UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission file number 0-11699
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BALCOR PENSION INVESTORS-IV
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(Exact name of registrant as specified in its charter)
Illinois 36-3202727
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2355 Waukegan Road
Bannockburn, Illinois 60015
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 267-1600
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
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(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ X ]
<PAGE>
PART I
Item 1. Business
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Balcor Pension Investors-IV (the "Registrant") is a limited partnership formed
in 1982 under the laws of the State of Illinois. The Registrant raised
$214,803,000 from sales of Limited Partnership Interests. The Registrant has
retained cash reserves from the sale of its real estate investments for
contingencies which exist or may arise. The Registrant's operations currently
consist of interest income earned on short-term investments, the payment of
administrative expenses and, to a lesser extent, the operations of the
remaining portion of a property, which was sold in March 1998.
The Registrant originally funded thirty-eight loans, and subsequently funded
four additional loans and acquired fourteen properties through foreclosure. As
of December 31, 1997, the Registrant had no loans in its portfolio and had
disposed of all of these properties, with the exception of a remaining outlot
at the North Kent Mall, as described under "Item 2. Properties," which was sold
in March 1998.
The Partnership Agreement provides for the dissolution of the Registrant upon
the occurrence of certain events, including the disposition of all interests in
real estate. During 1996, the Registrant sold five properties. In addition,
during 1996, the property in which the Registrant held a minority joint venture
interest was sold. During September 1997, the lender on North Kent Mall
acquired the mall portion of the property pursuant to a deed in lieu of
foreclosure; however, the Registrant continued to own its remaining real estate
investment, an outlot at the property (the "North Kent Outlot"), which was sold
in March 1998. During December 1997, the Registrant sold the Glendale Fashion
Center. The Registrant has retained a portion of the cash from the property
sales to satisfy obligations of the Registrant as well as establish a reserve
for contingencies. The timing of the termination of the Registrant and final
distribution of cash will depend upon the nature and extent of liabilities and
contingencies which exist or may arise. Such contingencies may include legal
and other fees and costs stemming from litigation involving the Registrant
including, but not limited to, the lawsuit discussed in "Item 3. Legal
Proceedings." In the absence of any such contingency, the reserves will be paid
within twelve months of the last property being sold. In the event a
contingency continues to exist or arises, reserves may be held by the
Registrant for a longer period of time.
During September 1997, the lender on the loan collateralized by the mall
portion of North Kent Mall acquired the property through foreclosure. During
March 1998, the Registrant sold the North Kent Outlot in an all cash sale for
$25,000. In addition, the Registrant received $1,000,000 in March 1998 pursuant
to a lease termination agreement between the Registrant and the lessee of the
theater located on the property. See "Other Information" and "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources" for additional information.
During December 1997, the Registrant sold the Glendale Fashion Center in an all
cash sale for $10,700,000. See "Other Information" and "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources" for additional information.
<PAGE>
The Registrant no longer has an ownership interest in any real estate
investment. The General Partner is not aware of any material potential
liability relating to environmental issues or conditions affecting real estate
formerly owned by the Registrant.
The officers and employees of Balcor Mortgage Advisors-III, the General Partner
of the Registrant, and its affiliates perform services for the Registrant. The
Registrant currently has no employees engaged in its operations.
Other Information
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Glendale Fashion Center
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As previously reported, on October 10, 1996, the Registrant contracted to sell
the Glendale Fashion Center, Glendale, California, to an unaffiliated party,
Vestar Development Co., an Arizona corporation. The sale price was $10,700,000.
Pursuant to an agreement between the Registrant and the purchaser, the closing
was extended from December 2, 1997. In addition, the purchaser assigned its
rights under the contract to Vestar/Lend Lease Glendale Fashion Center, L.L.C.
(the "Purchaser"). The sale closed on December 19, 1997.
At the closing, the Purchaser paid the Registrant $70,000 as a fee for
extending the closing. From the proceeds of the sale, the Registrant repaid the
outstanding balance of the first mortgage loan of $1,270,565 and paid a total
of $269,250 as a brokerage commission to two unaffiliated parties, one of which
is an affiliate of the company which provided property management services for
other properties owned by the Registrant, and $39,701 in closing costs. The
Registrant received the remaining proceeds of $9,190,484.
North Kent Outlot
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In October 1983, the Registrant funded a loan collateralized by a wrap-around
mortgage on North Kent Mall, Grand Rapids, Michigan. The Registrant obtained
title to the property pursuant to a deed in lieu of foreclosure on January 14,
1994. As previously reported, on September 18, 1997, with the exception of an
outlot (the "North Kent Outlot"), the Registrant conveyed the property (the
"Mall") to the holder of the mortgage loan collateralized by the Mall pursuant
to a deed in lieu of foreclosure. The mortgage loan collateralized by the North
Kent Outlot is held by a different lender. Located on the North Kent Outlot is
a motion picture theater which is leased by a third party (the "Lessee").
On January 21, 1998, the Registrant contracted to sell the North Kent Outlot to
an unaffiliated party, The Stratus Corporation, an Illinois corporation, for a
sale price of $1,025,000. The purchaser deposited $25,000 into an escrow
account as earnest money. Subsequently, the Registrant and the Lessee executed
a Lease Termination Agreement pursuant to which the Lessee paid the Registrant
$1,000,000 on March 3, 1998 and the lease for the theater was terminated as of
March 1, 1998. The Registrant used a portion of these proceeds in the amount of
$763,435 to repay the outstanding principal balance of the mortgage loan
collateralized by the North Kent Outlot. On March 2, 1998, the Registrant and
<PAGE>
the purchaser terminated the agreement of sale and executed a new agreement of
sale for the North Kent Outlot for a sale price of $25,000. The sale closed on
March 10, 1998.
For services rendered in negotiating the Lease Termination Agreement and the
sale of the North Kent Outlot, the Registrant paid $25,625 as a commission to
an affiliate of the third party which provided property management services for
other properties owned by the Registrant. The Registrant also paid $11,118 in
closing costs and received the remaining proceeds of approximately $225,000.
Neither the General Partner nor any affiliate will receive a brokerage
commission in connection with the sale of the North Kent Outlot. The General
Partner will be reimbursed by the Registrant for actual expenses incurred in
connection with the sale.
A principal of the purchaser (the "Principal") is a partner in the law firm of
Hopkins & Sutter in Chicago, Illinois. Hopkins & Sutter has provided legal
services periodically to the Registrant and to affiliates of the General
Partner. In addition, the Principal or affiliates of the Principal have
purchased four other properties from affiliates of the General Partner.
Item 2. Properties
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As of December 31, 1997, the Registrant did not own any properties, except for
the North Kent Outlot, located in Grand Rapids, Michigan. The property consists
solely of a land parcel on which a theater is located.
The land parcel was held subject to a mortgage loan. See Note 7 of Notes to the
Financial Statements for additional information.
In the opinion of the General Partner, the Registrant has obtained adequate
insurance coverage.
See Notes to Financial Statements for other information regarding former real
property investments.
Item 3. Legal Proceedings
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Dee vs. Walton Street Capital Acquisition II, LLC
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On June 14, 1996, a proposed class and derivative action complaint was filed,
Dee vs. Walton Street Capital Acquisition II, LLC (Circuit Court of Cook
County, Illinois, County Department, Chancery Division ("Chancery Court"), Case
No. 96 CH 06283) (the "Dee Case"), naming the General Partner and the general
partners (the "Balcor Defendants") of nine other limited partnerships sponsored
by The Balcor Company (together with the Registrant, the "Affiliated
Partnerships"), as well as the Affiliated Partnerships, as defendants.
Additional defendants were Insignia Management Group ("Insignia") and Walton
Street Capital Acquisition II, LLC ("Walton"") and certain of their affiliates
and principals (collectively, the "Walton and Insignia Defendants"). The
<PAGE>
complaint alleged, among other things, that the tender offers for the purchase
of limited partnership interests in the Affiliated Partnerships made by a joint
venture consisting of affiliates of Insignia and Walton were coercive and
unfair.
On July 1, 1996, another proposed class action complaint was filed in the
Chancery Court, Anderson vs. Balcor Mortgage Advisors (Case No. 96 CH 06884)
(the "Anderson Case"). An amended complaint consolidating the Dee and Anderson
Cases (the "Dee/Anderson Case") was filed on July 25, 1996.
The complaint seeks to assert class and derivative claims against the Walton
and Insignia Defendants and alleges that, in connection with the tender offers,
the Walton and Insignia Defendants misused the Balcor Defendants' and
Insignia's fiduciary positions and knowledge in breach of the Walton and
Insignia Defendants' fiduciary duty and in violation of the Illinois Securities
and Consumer Fraud Acts. The plaintiffs amended their complaint on October 8,
1996, adding additional claims. The plaintiffs requested certification as a
class and derivative action, unspecified compensatory damages and rescission of
the tender offers. Each of the defendants filed motions to dismiss the
complaint for failure to state a cause of action. On January 7, 1997, the
Chancery Court denied the plaintiffs' motion for leave to amend the complaint
and dismissed the matter for failure to state a cause of action, with
prejudice.
On February 3, 1997, the plaintiffs filed a Notice of Appeal of the Chancery
Court's order to the Appellate Court of Illinois. Plaintiff's brief was filed
with the Appellate Court in September 1997. Defendants filed their reply briefs
in January 1998. Oral arguments before the Appellate Court were held on March
18, 1998. The Appellate Court is expected to issue its opinion in the spring of
1998, although there can be no assurances on such date.
The Balcor Defendants intend to vigorously contest this action. No class has
been certified as of this date. The Registrant believes it has meritorious
defenses to contest the claims. It is not determinable at this time whether or
not an unfavorable decision in this action would have a material adverse impact
on the Registrant.
Item 4. Submission of Matters to a Vote of Security Holders
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No matters were submitted to a vote of the Limited Partners of the Registrant
during 1997.
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
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Matters
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There has not been an established public market for Limited Partnership
Interests and it is not anticipated that one will develop. For information
regarding distributions, see "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources" and Financial Statements.
As of December 31, 1997, the number of record holders of Limited Partnership
Interests of the Registrant was 27,672.
Item 6. Selected Financial Data
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Year ended December 31,
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1997 1996 1995 1994 1993
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Total income $678,007 $3,834,202 $1,477,161 $3,221,514 $5,140,176
Provision for losses
on loans, real
estate and
accrued interest
receivable 2,354,057 4,703,830 1,414,270 None 1,277,805
(Loss) income before
gains on dispositions
of assets and
extraordinary
items (2,720,943) 1,315,305 1,339,538 2,241,206 2,761,569
Net (loss) income (692,154) 5,962,109 1,339,538 3,411,752 2,885,608
Net (loss)income
per average number
of Limited Part-
nership Interests
outstanding - Basic
and Diluted (1.78) 5.73 3.10 7.84 6.58
Total assets 17,480,283 44,064,474 52,279,629 61,470,589 67,655,261
Mortgage notes
payable 768,601 3,883,828 10,419,008 11,316,222 14,410,060
Distributions per
Limited Partner-
ship Interest(A) 56.75(B) 17.00 21.13 14.05 16.75
(A) These amounts include distributions of Original Capital of $51.00, $13.00,
$16.13, $8.55 and $15.00 per Limited Partnership Interest during 1997, 1996,
1995, 1994 and 1993, respectively.
<PAGE>
(B) In addition to the above distributions, a special distribution of $.08 per
Interest was paid to class members including certain current investors in the
Partnership pursuant to the settlement of a class action lawsuit.
Item 7. Management's Discussion and Analysis of Financial Condition and
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Results of Operations
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Operations
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Summary of Operations
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During 1997, Balcor Pension Investors-IV (the "Partnership") recognized a
provision for losses on real estate held for sale and a gain on forgiveness of
debt both related to the North Kent Mall. In addition, the Partnership
generated a loss from operations of real estate held for sale during 1997 as
compared to income during 1996 and 1995 due to the 1997 and 1996 property
sales. During 1997 and 1996, the Partnership recognized gains related to
property sales. During 1996, the Partnership recognized participation income
from the gain on the sale of the property which the Partnership owned through a
joint venture with affiliates and a gain on the prepayment of a loan
receivable. In addition, the Partnership recognized provisions for losses on
real estate held for sale in 1996 and 1995 and a recovery of losses in 1996. As
a result of these transactions, the Partnership recognized a net loss in 1997
as compared to net income in 1996, and an increase in net income during 1996 as
compared to 1995. Further discussion of the Partnership's operations is
summarized below.
1997 Compared to 1996
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As a result of the prepayment of the Stonehaven South Apartments loan in 1996,
interest income on loan receivable ceased. In addition, the Partnership
recognized a gain of $786,766 in 1996 in connection with the prepayment of the
loan receivable.
The Stonehaven South Apartments loan provided additional interest in the form
of a share in the increase of the gross income of the property above a certain
level. Participation income was recognized during 1996 in connection with this
loan.
Higher average cash balances were available for investment primarily due to
proceeds received by the Partnership from the 1996 property sales prior to
distribution to Limited Partners in January 1997. In addition, higher average
cash balances were available for investment in the Early Investment Incentive
Fund due to the discontinuance of repurchases of Interests from Limited
Partners in February 1997. This resulted in an increase in interest income on
short-term investments in 1997 as compared to 1996.
During 1997 and 1996, the Partnership received $75,000 and $675,000,
<PAGE>
respectively, related to the October 1996 settlement with a former tenant of
the 240 East Ontario Office Building which was sold in 1993. The settlement
related to rental income owed to the Partnership pursuant to the terms of the
tenant's lease. These amounts were recognized as settlement income for
financial statement purposes.
The Partnership recognized other income during 1997 primarily in connection
with refunds of prior years' insurance premiums relating to the Partnership's
properties.
Provisions are charged to income when the General Partner believes an
impairment has occurred to the value of its properties or in a borrower's
ability to repay a loan or in the value of the collateral property.
Determinations of fair value are made periodically on the basis of assessments
of property operations and the property's estimated sales price less closing
costs. Determinations of fair value represent estimations based on many
variables which affect the value of real estate, including economic and
demographic conditions. The Partnership recognized provisions of $2,354,057 in
1997 related to the North Kent Mall and $4,703,830 in 1996 related to the North
Kent Mall and Del Lago and Regency Club apartment complexes to provide for
changes in the estimates of the fair values of the properties. In addition,
during 1996, the Partnership recognized a recovery of $2,621,805 related to the
change in the estimated fair value of the Glendale Fashion Center. During 1996,
the Partnership did not recognize any provisions for potential losses for its
loan. The Partnership wrote off allowances of $4,885,257 in connection with
the foreclosure of the North Kent Mall in 1997 and $106,330 and $574,500
related to the sales of the Regency Club and the Del Lago apartment complexes,
respectively, in 1996.
Operations of real estate held for sale represent the net operations of those
properties acquired by the Partnership through foreclosure. At December 31,
1997, the Partnership was operating an outlot at the North Kent Mall (the
"North Kent Outlot"). In 1997, the lender on North Kent Mall acquired the
property (with the exception of the North Kent Outlot) pursuant to a deed in
lieu of foreclosure and the Partnership recognized a gain on forgiveness of
debt of $1,769,057 in connection with the foreclosure. The North Kent Mall was
generating income prior to foreclosure. In 1996, the Partnership sold five
properties, which were generating income from operations prior to their sales,
which resulted in a significant decrease in income from operations of real
estate held for sale during 1997. In addition, during 1997, the Partnership
sold the Glendale Fashion Center, which was operating at a loss prior to the
sale. As a result of these transactions, the Partnership recognized a loss from
operations of real estate held for sale during 1997 as compared to income in
1996.
Participation in loss (income) of joint venture with affiliates represented the
Partnership's 15.37% share of the operations from the Perimeter 400 Center
Office Building. In December 1996, the joint venture sold the property and the
Partnership recognized its share of the gain on sale. During 1997, the
Partnership paid its share of additional expenses related to the property. As a
result, the Partnership recognized participation in loss of joint venture with
affiliates during 1997 as compared to income in 1996.
<PAGE>
The Partnership incurred higher legal, consulting, printing and postage costs
in connection with its response to a tender offer and certain related
litigation during 1996. In addition, the Partnership reimbursed The Balcor
Company in 1996 for legal expenses incurred in connection with a class action
lawsuit pursuant to a settlement agreement. These were the primary reasons for
the decrease in administrative expenses during 1997 as compared to 1996. The
Partnership also incurred higher portfolio management fees during 1996 which
contributed to the decrease.
The Partnership recognized gains in connection with the 1997 and 1996 property
sales of $259,732 and $4,085,118, respectively.
In 1996, the Partnership sold the Colony and Palm View apartment complexes. In
connection with the sales, the Partnership paid $123,308 of prepayment
penalties and wrote off the remaining unamortized deferred expenses in the
amount of $101,772. These amounts were recognized as debt extinguishment
expenses and classified as extraordinary items.
1996 Compared to 1995
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The Colonial Coach Mobile Home Park and the Stonehaven South Apartments loans
were prepaid in September 1995 and July 1996, respectively, resulting in a
decrease in interest income on loans receivable during 1996 as compared to
1995.
Operations of real estate held for sale represent the net operations of those
properties acquired by the Partnership through foreclosure. At December 31,
1996, the Partnership was operating two properties. The funds advanced for
these two properties by the Partnership totaled approximately $11,900,000,
representing approximately 6% of original funds advanced. In 1996, the
Partnership sold the Colony, Del Lago, Palm View, Pelican Pointe and Regency
Club apartment complexes.
Income from real estate held for sale in 1996 decreased by approximately
$731,000 when compared to 1995 primarily due to the 1996 property sales. These
decreases were partially offset by lower repairs, tenant improvements and
leasing costs at the North Kent Mall and Glendale Fashion Center, which
exceeded the decrease in revenue from Glendale due to the vacancy of the
property, resulting in an approximately $150,000 increase in net income
generated by these properties for 1996 as compared to 1995.
Participation in income of joint venture with affiliates represented the
Partnership's 15.37% share of the operations from the Perimeter 400 Center
Office Building. In December 1996, the joint venture sold the property and the
Partnership recognized its share of the gain on sale. As a result,
participation in income of joint venture with affiliates increased in 1996 as
compared to 1995.
Participation income was recognized during 1996 and 1995 in connection with the
Stonehaven South Apartments loan.
Lower average cash balances were available for investment due to the payment of<PAGE>
distributions to Limited Partners in July and October 1995 and October 1996
from proceeds received in connection with prior loan repayments and property
sales. This resulted in a decrease in interest income on short-term investments
during 1996 as compared to 1995.
In April 1995, the Partnership received insurance proceeds of $710,155 related
to earthquake damage incurred at the Glendale Fashion Center which was
recognized as other income.
During 1995, the Partnership recognized provisions of $1,344,000 related to the
Partnership's real estate held for sale to provide for changes in the estimate
of the fair value of certain properties in the Partnership's portfolio. In
addition, the Partnership recognized a provision of $70,270 in 1995 related to
the Colonial Coach loan and wrote off allowances of $320,270 in connection with
the prepayment of the loan at a discount.
The Partnership incurred legal, consulting, printing and postage costs in
connection with its response to a tender offer and certain related litigation
during 1996. As a result, administrative expenses increased during 1996 as
compared to 1995.
