Dollars ($100.00) of the Deposit
which shall be retained by Seller as independent consideration for Seller's
entering into this Agreement, and all rights and obligations of Purchaser and
Seller under this Agreement shall terminate and this Agreement shall be null and
void and of no further force and effect except as provided in Article III.E. The
election of Purchaser to terminate or not terminate this Agreement by the giving
or not giving of the Termination Notice shall be at Purchaser's sole discretion
and may be given or not given by Purchaser for any reason whatsoever or no
reason at all.
E. Purchaser agrees that, in making any inspections of, or conducting any
testing of, on or under, the Property, Purchaser or Purchaser's agents will
carry adequate liability insurance and, upon request of Seller, will provide
Seller with written evidence of same, will not unreasonably interfere with the
activity of tenants or any persons providing service at the Property, will not
reveal to any third party not approved by Seller, except as required by law or
judicial process or unless already in the public records, the results of or
information acquired by Purchaser in the course of its inspections or tests or
other Due Diligence Review, and will restore promptly any physical damage caused
by the inspections or tests. Purchaser shall give Seller reasonable prior notice
of its intention to conduct any inspections or tests, and Seller reserves the
right to have a representative present. Purchaser agrees to provide Seller with
a copy of any environmental or engineering inspection or test report upon
Seller's written request. Purchaser agrees (which agreement shall survive
Closing or termination of this Agreement) to indemnify, defend, and hold Seller
free and harmless from any loss, injury, damage, claim, lien, cost or expense,
including attorney's fees and costs, arising out of a breach of the forgoing
agreements by Purchaser in connection 'With the inspection and testing of the
Property and its other Due Diligence Review. Any inspections and testing shall
be at Purchaser's expense.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
--------------------------------
A. Seller represents and warrants to Purchaser as of the date hereof and
as of the Closing Date (subject to revisions based upon a change in the best
knowledge of Seller) that:
1. Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Connecticut, has duly authorized the
execution and performance of this Agreement, and such execution and performance
will not violate any material term of its certificate of incorporation or
by-laws.
2. To the best of Seller's knowledge, there are no judgments, lawsuits,
actions, investigations, claims, or proceedings, pending or threatened, whether
involving a governmental authority or private party, against Seller, or suits,
actions, or proceedings in connection with the Property which would have a
material adverse impact on the Property subsequent to Closing.
3. To the best of Seller's knowledge, the transactions contemplated by
this Agreement are not in violation of, nor prohibited by, the terms of any
agreement to which Seller is a party.
4. To the best of Seller's knowledge, Seller has received no written
notice that there is any condemnation proceeding pending or contemplated with
regard to all or any part of the Property.
5. To the best of Seller's knowledge, Seller has received no written
notice that all or any part of the Property is in violation of any building,
health, zoning, traffic, environmental (including hazardous or toxic materials),
flood control or other applicable rules, regulations, or statutes of any local,
state, or federal authorities or entities having jurisdiction of the Property.
6. To the best of Seller's knowledge, Exhibit D attached hereto is a
true, complete and correct list of each and every Lease and assignment thereof
and there are no other Leases affecting or encumbering the Property.
7. Attached hereto as Schedule A, is a true, complete and accurate copy
of the most recent rent roll received from the managing agent of the Property.
Seller has relied upon this rent roll in the ordinary conduct of its business
affairs and to the best of Seller's knowledge the information set forth therein
is true and accurate. Seller agrees to use reasonable effort's to obtain from
Seller's property manager, Zamagias Properties, a certificate regarding such
rent roll.
8. There are no employees of Seller at the Property who will become
employees of Purchaser after the Closing.
9. William F. Towill, Jr. and C. Kevin Gallagher are the employees of
Seller who have had primary responsibility for the operation, leasing,
management and administration of the Property during the period from January 1,
1993 to the date hereof.
B. Purchaser represents and warrants to Seller as of the date hereof and
as of the Closing Date that:
1. Purchaser is a voluntary association commonly known as a
Massachusetts business trust duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts, is authorized to
do business in the State of Connecticut, has duly authorized the execution and
performance of this Agreement, and such execution and performance will not
violate any material term of its certificate of incorporation or by-laws.
2. Purchaser is acting as principal in this transaction with authority
to close the transaction.
3. No petition in bankruptcy (voluntary or otherwise), assignment for
the benefit of creditors, or petition seeking reorganization or arrangement or
other action under Federal or State bankruptcy laws is pending against or
contemplated by Purchaser.
C. Each of Seller and Purchaser represents to the other that it has had no
dealings, negotiations, or consultations with any broker, representative,
employee, agent or other intermediary except Cushman & Wakefield of Connecticut,
Inc. in connection with the Agreement or the sale of the Property. Seller and
Purchaser agree that each will indemnify, defend and hold the other free and
harmless from the claims of any other broker(s), representatives), employees),
agent(s) or other intermediary(ies) claiming to have represented Seller or
Purchaser, respectively, in connection with this Agreement or in connection with
the sale of the Property.
ARTICLE V
COSTS
---------
A. Purchaser will pay the following costs of closing this transaction:
1. The fees and disbursements of its counsel, inspecting architect and
engineer, if any;
2. One-half (1/2) of any escrow fees and real estate transfer,
conveyance, stamp or documentary tax(es);
3. One-half (1/2) of any sales or use taxes relating to the transfer of
personal property to Purchaser;
4. One-half (1/2) of the cost of an ALTA owner's title insurance policy
without extended coverage or special endorsements, issued in connection with
this transaction, whether pursuant to the Title Commitment or otherwise;
5. The cost of any title insurance in excess of the cost(s) of an ALTA
owner's policy without extended coverage or special endorsements, including, any
additional.premium charge(s) for endorsements and/or deletions of exception
items and any cancellation charge(s) imposed by any title company in the event a
title insurance policy is not issued, unless caused by willful default of Seller
hereunder;
6. One half (1/2) of the reasonable cost of the Survey;
7. Any recording fees;
8. Any other expense(s) incurred by Purchaser or its representatives in
inspecting or evaluating the Property or closing this transaction; and
9. The cost of an ALTA (1970 Form B) title insurance policy in the
amount of the purchase money mortgage.
B. Seller will pay:
1. The fees and disbursements of its counsel;
2. One-half (1/2) of any escrow fees, and real estate transfer,
conveyance, stamp or documentary taxes;
3. one-half (1/2) of any sales or use taxes relating to the transfer of
personal property to Purchaser;
4. One-half (1/2) of the cost of an ALTA owner's title insurance policy
without extended coverage or special endorsements, issued in connection with
this transaction, whether pursuant to the Title Commitment or otherwise;
5. One-half (1/2) of the reasonable cost of the Survey; and
6. The broker's fee to the extent any such fee is payable pursuant to
Seller's separate agreement with Cushman & Wakefield-of Connecticut, Inc.
C. The income and expenses of the Property shall be prorated and
apportioned by and between Seller and Purchaser as follows:
1. The following shall be adjusted between Seller and Purchaser as of
11:59 p.m. of the date preceding the Closing Date:
(a) rents and additional rents under or in respect of the Leases,
as, when and to the extent actually collected, on the basis of the period for
which the same are payable under such applicable Lease and apportioned on the
basis of the actual number of days in such period;
(b) real property taxes, water and sewer rents and charges, vault
taxes or charges, and elevator inspection charges, each on the basis of the
fiscal year or other period for which assessed, and apportioned upon the basis
of the actual number of days in such year or period (subject to Subsection C.6
below);
(c) subject to Subsection C.7 below, electric, gas, steam and
other public utility charges for services furnished to the Property, on the
basis of the actual number of days in any period covered by the charge being
apportioned (except that no apportionment shall be made for any of such items as
are furnished and charged by the applicable utility company directly to Tenants
under the Leases);
(d) fuel, if any, and taxes thereon, on the basis of a reading
taken as recently as possible prior to the Closing, at the price then charged by
a supplier unrelated to either Purchaser or Seller.
With regard to the Property, Seller shall pay, at or prior to the Closing, all
installments or amounts of items which are being apportioned under this Section
which became due and payable prior to the Closing.
2. Seller shall pay all unpaid commissions, fees and other charges
currently due to real estate brokers or other Persons with respect to any lease
executed prior to the Closing, including any Amendment of any Lease executed
prior to the Closing Date but becoming effective after the Closing Date. if the
Closing occurs, then Purchaser shall be responsible for commissions, fees, or
other charges due to real estate brokers or other Persons with respect to the
Leases, which become due after the Closing Date, whether by reason of renewals,
exercise of options, or otherwise, and with respect to leases executed after the
Closing Date; provided, however, that with respect to those Leases entered into
by Seller, Purchaser shall be responsible only for commission's, fees, or other
charges due to Zamagias Real Estate Inc. for any fees incurred under brokerage
agreements with the real estate brokers listed in Exhibit E attached hereto,
provided, further, that Purchaser will be given a credit of $2,116.80 against
the Purchase Price for such commissions.
3. If the Closing occurs before a new real property or other applicable
tax rate or charge of a Governmental Entity is fixed for the Property with
respect to any period prior to the Closing Date, then the apportionment of such
tax or charge at the Closing shall be based upon the tax rate for the
immediately preceding fiscal period applied to the latest assessed valuation.
Promptly after the new tax rate has been fixed, the apportionment of such tax or
charge made at the Closing shall be recomputed.
4. With regard to the Property, if any Tenant under a Lease is in
arrears in the payment of rent, additional rent, or other charges, payments
received from such Tenant after the Closing shall be applied in the following
order of priority:
(a) to the month preceding the month in which the Closing occurred;
(b) then to the month in which the Closing occurred;
(c) then to any month or months following the month in which the
Closing occurred with respect to which rent is due at time of receipt; and
(d) then to the period prior to the month preceding the month in which
the Closing occurred.
If any payments from Tenants received by Seller after the Closing are payable to
Purchaser by reason of this Subsection, then the appropriate sum (less a
proportionate share of costs for collection thereof) shall be promptly paid to
the other party. After the Closing, upon ten (10) days, prior written notice to
Purchaser, Seller may bring, in Seller's name and expense, an action against any
Tenant under a Lease to collect rent, additional rent, or other payments due
Seller for a period prior to the Closing, together with the cost of collection
thereof; but in no event shall Seller seek any remedy other than collection of
funds from the particular Tenant (and Seller shall not be entitled to seek a
termination of the Lease or eviction of the Tenant). Seller shall furnish
Purchaser (within five (5) Business Days after issuing or receiving the same)
copies of all papers served by Seller, the Tenant, or any other party to the
particular action.
5. In this Section, "additional rents" means percentage rent, escalation
charges for real estate taxes, parking charges and/or tax and labor, operating
expenses and maintenance escalation rents or charges, cost-of-living increases,
common area maintenance charges, or other charges of a similar nature payable
under the Leases. With regard to the Property, if any additional rents are
collected by Seller after the Closing which are attributable in whole or in part
to any period subsequent to the Closing, then Seller shall pay to Purchaser
Purchaser's share thereof, determined under Subsection C.l(a) above, less a
proportionate share of the costs for collection thereof. With regard to the
Property, if any additional rents are collected by Purchaser after the Closing
which are attributable in whole or in part to any period prior to the Closing,
then Purchaser shall pay to Seller Seller's share thereof, determined under
Subsection C.l(a) above, less a proportionate share of costs for collection
thereof.