Liquidity and Capital Resources
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The cash position of the Partnership decreased by approximately $15,235,000 as
of December 31, 1997 when compared to December 31, 1996 primarily due to the
payment of a distribution to Limited Partners in January 1997 from proceeds
from the 1996 property sales which was partially offset by the proceeds
received from the sale of Glendale Fashion Center in December 1997. The
Partnership received cash flow of approximately $337,000 from its operating
activities, primarily from interest income earned on short-term interest
bearing instruments and the collection of receivables related to properties
sold in 1996, which was partially offset by the payment of administrative
expenses. The Partnership's investing activities consisted of net proceeds
received from the sale of Glendale Fashion Center of approximately $10,461,000
and from net distributions from the joint venture with affiliates totaling
approximately $187,000. The Partnership's financing activities consisted of the
payment of distributions to the Partners totaling approximately $22,257,000, an
increase in restricted cash and cash equivalents of approximately $2,529,000
due to the discontinuance of the repurchase of Interests from Limited Partners
in February 1997, a contribution by the General Partner of approximately
$36,000 in connection with a class action lawsuit pursuant to a settlement
agreement, the repayment of the mortgage note payable of approximately
$1,271,000 and principal payments on mortgage notes payable of approximately
$200,000. In addition, in January 1998, the Partnership made a distribution of
$11,418,927 to Limited Partners primarily from the proceeds received in
connection with the sale of Glendale Fashion Center, as discussed below.
The Partnership Agreement provides for the dissolution of the Partnership upon
the occurrence of certain events, including the disposition of all interests in
real estate. During 1996, the Partnership sold five properties. In addition,
during 1996, the property in which the Partnership held a minority joint
venture interest was sold. During September 1997, the lender on North Kent Mall
<PAGE>
acquired the mall portion of the property pursuant to a deed in lieu of
foreclosure; however, the Partnership continued to own its remaining real
estate investment, an outlot at the property (the "North Kent Outlot"), which
was sold in March 1998. During December 1997, the Partnership sold the Glendale
Fashion Center. The Partnership has retained a portion of the cash from the
property sales to satisfy obligations of the Partnership as well as establish a
reserve for contingencies. The timing of the termination of the Partnership and
final distribution of cash will depend upon the nature and extent of
liabilities and contingencies which exist or may arise. Such contingencies may
include legal and other fees and costs stemming from litigation involving the
Partnership including, but not limited to, the lawsuit discussed in "Item 3.
Legal Proceedings." In the absence of any such contingency, the reserves will
be paid within twelve months of the last property being sold. In the event a
contingency continues to exist or arises, reserves may be held by the
Partnership for a longer period of time.
North Kent Mall was composed of two portions, a shopping center (the "Mall")
and the North Kent Outlot, a land parcel on which a theater is located, each of
which was collateralized by a mortgage loan from a different lender. The
Partnership and the holder (the "Lender") of the mortgage loan collateralized
by the Mall executed an agreement effective as of January 1, 1997, pursuant to
which the maturity date of the loan was extended to September 1, 1997.
According to the agreement, if the Partnership was unable to locate a purchaser
and consummate a sale of the Mall by September 1, 1997, title to the Mall would
be conveyed to the Lender pursuant to a deed in lieu of foreclosure. The
Partnership was unable to complete a sale of the Mall and on September 18, 1997
the deed in lieu of foreclosure was delivered to the Lender. The Partnership
has no further obligations under the loan and no further interest in the Mall.
The Partnership sold the North Kent Outlot in March 1998, as discussed below.
In December 1997, the Partnership sold the Glendale Fashion Center in an all
cash sale for $10,700,000. In addition, the purchaser paid the Partnership
$70,000 as a fee for extending the closing. From the proceeds of the sale, the
Partnership paid $1,270,565 to the third party mortgage holder in full
satisfaction of the first mortgage loan and paid $308,951 in selling costs. The
available sale proceeds were distributed to Partners in January 1998. See Note
11 of Notes to Financial Statements for additional information.
In March 1998, the Partnership sold the North Kent Outlot in an all cash sale
for $25,000. In addition, the Partnership received $1,000,000 in March 1998
pursuant to a lease termination agreement between the Partnership and the
lessee of the theater located on the property. From the proceeds received, the
Partnership paid $763,435 to the third party mortgage holder in full
satisfaction of the first mortgage loan and paid $36,743 in selling costs. See
Note 17 of Notes to Financial Statements for additional information.
Pursuant to the sale agreement for the Regency Club Apartments, $250,000 of the
sale proceeds was retained by the Partnership and was unavailable for
distribution until January 1997, at which time the funds were released in full.
Pursuant to the sale agreement for the Perimeter 400 Center Office Building,
which was owned by a joint venture consisting of the Partnership and three <PAGE>
affiliates, $1,750,000 of the sale proceeds was retained by the joint venture
and was unavailable for distribution until September 1997, at which time the
funds were released in full. The Partnership's share was $268,975. These
proceeds were distributed to Limited Partners in October 1997.
In June 1997, the Partnership received $75,000 as a final payment related to an
October 1996 settlement with a former tenant at the 240 East Ontario Office
Building which was sold in 1993. In 1996, the Partnership received $675,000
related to this settlement. The settlement relates to rental income owed to the
Partnership under the terms of the tenant's lease.
In February 1997, the General Partner made a settlement payment of $32,220
($.08 per Interest) to members of the class pursuant to the settlement approved
by the court in November 1996 in the Paul Williams and Beverly Kennedy, et.
al., v. Balcor Pension Investors, et. al. class action lawsuit. The General
Partner made a contribution of $35,801 to the Partnership, from which the
plaintiffs' counsel was paid $3,581 pursuant to the settlement agreement. Of
the settlement amount, $16,056 was paid to the original investors who held
their Limited Partnership Interests at the date of the settlement and was
recorded as a distribution to Limited Partners in the Financial Statements. The
remaining portion of the settlement of $16,164 was paid to original investors
who previously had sold their Interests in the Partnership. This amount was
recorded as an administrative expense in the Financial Statements. Similar
contributions and payments were made on the seven other partnerships included
in the lawsuit in addition to those payments described above. The Balcor
Company paid an additional $635,000 to the plaintiffs' class counsel and The
Balcor Company received approximately $946,000 from the eight partnerships as a
reimbursement of its legal expenses, of which $169,393 was the Partnership's
share.
In February 1997, the Partnership discontinued the repurchase of Interests from
Limited Partners. As of December 31, 1997, there were 41,330 Interests and cash
of $2,713,854 in the Early Investment Incentive Fund.
The Partnership made four distributions to Limited Partners totaling $56.75,
$17.00 and $21.13 per Interest in 1997, 1996 and 1995, respectively. See
Statement of Partners' Capital for additional information. Distributions were
comprised of $5.75 of Cash Flow and $51.00 of Mortgage Reductions in 1997,
$4.00 of Cash Flow and $13.00 of Mortgage Reductions in 1996 and $5.00 of Cash
Flow and $16.13 of Mortgage Reductions in 1995.
In January 1998, the Partnership paid a distribution of $11,418,927 ($26.58 per
Interest) to the holders of Limited Partnership Interests representing
remaining available Cash Flow of $6.40 per Interest and Mortgage Reductions of
$20.18 per Interest from proceeds received in connection with the sale of the
Glendale Fashion Center and remaining available Mortgage Reductions. Including
the January 1998 distribution, Limited Partners have received cash
distributions totaling $672.56 per $500 Interest. Of this amount, $337.25
represents Cash Flow from operations and $335.31 represents a return of
Original Capital. In January 1998, the Partnership also paid $229,122 to the
General Partner as its distributive share of the Cash Flow for the fourth
quarter of 1997 and made a contribution to the Early Investment Incentive Fund
of $76,375. No additional distributions are anticipated to be made prior to the
termination of the Partnership. However, after paying final partnership
expenses, any remaining cash reserves will be distributed.
<PAGE>
Certain statements in this Form 10-K constitute "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. These
statements may include projections of revenues, income or losses, capital
expenditures, plans for future operations, financing plans or requirements, and
plans relating to properties of the Partnership, as well as assumptions
relating to the foregoing.
The forward-looking statements made by the Partnership are subject to known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Partnership to differ materially
from any future results, performance or achievements expressed or implied by
the forward-looking statements.
Item 8. Financial Statements and Supplementary Data
- ----------------------------------------------------
See Index to Financial Statements in this Form 10-K.
The supplemental financial information specified by Item 302 of Regulation S-K
is not applicable.
Item 9. Changes in and Disagreements with Accountants on Accounting and
- ------------------------------------------------------------------------
Financial Disclosure
- --------------------
There have been no changes in or disagreements with accountants on any matter
of accounting principles, practices or financial statement disclosure.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
- ------------------------------------------------------------
(a) Neither the Registrant nor Balcor Mortgage Advisors-III, its General
Partner, has a Board of Directors.
(b, c & e) The names, ages and business experience of the executive officers
and significant employees of the General Partner of the Registrant are as
follows:
TITLE OFFICERS
Chairman, President and Chief Thomas E. Meador
Executive Officer
Senior Vice President Alexander J. Darragh
Senior Vice President John K. Powell, Jr.
Senior Managing Director, Chief Jayne A. Kosik
Financial Officer, Treasurer
and Assistant Secretary
Thomas E. Meador (age 50) joined Balcor in July 1979. He is Chairman,
President and Chief Executive Officer and has responsibility for all ongoing
day-to-day activities at Balcor. He is a member of the board of directors of
The Balcor Company. He is also Senior Vice President of American Express
Company and is responsible for its real estate operations worldwide. Prior to
joining Balcor, Mr. Meador was employed at the Harris Trust and Savings Bank in
the commercial real estate division where he was involved in various lending
activities. Mr. Meador received his M.B.A. degree from the Indiana University
Graduate School of Business.
Alexander J. Darragh (age 43) joined Balcor in September 1988 and is
responsible for real estate advisory services for Balcor and American Express
Company. Mr. Darragh received masters' degrees in Urban Geography from Queen's
University and in Urban Planning from Northwestern University.
John K. Powell Jr. (age 47) joined Balcor in September 1985 and is responsible
for portfolio and asset management matters relating to Balcor's partnerships.
Mr. Powell also has supervisory responsibility for Balcor's risk management
function. He is a member of the board of directors of The Balcor Company. He
received a Master of Planning degree from the University of Virginia. Mr.
Powell has been designated a Certified Real Estate Financier by the National
Society for Real Estate Finance and is a full member of the Urban Land
Institute.
Jayne A. Kosik (age 40) joined Balcor in August 1982 and, as Chief Financial
Officer, is responsible for Balcor's financial, human resources and treasury
functions. From June 1989 until October 1996, Ms. Kosik had supervisory
responsibility for accounting functions relating to Balcor's public and private
partnerships. She is also Treasurer and a Senior Managing Director of The
Balcor Company. Ms. Kosik is a Certified Public Accountant.
(d) There is no family relationship between any of the foregoing officers.
<PAGE>
(f) None of the foregoing officers or employees are currently involved in any
material legal proceedings nor were any such proceedings terminated during the
fourth quarter of 1997.
Item 11. Executive Compensation
- --------------------------------
The Registrant paid $5,071 in 1997 with respect to one of the executive
officers and directors of Balcor Mortgage Advisors - III, the General Partner.
The Registrant has not paid and does not propose to pay any remuneration to the
remaining executive officers and directors of the General Partner. The other
officers receive compensation from The Balcor Company (but not from the
Registrant) for services performed for various affiliated entities, which may
include services performed for the Registrant. However, the General Partner
believes that any such compensation attributable to services performed for the
Registrant is immaterial to the Registrant. See Note 10 of Notes to Financial
Statements for the information relating to transactions with affiliates.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- ------------------------------------------------------------------------
(a) The following is the sole Limited Partner which owns beneficially more than
5% of the outstanding Limited Partnership Interests of the Registrant:
Name and Amount and
Address of Nature of Percent
Beneficial Beneficial of
Title of Class Owner Ownership Class
- -------------------------------------------------------------
Limited Walton Street 20,641.06 4.80%
Partnership Capital Limited
Interests Acquisition Partnership
Co. II, L.C.C. Interests
Chicago,
Illinois
Limited Beattie 11,114.42 2.59%
Partnership Place Limited
Interests Greenville, Partnership
South Carolina Interests
While Walton Street Capital Acquisition Co. II, L.C.C. and Beattie Place
individually own less than 5% of the Interests. For purposes of this Item 12,
Walton Street Capital Acquisition Co. II, L.C.C. is an affiliate of Beattie
Place and, collectively, they own 7.39% of the Interests.
(b) The Registrant, through the Early Investment Incentive Fund, Balcor
Mortgage Advisors-III, and their officers and partners own as a group the
following Limited Partnership Interests of the Registrant:
<PAGE>
Amount
Beneficially
Title of Class Owned Percent of Class
-------------- ------------- ----------------
Limited Partnership
Interests 41,350 Interests 9.6%
Relatives of the officers and affiliates of the partners of the General Partner
do not own any additional interests.
(c) The Registrant is not aware of any arrangements, the operation of which may
result in a change of control of the Registrant.
Item 13. Certain Relationships and Related Transactions
- --------------------------------------------------------
(a & b) See Note 4 of Notes to Financial Statements for information relating to
the Partnership Agreement and the allocation of distributions and profit and
losses.
See Note 10 of Notes to Financial Statements for additional information
relating to transactions with affiliates.
(c) No management person is indebted to the Registrant.
(d) The Registrant has no outstanding agreements with any promoters.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
- --------------------------------------------------------------------------
(a)
(1 & 2) See Index to Financial Statements in this Form 10-K.
(3) Exhibits:
(3) The Amended and Restated Agreement of Limited Partnership and Amended and
Restated Certificate of Limited Partnership, previously filed as Exhibits 3(a)
and 3(b) to Amendment No. 2 to the Registrant's Registration Statement on
Form S-11 dated February 23, 1983 (Registration No. 2-80287) and to the
Registrant's Registration Statement dated April 8, 1983 (Registration No.
2-82952), are incorporated herein by reference.
(4) Form of Confirmation regarding Interests in the Registrant set forth as
Exhibit 4 to the Registrant's Report on Form 10-Q for the quarter ended
June 30, 1992 is incorporated herein by reference.
(10) Material Contracts:
(a) Agreement of Sale and attachment thereto relating to the sale of Regency
Club Apartments, Evansville, Indiana, previously filed as Exhibit (2) to the
Partnership's Current Report on Form 8-K dated August 13, 1996, are
incorporated herein by reference.
(b)(i) Agreement of Sale and attachment thereto relating to the sale of Pelican
Pointe Apartments, Pompano Beach, Florida, previously filed as Exhibit (2) to
the Partnership's Current Report on Form 8-K dated August 29, 1996, are
incorporated herein by reference.
(b)(ii) First Amendment dated September 30, 1996 to Agreement of Sale relating
to the sale of Pelican Pointe Apartments, Pompano Beach, Florida, previously
filed as Exhibit (99)(b) to the Partnership's Current Report on Form 8-K dated
September 16, 1996, is incorporated herein by reference.
(c)(i) Agreement of Sale dated October 10, 1996 and attachment thereto relating
to the sale of Glendale Fashion Center, Glendale, California previously filed
as Exhibit (2) to the Partnership's Current Report on Form 8-K dated September
16, 1996, are incorporated herein by reference.
(c)(ii) First Amendment to Agreement of Purchase and Sale dated November 8,
1996 relating to the sale of Glendale Fashion Center, Glendale, California
previously filed as Exhibit (10)(c)(ii) to the Partnership's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1996, is incorporated herein
by reference.
(c)(iii) Second Amendment to Agreement of Purchase and Sale relating to the
sale of Glendale Fashion Center, Glendale, California, previously filed as
Exhibit (10)(c)(iii) to the Partnership's Annual Report on Form 10-K for the
year ended December 31, 1996, is incorporated herein by reference.
<PAGE>
(c)(iv) Third Amendment to Agreement of Purchase and Sale relating to the sale
of Glendale Fashion Center, Glendale, California, previously filed as Exhibit
(10)(c)(iv) to the Partnership's Annual Report on Form 10-K for the year ended
December 31, 1996, is incorporated herein by reference.
(c)(v) Fourth Amendment to Agreement of Purchase and Sale relating to the sale
of Glendale Fashion Center, Glendale, California, previously filed as Exhibit
(10)(c)(v) to the Partnership's Annual Report on Form 10-K for the year ended
December 31, 1996, is incorporated herein by reference.
(c)(vi) Fifth Amendment to Agreement of Purchase and Sale relating to the sale
of Glendale Fashion Center, Glendale, California, previously filed as Exhibit
(10)(c)(vi) to the Partnership's Annual Report on Form 10-K for the year ended
December 31, 1996, is incorporated herein by reference.
(c)(vii) Sixth Amendment to Agreement of Purchase and Sale relating to the sale
of Glendale Fashion Center, Glendale, California, previously filed as Exhibit
(10)(c)(vii) to the Partnership's Annual Report on Form 10-K for the year ended
December 31, 1996, is incorporated herein by reference.
(c)(viii) Seventh Amendment to Agreement of Purchase and Sale relating to the
sale of Glendale Fashion Center, Glendale, California, previously filed as
Exhibit (10)(c)(viii) to the Partnership's Annual Report on Form 10-K for the
year ended December 31, 1996, is incorporated herein by reference.
(c)(ix) Eighth Amendment to Agreement of Purchase and Sale relating to the sale
of Glendale Fashion Center, Glendale, California, previously filed as Exhibit
(10)(c)(ix) to the Partnership's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1997, is incorporated herein by reference.
(c)(x) Extension Letter dated April 25, 1997 relating to the sale of Glendale
Fashion Center, Glendale, California, previously filed as Exhibit (10)(c)(x) to
the Partnership's Quarterly Report on Form 10-Q for the quarter ended March 31,
1997, is incorporated herein by reference.
(c)(xi) Ninth Amendment to Agreement of Purchase and Sale relating to the sale
of Glendale Fashion Square, Glendale, California, previously filed as Exhibit
(10)(c)(xi) to the Partnership's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997, is incorporated herein by reference.
(c)(xii) Extension Letter dated July 24, 1997 relating to the sale of Glendale
Fashion Center, Glendale, California, previously filed as Exhibit (10)(c)(xii)
to the Partnership's Quarterly Report on Form 10-Q for the quarter ended June
30, 1997, is incorporated herein by reference.
(c)(xiii) Tenth Amendment to Agreement of Purchase and Sale relating to the
sale of Glendale Fashion Center, Glendale, California, previously filed as
Exhibit (99)(a) to the Partnership's Current Report on Form 8-K dated September
18, 1997, is incorporated herein by reference.
(c)(xiv) Extension Letter dated August 27, 1997 relating to the sale of
Glendale Fashion Center, Glendale, California, previously filed as Exhibit
(99)(b) to the Partnership's Current Report on Form 8-K dated September 18,
1997, is incorporated herein by reference.
<PAGE>
(c)(xv) Extension Letter dated September 23, 1997 relating to the sale of
Glendale Fashion Center, Glendale, California, previously filed as Exhibit
(99)(c) to the Partnership's Current Report on Form 8-K dated September 18,
1997, is incorporated herein by reference.
(c)(xvi) Extension Letter dated October 22, 1997 relating to the sale of
Glendale Fashion Center, Glendale, California, previously field as Exhibit
(10)(c)(xvi) to the Partnership's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997, is incorporated herein by reference.
(c)(xvii) Eleventh Amendment to Agreement of Purchase and Sale relating to the
sale of Glendale Fashion Center, Glendale, California, is attached hereto.
(c)(xviii) Twelfth Amendment to Agreement of Purchase and Sale relating to the
sale of Glendale Fashion Center, Glendale, California, is attached hereto.
(d) Agreement of Sale and attachment thereto relating to the sale of Perimeter
400 Center, Fulton County, Georgia, previously filed as Exhibit (2) to the
Partnership's Current Report on Form 8-K dated December 2, 1996, is
incorporated herein by reference.