6. If there are water meters on the Property, Seller, with respect to the
Property, shall furnish to Purchaser meter reading to a date not more than ten
(10) days prior to the Closing, and the unfixed meter charges for the
intervening time to the Closing shall be apportioned on the basis of such meter
readings. Upon the taking of a subsequent actual readings, such apportionments
shall be readjusted, and Seller or Purchaser, as' the case may be, will promptly
deliver to the other the amount determined to be so due upon such readjustments.
7. The apportionment of utility charges shall be made upon the basis of
charges shown on the latest available bills of such utilities. The charges shown
on such available bills for periods prior to the Closing shall be paid by
Seller, with respect to the Property, and for the period from the date of each
such last available utility bill to the Closing an apportionment shall be made
based on the amount charged for the period covered by such last available bill.
Notwithstanding the foregoing, Seller, with respect to the Property, will use
its best efforts to cause the utility company to read its meters or fix its
charges as of the Closing, in which event Seller shall pay such charges, when
billed, to the Closing, and Purchaser shall pay such charges from and after the
Closing.
8. At the Closing, Seller shall give Purchaser a credit against the
Purchase Price in the amount of the Security Deposits.
9. If any item covered by this Section cannot be apportioned because the
same has not been (or cannot be) fully ascertained on the Closing, or if any
error has been made with respect to any apportionment, then such item shall be
apportioned (or corrected, as applicable) as soon as the same is fully
ascertained.
10. After the date hereof, Seller may withdraw, settle, or otherwise
compromise any currently filed and proceeding protest or reduction proceeding
affecting real estate taxes assessed against the Property for any fiscal period
preceding or during which the Closing occurs. Real estate tax refunds and
credits received after the Closing which are attributable to the tax year during
which the Closing occurs shall be apportioned between Seller and Purchaser,
after deducting the costs of collection thereof, pursuant to this Section.
11. If, as of the Closing, the Property shall be (or shall have become)
subject to a special or local assessment or charge of any kind (whether or not
yet a lien), then Seller shall pay all installments thereof due and payable
prior to the Closing; provided, however, any installment thereof for a period
which includes the Closing shall be apportioned at the Closing in the same
manner as for taxes under Subsection C.l(b) above.
12. Seller shall pay to WFC-1 Realty Corp. "Landlord's Contribution" as
defined in that certain First Amendment of Lease, dated December 1 1993, by and
between Seller, as landlord, and WFC-1 Realty Corp., as tenant (the "Lease
Amendment") in accordance with the terms and conditions of the Lease Amendment;
provided, however, that Seller shall not be required to pay Landlord's
Contribution, or any portion thereof, if any of such terms or conditions or any
terms or conditions of the Lease (as defined in the Lease Amendment) are
materially modified by landlord or tenant thereunder. If landlord under the
Lease Amendment is entitled to reimbursement of Landlord's Contribution in
accordance with Paragraph 16 of the Lease Amendment, Purchaser shall promptly
turn over to Seller any of Landlord's Contribution received by Purchaser, and
Purchaser shall cooperate with Seller in obtaining the reimbursement of
Landlord's Contribution in accordance with the foregoing.
13. In the event either Seller or Purchaser shall owe the other any money
as a result of the terms of this Section (whether at Closing or thereafter),
then the party owing such money shall pay the other party such money as soon as
the amount is determined.
14. This Section C of Article V of this Agreement, and all rights and
duties of the parties hereunder, shall survive the Closing for a period of one
(1) year.
ARTICLE VI
DESTRUCTION OR CONDEMNATION OF PROPERTY
---------------------------------------
A. If prior to the Closing, a condemnation action is initiated or
threatened to take any part of the Property, Seller shall promptly give
Purchaser written notice of the action and, to the extent such information is
known to Seller, the amount, type and location involved. If the value of the
Property to be taken in such action exceeds Five Hundred Thousand and No/100
Dollars ($500,000.00), Purchaser may elect to terminate this Agreement upon
written notice to Seller within ten (10) days after its receipt of notice of
such condemnation; if notice of termination is not provided as set forth above,
Purchaser shall be deemed to have elected to proceed to close the transaction
contemplated by this Agreement. If Purchaser timely elects to terminate this
Agreement, Seller shall return the Deposit to Purchaser and thereupon neither
party shall have any further liability or obligation to the other except as
provided in Article III.E above. If Purchaser does not elect to terminate this
Agreement, Seller shall, at the Closing (i) assign, in a form reasonably
satisfactory to Purchaser and Seller, and turn over the net proceeds of any
award of such taking which may have been collected by Seller or (ii) if no award
or other proceeds shall have been collected, deliver to Purchaser an assignment
of Seller's right, in a form reasonably satisfactory to Purchaser and Seller, to
any such award or other proceeds which may be payable as a result of such
taking. In all other instances Purchaser shall be obligated to proceed to close
the transaction contemplated by this Agreement, provided that Seller delivers or
assigns to Purchaser, as the case may be, the net proceeds received or
receivable in connection with such condemnation in form reasonably acceptable to
Purchaser and Seller.