(e)(i) Agreement of Sale and attachment thereto dated January 21, 1998 relating
to the sale of the North Kent Outlot, Grand Rapids, Michigan, is attached
hereto.
(e)(ii) Termination Agreement relating the sale of the North Kent Outlot, Grand
Rapids, Michigan, is attached hereto.
(e)(iii) Agreement of Sale and attachment thereto dated February 27, 1998
relating to the sale of the North Kent Outlot, Grand Rapids, Michigan, is
attached hereto.
(e)(iv) Lease Termination Agreement relating to the sale of North Kent Outlot,
Grand Rapids, Michigan, is attached hereto.
(27) Financial Data Schedule of the Registrant for 1997 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended December 31, 1997.
(c) Exhibits: See Item 14(a)(3) above.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BALCOR PENSION INVESTORS-IV
By:/s/Jayne A. Kosik
----------------------------------
Jayne A. Kosik
Senior Managing Director and Chief
Financial Officer (Principal Accounting
Officer) of Balcor Mortgage
Advisors-III, the General Partner
Date: March 30, 1998
--------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
- ---------------------- ------------------------------ ------------
President and Chief Executive
Officer (Principal Executive
Officer) of Balcor Mortgage
Advisors-III, the General
Partner
/s/Thomas E. Meador March 30, 1998
- ---------------------- --------------
Thomas E. Meador
Senior Managing Director and Chief
Financial Officer (Principal
Accounting Officer) of Balcor
Mortgage Advisors-III,
the General Partner
/s/Jayne A. Kosik March 30, 1998
- ---------------------- --------------
Jayne A. Kosik
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Report of Independent Accountants
Financial Statements:
Balance Sheets, December 31, 1997 and 1996
Statements of Partners' Capital, for the years ended December 31, 1997, 1996
and 1995
Statements of Income and Expenses, for the years ended December 31, 1997, 1996
and 1995
Statements of Cash Flows, for the years ended December 31, 1997, 1996 and 1995
Notes to Financial Statements
Financial Statement Schedules are omitted for the reason that they are
inapplicable or equivalent information has been included elsewhere herein.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Balcor Pension Investors-IV
We have audited the financial statements of Balcor Pension Investors-IV (An
Illinois Limited Partnership) as listed in the Index of this Form 10-K. These
financial statements are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Balcor Pension Investors-IV at
December 31, 1997 and 1996, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.
As described in Note 2 to the financial statements, the partnership agreement
provides for the dissolution of the Partnership upon the disposition of all its
real estate interests. The Partnership sold its remaining real estate asset in
March 1998. Upon resolution of the litigation described in Note 16 to the
financial statements, the Partnership intends to cease operations and dissolve.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
March 26, 1998
<PAGE>
BALCOR PENSION INVESTORS-IV
(AN ILLINOIS LIMITED PARTNERSHIP)
BALANCE SHEETS
December 31, 1997 AND 1996
ASSETS
1997 1996
-------------- --------------
Cash and cash equivalents $ 13,969,707 $ 29,204,900
Cash and cash equivalents - Early
Investment Incentive Fund 2,713,854 185,167
Accounts and accrued interest receivable 93,696 1,092,340
Prepaid expenses 54,692
-------------- --------------
16,777,257 30,537,099
-------------- --------------
Real estate held for sale (net of allowance
of $1,491,800 in 1997 and $4,023,000
in 1996) 703,026 13,258,400
Investment in joint venture with affiliates 268,975
-------------- --------------
703,026 13,527,375
-------------- --------------
$ 17,480,283 $ 44,064,474
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts and accrued real estate taxes
payable $ 84,991 $ 533,906
Due to affiliates 51,372 145,771
Other liabilities 12,489
Mortgage notes payable 768,601 3,883,828
-------------- --------------
Total liabilities 904,964 4,575,994
-------------- --------------
Commitments and contingencies
Limited Partners' capital (429,606
Interests issued and outstanding) 26,009,849 48,752,958
Less Interests held by Early Investment
Incentive Fund (41,330 in 1997 and 1996) (9,264,478) (9,264,478)
-------------- --------------
16,745,371 39,488,480
General Partner's deficit (170,052) None
-------------- --------------
Total partners' capital 16,575,319 39,488,480
-------------- --------------
$ 17,480,283 $ 44,064,474
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-IV
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL
for the years ended December 31, 1997, 1996, and 1995
Partners' Capital (Deficit) Accounts
-------------- ------------- --------------
General Limited
Total Partner Partners
-------------- ------------- --------------
Balance at December 31, 1994 $ 48,993,857 $ (3,483,492) $ 52,477,349
Repurchase of 5,932 Limited
Partnership Interests (731,709) (731,709)
Cash distributions (A) (8,609,565) (179,004) (8,430,561)
Net income for the year
ended December 31, 1995 1,339,538 100,465 1,239,073
-------------- ------------- --------------
Balance at December 31, 1995 40,992,121 (3,562,031) 44,554,152
Repurchase of 6,415 Limited
Partnership Interests (651,348) (651,348)
Cash distributions (A) (6,814,402) (143,204) (6,671,198)
Net income for the year
ended December 31, 1996 5,962,109 3,705,235 2,256,874
-------------- ------------- --------------
Balance at December 31, 1996 39,488,480 None 39,488,480
Cash distributions (A) (22,256,808) (205,853) (22,050,955)
Cash contribution 35,801 35,801
Net (loss) for the year
ended December 31, 1997 (692,154) None (692,154)
-------------- ------------- --------------
Balance at December 31, 1997 $ 16,575,319 $ (170,052) $ 16,745,371
============== ============= ==============
(A) Summary of cash distributions paid per Limited Partnership Interest:
1997 1996 1995
-------------- ------------- --------------
First Quarter $ 50.00 (B)$ 1.00 $ 1.50
Second Quarter 2.75 1.00 1.50
Third Quarter 2.00 1.00 13.24
Fourth Quarter 2.00 14.00 4.89
(B) In addition to the above distribution, a special distribution of $0.08 per
Interest was paid to class members including certain current investors in
the Partnership pursuant to the settlement of a class action lawsuit.
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-IV
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF INCOME AND EXPENSES
for the years ended December 31, 1997, 1996, and 1995
1997 1996 1995
-------------- ------------- --------------
Income:
Interest on loans
receivable $ 119,018 $ 195,982
Participation income 10,283 6,636
Interest on short-term
investments $ 568,011 408,096 564,388
Settlement income 75,000 675,000
Other income 34,996 710,155
Recovery of losses on real
estate held for sale 2,621,805
-------------- ------------- --------------
Total income 678,007 3,834,202 1,477,161
-------------- ------------- --------------
Expenses:
Loss (income) from
operations of real estate 222,403 (1,271,133) (1,852,555)
held for sale
Participation in loss
(income) of joint ventures
with affiliate 81,930 (2,184,244) (425,111)
Provision for potential
losses on loans, real
estate and accrued interest
receivable 2,354,057 4,703,830 1,414,270
Administrative 740,560 1,270,444 1,001,019
-------------- ------------- --------------
Total expenses 3,398,950 2,518,897 137,623
-------------- ------------- --------------
(Loss) income before gain on
prepayment of loan receivable,
gains on sales of real estate
and extraordinary items (2,720,943) 1,315,305 1,339,538
Gain on prepayment of loan
receivable 786,766
Gains on sales of real estate 259,732 4,085,118
-------------- ------------- --------------
(Loss) income before
extraordinary items (2,461,211) 6,187,189 1,339,538
Extraordinary items:
Gain on forgiveness of debt 1,769,057
Debt extinguishment expense (225,080)
-------------- ------------- --------------
Net (loss) income $ (692,154) $ 5,962,109 $ 1,339,538
============== ============= ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-IV
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF INCOME AND EXPENSES
for the years ended December 31, 1997, 1996, and 1995
(Continued)
1997 1996 1995
-------------- ------------- --------------
Income before extraordinary
items allocated to General
Partner None $ 3,722,116 $ 100,465
============== ============= ==============
(Loss) income before
extraordinary items allocated
to Limited Partners $ (2,461,211) $ 2,465,073 $ 1,239,073
============== ============= ==============
(Loss) income before
extraordinary items per
average number of Limited
Partnership Interests
outstanding (388,276, 393,690
and 399,267 for the years
ended December 31, 1997,
1996 and 1995, respectively)
- Basic and Diluted $ (6.34) $ 6.26 $ 3.10
============== ============= ==============
Extraordinary items allocated
to General Partner None $ (16,881) None
============== ============= ==============
Extraordinary items allocated
to Limited Partners $ 1,769,057 $ (208,199) None
============== ============= ==============
Extraordinary items per average
number of Limited Partnership
Interests outstanding
(388,276, 393,690 and
399,267 for the years ended
December 31, 1997, 1996 and
1995, respectively) -
Basic and Diluted $ 4.56 $ (0.53) None
============== ============= ==============
Net income allocated to
General Partner None $ 3,705,235 $ 100,465
============== ============= ==============
Net (loss) income allocated to
Limited Partners $ (692,154) $ 2,256,874 $ 1,239,073
============== ============= ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-IV
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF INCOME AND EXPENSES
for the years ended December 31, 1997, 1996, and 1995
(Continued)
1997 1996 1995
-------------- ------------- --------------
Net(loss)income per average
number of Limited
Partnership Interests
outstanding (388,276,
393,690 and 399,267 for the
years ended December 31,
1997, 1996 and 1995,
respectively) - Basic
and Diluted $ (1.78) $ 5.73 $ 3.10
============== ============= ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-IV
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1997, 1996, and 1995
1997 1996 1995
-------------- ------------ -------------
Operating activities:
Net (loss) income $ (692,154) $ 5,962,109 $ 1,339,538
Adjustments to reconcile net
(loss) income to net cash
provided by operating
activities:
Debt extinguishment
expense 101,772
Gain on forgiveness of
debt (1,769,057)
Gain on prepayment of
loan receivable (786,766)
Gains on sales of real
estate (259,732) (4,085,118)
Participation in (loss)
income of joint venture
with affiliates 81,930 (2,184,244) (425,111)
Recovery of losses on
real estate owned (2,621,805)
Provision for potential
losses on loans, real
estate and accrued
interest receivable 2,354,057 4,703,830 1,414,270
Amortization of deferred
expenses 22,335 22,528
Accrued expenses due at
maturity 35,750
Net change in:
Escrow deposits 240,948 (89,988)
Accounts and accrued
interest receivable 998,644 (862,233) (130,992)
Prepaid expenses 54,692 90,126 (124,917)
Accounts and accrued
real estate taxes
payable (334,224) (1,855) (211,352)
Due to affiliates (94,399) 101,395 (79,772)
Other liabilities (3,000) (275,874) (886)
-------------- ------------ -------------
Net cash provided by
operating activities 336,757 440,370 1,713,318
-------------- ------------ -------------
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-IV
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1997, 1996, and 1995
(Continued)
1997 1996 1995
-------------- ------------- --------------
Investing activities:
Capital contribution to joint
venture with affiliate $ (81,930)
Distributions from joint
venture with affiliates 268,975 $ 6,138,544 $ 311,731
Collection of principal
payment on loan receivable 2,444,552 1,059,040
Additions to real estate (459,041) (143,008)
Proceeds from sales of
real estate 10,770,000 31,150,000
Costs incurred in connection
with sales of real estate (308,951) (1,254,152)
Costs incurred in
connection with real
estate acquired through
foreclosure (375,000)
-------------- ------------- --------------
Net cash provided by
investing activities 10,648,094 38,019,903 852,763
-------------- ------------- --------------
Financing activities:
Distributions to Limited
Partners (22,050,955) (6,671,198) (8,430,561)
Distributions to General
Partner (205,853) (143,204) (179,004)
Contribution by General
Partner 35,801
Change in cash and cash
equivalents - Early
Investment Incentive
Fund (2,528,687) (36,937) 9,317
Repurchase of Limited
Partnership Interests (651,348) (731,709)
Principal payments on
mortgage notes payable (199,785) (405,526) (278,530)
Repayment of mortgage
notes payable (1,270,565) (6,165,404) (618,684)
Release of capital
improvement escrows 597,859 23,060
-------------- ------------- --------------
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-IV
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1997, 1996, and 1995
(Continued)
1997 1996 1995
-------------- ------------- --------------
Net cash used in financing
activities (26,220,044) (13,475,758) (10,206,111)
-------------- ------------- --------------
Net change in cash and cash
equivalents (15,235,193) 24,984,515 (7,640,030)
Cash and cash equivalents at
beginning of year 29,204,900 4,220,385 11,860,415
-------------- ------------- --------------
Cash and cash equivalents
at end of year $ 13,969,707 $ 29,204,900 $ 4,220,385
============== ============= ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-IV
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Nature of the Partnership's Business:
Balcor Pension Investors-IV (the "Partnership") has retained cash reserves from
the sale of its real estate investments for contingencies which exist or may
arise. The Partnership's operations currently consist of interest income earned
on short-term investments, the payment of administrative expenses and, to a
lesser extent, the operations of the remaining portion of a property, which was
sold in March 1998.
2. Partnership Termination:
The Partnership Agreement provides for the dissolution of the Partnership upon
the occurrence of certain events, including the disposition of all interests in
real estate. During 1996, the Partnership sold five properties. In addition,
during 1996, the property in which the Partnership held a minority joint
venture interest was sold. During September 1997, the lender on North Kent Mall
acquired the mall portion of the property pursuant to a deed in lieu of
foreclosure; however, the Partnership continued to own its remaining real
estate investment, an outlot at the property (the "North Kent Outlot"), which
was sold in March 1998. During December 1997, the Partnership sold the Glendale
Fashion Center. The Partnership has retained a portion of the cash from the
property sales to satisfy the obligations of the Partnership as well as
establish a reserve for contingencies. The timing of the termination of the
Partnership and final distribution of cash will depend upon the nature and
extent of liabilities and contingencies which exist or may arise. Such
contingencies may include legal and other fees and costs stemming from
litigation involving the Partnership including, but not limited to, the lawsuit
discussed in Note 16 of Notes to Financial Statements. In the absence of any
such contingency, the reserves will be paid within twelve months of the last
property being sold. In the event a contingency continues to exist or arises,
reserves may be held by the Partnership for a longer period of time.
3. Accounting Policies:
(a) The preparation of the financial statements in conformity with generally
accepted accounting principles requires the General Partner to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could vary from those estimates.
(b) Income on loans was recorded as earned in accordance with the terms of the
related loan agreements. The accrual of interest was discontinued when a loan
became ninety days contractually delinquent or sooner when, in the opinion of
the Partnership's management, an impairment had occurred in the value of the
collateral property securing the loan. Income on nonaccrual loans or loans
which were otherwise not performing in accordance with their terms was recorded
on a cash basis.
<PAGE>
Various loan agreements provided for participation by the Partnership in
increases in value of the collateral property when the loan was repaid or
refinanced. In addition, certain loan agreements allowed the Partnership to
receive a percentage of rental income exceeding a base amount. Participation
income was reflected in the accompanying Statements of Income and Expenses when
received.
Income from operations of real estate owned and held for sale is reflected in
the accompanying Statements of Income and Expenses net of related direct
operating expenses.
(c) Loan losses on mortgage notes receivable were charged to income and an
allowance account was established when the General Partner believed the loan
balance would not be recovered. The General Partner assessed the collectibility
of each loan on a periodic basis through a review of the collateral property
operations, the property value and the borrower's ability to repay the loan.
Upon foreclosure, the loan net of the allowance was transferred to real estate
held for sale after the fair value of the property, less costs of disposal, was
assessed. Upon the transfer to real estate held for sale, a new basis in the
property was established.
(d) Effective January 1, 1995 the Partnership adopted Statement of Financial
Accounting Standards, No. 121 (SFAS 121), "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to Be Disposed Of." Under SFAS 121, the
General Partner periodically assessed, but not less than on an annual basis,
the fair value of its real estate properties held for sale. The General Partner
estimated the fair value of its properties based on the current sales price
less estimated closing costs. Changes in the property's fair value were
recorded by an adjustment to the property allowance account and were recognized
in the income statement as an increase or decrease through recovery income or a
provision for loss in the period the change in fair value was determined. The
General Partner considered the methods referred to above to result in a
reasonable measurement of a property's fair value, unless other factors
affecting the property's value indicated otherwise.
(e) Investment in joint venture with affiliates represented the Partnership's
15.37% interest, under the equity method of accounting, in a joint venture with
affiliated partnerships. Under the equity method of accounting, the Partnership
recorded its initial investment at cost and adjusted its investment account for
additional capital contributions, distributions and its share of joint venture
income or loss.
(f) Deferred expenses consisted of financing fees which were amortized over the
terms of the respective agreement. Upon sale, any remaining unamortized balance
was recognized as debt extinguishment expense and classified as an
extraordinary item.
(g) Revenue is recognized on an accrual basis in accordance with generally
accepted accounting principles. Income from operating leases with significant
abatements and/or scheduled rent increases is recognized on a straight line
basis over the respective lease term. Service income includes reimbursements
for operating costs such as real estate taxes, maintenance and insurance and is
recognized as revenue in the period the applicable costs are incurred.
<PAGE>
(h) The Financial Accounting Standard Board's Statement No. 107, "Disclosures
About Fair Value of Financial Instruments," requires disclosure of fair value
information about financial instruments for which it is practicable to estimate
that value. Since quoted market prices are not available for the Partnership's
financial instruments, fair values have been based on estimates using present
value techniques. These techniques are significantly affected by the
assumptions used, including the discount rate and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be substantiated
by comparison to independent markets and, in many cases, may not be realized in
immediate settlement of the instrument. Statement No. 107 does not apply to all
balance sheet items and excludes certain financial instruments and all
non-financial instruments such as real estate and investment in joint ventures
from its disclosure requirements.
(i) The Partnership recorded repurchases of Interests by the Early Investment
Incentive Fund as a reduction of Partners' Capital (see Note 4 of Notes to
Financial Statements). Cash and cash equivalents not utilized to repurchase
Interests, but which are part of the Early Investment Incentive Fund, are
classified as restricted assets of the Partnership.
(j) Cash and cash equivalents include all unrestricted, highly liquid
investments with an original maturity of three months or less. Cash is held or
invested primarily in one financial institution.
(k) For financial statement purposes, prior to 1996 partners were allocated
income and loss in accordance with the provisions in the Partnership Agreement.
In order for the capital accounts of the General Partner and Limited Partners
to appropriately reflect their remaining economic interests as provided for in
the Partnership Agreement, income (loss) allocations between the partners have
been adjusted for financial statement purposes in 1997 and 1996.
(l) The Partnership is not liable for Federal income taxes and each partner
recognizes his proportionate share of the Partnership income or loss in his tax
return; therefore, no provision for income taxes is made in the financial
statements of the Partnership.
(m) Statement of Financial Accounting Standards, No. 128, "Earnings per Share"
was adopted by the Partnership for the year-ended December 31, 1997 and has
been applied to all prior earnings periods presented in the financial
statements. Since the Partnership has no dilutive securities, there is no
difference between basic and diluted net income (loss) per Limited Partnership
Interest.
4. Partnership Agreement:
The Partnership was organized on October 21, 1982; however, operations did not
commence until 1983. The Partnership Agreement provides for Balcor Mortgage
Advisors-III to be the General Partner and for the admission of Limited
Partners through the sale of up to 450,000 Limited Partnership Interests at
$500 per Interest, 429,606 of which were sold on or prior to June 2, 1983, the
termination date of the offering. The Partnership Agreement provides that
profits and losses are allocated 92.5% to the Limited Partners, of which 2.5%
relates to the Early Investment Incentive Fund, and 7.5% to the General
<PAGE>
Partner. For financial statement purposes, prior to 1996 partners were
allocated income and loss in accordance with the provisions in the Partnership
Agreement. In order for the capital accounts of the General Partner and Limited
Partners to appropriately reflect their remaining economic interests as
provided for in the Partnership Agreement, income (loss) allocations between
the partners have been adjusted for financial statement purposes in 1997 and
1996.
To the extent that Cash Flow is distributed, distributions are made as follows:
(i) 90% of such Cash Flow is distributed to the Limited Partners, (ii) 7.5% of
such Cash Flow is distributed to the General Partner, and (iii) 2.5% of such
Cash Flow is set aside in the Early Investment Incentive Fund (the "Fund") for
payment on dissolution of the Partnership to those investors who subscribed
prior to August 31, 1983 ("Early Investors") if necessary for them to receive a
return of their Original Capital plus a specified Cumulative Return based on
the date of investment. Amounts, if any, remaining in the Fund after Early
Investors have received such returns will be distributed 90% to all Limited
Partners and 10% to the General Partner. The Limited Partners will receive 100%
of all distributions of Mortgage Reductions.
Amounts placed in the Fund were, at the sole discretion of the General Partner
and subject to certain limitations as set forth in the Partnership Agreement,
used to repurchase Interests from existing Limited Partners. All repurchases of
Interests were made at 90% of the then current valuation of such Limited
Partnership Interests at the previous quarter end less any distributions made
after the previous quarter end. Distributions of Cash Flow and Mortgage
Reductions pertaining to such repurchased Interests were paid to the Fund. To
the extent that amounts in the Fund have not been utilized to repurchase
Interests, such amounts are invested in short-term interest-bearing instruments
with interest thereon being earned by the Fund. In February 1997, the
Partnership discontinued the repurchase of Interests from Limited Partners. As
of December 31, 1997, there were 41,330 Interests and cash of $2,713,854 in the
Fund.
5. Investment in Loans Receivable:
The Stonehaven South Apartments loan receivable had been classified as
nonaccrual due to the borrower's noncompliance with the original terms of the
loan agreement and was scheduled to mature in 1997. However, in July 1996, the
borrower paid $2,380,685 in full satisfaction of the loan. For financial
statement purposes, the loan balance at the date of prepayment was $1,588,691,
and the Partnership recognized a gain of $786,766 from the prepayment.
The Colonial Coach Mobile Home Park loan receivable was funded by the
Partnership and an affiliate (together, the "Participants"). The Partnership
participated ratably in approximately 12% of the loan amount and interest
income. The loan was scheduled to mature in July 1998; however, in September
1995, the borrower prepaid this $1,247,350 loan at a discount due to the
diminished value of the property. The Partnership received $927,080 as its
share of the proceeds which represented a portion of the funds advanced on the
loan. The Partnership wrote-off the remaining balance of $320,270 against the
previously established allowance for potential loan losses.
<PAGE>
Loans which had been classified as nonaccrual as a result of delinquency or
other noncompliance with the terms of the loan agreements were referred to as
impaired loans. The average recorded investments in impaired loans in 1996 and
1995 were approximately $828,893 and $2,347,441, respectively. Interest income
relating to impaired loans would have been approximately $218,000 in 1996 and
$461,000 in 1995. Net interest income from impaired loans included in the
accompanying Statements of Income and Expenses amounted to approximately
$94,000 in 1996 ($163,000 cash basis) and $164,000 in 1995 ($176,000 cash
basis).
6. Allowance for Losses on Loans and Real Estate Held for Sale:
Activity recorded in the allowances for losses on loans and real estate held
for sale during the three years ended December 31, 1997 is described in the
table below:
1997 1996 1995
------------ ----------- -----------
Loans:
Balance at beginning of
year None None $ 250,000
Provision charged to
income None None 70,270
Direct write-off of loans
against allowance None None (320,270)
------------ ----------- -----------
Balance at the end of
the year None None None
============ =========== ===========
Real Estate Held for Sale:
Balance at beginning of
year $ 4,023,000 $ 2,621,805 $ 1,277,805
Provision charged to
income 2,354,057 4,703,830 1,344,000
Recovery of provision
previously charged to income None (2,621,805) None
Direct write-off of real
estate held for sale
against allowance (4,885,257) (680,830) None
------------ ----------- -----------
Balance at the end of
the year $ 1,491,800 $ 4,023,000 $ 2,621,805
============ =========== ============
7. Mortgage Notes Payable:
Mortgage notes payable at December 31, 1997 and 1996 consisted of the
following:
Carrying Carrying
Amount of Amount of Current Current Final Estimated
Notes at Notes at Monthly Interest Maturity Balloon
Property 12/31/97 12/31/96 Payments Rate Date Payment
- ---------------- --------- -------- -------- -------- ------- -------
<PAGE>
Shopping Centers:
North Kent Mall (A) $1,815,571
North Kent Outlot(A) $768,601 797,692 $9,617 11.00% 2010 None
Glendale Fashion
Center(B) 1,270,565
----------- -----------
Total $768,601 $3,883,828
=========== ===========
(A) North Kent Mall was composed of two portions, a shopping center (the
"Mall") and the North Kent Outlot, a land parcel on which a theater is located,
each of which was collateralized by a mortgage loan from a different lender. In
May 1996, the loan collateralized by the Mall was modified. The maturity date
was extended from July 1996 to December 1996 subject to a $100,000 payment by
the Partnership, which was applied to the outstanding principal balance of the
loan. The Partnership and the holder (the "Lender") of the mortgage loan
collateralized by the Mall executed an additional agreement effective as of
January 1, 1997, pursuant to which the maturity date of the loan was extended
to September 1, 1997. According to the agreement, if the Partnership was unable
to locate a purchaser and consummate a sale of the Mall by September 1, 1997,
title to the Mall would be conveyed to the Lender pursuant to a deed in lieu of
foreclosure. The Partnership was unable to complete a sale of the Mall and on
September 18, 1997 the deed in lieu of foreclosure was delivered to the Lender.
The outstanding principal balance of the mortgage note collateralized by the
Mall on the date of foreclosure was $1,644,877 and the Lender assumed other
liabilities totaling $124,180, which consisted of real estate taxes payable of
$114,691 and security deposits of $9,489. The Partnership has no further
obligations under the loan and no further interest in the Mall. The Partnership
sold the North Kent Outlot in March 1998. See Notes 12 and 17 of Notes to
Financial Statements for additional information.
(B) In December 1997, this property was sold. See Note 11 of Notes to Financial
Statements for additional information.
During the years ended December 31, 1997, 1996 and 1995, the Partnership
incurred interest expense on the mortgage loans payable of $333,100, $902,936,
and $1,093,543, respectively, and paid interest of $351,985, $903,851, and
$1,087,644, respectively.
8. Investment in Joint Venture with Affiliates:
The Perimeter 400 Center Office Building was owned by a joint venture
consisting of the Partnership and three affiliates. The Partnership's sharing
percentage is 15.37%. In December 1996, the joint venture sold the property in
all cash sale for $40,700,000. From the proceeds of the sale, the joint venture
paid $882,765 in selling costs. The joint venture recognized a gain of
$12,420,982 from the sale of this property, of which $1,910,549 is the
Partnership's share. For financial statement purposes, the Partnership's share
of the gain is included in participation in income of joint venture with
affiliates in 1996. Pursuant to the terms of the sale, $1,750,000 of the
proceeds were retained by the joint venture until September 1997 at which time
the funds were released in full. The Partnership's share was $268,975. During
<PAGE>
1995, the Partnership recognized $102,211 as its share of the recovery of a
provision related to the change in the estimate of the fair value of this
property. The recovery is included in the Partnership's participation in income
of joint venture with affiliates in 1995. In addition, during 1997, 1996 and
1995, the Partnership received net distributions from the joint venture
totaling $187,045, $6,138,544 and $311,731, respectively.
The following combined information has been summarized from the financial
statements of the joint venture:
1996 1995
----------- -----------
Net investment in
real estate as
of December 31 None $26,541,734
Total liabilities
as of December 31 None 151,526
Total income before
gain on sale $4,891,231 5,210,146
Gain on sale 12,420,982 None
Net income before
recovery 6,567,998 2,100,844
Recovery for
potential loss None 665,000
Net income 6,567,998 2,765,844
9. Management Agreements:
The Partnership's properties were under management agreements with a third
party management company prior to the sale of the properties. These management
agreements provided for annual fees of 3% to 6% of gross operating receipts.
10. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates are:
Year Ended Year Ended Year Ended
12/31/97 12/31/96 12/31/95
--------------- --------------- ---------------
Paid Payable Paid Payable Paid Payable
------ ------- ------ ------- ------ -------
Mortgage servicing fees None None $4,666 None $ 9,339 $ 583
Reimbursement of expenses
to the General Partner,
at cost:
Accounting $47,704 $9,486 28,774 $21,248 75,855 7,116
Data processing 10,866 1,522 8,080 2,906 42,577 3,774
Investor communica-
tion None None None None 10,492 None
Legal 26,527 5,145 15,887 11,360 28,085 3,408
Portfolio management 173,536 35,219 161,226 110,257 178,478 29,495
Other None None None None 18,426 None
<PAGE>
The Partnership participated in an insurance deductible program with other
affiliated partnerships in which the program paid claims up to the amount of
the deductible under the master insurance policies for its properties. The
program was administered by an affiliate of the General Partner (The Balcor
Company) who received no fee for administering the program; however, the
General Partner was reimbursed for program expenses. The Partnership paid
premiums to the deductible insurance program of $12,743 and $62,243 for 1996
and 1995, respectively.
The General Partner made a contribution of $35,801 to the Partnership in
connection with the settlement of certain litigation as further described in
Note 14 of Notes to Financial Statements.
11. Sales of Real Estate:
(a) In December 1997, the Partnership sold the Glendale Fashion Center in an
all cash sale for $10,700,000. In addition, the purchaser paid the Partnership
$70,000 as a fee for extending the closing. From the proceeds of the sale, the
Partnership paid $1,270,565 to the third party mortgage holder in full
satisfaction of the first mortgage loan and paid $308,951 in selling costs. The
basis of the property was $10,201,317. For financial statement purposes, the
Partnership recognized a gain of $259,732 from the sale of this property.
(b) In December 1996, the Partnership sold the Palm View Apartments in an all
cash sale for $6,500,000. From the proceeds of the sale, the Partnership paid
$2,782,063 to the third party mortgage holder in full satisfaction of the first
mortgage loan, and paid $289,386 in selling costs and $55,641 of prepayment
penalties. The basis of the property was $5,726,999. For financial statement
purposes, the Partnership recognized a gain of $483,615 from the sale of this
property.
(c) In November 1996, the Partnership sold the Del Lago Apartments in an all
cash sale of $2,800,000. From the proceeds of the sale, the Partnership paid
$174,500 in selling costs. The basis of the property was $3,200,000. For
financial statement purposes, the Partnership recognized no gain or loss on the
sale of this property. However, the Partnership had previously established an
allowance for potential losses related to this property against which its
remaining net investment of $574,500 was written off.
(d) In November 1996, the Partnership sold the Colony Apartments in an all cash
sale for $7,100,000. From the proceeds of the sale, the Partnership paid
$3,383,341 to the third party mortgage holder in full satisfaction of the first
mortgage loan, and paid $254,621 in selling costs and $67,667 of prepayment
penalties. The basis of the property was $4,507,984. For financial statement
purposes, the Partnership recognized a gain of $2,337,395 from the sale of this
property.
(e) In October 1996, the Partnership sold the Pelican Pointe Apartments in an
all cash sale for $9,000,000. From the proceeds of the sale, the Partnership
paid $312,315 in selling costs. The basis of the property was $7,423,577. For
financial statement purposes, the Partnership recognized a gain of $1,264,108
from the sale of this property.
<PAGE>
(f) In September 1996, the Partnership sold the Regency Club Apartments in an
all cash sale of $5,750,000. From the proceeds of the sale, the Partnership
paid $223,330 in selling costs. The basis of the property was $5,633,000. For
financial statement purposes, the Partnership recognized no gain or loss on the
sale of this property. However, the Partnership had previously established an
allowance for potential losses related to this property against which its
remaining net investment of $106,330 was written off.
12. Real Estate Relinquished through Foreclosure:
North Kent Mall is composed of two portions, the Mall and the North Kent
Outlot, each of which is collateralized by a mortgage loan from a different
lender. In September 1997, the lender of the mortgage loan collateralized by
the Mall took title to the property pursuant to a deed in lieu of foreclosure.
In connection with the foreclosure, the Partnership recognized a $1,769,057
extraordinary gain on forgiveness of debt representing the outstanding mortgage
balance of $1,644,877 and other liabilities of $124,180 assumed by the lender.
In addition, the Partnership recognized a $2,354,057 provision for losses,
which was equal to the carrying value of the property. For financial statement
purposes, the basis of the Mall was written off against the loss allowance of
$4,885,287 related to this property. The Partnership sold the North Kent Outlot
in March 1998. See Note 17 of Notes to Financial Statements for additional
information relating to the sale of the North Kent Outlot.
13. Extraordinary Items:
(a) In connection with the 1997 foreclosure of the North Kent Mall, the
Partnership recognized a $1,769,057 extraordinary gain on forgiveness of debt
representing the outstanding mortgage balance of $1,644,877 and other
liabilities of $124,180 assumed by the lender.
(b) In 1996, the Partnership sold the Colony and Palm View apartment complexes.
In connection with the sales, the Partnership paid $123,308 of prepayment
penalties and wrote-off the remaining unamortized deferred expenses in the
amount of $101,772. These amounts were recognized as debt extinguishment
expenses and classified as extraordinary items .
14. Settlement of Litigation:
(a) A settlement received final approval by the court in November 1996 in the
class action, Paul Williams and Beverly Kennedy, et. al. v. Balcor Pension
Investors, et. al. upon the terms described in the notice to class members in
September 1996. The General Partner made a contribution of $35,801 to the
Partnership, from which the plaintiff's counsel was paid $3,581 pursuant to the
settlement agreement. In February 1997, the General Partner made a settlement
payment of the remaining $32,220 ($0.08 per Interest) to members of the class
pursuant to the settlement agreement. Of the settlement amount, $16,056 was
paid to original investors who held their Limited Partnership Interests at the
date of the settlement and was recorded as a distribution to Limited Partners
in the Financial Statements. The remaining portion of the settlement of $16,164
was paid to original investors who previously sold their Interests in the
Partnership. This amount was recorded as an administrative expense in the
<PAGE>
Financial Statements. Similar contributions and payments were made on the seven
other partnerships included in the lawsuit in addition to those payments
described above. The Balcor Company paid an additional $635,000 to the
plaintiffs' class counsel and The Balcor Company received approximately
$946,000 from the eight partnerships as a reimbursement of its legal expenses,
of which $169,393 was the Partnership's share. The settlement had no material
impact on the Partnership.
(b) In October 1996, the Partnership reached a settlement totaling $750,000
with a former tenant at the 240 East Ontario Office Building (which was sold in
1993) for rental income owed to the Partnership pursuant to the terms of the
tenant's lease. Under the terms of the settlement, the Partnership received
$675,000 in 1996. In June 1997, the Partnership received a final payment of
$75,000. The payments were recognized as settlement income for financial
statement purposes.
15. Fair Value of Financial Instruments:
The carrying amounts and fair values of the Partnership's financial instruments
at December 31, 1997 and 1996 are as follows:
The carrying value of cash and cash equivalents, accounts and accrued interest
receivable and accounts and accrued interest payable approximates fair value.
Based on borrowing rates available to the Partnership at the end of 1997 and
1996 for mortgage loans with similar terms and maturities, the fair value of
the mortgage notes payable approximates the carrying value.
16. Contingency:
The Partnership is currently involved in a lawsuit whereby the Partnership, the
General Partner and certain third parties have been named as defendants seeking
damages relating to tender offers to purchase interests in the Partnership and
nine affiliated partnerships initiated by the third party defendants in 1996.
The defendants continue to vigorously contest this action. The action has been
dismissed with prejudice and plaintiffs have filed an appeal. It is not
determinable at this time whether or not an unfavorable decision in this action
would have a material adverse impact on the financial position, operations or
liquidity of the Partnership. The Partnership believes it has meritorious
defenses to contest the claims.
17. Subsequent Events:
(a) In January 1998, the Partnership made a distribution of $11,418,927 ($26.58
per Interest) to the holders of Limited Partnership Interests representing
remaining available Cash Flow of $6.40 per Interest and Mortgage Reductions of
$20.18 per Interest from proceeds received in connection with the sale of
Glendale Fashion Center and remaining available Mortgage Reductions.
(b) In March 1998, the Partnership sold the North Kent Outlot in an all cash
sale for $25,000. In addition, the Partnership received $1,000,000 in March
1998 pursuant to a lease termination agreement between the Partnership and the
lessee of the theater located on the property. From the proceeds received, the
<PAGE>
Partnership paid $763,435 to the third party mortgage holder in full
satisfaction of the first mortgage loan and paid $36,743 in selling costs. The
basis of the property was $2,194,826. For financial statement purposes, the
Partnership will recognize no gain or loss in connection with the sale of this
property. During the first quarter of 1998, the Partnership will recognize a
recovery of loss on real estate of $285,231 and write-off $1,206,569 against
the previously established loss allowance related to this property.
A principal of the purchaser is a partner in a law firm that has periodically
provided legal services to the Partnership and to affiliates of the General
Partner.
<PAGE>
ELEVENTH AMENDMENT TO AGREEMENT OF PURCHASE AND SALE
DATED FEBRUARY 13, 1997
by and between
VESTAR DEVELOPMENT CO., an Arizona corporation ("PURCHASER"),
and
GLENDALE FASHION CENTER LIMITED PARTNERSHIP,
an Illinois limited partnership ("SELLER")
RECITALS
A. The parties have entered into the above-described Agreement of Purchase
and Sale, as amended by the First through Tenth Amendments ("Agreement").
B. The parties now wish to further amend the Agreement in the manner set
forth below.
1. The Parties agree that the Closing Date is extended to and
including December 9, 1997.
2. All capitalized terms used in this Eleventh Amendment, to the
extent not otherwise expressly defined herein, shall have the same meanings
ascribed to such terms in the Agreement or the Escrow Agreement.
3. Except as modified herein, the Agreement, as amended by this
Amendment, shall remain in full force and effect.
4. This Eleventh Amendment may be executed in multiple
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same agreement.
5. The parties hereto agree and acknowledge that a facsimile copy
of any party's signature on this Eleventh Amendment shall be enforceable
against such party as an original. The parties hereto further agree that
this Eleventh Amendment shall be enforceable by and between the Purchaser and
Seller prior to the execution of this Eleventh Amendment by Escrow Agent.
<PAGE>
SELLER: GLENDALE FASHION CENTER LIMITED
PARTNERSHIP, an Illinois limited partnership
By: Glendale Fashion Center Partners, Inc., an
Illinois corporation, its general partner
By /s/ Michael J. Becker
-----------------------
Name Michael J. Becker
-----------------------
Its Managing Director
-----------------------
PURCHASER: VESTAR DEVELOPMENT CO., an Arizona
corporation
By /s/Lee T. Hanley
----------------
Name Lee T. Hanley
----------------
Its President
----------------
<PAGE>
TWELFTH AMENDMENT TO AGREEMENT OF PURCHASE AND SALE
DATED FEBRUARY 13, 1997
by and between
VESTAR DEVELOPMENT CO., an Arizona corporation ("PURCHASER"),
and
GLENDALE FASHION CENTER LIMITED PARTNERSHIP,
an Illinois limited partnership ("SELLER")
RECITALS
A. The parties have entered into the above-described Agreement of Purchase
and Sale, as amended by the First through Eleventh Amendments ("Agreement").