B. Risk of loss or damage to the Property, or any part thereof, by fire or
other casualty from the date hereof to the Closing Date shall be on Seller. If,
prior to the Closing Date, the Property, or any portion thereof, is damaged by
fire, or any other cause of whatsoever nature, Seller shall promptly give
Purchaser written notice of such damage, together with a description of such
damage and Seller's reasonable estimate of the cost and time necessary to repair
such damage. If the cost for repairing such damage shall, in the reasonable
judgment of Purchaser, exceed Five Hundred Thousand and No/100 Dollars
($500,000-00), Purchaser shall have the option, by written notice delivered to
Seller within twenty (20) days of receipt of Seller's written notice of damage
to Purchaser, either (1) to require Seller to convey the Property to Purchaser
in its damaged condition without any abatement in the Purchaser Price, to assign
to Purchaser all of Seller's right, title and interest in and to any claims
Seller may have under the insurance policies covering the Property and all
proceeds thereunder, and to pay to Purchaser the deductible amount of any such
policy, but in no event more than the amount reasonably required to repair such
damage, and Seller shall have no liability or obligation to repair or replace
the Property, or (2) to terminate this Agreement, in which event Seller shall
immediately return the Deposit to Purchaser, and neither party hereto shall have
any further duties or obligations hereunder except as provided in Article III.E
above. If the cost of repairing such damage shall, in the reasonable judgment of
Purchaser, not exceed Five Hundred Thousand No/1OO Dollars ($500,000.00), Seller
shall convey the Property to Purchaser in its damaged condition without any
abatement in the Purchase Price, and Seller shall assign to Purchaser all of
Seller's right, title and interest in and to any claims Seller may have under
the insurance policies covering the Property and all proceeds thereunder, and
pay Purchaser the deductible amount of any such policy, but in no event more
than the amount reasonably required to repair such damage, and Seller shall have
no liability or obligation to repair or replace the Property. Seller shall use
good faith efforts to cooperate with Purchaser in its attempt to obtain a letter
from the applicable insurer that such casualty is covered by the applicable
insurance policy and that such claim, policy or proceeds may be assigned to
Purchaser.
ARTICLE VII
NOTICES
------------------
Any notice required or permitted to be given hereunder shall be deemed to
be given when hand delivered or one (1) business day after pickup by Emery Air
Freight, Airborne, Federal Express, or similar overnight express service, in
either case addressed to the parties at their respective addresses referenced
below:
If to Seller: c/o Aetna Investment Group
242 Trumbull Street
Hartford, Connecticut 06156
Attention: William F. Towill, Jr.
Tel. (203) 275-2202
Fax (203) 275-3065
With a copy to: Garrett J. Delehanty, Jr., Counsel
Law Division
Aetna Life & Casualty
CityPlace, YFF1
Hartford, Connecticut 06156
Tel. (203) 275-3512
Fax (203) 275-4020
With a copy to: James A. McGraw, Esq.
Day, Berry & Howard
CityPlace
185 Asylum Street
Hartford, Connecticut 06103
Tel. (203) 275-0180
Fax (203) 275-0343
If to Purchaser: HRE Properties
530 Fifth Avenue
New York, New York 10036
Attention: John H. Kent and
Raymond P. Argila, Esq.
Tel. (212) 642-4800
Fax (212) 642-4823
With a copy to: Charles E. Aster, Esq.
Coudert Brothers
1114 Avenue of the Americas
New York, New York 10036-7794
Tel. (212) 626-4592
Fax (212) 626-4120
or in each case to such other address as either party may from time to time
designate by giving notice in writing to the other party. Telephone and
facsimile numbers are for informational purposes only. Effective notice will be
deemed given only as provided above.
ARTICLE VIII
CLOSING AND ESCROW
------------------
A. Upon execution of this Agreement, the parties hereto shall deposit an
executed counterpart of this Agreement with the Title Company and this
instrument shall serve as the instructions to the Title Company as the escrow
holder for consummation of the transaction contemplated herein. Seller and
Purchaser agree to execute such additional and supplementary escrow instructions
as may be appropriate to enable the Title Company to comply with the terms of
this Agreement, provided, however that in the event of any conflict between the
provisions of this Agreement and any supplementary escrow instructions, the
terms of the Agreement shall prevail.
B. At the Closing, Seller shall provide the following original documents
(the "Closing Documents"), each executed and acknowledged (as appropriate):
1. A special warranty deed to the Property, in form and substance
satisfactory to Purchaser and Seller which satisfaction shall be evidenced by
execution and acceptance of said document, subject to the matters set out in
Article I(A) and other matters subsequently approved by Purchaser or Purchaser's
counsel.
2. A bill of sale, in form and substance satisfactory to Purchaser and
Seller which satisfaction shall be evidenced by execution and acceptance of said
document, conveying the Personal Property.
3. (i) The Leases then currently encumbering the Property, which Leases
are listed in Exhibit D, attached hereto and incorporated herein by reference;
(ii) a current listing of any Security Deposits and prepaid rents held by Seller
with respect to the Property; and (iii) an assignment of such Leases, Security
Deposits, and prepaid rents by way of an assignment and assumption agreement,
which agreement shall be in form and substance satisfactory to Purchaser and
Seller which satisfaction shall be evidenced by execution and acceptance of said
document.
4. If requested by Purchaser, an assignment to Purchaser of Seller's
right, title and interest, if any, in the name Townline Center, which assignment
shall be in form and substance satisfactory to Purchaser and Seller which
satisfaction shall be evidenced by execution and acceptance of said document.
5. An assignment of all transferable warranties and guarantees then in
effect, if any, with respect to the improvements located on the Property or any
repairs or renovations to such improvements and Personal Property being conveyed
hereunder, which assignment shall be in form and substance satisfactory to
Purchaser and Seller which satisfaction shall be evidenced by execution and
acceptance of said document.
6. All books and records at the Property held by or for the account of
Seller, including without limitation, plans and specifications and lease
applications, as available.
7. An affidavit pursuant to the Foreign Investment in Real Property Tax
Act, in form and substance satisfactory to Purchaser and Seller which
satisfaction shall be evidenced by execution and acceptance of said document.
8. A corporate authorization in form and substance satisfactory to
Purchaser and Seller which satisfaction shall be evidenced by execution and
acceptance of said document.