B. The parties now wish to further amend the Agreement in the manner set
forth below.
1. The Parties agree that the Closing Date is extended to and including
December 19, 1997. In consideration of such extension, Purchaser shall pay
Seller at Closing a non-applicable payment of $2,000 per day commencing
December 9, 1997 and continuing to the date of Closing.
2. All capitalized terms used in this Twelfth Amendment, to the extent
not otherwise expressly defined herein, shall have the same meanings ascribed
to such terms in the Agreement or the Escrow Agreement.
3. Except as modified herein, the Agreement, as amended by this Twelfth
Amendment, shall remain in full force and effect.
4. This Twelfth Amendment may be executed in multiple counterparts, each
of which shall be deemed to be an original, but all of which together shall
constitute one and the same agreement.
5. The parties hereto agree and acknowledge that a facsimile copy of any
party's signature on this Twelfth Amendment shall be enforceable against such
party as an original. The parties hereto further agree that this Twelfth
Amendment shall be enforceable by and between the Purchaser and Seller prior
to the execution of this Twelfth Amendment by Escrow Agent.
SELLER: GLENDALE FASHION CENTER LIMITED
PARTNERSHIP, an Illinois limited partnership
By: Glendale Fashion Center Partners, Inc., an
Illinois corporation, its general partner
By: /s/ Beth Goldstein
----------------------------------
Name: Beth Goldstein
-----------------------------------
Its: Authorized Agent
-----------------------------------
<PAGE>
PURCHASER: VESTAR DEVELOPMENT CO., an Arizona
corporation
By: /s/ David V. Latcher
--------------------------------
Name: David V. Latcher
----------------------------
Its: Vice President
------------------------------
<PAGE>
AGREEMENT OF SALE
THIS AGREEMENT OF SALE (this "Agreement"), is entered into as of the 21st
day of January, 1998, by and between THE STRATUS CORPORATION, an Illinois
corporation ("Purchaser"), and NORTH KENT PARTNERS LIMITED PARTNERSHIP, an
Illinois limited partnership ("Seller").
W I T N E S S E T H:
1. PURCHASE AND SALE. Purchaser agrees to purchase and Seller agrees to sell
at the price of One Million Twenty-Five Thousand And No/100 Dollars
($1,025,000.00) (the "Purchase Price"), that certain property commonly known as
the United Artists Theater Building, North Kent Mall, Grand Rapids, Michigan,
legally described on Exhibit A attached hereto (the "Property"). Included in
the Purchase Price is all of Seller's right, title and interest in the personal
property set forth on Exhibit B attached hereto (the "Personal Property").
2. PURCHASE PRICE. The Purchase Price shall be paid by Purchaser as follows:
2.1. Upon the execution of this Agreement, the sum of Twenty-Five
Thousand and No/100 Dollars ($25,000.00) (the "Earnest Money") to be held in
escrow by and in accordance with the provisions of the Escrow Agreement
("Escrow Agreement") attached hereto as Exhibit C;
2.2. On or before the expiration of the "Inspection Period" (hereinafter
defined), the sum of Twenty-Five Thousand and No/100 Dollars ($25,000.00) (the
"Additional Earnest Money") to be held in escrow by and in accordance with the
provisions of the Escrow Agreement (at such time as the Additional Earnest
Money is deposited, or is required to be deposited, the term "Earnest Money"
shall include the Additional Earnest Money; and
2.3. On the "Closing Date" (hereinafter defined), the sum of One Million
Twenty-Five Thousand And No/100 Dollars ($1,025,000.00) (inclusive of all
Earnest Money) adjusted in accordance with the prorations, by federally wired
"immediately available" funds, on or before 11:00 a.m Chicago time. If the
funds are not received by the Title Insurer by 11:00 a.m. Central Time, then,
on the Closing Date, and if the delay is not caused by Seller, Purchaser shall
pay Seller an amount equal to any additional mortgage per diem interest costs
incurred by the Seller until such time as the Closing takes place.
3. TITLE COMMITMENT AND SURVEY.
3.1. Attached hereto as Exhibit D is a copy of a title commitment for an
owner's standard title insurance policy issued by Near North National Title
Corporation as agent for First American Title Insurance Company (hereinafter
referred to as "Title Insurer") dated December 29, 1997 and designated as
commitment no. 41-137876 for the Property (the "Title Commitment"). For
purposes of this Agreement, "Permitted Exceptions" shall mean: (a) general real
estate taxes, association assessments, special assessments, special district
taxes and related charges not yet due and payable; (b) matters shown on the
"Existing Survey" (hereinafter defined); (c) matters caused by the actions of
Purchaser; (d) the title exceptions set forth in Schedule B, Section II of the
<PAGE>
Title Commitment as Numbers 5 and 13-27, inclusive, (or as the parties may
agree prior to the expiration of the Inspection Period) to the extent that the
same affect the Property; and (e) the Reciprocal Construction, Operation and
Easement Agreement between the Wurzburg Company, a Michigan corporation; Forbes
Cohen Properties, a Michigan registered co-partnership; and Montgomery Ward
Realty Corporation, a Delaware corporation, dated January 17, 1969 (as amended,
the "Reciprocal Easement Agreement") (Note: In the event that Purchaser does
not elect the Assumption Option set forth in Paragraph 8 hereof then exception
numbers 14, 19, 20, 21, 26 and 27 shall not be Permitted Exceptions). All
other exceptions to title shall be referred to as "Unpermitted Exceptions".
The Title Commitment shall be conclusive evidence of good title as therein
shown as to all matters to be insured by the title policy, subject only to the
exceptions therein stated. On the Closing Date, Title Insurer shall deliver to
Purchaser a standard title policy in conformance with the previously delivered
Title Commitment, subject to Permitted Exceptions and Unpermitted Exceptions
waived by Purchaser (the "Title Policy"). Seller and Purchaser shall each pay
for one-half (1/2) of the costs of the Title Commitment and Title Policy.
3.2. Purchaser has received a survey of the Property prepared by Exxel
Engineering, Inc., designated as file no. 971285 and dated April 28, 1997 (the
"Existing Survey"). Seller and Purchaser shall each pay for one-half (1/2) of
the costs of updating the Existing Survey (including a recertification thereof)
and Seller shall deliver the updated survey (the "Updated Survey") to Purchaser
at least fourteen (14) days prior to the Closing Date.
4. PAYMENT OF CLOSING COSTS.
4.1. In addition to the costs set forth in Paragraphs 3.1 and 3.2, Seller
and Purchaser shall each pay for one-half (1/2) of the costs of the documentary
or transfer stamps to be paid with reference to the "Deed" (hereinafter
defined) and all other stamps, intangible, transfer, documentary, recording,
sales tax and surtax imposed by law with reference to any other sale documents
delivered in connection with the sale of the Property to Purchaser and all
other charges of the Title Insurer in connection with this transaction.
4.2. Purchaser and Seller shall each be responsible for the costs of their
respective attorneys.
5. CONDITION OF TITLE.
5.1. If, prior to "Closing" (as hereinafter defined), a date-down to the
Title Commitment or the Updated Survey discloses any new Unpermitted Exception,
Seller shall have thirty (30) days from the date of the date-down to the Title
Commitment or the Updated Survey, as applicable, at Seller's expense, to (i)
bond over, cure and/or have any Unpermitted Exceptions which, in the aggregate,
do not exceed $25,000.00, removed from the Title Commitment or to have the
Title Insurer commit to insure against loss or damage that may be occasioned by
such Unpermitted Exceptions, or (ii) have the right, but not the obligation, to
bond over, cure and/or have any Unpermitted Exceptions which, in the aggregate,
equal or exceed $25,000.00, removed from the Title Commitment or to have the
Title Insurer commit to insure against loss or damage that may be occasioned by
such Unpermitted Exceptions. In such event, the time of Closing shall be
delayed, if necessary, to give effect to said aforementioned time periods. If
Seller fails to cure or have said Unpermitted Exception removed or have the
<PAGE>
Title Insurer commit to insure as specified above within said thirty (30) day
period or if Seller elects not to exercise its rights under (ii) in the
preceding sentence, Purchaser may terminate this Agreement upon notice to
Seller within five (5) days after the expiration of said thirty (30) day
period. Absent notice from Purchaser to Seller in accordance with the
preceding sentence, Purchaser shall be deemed to have elected to take title
subject to said Unpermitted Exception. If Purchaser terminates this Agreement
in accordance with the terms of this Paragraph 5.1, this Agreement shall become
null and void without further action of the parties and all Earnest Money
theretofore deposited into the escrow by Purchaser together with any interest
accrued thereon, shall be returned to Purchaser, and neither party shall have
any further liability to the other, except for Purchaser's obligation to
indemnify Seller and restore the Property, as more fully set forth in Paragraph
7.
5.2. Seller agrees to convey fee simple title to the Property to
Purchaser by special warranty deed (the "Deed") in recordable form subject only
to the Permitted Exceptions and any Unpermitted Exceptions waived by Purchaser.
6. CONDEMNATION, EMINENT DOMAIN, DAMAGE AND CASUALTY.
6.1. Except as provided in the indemnity provisions contained in
Paragraph 7.1 of this Agreement, Seller shall bear all risk of loss with
respect to the Property up to the earlier of the dates upon which either
possession or title is transferred to Purchaser in accordance with this
Agreement. Notwithstanding the foregoing, in the event of damage to the
Property by fire or other casualty prior to the Closing Date, repair of which
would cost less than or equal to $100,000.00 (as determined by Seller in good
faith) Purchaser shall not have the right to terminate its obligations under
this Agreement by reason thereof, but Seller shall have the right to elect to
either repair and restore the Property (in which case the Closing Date shall be
extended until completion of such restoration) or to assign and transfer to
Purchaser on the Closing Date all of Seller's right, title and interest in and
to all insurance proceeds paid or payable to Seller on account of such fire or
casualty. Seller shall promptly notify Purchaser in writing of any such fire
or other casualty and Seller's determination of the cost to repair the damage
caused thereby. In the event of damage to the Property by fire or other
casualty prior to the Closing Date, repair of which would cost in excess of
$100,000.00 (as determined by Seller in good faith), then this Agreement may be
terminated at the option of Purchaser, which option shall be exercised, if at
all, by Purchaser's written notice thereof to Seller within five (5) business
days after Purchaser receives written notice of such fire or other casualty and
Seller's determination of the amount of such damages, and upon the exercise of
such option by Purchaser this Agreement shall become null and void, the Earnest
Money deposited by Purchaser shall be returned to Purchaser together with
interest thereon, and neither party shall have any further liability or
obligations hereunder. In the event that Purchaser does not exercise the
option set forth in the preceding sentence, the Closing shall take place on the
Closing Date and Seller shall assign and transfer to Purchaser on the Closing
Date all of Seller's right, title and interest in and to all insurance proceeds
paid or payable to Seller on account of the fire or casualty.
<PAGE>
6.2. If between the date of this Agreement and the Closing Date, any
condemnation or eminent domain proceedings are initiated which might result in
the taking of any part of the Property or the taking or closing of any right of
access to the Property, Seller shall immediately notify Purchaser of such
occurrence. In the event that the taking of any part of the Property shall:
(i) materially impair access to the Property; (ii) cause any material
non-compliance with any applicable law, ordinance, rule or regulation of any
federal, state or local authority or governmental agencies having jurisdiction
over the Property or any portion thereof; (iii) materially and adversely impair
the use of the Property as it is currently being operated or (iv) give the
tenant under the Lease (as hereinafter defined) the right to terminate the
Lease (hereinafter collectively referred to as a "Material Event"), Purchaser
may:
6.2.1. terminate this Agreement by written notice to Seller, in
which event the Earnest Money deposited by Purchaser, together with interest
thereon, shall be returned to Purchaser and all rights and obligations of the
parties hereunder with respect to the closing of this transaction will cease;
or
6.2.2. proceed with the Closing, in which event Seller shall assign
to Purchaser all of Seller's right, title and interest in and to any award made
in connection with such condemnation or eminent domain proceedings.
6.3. Purchaser shall then notify Seller, within five (5) business days
after Purchaser's receipt of Seller's notice, whether Purchaser elects to
exercise its rights under Paragraph 6.2.1 or Paragraph 6.2.2. Closing shall be
delayed, if necessary, until Purchaser makes such election. If Purchaser fails
to make an election within such five (5) business day period, Purchaser shall
be deemed to have elected to exercise its rights under Paragraph 6.2.2. If
between the date of this Agreement and the Closing Date, any condemnation or
eminent domain proceedings are initiated which do not constitute a Material
Event, Purchaser shall be required to proceed with the Closing, in which event
Seller shall assign to Purchaser all of Seller's right, title and interest in
and to any award made in connection with such condemnation or eminent domain
proceedings.
7. INSPECTION AND AS-IS CONDITION.
7.1. During the period commencing on the date hereof and ending at 5:00
p.m. Chicago time on the forty-fifth (45th) day after Seller accepts this
Agreement (said period being herein referred to as the "Inspection Period"),
Purchaser and the agents, engineers, employees, contractors and surveyors
retained by Purchaser may enter upon the Property, at any reasonable time and
upon reasonable prior notice to Seller, to inspect the Property, review the
Lease, and to conduct and prepare such studies, tests and surveys as Purchaser
may deem reasonably necessary and appropriate. In connection with Purchaser's
review of the Property, Seller agrees to deliver copies of the tenant Lease,
the most recent tax bills, the Loan Documents, and the Reciprocal Easement
Agreement to Purchaser within five (5) business days after Seller accepts this
Agreement. Seller also agrees to use its best efforts to help Purchaser obtain
copies of financial data relating to the operation of the Property.
<PAGE>
All of the foregoing tests, investigations and studies to be conducted
under this Paragraph 7.1 by Purchaser shall be at Purchaser's sole cost and
expense and Purchaser shall restore the Property to the condition existing
prior to the performance of such tests or investigations by or on behalf of
Purchaser. Purchaser shall defend, indemnify and hold Seller and any
affiliate, parent of Seller, and all shareholders, employees, officers and
directors of Seller or Seller's affiliate or parent (hereinafter collectively
referred to as "Affiliate of Seller") harmless from any and all liability, cost
and expense (including without limitation, reasonable attorney's fees, court
costs and costs of appeal) suffered or incurred by Seller or Affiliates of
Seller for injury to persons or property caused by Purchaser's investigations
and inspection of the Property. Purchaser shall undertake its obligation to
defend set forth in the preceding sentence using attorneys selected by Seller,
in Seller's sole discretion.
Prior to commencing any such tests, studies and investigations, Purchaser
shall furnish to Seller a certificate of insurance evidencing comprehensive
general public liability insurance insuring the person, firm or entity
performing such tests, studies and investigations and listing Seller and
Purchaser as additional insureds thereunder.
If Purchaser is dissatisfied with the results of the tests, studies or
investigations performed or information received pursuant to this Paragraph
7.1, Purchaser shall have the right, in its sole and absolute discretion, to
terminate this Agreement by giving written notice of such termination to Seller
at any time prior to the expiration of the Inspection Period. If written
notice is not received by Seller pursuant to this Paragraph 7.1 prior to the
expiration of the Inspection Period, then the right of Purchaser to terminate
this Agreement pursuant to this Paragraph 7.1 shall be waived. If Purchaser
terminates this Agreement by written notice to Seller prior to the expiration
of the Inspection Period: (i) Purchaser shall promptly deliver to Seller copies
of all studies, reports and other investigations obtained by Purchaser in
connection with its due diligence during the Inspection Period; and (ii) the
Earnest Money deposited by Purchaser shall be immediately paid to Purchaser,
together with any interest earned thereon, and neither Purchaser nor Seller
shall have any right, obligation or liability under this Agreement, except for
Purchaser's obligation to indemnify Seller and restore the Property, as more
fully set forth in this Paragraph 7.1. Notwithstanding anything contained
herein to the contrary, the terms of this Paragraph 7.1, shall survive the
Closing and the delivery of the Deed and termination of this Agreement.
7.2. Seller (or Seller's predecessor-in-interest) acquired title to the
Property by foreclosure (or deed-in-lieu thereof) and, therefore, Seller can
make no representations or warranties relating to the condition of the Property
or the Personal Property. Purchaser acknowledges and agrees that it will be
purchasing the Property and the Personal Property based solely upon its
inspections and investigations of the Property and the Personal Property, and
that Purchaser will be purchasing the Property and the Personal Property "AS
IS" and "WITH ALL FAULTS", based upon the condition of the Property and the
Personal Property as of the date of this Agreement, wear and tear and loss by
fire or other casualty or condemnation excepted. Without limiting the
foregoing, Purchaser acknowledges that, except as may otherwise be specifically
set forth elsewhere in this Agreement, neither Seller nor its consultants,
<PAGE>
brokers or agents have made any representations or warranties of any kind upon
which Purchaser is relying as to any matters concerning the Property or the
Personal Property, including, but not limited to, the condition of the land or
any improvements comprising the Property, the existence or non-existence of
"Hazardous Materials" (as hereinafter defined), economic projections or market
studies concerning the Property, any development rights, taxes, bonds,
covenants, conditions and restrictions affecting the Property, water or water
rights, topography, drainage, soil, subsoil of the Property, the utilities
serving the Property or any zoning or building laws, rules or regulations or
"Environmental Laws" (hereinafter defined) affecting the Property. Seller
makes no representation or warranty that the Property complies with Title III
of the Americans with Disabilities Act or any fire code or building code.
Purchaser hereby releases Seller and the Affiliates of Seller from any and all
liability in connection with any claims which Purchaser may have against Seller
or the Affiliates of Seller, and Purchaser hereby agrees not to assert any
claims for contribution, cost recovery or otherwise, against Seller or the
Affiliates of Seller, relating directly or indirectly to the existence of
asbestos or Hazardous Materials on, or environmental conditions of, the
Property, whether known or unknown. As used herein, "Environmental Laws" means
all federal, state and local statutes, codes, regulations, rules, ordinances,
orders, standards, permits, licenses, policies and requirements (including
consent decrees, judicial decisions and administrative orders) relating to the
protection, preservation, remediation or conservation of the environment or
worker health or safety, all as amended or reauthorized, or as hereafter
amended or reauthorized, including without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C.
Section 9601 et seq., the Resource Conservation and Recovery Act of 1976
("RCRA"), 42 U.S.C. Section 6901 et seq., the Emergency Planning and Community
Right-to-Know Act ("Right-to-Know Act"), 42 U.S.C. Section 11001 et seq., the
Clean Air Act ("CAA"), 42 U.S.C. Section 7401 et seq., the Federal Water
Pollution Control Act ("Clean Water Act"), 33 U.S.C. Section 1251 et seq., the
Toxic Substances Control Act ("TSCA"), 15 U.S.C. Section 2601 et seq., the Safe
Drinking Water Act ("Safe Drinking Water Act"), 42 U.S.C. Section 300f et seq.,
the Atomic Energy Act ("AEA"), 42 U.S.C. Section 2011 et seq., the Occupational
Safety and Health Act ("OSHA"), 29 U.S.C. Section 651 et seq., and the
Hazardous Materials Transportation Act (the "Transportation Act"), 49 U.S.C.