9. An incumbency affidavit in form and substance satisfactory to
Purchaser and Seller which satisfaction shall be evidenced by execution and
acceptance of said document.
10. Notice letters (to be prepared and provided by Purchaser)
originally executed by Seller and individually addressed to each Tenant under a
Lease, in form and substance satisfactory to Purchaser and Seller which
satisfaction shall be evidenced by execution and acceptance of said document.
11. Copies of all ad valorem tax statements for the Property for the
calendar year of the Closing, if available, and the calendar year immediately
preceding the calendar year of the Closing, if not previously delivered to
Purchaser and in Seller's possession.
12. Possession of the Property shall be delivered to Purchaser at
Closing, subject to the rights of Tenants and the Permitted Encumbrances,
together with a complete set of keys to the Property, to the extent the same are
in Seller's possession, properly labeled and identified.
C. At the Closing, Purchaser shall (i) pay Seller the cash portion of the
Purchase Price; and (ii) execute and deliver to Seller the Note, Mortgage,
Assignment of Rents, and other agreements, opinions and documents referred to in
Articles II.A.3 and VIII.B.3(iii).
D. The documents referred to in Article VIII.B.3(i)and 6 shall be made
available to the Purchaser at the Closing.
E. Seller shall terminate its policies of insurance as of noon on the date
of Closing Date and Purchaser shall be responsible for obtaining its own
insurance thereafter.
F. Seller shall be entitled to the return of any deposit(s) posted by it
with any utility company and Purchaser shall-notify each utility company serving
the Property to terminate Seller's account, effective at noon on the Closing
Date.
G. Subsequent to Closing, Seller shall provide to Purchaser copies of form
letters to utility companies serving the Property, advising them of the sale of
the Property to Purchaser and directing to Purchaser all bills for the services
provided to the Property on and after the date of Closing.
ARTICLE IX
PRE-CLOSING DEFAULT
--------------------
A. (i) If Purchaser shall default under this Agreement, the Deposit shall
be retained by Seller as liquidated damages, and both parties shall be relieved
of and released from any further liability hereunder except for the obligations
of Purchaser set out in Article III.C. above. Seller and Purchaser agree that
the Deposit is a fair and reasonable amount to be retained by Seller as agreed
and liquidated damages in light of Seller's removal of the Property from the
market and the costs incurred by Seller and shall not constitute a penalty or a
forfeiture.
(ii) If Seller shall default under this Agreement, Purchaser's sole
remedy hereunder shall be either to terminate the Agreement and recover the
Deposit or to enforce the Seller's obligations to convey the Property, provided
that no such action in specific performance shall seek to require the Seller to
do any of the following: (a) change the condition of the Property or restore the
same after any fire or other casualty; (b) subject to Article IX.B, below,
expend money or post a bond to remove a title Encumbrance or defect or correct
any matter shown on a survey of the Property, except those Encumbrances or
defects voluntarily placed on the Property or title thereto by Seller after the
date hereof; or (c) secure any permit, approval, or consent with respect to the
Property or Seller's conveyance of the Property, except those consents within
the organization of Seller.
B. If prior to Closing Seller discloses to Purchaser or Purchaser
discovers that title to the Property is subject to defects, limitations or
Encumbrances other than Permitted Encumbrances, that any representation or
warranty of Seller contained in this Agreement is or, as of the date of Closing,
will be untrue, or that Seller has failed to perform an obligation, covenant or
agreement of Seller under this Agreement, then Purchaser shall promptly give
Seller written notice of its objection thereto. In such event, Seller may elect
to postpone the Closing for thirty (30) days and attempt to cure such objection,
provided that Purchaser may not object to the state of title of the Property
based on the Permitted Encumbrances. Subject to the exception set forth in
Section A(ii)(b) of Article IX above, the parties acknowledge and agree that
Seller shall have no obligation to cure such objection. If Purchaser fails to
waive the objection within ten (10) Business Days after notice from Seller that
Seller will not cure the objection, this Agreement will terminate automatically
and Seller shall promptly return the Deposit to Purchaser, and neither party
shall have any liability to the other except for the obligations of Purchaser
set out in Article III.E., above. For the purposes of this Agreement, any title
defect, limitation or Encumbrance other than a Permitted Encumbrance shall be
deemed cured if the Title Company will agree to (i) issue an ALTA owner's title
insurance policy to Purchaser for the Purchase Price, which policy takes no
exception for such defect, limitation or encumbrance for no additional premium
or for an additional premium upon Closing, or (ii) at the request of Purchaser,
affirmatively insure that such matter will not affect Purchaser's title to the
Property.
ARTICLE X
CONDITIONS TO OBLIGATIONS OF PURCHASER
--------------------------------------
A. The obligations of Purchaser to execute and deliver the applicable
Closing Documents, to pay the Purchase Price and to perform Purchaser's other
obligations at the Closing under this Agreement are and shall be subject to the
satisfaction of each of the following conditions at or prior to the Closing:
1. Title to the Property shall be free of all Encumbrances other than
the Permitted Encumbrances (or all such other Encumbrances shall be deemed to
have been cured pursuant to Article IX, Paragraph B above).
2. Seller shall have executed (where applicable) and delivered the
Closing Documents to be executed and delivered by Seller and delivered to
Purchaser all other documents and items required of Seller under this Agreement.
3. Purchaser shall have obtained an Owner's Policy of Title Insurance
on the ALTA 1990 Standard Form (the "Title Policy") from the Title Company
insuring Purchaser's right, title and interest in the Property in the amount of
$25,000,000, and excepting no Encumbrances other than the Permitted
Encumbrances; provided, however, that Purchaser shall have paid one-half of the
cost of the Title Policy.