Section 1802 et seq. As used herein, "Hazardous Materials" means:
(1) "hazardous substances," as defined by CERCLA; (2) "hazardous wastes," as
defined by RCRA; (3) any radioactive material including, without limitation,
any source, special nuclear or by-product material, as defined by AEA; (4)
asbestos in any form or condition; (5) polychlorinated biphenyls; and (6) any
other material, substance or waste to which liability or standards of conduct
may be imposed under any Environmental Laws. Notwithstanding anything
contained herein to the contrary, the terms of this Paragraph 7.2 shall survive
the Closing and the delivery of the Deed and termination of this Agreement.
7.3. Seller has provided to Purchaser certain unaudited historical
financial information regarding the Property relating to certain periods of
time in which Seller owned the Property. Seller and Purchaser hereby
acknowledge that such information has been provided to Purchaser at Purchaser's
request solely as illustrative material. Seller makes no representation or
warranty that such material is complete or accurate or that Purchaser will
achieve similar financial or other results with respect to the operations of
<PAGE>
the Property, it being acknowledged by Purchaser that Seller's operation of the
Property and allocations of revenues or expenses may be vastly different than
Purchaser may be able to attain. Purchaser acknowledges that it is a
sophisticated and experienced purchaser of real estate and further that
Purchaser has relied upon its own investigation and inquiry with respect to the
operation of the Property and releases Seller and the Affiliates of Seller from
any liability with respect to such historical information. Notwithstanding
anything contained herein to the contrary, the terms of this Paragraph 7.3
shall survive the Closing and the delivery of the Deed and termination of this
Agreement.
7.4. Seller has provided to Purchaser the following existing report:
Phase I Environmental Site Assessment prepared by Law Engineering, dated
December 10, 1993, and an Addendum to said Phase I, dated January 3, 1994
(collectively, the "Existing Report"). Seller makes no representation or
warranty concerning the accuracy or completeness of the Existing Report.
Purchaser hereby releases Seller and the Affiliates of Seller from any
liability whatsoever with respect to the Existing Report, or, including,
without limitation, the matters set forth in the Existing Report, and the
accuracy and/or completeness of the Existing Report. Furthermore, Purchaser
acknowledges that it will be purchasing the Property with all faults disclosed
in the Existing Report. Notwithstanding anything contained herein to the
contrary, the terms of this Paragraph 7.4 shall survive the Closing and the
delivery of the Deed and termination of this Agreement.
8. ASSUMPTION OF BOND AND LOAN DOCUMENTS/CONDITION PRECEDENT.
8.1. The Property is currently encumbered by that certain Economic
Development Revenue Bond (Forbes-Cohen Properties Project), in the original
aggregate principal amount of $1,000,000.00 (the "Bond") as evidenced and/or
secured by, among other items, the following documents (together with any
amendments, modifications or supplements thereof or thereto, collectively, the
"Loan Documents"): (a) that certain Loan Agreement dated December 20, 1981, by
and between The Economic Development Corporation of the Charter Township of
Plainfield, a public body corporate of the State of Michigan (the "Issuer") and
Forbes-Cohen Properties, a Michigan general partnership (the "Borrower") (as
amended, the "Loan Agreement"); (b) that certain Mortgage, Assignment of Rents
and Leases and Security Agreement dated December 20, 1981, by and between
Borrower (also referred to therein as the "Mortgagor") and The Aetna Casualty
and Surety Company, a Connecticut corporation ("Aetna", also referred to
therein as the "Mortgagee") (as amended, the "Mortgage"); (c) that certain
promissory note (the "Note"), with a final maturity date not later than April
1, 2010, executed by the Borrower in favor of the Issuer and which has been
endorsed and assigned to Aetna as security for the Bond; and (d) that certain
Assignment and Security Agreement dated as of December 20, 1981, from the
Issuer to Aetna (Aetna and Issuer, as well as any subsequent assignees, are
hereinafter referred to collectively as "Lender Entities"). The debt described
in this Paragraph 8.1 shall be referred to herein as the "Existing Financing".
8.2. Purchaser shall have the right, but not the obligation to elect to
assume all of Seller's right, title and interest under the Existing Financing
on or before the expiration of the Inspection Period (the "Assumption Option").
In the event that Purchaser desires to exercise such Assumption Option,
<PAGE>
Purchaser must notify Seller of such intent in writing prior to the expiration
of the Inspection Period. If Purchaser does not exercise its rights under the
Assumption Option then the parties shall proceed to Closing in accordance with
the terms and conditions of this Agreement, excluding Paragraph 8.3 below.
However, if Purchaser does exercise its rights under the Assumption Option then
the following Paragraph 8.3 shall become incorporated into this Agreement.
8.3. In the event that Purchaser exercises its rights under the Assumption
Option, (i) Purchaser shall obtain (and Purchaser covenants and agrees to use
good faith efforts to so obtain) any written consents required by the Lender
Entities to affect an assignment and assumption of the Loan Documents and a
transfer of the Property to Purchaser, subject only to such conditions as
Purchaser deems acceptable in its reasonable discretion, (ii) Purchaser and the
Lender Entities shall agree upon the form of documentation required to effect
the assignment and assumption of the Loan Documents and transfer of the
Property (the "Transfer Documents"), the form of which Transfer Documents shall
be acceptable to Purchaser in its reasonable discretion, (iii) the applicable
Lender Entities shall commit in writing to execute and deliver the Transfer
Documents at Closing, and (iv) the Transfer Documents shall contain a complete
release of Seller for any and all liability arising after the Closing Date
under the Bond and the Loan Documents. On the Closing Date, the Purchaser
shall assume all obligations of the Seller under the Loan Documents, including,
but not limited to, all obligations of the "Borrower" and the "Mortgagor" under
the terms of the Note and the Mortgage. Seller hereby authorizes Purchaser to
discuss any and all issues relating to the Bond and the Loan Documents with the
Issuer, Aetna and any other interested parties. Seller will reasonably
cooperate with Purchaser in facilitating such discussions. Purchaser agrees to
pay any and all costs, fees or other expenses (not including Seller's
attorney's fees) associated with the assumption of the Loan Documents charged
by any of the Lender Entities. Additionally, if Purchaser exercises its rights
under the Assumption Option then at Closing; (a) the parties shall prorate the
interest payments due under the Existing Financing, (b) Seller shall receive a
credit from Purchaser for any impound or escrow accounts held by any of the
Lender Entities, and (c) Purchaser shall receive a credit against the Purchase
Price in an amount equal to the outstanding principal balance of the Existing
Financing as of the Closing Date.
9. CLOSING. The closing of this transaction (the "Closing") shall be on the
date which is thirty (30) days after the expiration of the Inspection Period
(the "Closing Date"), at the office of Title Insurer, Chicago, Illinois, at
which time Seller shall deliver possession of the Property to Purchaser. This
transaction shall be closed through an escrow with Title Insurer, in accordance
with the general provisions of the usual and customary form of deed and money
escrow for similar transactions in Michigan, or at the option of either party,
the Closing shall be a "New York style" closing at which the Purchaser shall
wire the Purchase Price to Title Insurer on the Closing Date and prior to the
release of the Purchase Price to Seller, Purchaser shall receive the Title
Policy or marked up commitment which is in effect, the Title Policy dated the
date of the Closing Date. In the event of a New York style closing, Seller
shall deliver to Title Insurer any customary affidavit in connection with a New
York style closing. All closing and escrow fees shall be shared equally by
Seller and Purchaser.
<PAGE>
10. CLOSING DOCUMENTS.
10.1. On or prior to the Closing Date, Seller and Purchaser shall execute
and deliver to one another a joint closing statement. In addition, Purchaser
shall deliver to Seller the balance of the Purchase Price, an assumption of the
documents set forth in Paragraphs 10.2.3 and 10.2.4 and such other documents as
may be reasonably required by the Title Insurer in order to consummate the
transaction as set forth in this Agreement.
10.2. On the Closing Date, Seller shall deliver to Purchaser the
following:
10.2.1. the Deed (in the form of Exhibit E attached hereto), subject
to Permitted Exceptions and those Unpermitted Exceptions waived by
Purchaser;
10.2.2. a quit claim bill of sale conveying the Personal Property
(in the form of Exhibit F attached hereto);
10.2.3. an assignment and assumption of intangible property (in the
form attached hereto as Exhibit G), including, without limitation, the
service contracts listed in Exhibit H;
10.2.4. an assignment and assumption of lease and security deposit
(if any) (in the form attached hereto as Exhibit I);
10.2.5. non-foreign affidavit (in the form of Exhibit J attached
hereto);
10.2.6. original, and/or certified copies of, the Lease affecting
the Property in Seller's possession;
10.2.7. all documents and instruments reasonably required by the
Title Insurer to issue the Title Policy;
10.2.8. possession of the Property to Purchaser, subject to the
terms of the Lease;
10.2.9. evidence of the termination of the management agreement;
10.2.10. notice to the tenant of the Property of the transfer of
title and assumption by Purchaser of the landlord's obligation under the
Lease and the obligation to refund the security deposit (if any) (in the
form of Exhibit K attached hereto); and
10.2.11. a tenant estoppel letter executed by the tenant under the
Lease (in the form of Exhibit M attached hereto).
11. PURCHASER'S DEFAULT. ALL EARNEST MONEY DEPOSITED INTO THE ESCROW IS TO
SECURE THE TIMELY PERFORMANCE BY PURCHASER OF ITS OBLIGATIONS AND UNDERTAKINGS
UNDER THIS AGREEMENT. IN THE EVENT OF A DEFAULT OF THE PURCHASER UNDER THE
PROVISIONS OF THIS AGREEMENT, SELLER SHALL RETAIN ALL OF THE EARNEST MONEY AND
THE INTEREST THEREON AS SELLER'S SOLE RIGHT TO DAMAGES OR ANY OTHER REMEDY,
EXCEPT FOR PURCHASER'S OBLIGATIONS TO INDEMNIFY SELLER AND RESTORE THE PROPERTY
<PAGE>
AS SET FORTH IN PARAGRAPH 7.1 HEREOF. THE PARTIES HAVE AGREED THAT SELLER'S
ACTUAL DAMAGES, IN THE EVENT OF A DEFAULT BY PURCHASER, WOULD BE EXTREMELY
DIFFICULT OR IMPRACTICAL TO DETERMINE. THEREFORE, BY PLACING THEIR INITIALS
BELOW, THE PARTIES ACKNOWLEDGE THAT THE EARNEST MONEY HAS BEEN AGREED UPON,
AFTER NEGOTIATION, AS THE PARTIES' REASONABLE ESTIMATE OF SELLER'S DAMAGES.
12. SELLER'S DEFAULT. IF THIS SALE IS NOT COMPLETED BECAUSE OF SELLER'S
DEFAULT, PURCHASER'S SOLE REMEDY SHALL BE THE RETURN OF ALL EARNEST MONEY
TOGETHER WITH ANY INTEREST ACCRUED THEREON, AND THIS AGREEMENT SHALL THEN
BECOME NULL AND VOID AND OF NO EFFECT AND THE PARTIES SHALL HAVE NO FURTHER
LIABILITY TO EACH OTHER AT LAW OR IN EQUITY, EXCEPT FOR PURCHASER'S OBLIGATIONS
TO INDEMNIFY SELLER AND RESTORE THE PROPERTY AS SET FORTH MORE FULLY IN
PARAGRAPH 7. NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY, IF
SELLER'S DEFAULT IS ITS WILLFUL REFUSAL TO DELIVER THE DEED, THEN PURCHASER
WILL BE ENTITLED TO SUE FOR SPECIFIC PERFORMANCE.
13. PRORATIONS.
13.1. Rents (exclusive of delinquent rents, but including prepaid rents);
refundable security deposits (which will be assigned to and assumed by
Purchaser and credited to Purchaser at Closing); water and other utility
charges; fuels; prepaid operating expenses; real and personal property taxes
prorated on a "net" basis (i.e. adjusted for Tenants' liability, if any, for
such items), accrued interest under the Loan Documents for the month in which
the Closing occurs; operating expenses which are reimbursable by the Tenant for
the period prior to the Closing Date less any amount previously paid by the
Tenant shall be credited to Seller; and other similar items shall be adjusted
ratably as of 11:59 p.m. on the Closing Date, and credited against the balance
of the cash due at Closing. Assessments payable in installments which are due
subsequent to the Closing Date shall be paid by Purchaser. If the amount of
any of the items to be prorated is not then ascertainable, the adjustments
thereof shall be on the basis of the most recent ascertainable data. Seller
shall receive a credit at Closing for any and all escrow or impound accounts
held by any Lender Entities. All prorations will be final except as to
delinquent rent referred to in Paragraph 13.2 below and except for mathematical
errors or mutual mistakes.
13.2. All basic rent paid following the Closing Date by the Tenant of the
Property who is indebted under the Lease for rent for any period prior to and
including the Closing Date shall be first applied against the current rents due
under the Lease and the excess (if any) shall be deemed a "Post-Closing
Receipt" until such time as all such indebtedness is paid in full. Within ten
(10) days following each receipt by Purchaser of a Post-Closing Receipt,
Purchaser shall pay such Post-Closing Receipt to Seller. Purchaser shall use
its best efforts to collect all amounts which, upon collection, would
constitute Post-Closing Receipts hereunder. Within 120 days after the Closing
Date, Purchaser shall deliver to Seller a reconciliation statement of
Post-Closing Receipts through the first 90 days after the Closing Date. Upon
the delivery of the Post-Closing Receipts reconciliation, Purchaser shall
deliver to Seller any Post-Closing Receipts owing to Seller and not previously
delivered to Seller in accordance with the terms hereof. Seller retains the
right to conduct an audit, at reasonable times and upon reasonable notice, of
Purchaser's books and records to verify the accuracy of the Post-Closing
<PAGE>
Receipts reconciliation statement and upon the verification of additional funds
owing to Seller, Purchaser shall pay to Seller said additional Post-Closing
Receipts and the cost of performing Seller's audit. Paragraph 13.2 of this
Agreement shall survive the Closing and the delivery and recording of the deed.
Any "percentage rent" (as that term is defined in Section 2.02 of the Lease)
collected by Purchaser for periods prior to the Closing Date shall not be
characterized as Post-Closing Receipts and, to the extent collected by
Purchaser, shall remain the sole and exclusive property of Purchaser.
14. RECORDING. Neither this Agreement nor a memorandum thereof shall be
recorded and the act of recording by Purchaser shall be an act of default
hereunder by Purchaser and subject to the provisions of Paragraph 11 hereof.
15. ASSIGNMENT. Except as provided below, the Purchaser shall not have the
right to assign its interest in this Agreement and the Escrow Agreement without
the prior written consent of the Seller. Any unauthorized assignment or
transfer of, or attempt to assign or transfer, Purchaser's interest in this
Agreement shall be an act of default hereunder by Purchaser and subject to the
provisions of Paragraph 11 hereof. Seller hereby consents to an assignment of
this Agreement and the Escrow Agreement to an entity in which Michael P.
Morrison, Esq. has a controlling interest; provided, however, that such
assignment is effected at least ten (10) business days prior to the Closing
Date.
16. BROKER. The parties hereto represent and warrant that no broker
commission or finder fee is due and payable in connection with this transaction
other than to Insignia Mortgage & Investment Company ("Insignia") (to be paid
by Seller). Seller's commission to Insignia shall only be payable out of the
proceeds of the sale of the Property in the event the transaction set forth
herein closes. Purchaser and Seller shall indemnify, defend and hold the other
party hereto harmless from any claim whatsoever (including without limitation,
reasonable attorney's fees, court costs and costs of appeal) from anyone
claiming by or through the indemnifying party any fee, commission or
compensation on account of this Agreement, its negotiation or the sale hereby
contemplated other than to Insignia. The indemnifying party shall undertake
its obligations set forth in this Paragraph 16 using attorneys selected by the
indemnifying party and reasonably acceptable to the indemnified party. The
provisions of this Paragraph 16 will survive the Closing and delivery of the
Deed.
17. REPRESENTATIONS AND WARRANTIES.
17.1. Any reference herein to Seller's knowledge or notice of any matter
or thing shall only mean such knowledge or notice that has actually been
received by John K. Powell, Jr. (referred to as the "Seller's Representative"),
and any representation or warranty of the Seller is based upon those matters of
which the Seller's Representative has actual knowledge. Any knowledge or
notice given, had or received by any of Seller's agents, servants or employees
shall not be imputed to Seller, the general partner or limited partners of
Seller, the subpartners of the general partner or limited partners of Seller or
Seller's Representative.
<PAGE>
17.2. Subject to the limitations set forth in Paragraph 17.1, Seller
hereby makes the following representations and warranties, which
representations and warranties are made to Seller's knowledge and which shall
not survive Closing: (i) Seller has no knowledge of any pending or threatened
litigation, condemnation, claim, cause of action or administrative proceeding
concerning the Property; (ii) Seller has the power to execute and deliver this
Agreement and consummate the transactions contemplated herein; (iii) the lease
between Forbes/Cohen Properties and United Artists Theatre Circuit, Inc. (the
"Tenant") dated May 5, 1980 (the "Lease") (attached hereto as Exhibit L) is
true, correct and complete as of the date hereof and has not been modified or
amended in any way; and (iv) the Lease is in full force and effect and Tenant
is not in any monetary default thereunder nor has Tenant asserted any claims or
offsets against the rents due under the Lease.
17.3. Purchaser hereby represents and warrants to Seller that
Purchaser has the full right, power and authority to execute and deliver this
Agreement and consummate the transactions contemplated herein.
18. LIMITATION OF LIABILITY. Neither Seller, nor any Affiliate of Seller, nor
any of their respective beneficiaries, shareholders, partners, officers,
directors, agents or employees, heirs, successors or assigns shall have any
personal liability of any kind or nature for or by reason of any matter or
thing whatsoever under, in connection with, arising out of or in any way
related to this Agreement and the transactions contemplated herein, and
Purchaser hereby waives for itself and anyone who may claim by, through or
under Purchaser any and all rights to sue or recover on account of any such
alleged personal liability.
19. TIME OF ESSENCE. Time is of the essence of this Agreement.
20. NOTICES. Any notice or demand which either party hereto is required or
may desire to give or deliver to or make upon the other party shall be in
writing and may be personally delivered or given or made by overnight courier
such as Federal Express, by facsimile transmission or made by United States
registered or certified mail addressed as follows:
TO SELLER: c/o The Balcor Company
Bannockburn Lake Office Plaza
2355 Waukegan Road
Suite A-200
Bannockburn, Illinois 60015
Attention: Ilona Adams
with copies to: The Balcor Company
Bannockburn Lake Office Plaza
2355 Waukegan Road
Suite A-200
Bannockburn, Illinois 60015
Attention: Jerry Ogle, Esq.
(847) 317-4380
(847) 317-4462 (FAX)
<PAGE>
and to: Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
Attention: Daniel J. Perlman, Esq.
(312) 902-5532
(312) 902-1061 (FAX)
TO PURCHASER: The Stratus Corporation
c/o Hopkins & Sutter
Three First National Plaza
Chicago, Illinois 60602
Attention: Michael P. Morrison, Esq.
(312) 558-6600
(312) 558-6538 (FAX)
subject to the right of either party to designate a different address for
itself by notice similarly given. Any notice or demand so given shall be
deemed to be delivered or made on the next business day if sent by overnight
courier, or the same day as given if sent by facsimile transmission and
received by 5:00 p.m. Chicago time or on the 4th business day after the same is
deposited in the United States Mail as registered or certified matter,
addressed as above provided, with postage thereon fully prepaid. Any such
notice, demand or document not given, delivered or made by registered or
certified mail, by overnight courier or by facsimile transmission as aforesaid
shall be deemed to be given, delivered or made upon receipt of the same by the
party to whom the same is to be given, delivered or made. Copies of all
notices shall be served upon the Escrow Agent.
21. EXECUTION OF AGREEMENT AND ESCROW AGREEMENT. Purchaser will execute two
(2) copies of this Agreement and three (3) copies of the Escrow Agreement and
forward them to Seller for execution, accompanied with the Earnest Money
payable to the Escrow Agent set forth in the Escrow Agreement. Seller will
forward one (1) copy of the executed Agreement to Purchaser and will forward
the following to the Escrow Agent:
(A) Earnest Money;
(B) One (1) fully executed copy of this Agreement; and
(C) Three (3) copies of the Escrow Agreement signed by the parties with a
direction to execute two (2) copies of the Escrow Agreement and deliver a fully
executed copy to each of the Purchaser and the Seller.
22. GOVERNING LAW. The provisions of this Agreement shall be governed by the
laws of the State of Michigan, except that with respect to the retainage of the
Earnest Money as liquidated damages the laws of the State of Illinois shall
govern.
23. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties and supersedes all other negotiations, understandings and
representations made by and between the parties and the agents, servants and
employees.
<PAGE>
24. COUNTERPARTS. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same instrument.
25. CAPTIONS. Paragraph titles or captions contained herein are inserted as a
matter of convenience and for reference, and in no way define, limit, extend or
describe the scope of this Agreement or any provision hereof.
IN WITNESS WHEREOF, the parties hereto have put their hand and seal as of
the date first set forth above.
PURCHASER:
THE STRATUS CORPORATION, an Illinois corporation
By:/S/Michael P. Morrison
----------------------
Name: Michael P. Morrison
Its: President
SELLER:
NORTH KENT PARTNERS LIMITED PARTNERSHIP, an
Illinois limited partnership
By: North Kent Partners, Inc., an Illinois
corporation, its general partner
By: /s/Beth Goldstein
----------------------------
Name: Beth Goldstein
----------------------------
Its: Authorized Representative
----------------------------
Date of acceptance by Seller:
January 22, 1998
<PAGE>
[North Kent Mall Theater Parcel]
_________________ of Insignia Mortgage & Investment Company ("Seller's Broker")
executed this Agreement in its capacity as a real estate broker and
acknowledges that the fee or commission due it from Seller as a result of the
transaction described in this Agreement is as set forth in that certain Listing
Agreement, dated September 18, 1986, between Seller and Seller's Broker (as
amended, the "Listing Agreement"). Seller's Broker also acknowledges that
payment of the aforesaid fee or commission is conditioned upon the Closing and
the receipt of the Purchase Price by the Seller. Seller's Broker agrees to
deliver a receipt to the Seller at the Closing for the fee or commission due
Seller's Broker and a release, in the appropriate form, stating that no other
fees or commissions are due to it from Seller or Purchaser.
_____________________________
By:
<PAGE>
Exhibits
A - Legal
B - Personal Property
C - Escrow Agreement
D - Title Commitment
E - Deed
F - Bill of Sale
G - Assignment and Assumption of Intangible Property
H - Service Contracts
I - Assignment and Assumption of Leases and Security Deposits
J - Non-Foreign Affidavit
K - Notice to Tenants
L - Tenant Lease
M - Tenant Estoppel
<PAGE>
LEASE TERMINATION AGREEMENT
---------------------------
THIS LEASE TERMINATION AGREEMENT ("Agreement") is made this day of
February, 1998, by and between NORTH KENT PARTNERS LIMITED PARTNERSHIP,
successor to Forbes/Cohen Properties ("Landlord") and UNITED ARTISTS THEATRE
CIRCUIT, INC., a Maryland corporation ("Tenant").
Recitals
---------
A. Landlord and Tenant are parties to a certain Lease dated May 5, 1989,
as subsequently amended (the "Lease"), pursuant to which Landlord is leasing to
Tenant a theatre (the "Premises") known as the United Artists Theatre located
in the North Kent Mall, Grand Rapids, Michigan, and more particularly described
in the Lease.
B. Landlord and Tenant now desire to terminate the Lease prior to the
expiration of the stated term thereof, all on the terms and conditions
contained herein.
Agreement
----------
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein set forth, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. In consideration of the payment of $1,000,000.00 from Tenant to
Landlord by certified check or federal wire transfer, the term of the Lease
shall terminate on March 1, 1998 (the "Termination Date"), as if that date were
the day definitely fixed in the Lease for the expiration of the term thereof.
Tenant shall pay Landlord all rent due under the Lease through the Termination
Date.
2. As provided in Paragraph 5 below, Tenant shall vacate and surrender
the Premises to Landlord in the same condition that the Premises are in on the
date of this Agreement, normal wear and tear excepted. Landlord acknowledges
that Tenant has made no representations or warranties with regard to the HVAC,
plumbing, or electrical systems, or any similar systems within the Premises or
repair or condition of the Premises, and the Premises shall be transferred to
Landlord in an "AS IS" condition and state of repair as of the date of this
Agreement.
3. All real property taxes and assessments, insurance, CAM and utilities
shall be prorated and paid as of the Termination Date, provided that such
proration of taxes and assessments shall be based on the current year's taxes
and assessments, if available, or upon figures from the last preceding year.
All such prorations shall be deemed to be a final settlement, and no further
adjustments between Landlord and Tenant shall be made.
4. Except for: (i) Tenant's agreement to pay to Landlord the sums
referenced n Paragraphs 1 and 3 hereof; (ii) Tenant's agreement to be
<PAGE>
responsible for insured claims from and after the Termination Date resulting
from occurrences (such as personal injury) up to the Termination Date; and
(iii) Tenant's agreement to be responsible for any violations of environmental
laws in existence prior to the Termination Date directly related to hazardous
materials or substances deposited on or in the Premises by Tenant, Landlord,
for itself and its successors and assigns, hereby releases and forever
discharges Tenant from any and all actions, causes of actions, suits, claims
and demands of every kind and nature whatsoever, whether now known or hereafter
to become known, anticipated or unanticipated, which Landlord ever had, now has
or may have had, by reason of any matter, cause or thing whatsoever, arising
out of, related to or in any way connected with the Lease or the Premises.
Landlord declares that the terms of this release are fully understood and
voluntarily made for the purposes of making a full and final release and
discharge of any and all claims that Landlord may have against Tenant Related
to the matters described in this Agreement.
5. On or before the Termination Date, Tenant shall vacate the Premises in
accordance with Paragraph 2 of this Agreement, and Tenant may elect to remove
its candy and concession inventory and supplies, together with the personal
property and assets described on the attached Exhibit A (the "Excluded
Property"). Tenant shall leave in the Premises in "broom clean" condition and
shall convey to Landlord any other furniture, trade fixtures and equipment
owned by Tenant in the Premises used in connection with the operation of the
theatre in the Premises, including seats, screens, concessions counters,
projection and video equipment, concession equipment, soundfolding, curtains,
draperies, light fixtures and signage, other than the Excluded Property.
Tenant shall have the right to remove the Excluded Property within 10 days
following the Termination Date. In the event Tenant elects to leave any of the
Excluded Property on the Premises, Landlord may retain or dispose of such
property at Landlord's sole descretion and cost. Tenant shall have no further
liability with respect to such property. On the Termination Date, Tenant shall
deliver possession of the Premises to Landlord free and clear of any third
party possessory rights.
6. Landlord hereby represents and warrants that, as of the date of this
Agreement, there are no outstanding defaults by Tenant under the Lease, nor are
there any uncured past defaults by Tenant under the Lease.
7. Tenant hereby represents and warrants that, as of the date of this
Agreement: (i) there are no outstanding defaults by Landlord under the Lease,
nor are there any uncured past defaults by Landlord under the Lease: (ii) the
leasehold interest of Tenant as well as all personalty, equipment and fixtures
located on the Premises and used by Tenant in the operation of its business are
free and clear of all liens, security interests and encumbrances; and (iii) to
the best of Tenant's knowledge, with no investigation having been made, there
are no outstanding violations of environmental law related to the Premises, nor
any litigation affecting the Premises.
8. Landlord hereby represents and warrants that there are no other
consents or other documents required to terminate the Lease under the terms set
forth in this Agreement and that any consent required by any lenders has been
obtained.
9. In the event of any litigation brought by either party to enforce the
terms and provisions of this Agreement, the prevailing party shall be entitled
to recover all of its costs and expenses incurred in such litigation, including
but not limited to, reasonable attorneys' fees.
<PAGE>
10. If there are any inconsistencies between the terms and conditions of
this Agreement and the terms and conditions of the Lease, the terms and
conditions of this Agreement shall control.
11. All capitalized terms not otherwise defined in this Agreement shall
have the meanings which said capitalized terms have in the Lease.
12. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, executors, administrators,
successors and assigns.
13. This Agreement may be executed in several counterparts, each of which
will be considered an original, and all of which taken together shall
constitute one agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
LANDLORD:
NORTH KENT PARTNERS
LIMITED PARTNERSHIP, an
Illinois limited partnership
By: North Kent Partners, Inc., an
Illinois corporation, its general partner
By: /s/ Jerry M. Ogle
--------------------------------------
Name: Jerry M. Ogle
Its: Managing Director and Secretary
TENANT:
UNITED ARTISTS THEATRE CIRCUIT,
INC., a Maryland corporation
By: /s/Kurt C. Hall
-----------------------------------------
Executive Vice President
<PAGE>
AGREEMENT OF SALE
THIS AGREEMENT OF SALE (this "Agreement"), is entered into as of the 27th
day of February, 1998, by and between THE STRATUS CORPORATION, an Illinois
corporation ("Purchaser"), and NORTH KENT PARTNERS LIMITED PARTNERSHIP, an
Illinois limited partnership ("Seller").
W I T N E S S E T H:
1. PURCHASE AND SALE. Purchaser agrees to purchase and Seller agrees to sell
at the price of Twenty-Five Thousand And No/100 Dollars ($25,000.00) (the
"Purchase Price"), that certain property commonly known as the North Kent Mall
Theater Building, Grand Rapids, Michigan, legally described on Exhibit A
attached hereto (the "Property"). Included in the Purchase Price is all of
Seller's right, title and interest in the personal property set forth on
Exhibit B attached hereto (the "Personal Property").
2. PURCHASE PRICE. The Purchase Price shall be paid by Purchaser as follows:
2.1. Upon the execution of this Agreement, the sum of Twenty-Five
Thousand and No/100 Dollars ($25,000.00) (the "Earnest Money") to be held in
escrow by and in accordance with the provisions of the Escrow Agreement
("Escrow Agreement") attached hereto as Exhibit C;
2.2. On the "Closing Date" (hereinafter defined), the sum of Twenty-Five
Thousand And No/100 Dollars ($25,000.00) (inclusive of all Earnest Money)
adjusted in accordance with the prorations.
3. TITLE COMMITMENT AND SURVEY.
3.1. Attached hereto as Exhibit D is a copy of a title commitment for an
owner's standard title insurance policy issued by Near North National Title
Corporation as agent for First American Title Insurance Company (hereinafter
referred to as "Title Insurer") dated December 29, 1997 and designated as
commitment no. 41-137876 for the Property (the "Title Commitment"). For
purposes of this Agreement, "Permitted Exceptions" shall mean: (a) general real
estate taxes, association assessments, special assessments, special district
taxes and related charges not yet due and payable; (b) matters shown on the
"Existing Survey" (hereinafter defined); (c) matters caused by the actions of
Purchaser; and (d) the title exceptions set forth in Schedule B, Section II of
the Title Commitment as Numbers 5, 14-16, 20, 21, 23 and 26, inclusive, (or as
the parties may agree prior to the expiration of the Inspection Period) to the
extent that the same affect the Property. All other exceptions to title shall
be referred to as "Unpermitted Exceptions". The Title Commitment shall be
conclusive evidence of good title as therein shown as to all matters to be
insured by the title policy, subject only to the exceptions therein stated. On
the Closing Date, Title Insurer shall deliver to Purchaser a standard title
policy in conformance with the previously delivered Title Commitment, subject
to Permitted Exceptions and Unpermitted Exceptions waived by Purchaser (the
"Title Policy"). Seller and Purchaser shall each pay for one-half (1/2) of the
costs of the Title Commitment and Title Policy.
<PAGE>
3.2. Purchaser has received a survey of the Property prepared by Exxel
Engineering, Inc., designated as file no. 971285 and dated April 28, 1997 (the
"Existing Survey"). Seller and Purchaser shall each pay for one-half (1/2) of
the costs of updating the Existing Survey (including a recertification thereof)
and Seller shall deliver the updated survey (the "Updated Survey") to Purchaser
at or prior to the "Closing" (hereinafter defined).
4. PAYMENT OF CLOSING COSTS.
4.1. In addition to the costs set forth in Paragraphs 3.1 and 3.2, Seller
and Purchaser shall each pay for one-half (1/2) of the costs of the documentary
or transfer stamps to be paid with reference to the "Deed" (hereinafter
defined) and all other stamps, intangible, transfer, documentary, recording,
sales tax and surtax imposed by law with reference to any other sale documents
delivered in connection with the sale of the Property to Purchaser and all
other charges of the Title Insurer in connection with this transaction.
4.2. Purchaser and Seller shall each be responsible for the costs of their
respective attorneys.
5. CONDITION OF TITLE.
5.1. If, prior to Closing, a date-down to the Title Commitment or the
Updated Survey discloses any new Unpermitted Exception, Seller shall have
thirty (30) days from the date of the date-down to the Title Commitment or the
Updated Survey, as applicable, at Seller's expense, to (i) bond over, cure
and/or have any Unpermitted Exceptions which, in the aggregate, do not exceed
$5,000.00, removed from the Title Commitment or to have the Title Insurer
commit to insure against loss or damage that may be occasioned by such
Unpermitted Exceptions, or (ii) have the right, but not the obligation, to bond
over, cure and/or have any Unpermitted Exceptions which, in the aggregate,
equal or exceed $5,000.00, removed from the Title Commitment or to have the
Title Insurer commit to insure against loss or damage that may be occasioned by
such Unpermitted Exceptions. In such event, the time of Closing shall be
delayed, if necessary, to give effect to said aforementioned time periods. If
Seller fails to cure or have said Unpermitted Exception removed or have the
Title Insurer commit to insure as specified above within said thirty (30) day
period or if Seller elects not to exercise its rights under (ii) in the
preceding sentence, Purchaser may terminate this Agreement upon notice to
Seller within five (5) days after the expiration of said thirty (30) day
period. Absent notice from Purchaser to Seller in accordance with the
preceding sentence, Purchaser shall be deemed to have elected to take title
subject to said Unpermitted Exception. If Purchaser terminates this Agreement
in accordance with the terms of this Paragraph 5.1, this Agreement shall become
null and void without further action of the parties and all Earnest Money
theretofore deposited into the escrow by Purchaser together with any interest
accrued thereon, shall be returned to Purchaser, and neither party shall have
any further liability to the other, except for Purchaser's obligation to
indemnify Seller and restore the Property, as more fully set forth in Paragraph
7.
5.2. Seller agrees to convey fee simple title to the Property to
Purchaser by special warranty deed (the "Deed") in recordable form subject only
to the Permitted Exceptions and any Unpermitted Exceptions waived by Purchaser.
<PAGE>
6. CONDEMNATION, EMINENT DOMAIN, DAMAGE AND CASUALTY.
6.1. Except as provided in the indemnity provisions contained in
Paragraph 7.1 of this Agreement, Seller shall bear all risk of loss with
respect to the Property up to the earlier of the dates upon which either
possession or title is transferred to Purchaser in accordance with this
Agreement. Notwithstanding the foregoing, in the event of damage to the
Property by fire or other casualty prior to the Closing Date, repair of which
would cost less than or equal to $100,000.00 (as determined by Seller in good
faith) Purchaser shall not have the right to terminate its obligations under
this Agreement by reason thereof, but Seller shall have the right to elect to
either repair and restore the Property (in which case the Closing Date shall be
extended until completion of such restoration) or to assign and transfer to
Purchaser on the Closing Date all of Seller's right, title and interest in and
to all insurance proceeds paid or payable to Seller on account of such fire or
casualty. Seller shall promptly notify Purchaser in writing of any such fire
or other casualty and Seller's determination of the cost to repair the damage
caused thereby. In the event of damage to the Property by fire or other
casualty prior to the Closing Date, repair of which would cost in excess of
$100,000.00 (as determined by Seller in good faith), then this Agreement may be
terminated at the option of Purchaser, which option shall be exercised, if at
all, by Purchaser's written notice thereof to Seller within five (5) business
days after Purchaser receives written notice of such fire or other casualty and
Seller's determination of the amount of such damages, and upon the exercise of
such option by Purchaser this Agreement shall become null and void, the Earnest
Money deposited by Purchaser shall be returned to Purchaser together with
interest thereon, and neither party shall have any further liability or
obligations hereunder. In the event that Purchaser does not exercise the
option set forth in the preceding sentence, the Closing shall take place on the
Closing Date and Seller shall assign and transfer to Purchaser on the Closing
Date all of Seller's right, title and interest in and to all insurance proceeds
paid or payable to Seller on account of the fire or casualty.
6.2. If between the date of this Agreement and the Closing Date, any
condemnation or eminent domain proceedings are initiated which might result in
the taking of any part of the Property or the taking or closing of any right of
access to the Property, Seller shall immediately notify Purchaser of such
occurrence. In the event that the taking of any part of the Property shall:
(i) materially impair access to the Property; (ii) cause any material
non-compliance with any applicable law, ordinance, rule or regulation of any
federal, state or local authority or governmental agencies having jurisdiction
over the Property or any portion thereof; or (iii) materially and adversely
impair the use of the Property as it is currently being operated (as
hereinafter defined) the right to terminate the Lease (hereinafter collectively
referred to as a "Material Event"), Purchaser may:
6.2.1. terminate this Agreement by written notice to Seller, in
which event the Earnest Money deposited by Purchaser, together with interest
thereon, shall be returned to Purchaser and all rights and obligations of the
parties hereunder with respect to the closing of this transaction will cease;
or
6.2.2. proceed with the Closing, in which event Seller shall assign
to Purchaser all of Seller's right, title and interest in and to any award made
in connection with such condemnation or eminent domain proceedings.
<PAGE>
6.3. Purchaser shall then notify Seller, within five (5) business days
after Purchaser's receipt of Seller's notice, whether Purchaser elects to
exercise its rights under Paragraph 6.2.1 or Paragraph 6.2.2. Closing shall be
delayed, if necessary, until Purchaser makes such election. If Purchaser fails
to make an election within such five (5) business day period, Purchaser shall
be deemed to have elected to exercise its rights under Paragraph 6.2.2. If
between the date of this Agreement and the Closing Date, any condemnation or
eminent domain proceedings are initiated which do not constitute a Material
Event, Purchaser shall be required to proceed with the Closing, in which event
Seller shall assign to Purchaser all of Seller's right, title and interest in
and to any award made in connection with such condemnation or eminent domain
proceedings.
7. INSPECTION AND AS-IS CONDITION.
7.1. During the period commencing on the date hereof and ending at 5:00
p.m. Chicago time on March 9, 1998 (said period being herein referred to as the
"Inspection Period"), Purchaser and the agents, engineers, employees,
contractors and surveyors retained by Purchaser may enter upon the Property, at
any reasonable time and upon reasonable prior notice to Seller, to inspect the
Property, and to conduct and prepare such studies, tests and surveys as
Purchaser may deem reasonably necessary and appropriate.