4. Purchaser shall have obtained, at Purchaser's sole cost, a zoning
opinion confirming that the Property complies with all applicable zoning laws
and regulations.
5. Seller shall deliver to Purchaser on or before the Closing, dated
and originally executed by each of the Major Tenants and at least eighty percent
(80%) in number of the other Tenants, no earlier than thirty (30) Business Days
prior to the Closing Date, Tenant estoppel certificates, in form and substance
satisfactory to Purchaser and Seller which satisfaction shall be evidenced by
execution and acceptance of said document, with all blanks filled in by
Purchaser based on information supplied by the property manager and agreed to by
Purchaser (individually, an "Estoppel Certificate" and collectively, "Estoppel
Certificates").
6. All of the representations and warranties of Seller contained in
this Agreement shall have been true and correct when made, and shall be true and
correct on the Closing Date with the same effect as if made on and as of such
date.
7. Seller shall have performed, observed, and complied with all
covenants, agreements, and conditions required by this Agreement to be
performed, observed, and complied with on Seller's part prior to or as of the
Closing Date.
8. Neither Seller nor Purchaser has received written notice from the
applicable Governmental Entity that there is an actual, threatened or imminent
change in the zoning of the Property from the date hereof.
9. No uncured Violations shall exist against the Property, including
but not limited to Violations of Environmental Laws.
10. on the Closing Date, no Major Tenants, shall be the subject of any
pending bankruptcy proceeding pursuant to the United States Bankruptcy Code of
1978, as amended.
11. on the Closing Date, none of the Major Tenants (except Supermarkets
General Corporation) nor more than two of the other Tenants in the Property as
of the date hereof, nor The Wiz of Meriden, shall have vacated its respective
demised premises.
12. All other conditions to Purchaser's obligations which are
specifically set forth in this Agreement shall have been fulfilled. Purchaser
shall use its best efforts, during the period from the date hereof to the
Closing Date, to obtain the items described in Subsections A.3 and 4 above.
B. In the event that, on the Closing Date, no more than thirty percent
(300-.) in number of Tenants under a Lease (other than the Major Tenants), have
failed or refused to deliver an Estoppel Certificate for the benefit of
Purchaser, Seller may, at its option, in substitution of any of such missing
Estoppel Certificate, execute and deliver to Purchaser on the Closing Date an
estoppel certificate in form and substance satisfactory to Purchaser and Seller
which satisfaction shall be evidenced by execution and acceptance of said
document (a "Seller's Estoppel Certificate,,), and if Seller does so the
condition precedent with respect to such Estoppel Certificate set forth in
Subsection A.5 above shall be deemed satisfied. Any Seller's Estoppel
Certificate shall survive the Closing Date until, and any action based upon any
misrepresentation set forth therein must be commenced prior to, the earlier to
occur of (i) the delivery to Purchaser by Seller of an Estoppel Certificate
executed by the subject Tenant (a "Post Closing Tenant Estoppel") or (ii) one
(1) year after the Closing Date.
C. In the event any of the above conditions are not met, Purchaser may, at
its sole election, terminate the Agreement in which case the Deposit will be
immediately returned to Purchaser and all of the Seller's and Purchaser's
obligations under this Agreementshall terminate, except as provided in Article
III.E above.
ARTICLE XI
DEFINITIONS
------------
A. In this Agreement, and in the Exhibits and Schedules attached hereto,
the following words and phrases shall have the following meanings:
"Amendments" means an amendment, renewal, supplement, modification,
expansion, restatement, extension, or any other change or revision.
"Business Day" means any day other than (a) a Saturday or Sunday or (b) a
federal or New York State or Connecticut State banking holiday.
"Closing" is defined in Section B of Article II of this Agreement.
"Closing Date" is defined in Section B of Article II of this Agreement.
"Closing Documents" is defined in Section B of Article VIII of this
Agreement.
"Contracts" is defined in Section A of Article III of this Agreement.
"Development Rights" means all rights of the owner to the air space above
the Property, all zoning entitlements, development rights and appurtenances
(including, but not limited to, all entitlements based upon so-called unused
floor-area ratios) accruing to the Property (and/or Seller with respect to the
Property) under, or by reason of, any applicable zoning ordinance or other laws.
"Encumbrances" means any and all liens, mortgages, deeds of trust,
security agreements, security interests, claims, options, rights of purchase or
first refusal, encroachments, rights-of-way, operating agreements, covenants,
reservations, orders, decrees, judgments, leases, subleases, licenses,
assignments, agreements, charges, conditions, restrictions, or other
encumbrances affecting title to a property and of record.
"Environmental Laws" means any federal, state or local statute, law, rule,
regulation, ordinance, code, policy, rule of common law, judicial order,
administrative order, consent decree, or judgment now or hereafter in effect, in
each case, as have been amended from time to time, relating to the environment,
health or safety, including the National Environmental Policy Act (42 U.S.C.
Sec. 4321 et seq.), the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (42 U.S.C. 9601 et seq.), as amended by the Superfund
Amendments and Reauthorization Act of 1986, the Resource Conservation and
Recovery Act (42 U.S.C. Sec. 6901 et seq.), as amended by the Hazardous and
Solid Waste Amendments of 1984, the Hazardous Materials Transportation Act (49
U.S.C. Sec. 1801 et seq.), the Toxic Substances Control Act (15 U.S.C. Sec. 2601
et seq.), the Clean Water Act (33 U.S.C. Sec. 1331 et seq.), Clean Air Act (42
U.S.C. 7401 et seq.), Occupational Safety and Health Act (25 U.S.C. 651 et
seq.), the Federal Water Pollution Control Act (33 U.S.C. Sec. 1251 et seq.),
the Safe Drinking Water Act (42 U.S.C. Sec. 3808 et seq.), or any similar
federal, state or local laws, ordinances or regulations implementing such laws.
"Governmental Entity" means the United states, the State of New York, the
State of Connecticut any other State in which a party to this Agreement is
incorporated or organized, the County of New Haven, Town of Meriden, Town of
Wallingford, or other political subdivision of any of the foregoing, and any
agency, authority, department, court, commission or other legal entity of any of
the foregoing asserting jurisdiction over any of the parties hereto or over the
Property or over the operation of the business of the Property.
"Hazardous Materials" means (a) asbestos, radon gas, urea formaldehyde
foam insulation, transformers or other equipment which contain dielectric fluid
contains levels of polychlorinated byphenyls in excess of federal, the State of
Connecticut, the County of New Haven, Connecticut, or either of the Towns of
Meriden or Wallingford, safety guidelines, whichever are more stringent, (b) any
solid or liquid wastes (including hazardous wastes), hazardous air pollutants,
hazardous substances, hazardous chemical substances and mixtures, toxic
substances, pollutants and contaminants, as such terms are defined in the
National Environmental Policy Act (42 U.S.C. Section 4321 et seq.), the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42
U.S.C. Section 9601 et seq.), as amended by the Superfund Amendments and
Reauthorization Act of 1986, the.Resource Conservation and Recovery Act (42
U.S.C. Section 6901 et seq.), as amended by the Hazardous and Solid Wastes
Amendments of 1984, the Hazardous Materials Transportation Act, the Toxic
Substances Control Act, the Clean Water Act (33 U.S.C. Section 1321 et seq.),
the Clean Air Act, the Occupational Safety and Health Act (29 U.S.C. Section 651
et seq.), as such laws and regulations may be amended and/or supplemented from
time to time, or any and all rules and regulations promulgated under any of the
above as such may be amended and/or supplemented from time to time, or (c) any
other chemical material or substance, exposure to which is prohibited, or, to
the extent limited or regulated, limited or regulated by any Governmental
Entity.
"Leases" means all written leases, rental agreements, concession
agreements, subleases, underleases or other agreements which permit or authorize
the use and occupancy of the Property, of every kind whatsoever now existing or
hereafter (prior to the Closing Date) created or granted with respect to the
Property and/or use and occupancy thereof, together with any and all, if any,
guaranties, for performance of a tenant's obligations thereunder known to
Seller, and all Amendments and/or other agreements forming a part thereof.
"Major Tenant" means each of Supermarkets General Corporation, WFC-1
Realty Corp., The Stop & Shop Companies, Inc., and Marshalls of Meriden, Ct.,
Inc.
"Permitted Encumbrances" is defined in the last paragraph of Section A of
Article I of this Agreement.
"Person" means an individual person, a corporation, partnership, trust,
joint venture, proprietorship, estate, association, Governmental Entity or other
incorporated or unincorporated enterprise, entity.or organization of any kind.
"Personal Property" is defined in Section A.2 of Article I of this
Agreement.
"Plans" means all architectural, electrical, mechanical, plumbing and
other plans and specifications in Seller's possession or control produced in
connection with the construction, repair and maintenance of the Property
(including all revisions and supplements thereto) and all operating manuals and
other documents pertaining,to the physical operation of the Property in Seller's
possession.
"Property" is defined in Section A of Article I of this Agreement.
"Purchase Price" is defined in Section A of Article II of this Agreement.
"Security Deposits" means those security deposits and/or prepaid rentals
received from any Tenant under any Lease and in the possession of Seller, which
Purchaser and Seller acknowledge and agree to be in the aggregate amount of
$24,676.57.
"Tenant" means a tenant, subtenant, undertenant, or occupant under a
Lease.
"Title Company" means Lawyers Title Insurance Corporation, located at 708
Third Avenue, Suite 2300, New York, New York 10017, Attention: Ms. Stephanie
Butler.
"Violation" means any written notice of any violation of law issued by any
Governmental Entity against or with respect to the Property.
B. Wherever used in this Agreement:
1. the words "include,, or "including" shall be construed as
incorporating also, "but not limited to,' or "without limitation";
2. the word "day" means a calendar day unless otherwise specified;
3. the word "law" (or "laws") means any statute, ordinance, resolution,
regulation, code, rule, order, decree, judgment, injunction, mandate or other
legally binding requirements of a Governmental Entity;
4. each reference to either Land or the Property shall be deemed to
include "and/or any portion thereof"; and
5. The word "party" means Purchaser or Seller, as the case may be.
ARTICLE XII
MISCELLANEOUS
---------------------
A. Entire Agreement - This Agreement is the entire Agreement between the
parties with respect to the subject matter hereof, and no alteration,
modification or interpretation hereof shall be binding unless in writing and
signed by both parties.
B. Severability - If any provision of this Agreement or application to any
party or circumstances shall be determined by any court ' of competent
jurisdiction to be invalid and unenforceable to any extent, the remainder of
this Agreement or the application of such provision to such person or
.circumstances, other than those as to which it is so determined invalid or
unenforceable, shall not be affected thereby, and each provision hereof shall be
valid and shall be enforced to the fullest extent permitted by law.
C. Applicable Law - This Agreement shall be construed and enforced in
accordance with the laws of the State of Connecticut.
D. Assignability - Purchaser may not assign this Agreement without first
obtaining Seller's written consent. Any assignment in contravention of this
provision shall be void. No assignment shall release the Purchaser herein named
from any obligation or liability under this Agreement.
If Purchaser requests Seller's written consent to any assignment,
Purchaser shall (1) notify Seller in writing of the proposed assignment; (2)
provide Seller with the name and address of the proposed assignee; (3) provide
Seller with financial information including financial statements of the proposed
assignee; and (4) provide Seller with a copy of the proposed assignment.
E. Successors Bound - This Agreement shall be binding upon and inure to
the benefit of Purchaser and Seller and their successors and permitted assigns.
F. No Public Disclosure - Purchaser shall make no public disclosure of the
terms of this transaction without the prior written consent of Seller, except
that Purchaser may discuss the transaction in confidence with proposed joint
venturers or prospective mortgagees.
G. Captions - The captions in this Agreement are inserted only as a matter
of convenience and for reference and in no way define, limit or describe the
scope of this Agreement or the scope or content of any of its provisions.
H. Attorney's Fees - In the event of any litigation arising out of this
Agreement, the prevailing party shall be entitled to reasonable attorney's fees
and costs.
I. No Partnership - Nothing contained in this Agreement shall be construed
to create a partnership or joint venture between the parties or their successors
in interest.
J. Time - Time is of the essence in this Agreement.
K. Counterparts - This Agreement may be executed and delivered in any
number of counterparts, each of which so executed and delivered shall be deemed
to be an original and all of which shall constitute one and the same instrument.
L. Recordation - Purchaser and Seller agree not to record this Agreement
or any memorandum thereof.
M. Proper Execution - The submission by Seller to Purchaser of this
Agreement in unsigned form shall be deemed to be a submission solely for
Purchaser's consideration and not for acceptance and execution. Such submission
shall have no binding force and effect, shall not constitute an option, and
shall not confer any rights or impose any obligations upon Purchaser,
irrespective of any reliance thereon, change of position or partial performance.
The submission by Seller of this Agreement for execution by Purchaser and the
actual execution and delivery thereof by Purchaser to Seller shall similarly
have no binding force and effect on Seller unless and until Seller shall have
executed this Agreement and a counterpart thereof shall have been delivered to
Purchaser.
N. Best Knowledge - Whenever a representation or warranty is made in this
Agreement on the basis of the best of knowledge of!Seller, such representation
and warranty is made solely on the basis of the actual, as distinguished from
implied, imputed and constructive, conscious knowledge on the date that such
representation or warranty is made, without inquiry or investigation, of William
F. Towill,, Jr. and C. Kevin Gallagher, without attribution to them of facts and
matters otherwise within the personal knowledge of any other officers or
employees of Seller or third parties, including but not limited to tenants and
property managers of the Property.
O. Survival and Limitation of Re-presentations and Warranties - The
representations and warranties set forth in Article IV.A. and C shall survive
the Closing but written notification of any claim arising therefrom must be
received by Seller within one (1) year of the Closing Date or such claim shall
be forever barred and Seller shall have no liability with respect thereto. The
aggregate liability of the Seller with respect to all claims hereunder shall not
exceed TWO MILLION DOLLARS ($2,000,000.00).
P. Committee Approval This Agreement is subject to approval by Aetna's
Investment Committee and the portfolio manager having responsibility for the
Property.
Q. Disclaimer - The Declaration of Trust establishing HRE Properties,
dated July 7, 1969, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of the Commonwealth of
Massachusetts, provides that the name "HRE Properties" refers to the Trustees
under the Declaration collectively as Trustee, but not as individuals or
personally; and no trustee, shareholder, officer or agent of HRE Properties
shall be held to any personal liability, nor shall resort be had to their
private property for the satisfaction of any obligation or claim or otherwise in
connection with affairs of said HRE Properties, but the trust estate only shall
be liable.
<PAGE>
IN WITNESS WHEREOF, Purchaser and Seller have caused this Agreement to be
executed on the dates set forth below, effective as of the date set forth above.
ATTEST: SELLER: AETNA LIFE INSURANCE COMPANY
By /s/ Davic J. Ingram
---------------------------
Printed name : Davic J. Ingram
Its: Vice President
/s/ William F. Towill
- ----------------------
Assistant Secretary
Date: 12/22/93
PURCHASER: HRE PROPERTIES
By /s/ John H. Kent
---------------------------
Printed name : John H. Kent
Its: Vice President - Acquisitions
/s/ Natalie s. Keller
- ----------------------
Date: 12/22/93
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report included in this Annual Report on Form 10-K for the year ended October
31, 1994 of HRE Properties, into its previously filed Registration Statement on
Form S-3 (No. 33-57119) and its previously filed Registration Statements on Form
S-8 (No.2-93146 and No. 33-41408), and to the reference to our Firm under the
caption "Experts" in said Registration Statements.
ARTHUR ANDERSEN LLP
New York, New York
January 26, 1995
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-END> OCT-31-1994
<CASH> 8738000
<SECURITIES> 0
<RECEIVABLES> 2343000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 146804000<F1>
<DEPRECIATION> 26173000
<TOTAL-ASSETS> 142559000
<CURRENT-LIABILITIES> 6024000
<BONDS> 45386000
<COMMON> 123507000
0
0
<OTHER-SE> (35026000)
<TOTAL-LIABILITY-AND-EQUITY> 142559000
<SALES> 0
<TOTAL-REVENUES> 18969000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 12866000
<LOSS-PROVISION> 1086000<F3>
<INTEREST-EXPENSE> 3775000
<INCOME-PRETAX> 1262000
<INCOME-TAX> 0
<INCOME-CONTINUING> 1262000
<DISCONTINUED> 0
<EXTRAORDINARY> 82000<F2>
<CHANGES> 0
<NET-INCOME> 1344000
<EPS-PRIMARY> .26
<EPS-DILUTED> .26
<FN>
<F1>This item consists of Real Estate Investments:Properties Owned
<F2>This item consists of Gains on Sales of Properties
<F3>This item consists of Writedown in carrying value of investment
</FN>
<PAGE>
</TABLE>