All of the foregoing tests, investigations and studies to be conducted
under this Paragraph 7.1 by Purchaser shall be at Purchaser's sole cost and
expense and Purchaser shall restore the Property to the condition existing
prior to the performance of such tests or investigations by or on behalf of
Purchaser. Purchaser shall defend, indemnify and hold Seller and any
affiliate, parent of Seller, and all shareholders, employees, officers and
directors of Seller or Seller's affiliate or parent (hereinafter collectively
referred to as "Affiliate of Seller") harmless from any and all liability, cost
and expense (including without limitation, reasonable attorney's fees, court
costs and costs of appeal) suffered or incurred by Seller or Affiliates of
Seller for injury to persons or property caused by Purchaser's investigations
and inspection of the Property. Purchaser shall undertake its obligation to
defend set forth in the preceding sentence using attorneys selected by Seller,
in Seller's sole discretion.
Prior to commencing any such tests, studies and investigations, Purchaser
shall furnish to Seller a certificate of insurance evidencing comprehensive
general public liability insurance insuring the person, firm or entity
performing such tests, studies and investigations and listing Seller and
Purchaser as additional insureds thereunder.
If Purchaser is dissatisfied with the results of the tests, studies or
investigations performed or information received pursuant to this Paragraph
7.1, Purchaser shall have the right, in its sole and absolute discretion, to
terminate this Agreement by giving written notice of such termination to Seller
at any time prior to the expiration of the Inspection Period. If written
notice is not received by Seller pursuant to this Paragraph 7.1 prior to the
expiration of the Inspection Period, then the right of Purchaser to terminate
this Agreement pursuant to this Paragraph 7.1 shall be waived. If Purchaser
terminates this Agreement by written notice to Seller prior to the expiration
of the Inspection Period: (i) Purchaser shall promptly deliver to Seller copies
<PAGE>
of all studies, reports and other investigations obtained by Purchaser in
connection with its due diligence during the Inspection Period; and (ii) the
Earnest Money deposited by Purchaser shall be immediately paid to Purchaser,
together with any interest earned thereon, and neither Purchaser nor Seller
shall have any right, obligation or liability under this Agreement, except for
Purchaser's obligation to indemnify Seller and restore the Property, as more
fully set forth in this Paragraph 7.1. Notwithstanding anything contained
herein to the contrary, the terms of this Paragraph 7.1, shall survive the
Closing and the delivery of the Deed and termination of this Agreement.
7.2. Seller (or Seller's predecessor-in-interest) acquired title to the
Property by foreclosure (or deed-in-lieu thereof) and, therefore, Seller can
make no representations or warranties relating to the condition of the Property
or the Personal Property. Purchaser acknowledges and agrees that it will be
purchasing the Property and the Personal Property based solely upon its
inspections and investigations of the Property and the Personal Property, and
that Purchaser will be purchasing the Property and the Personal Property "AS
IS" and "WITH ALL FAULTS", based upon the condition of the Property and the
Personal Property as of the date of this Agreement, wear and tear and loss by
fire or other casualty or condemnation excepted. Without limiting the
foregoing, Purchaser acknowledges that, except as may otherwise be specifically
set forth elsewhere in this Agreement, neither Seller nor its consultants,
brokers or agents have made any representations or warranties of any kind upon
which Purchaser is relying as to any matters concerning the Property or the
Personal Property, including, but not limited to, the condition of the land or
any improvements comprising the Property, the existence or non-existence of
"Hazardous Materials" (as hereinafter defined), economic projections or market
studies concerning the Property, any development rights, taxes, bonds,
covenants, conditions and restrictions affecting the Property, water or water
rights, topography, drainage, soil, subsoil of the Property, the utilities
serving the Property or any zoning or building laws, rules or regulations or
"Environmental Laws" (hereinafter defined) affecting the Property. Seller
makes no representation or warranty that the Property complies with Title III
of the Americans with Disabilities Act or any fire code or building code.
Purchaser hereby releases Seller and the Affiliates of Seller from any and all
liability in connection with any claims which Purchaser may have against Seller
or the Affiliates of Seller, and Purchaser hereby agrees not to assert any
claims for contribution, cost recovery or otherwise, against Seller or the
Affiliates of Seller, relating directly or indirectly to the existence of
asbestos or Hazardous Materials on, or environmental conditions of, the
Property, whether known or unknown. As used herein, "Environmental Laws" means
all federal, state and local statutes, codes, regulations, rules, ordinances,
orders, standards, permits, licenses, policies and requirements (including
consent decrees, judicial decisions and administrative orders) relating to the
protection, preservation, remediation or conservation of the environment or
worker health or safety, all as amended or reauthorized, or as hereafter
amended or reauthorized, including without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C.
Section 9601 et seq., the Resource Conservation and Recovery Act of 1976
("RCRA"), 42 U.S.C. Section 6901 et seq., the Emergency Planning and Community
Right-to-Know Act ("Right-to-Know Act"), 42 U.S.C. Section 11001 et seq., the
Clean Air Act ("CAA"), 42 U.S.C. Section 7401 et seq., the Federal Water
Pollution Control Act ("Clean Water Act"), 33 U.S.C. Section 1251 et seq., the
<PAGE>
Toxic Substances Control Act ("TSCA"), 15 U.S.C. Section 2601 et seq., the Safe
Drinking Water Act ("Safe Drinking Water Act"), 42 U.S.C. Section 300f et seq.,
the Atomic Energy Act ("AEA"), 42 U.S.C. Section 2011 et seq., the Occupational
Safety and Health Act ("OSHA"), 29 U.S.C. Section 651 et seq., and the
Hazardous Materials Transportation Act (the "Transportation Act"), 49 U.S.C.
Section 1802 et seq. As used herein, "Hazardous Materials" means:
(1) "hazardous substances," as defined by CERCLA; (2) "hazardous wastes," as
defined by RCRA; (3) any radioactive material including, without limitation,
any source, special nuclear or by-product material, as defined by AEA; (4)
asbestos in any form or condition; (5) polychlorinated biphenyls; and (6) any
other material, substance or waste to which liability or standards of conduct
may be imposed under any Environmental Laws. Notwithstanding anything
contained herein to the contrary, the terms of this Paragraph 7.2 shall survive
the Closing and the delivery of the Deed and termination of this Agreement.
7.3. Seller has provided to Purchaser certain unaudited historical
financial information regarding the Property relating to certain periods of
time in which Seller owned the Property. Seller and Purchaser hereby
acknowledge that such information has been provided to Purchaser at Purchaser's
request solely as illustrative material. Seller makes no representation or
warranty that such material is complete or accurate or that Purchaser will
achieve similar financial or other results with respect to the operations of
the Property, it being acknowledged by Purchaser that Seller's operation of the
Property and allocations of revenues or expenses may be vastly different than
Purchaser may be able to attain. Purchaser acknowledges that it is a
sophisticated and experienced purchaser of real estate and further that
Purchaser has relied upon its own investigation and inquiry with respect to the
operation of the Property and releases Seller and the Affiliates of Seller from
any liability with respect to such historical information. Notwithstanding
anything contained herein to the contrary, the terms of this Paragraph 7.3
shall survive the Closing and the delivery of the Deed and termination of this
Agreement.
7.4. Seller has provided to Purchaser the following existing report:
Phase I Environmental Site Assessment prepared by Law Engineering, dated
December 10, 1993, and an Addendum to said Phase I, dated January 3, 1994
(collectively, the "Existing Report"). Seller makes no representation or
warranty concerning the accuracy or completeness of the Existing Report.
Purchaser hereby releases Seller and the Affiliates of Seller from any
liability whatsoever with respect to the Existing Report, or, including,
without limitation, the matters set forth in the Existing Report, and the
accuracy and/or completeness of the Existing Report. Furthermore, Purchaser
acknowledges that it will be purchasing the Property with all faults disclosed
in the Existing Report. Notwithstanding anything contained herein to the
contrary, the terms of this Paragraph 7.4 shall survive the Closing and the
delivery of the Deed and termination of this Agreement.
8. [INTENTIONALLY OMITTED]
9. CLOSING. The closing of this transaction (the "Closing") shall be on
March 10, 1998 (the "Closing Date") at the office of Title Insurer, Chicago,
Illinois, at which time Seller shall deliver possession of the Property to
Purchaser. This transaction shall be closed through an escrow with Title
<PAGE>
Insurer, in accordance with the general provisions of the usual and customary
form of deed and money escrow for similar transactions in Michigan, or at the
option of either party, the Closing shall be a "New York style" closing at
which the Purchaser shall wire the Purchase Price to Title Insurer on the
Closing Date and prior to the release of the Purchase Price to Seller,
Purchaser shall receive the Title Policy or marked up commitment which is in
effect, the Title Policy dated the date of the Closing Date. In the event of a
New York style closing, Seller shall deliver to Title Insurer any customary
affidavit in connection with a New York style closing. All closing and escrow
fees shall be shared equally by Seller and Purchaser.
10. CLOSING DOCUMENTS.
10.1. On or prior to the Closing Date, Seller and Purchaser shall execute
and deliver to one another a joint closing statement. In addition, Purchaser
shall deliver to Seller the balance of the Purchase Price, an assumption of the
document set forth in Paragraph 10.2.3 and such other documents as may be
reasonably required by the Title Insurer in order to consummate the transaction
as set forth in this Agreement.
10.2. On the Closing Date, Seller shall deliver to Purchaser the
following:
10.2.1. the Deed (in the form of Exhibit E attached hereto), subject
to Permitted Exceptions and those Unpermitted Exceptions waived by Purchaser;
10.2.2. a quit claim bill of sale conveying the Personal Property
(in the form of Exhibit F attached hereto);
10.2.3. an assignment and assumption of intangible property (in the
form attached hereto as Exhibit G), including, without limitation, the service
contracts listed in Exhibit H;
10.2.4. non-foreign affidavit (in the form of Exhibit J attached
hereto);
10.2.5. all documents and instruments reasonably required by the
Title Insurer to issue the Title Policy;
10.2.6. possession of the Property to Purchaser; and
10.2.7. evidence of the termination of the management agreement.
11. PURCHASER'S DEFAULT. ALL EARNEST MONEY DEPOSITED INTO THE ESCROW IS TO
SECURE THE TIMELY PERFORMANCE BY PURCHASER OF ITS OBLIGATIONS AND UNDERTAKINGS
UNDER THIS AGREEMENT. IN THE EVENT OF A DEFAULT OF THE PURCHASER UNDER THE
PROVISIONS OF THIS AGREEMENT, SELLER SHALL RETAIN ALL OF THE EARNEST MONEY AND
THE INTEREST THEREON AS SELLER'S SOLE RIGHT TO DAMAGES OR ANY OTHER REMEDY,
EXCEPT FOR PURCHASER'S OBLIGATIONS TO INDEMNIFY SELLER AND RESTORE THE PROPERTY
AS SET FORTH IN PARAGRAPH 7.1 HEREOF. THE PARTIES HAVE AGREED THAT SELLER'S
ACTUAL DAMAGES, IN THE EVENT OF A DEFAULT BY PURCHASER, WOULD BE EXTREMELY
DIFFICULT OR IMPRACTICAL TO DETERMINE. THEREFORE, BY PLACING THEIR INITIALS
BELOW, THE PARTIES ACKNOWLEDGE THAT THE EARNEST MONEY HAS BEEN AGREED UPON,
AFTER NEGOTIATION, AS THE PARTIES' REASONABLE ESTIMATE OF SELLER'S DAMAGES.
<PAGE>
12. SELLER'S DEFAULT. IF THIS SALE IS NOT COMPLETED BECAUSE OF SELLER'S
DEFAULT, PURCHASER'S SOLE REMEDY SHALL BE THE RETURN OF ALL EARNEST MONEY
TOGETHER WITH ANY INTEREST ACCRUED THEREON, AND THIS AGREEMENT SHALL THEN
BECOME NULL AND VOID AND OF NO EFFECT AND THE PARTIES SHALL HAVE NO FURTHER
LIABILITY TO EACH OTHER AT LAW OR IN EQUITY, EXCEPT FOR PURCHASER'S OBLIGATIONS
TO INDEMNIFY SELLER AND RESTORE THE PROPERTY AS SET FORTH MORE FULLY IN
PARAGRAPH 7. NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY, IF
SELLER'S DEFAULT IS ITS WILLFUL REFUSAL TO DELIVER THE DEED, THEN PURCHASER
WILL BE ENTITLED TO SUE FOR SPECIFIC PERFORMANCE.
13. PRORATIONS. Water and other utility charges; fuels; prepaid operating
expenses; real and personal property taxes and other similar items shall be
adjusted ratably as of 11:59 p.m. on the Closing Date, and credited against the
balance of the cash due at Closing. Assessments payable in installments which
are due subsequent to the Closing Date shall be paid by Purchaser. If the
amount of any of the items to be prorated is not then ascertainable, the
adjustments thereof shall be on the basis of the most recent ascertainable
data. All prorations will be final except as to delinquent rent referred to in
Paragraph 13.2 below and except for mathematical errors or mutual mistakes.
14. RECORDING. Neither this Agreement nor a memorandum thereof shall be
recorded and the act of recording by Purchaser shall be an act of default
hereunder by Purchaser and subject to the provisions of Paragraph 11 hereof.
15. ASSIGNMENT. Except as provided below, the Purchaser shall not have the
right to assign its interest in this Agreement and the Escrow Agreement without
the prior written consent of the Seller. Any unauthorized assignment or
transfer of, or attempt to assign or transfer, Purchaser's interest in this
Agreement shall be an act of default hereunder by Purchaser and subject to the
provisions of Paragraph 11 hereof. Seller hereby consents to an assignment of
this Agreement and the Escrow Agreement to an entity in which Michael P.
Morrison, Esq. has a controlling interest; provided, however, that such
assignment is effected at least ten (10) business days prior to the Closing
Date.
16. BROKER. The parties hereto represent and warrant that no broker
commission or finder fee is due and payable in connection with this transaction
other than to Insignia Mortgage & Investment Company ("Insignia") (to be paid
by Seller). Seller's commission to Insignia shall only be payable out of the
proceeds of the sale of the Property in the event the transaction set forth
herein closes. Purchaser and Seller shall indemnify, defend and hold the other
party hereto harmless from any claim whatsoever (including without limitation,
reasonable attorney's fees, court costs and costs of appeal) from anyone
claiming by or through the indemnifying party any fee, commission or
compensation on account of this Agreement, its negotiation or the sale hereby
contemplated other than to Insignia. The indemnifying party shall undertake
its obligations set forth in this Paragraph 16 using attorneys selected by the
indemnifying party and reasonably acceptable to the indemnified party. The
provisions of this Paragraph 16 will survive the Closing and delivery of the
Deed.
17. REPRESENTATIONS AND WARRANTIES.
17.1. Any reference herein to Seller's knowledge or notice of any matter
<PAGE>
or thing shall only mean such knowledge or notice that has actually been
received by John K. Powell, Jr. (referred to as the "Seller's Representative"),
and any representation or warranty of the Seller is based upon those matters of
which the Seller's Representative has actual knowledge. Any knowledge or
notice given, had or received by any of Seller's agents, servants or employees
shall not be imputed to Seller, the general partner or limited partners of
Seller, the subpartners of the general partner or limited partners of Seller or
Seller's Representative.
17.2. Subject to the limitations set forth in Paragraph 17.1, Seller
hereby makes the following representations and warranties, which
representations and warranties are made to Seller's knowledge and which shall
not survive Closing: (i) Seller has no knowledge of any pending or threatened
litigation, condemnation, claim, cause of action or administrative proceeding
concerning the Property; and (ii) Seller has the power to execute and deliver
this Agreement and consummate the transactions contemplated herein.
17.3. Purchaser hereby represents and warrants to Seller that
Purchaser has the full right, power and authority to execute and deliver this
Agreement and consummate the transactions contemplated herein.
18. LIMITATION OF LIABILITY. Neither Seller, nor any Affiliate of Seller, nor
any of their respective beneficiaries, shareholders, partners, officers,
directors, agents or employees, heirs, successors or assigns shall have any
personal liability of any kind or nature for or by reason of any matter or
thing whatsoever under, in connection with, arising out of or in any way
related to this Agreement and the transactions contemplated herein, and
Purchaser hereby waives for itself and anyone who may claim by, through or
under Purchaser any and all rights to sue or recover on account of any such
alleged personal liability.
19. TIME OF ESSENCE. Time is of the essence of this Agreement.
20. NOTICES. Any notice or demand which either party hereto is required or
may desire to give or deliver to or make upon the other party shall be in
writing and may be personally delivered or given or made by overnight courier
such as Federal Express, by facsimile transmission or made by United States
registered or certified mail addressed as follows:
TO SELLER: c/o The Balcor Company
Bannockburn Lake Office Plaza
2355 Waukegan Road
Suite A-200
Bannockburn, Illinois 60015
Attention: Ilona Adams
with copies to: The Balcor Company
Bannockburn Lake Office Plaza
2355 Waukegan Road
Suite A-200
Bannockburn, Illinois 60015
Attention: Jerry Ogle, Esq.
(847) 317-4380
(847) 317-4462 (FAX)
<PAGE>
and to: Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
Attention: Daniel J. Perlman, Esq.
(312) 902-5532
(312) 902-1061 (FAX)
TO PURCHASER: The Stratus Corporation
c/o Hopkins & Sutter
Three First National Plaza
Chicago, Illinois 60602
Attention: Michael P. Morrison, Esq.
(312) 558-6600
(312) 558-6538 (FAX)
subject to the right of either party to designate a different address for
itself by notice similarly given. Any notice or demand so given shall be
deemed to be delivered or made on the next business day if sent by overnight
courier, or the same day as given if sent by facsimile transmission and
received by 5:00 p.m. Chicago time or on the 4th business day after the same is
deposited in the United States Mail as registered or certified matter,
addressed as above provided, with postage thereon fully prepaid. Any such
notice, demand or document not given, delivered or made by registered or
certified mail, by overnight courier or by facsimile transmission as aforesaid
shall be deemed to be given, delivered or made upon receipt of the same by the
party to whom the same is to be given, delivered or made. Copies of all
notices shall be served upon the Escrow Agent.
21. EXECUTION OF AGREEMENT AND ESCROW AGREEMENT. Purchaser will execute two
(2) copies of this Agreement and three (3) copies of the Escrow Agreement and
forward them to Seller for execution, accompanied with the Earnest Money
payable to the Escrow Agent set forth in the Escrow Agreement. Seller will
forward one (1) copy of the executed Agreement to Purchaser and will forward
the following to the Escrow Agent:
(A) Earnest Money;
(B) One (1) fully executed copy of this Agreement; and
(C) Three (3) copies of the Escrow Agreement signed by the parties with a
direction to execute two (2) copies of the Escrow Agreement and deliver a fully
executed copy to each of the Purchaser and the Seller.
22. GOVERNING LAW. The provisions of this Agreement shall be governed by the
laws of the State of Michigan, except that with respect to the retainage of the
Earnest Money as liquidated damages the laws of the State of Illinois shall
govern.
23. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties and supersedes all other negotiations, understandings and
representations made by and between the parties and the agents, servants and
employees.
<PAGE>
24. COUNTERPARTS. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same instrument.
25. CAPTIONS. Paragraph titles or captions contained herein are inserted as a
matter of convenience and for reference, and in no way define, limit, extend or
describe the scope of this Agreement or any provision hereof.
IN WITNESS WHEREOF, the parties hereto have put their hand and seal as of
the date first set forth above.
PURCHASER:
THE STRATUS CORPORATION, an Illinois corporation
By: /s/Michael P. Morrison
----------------------
Name: Michael P. Morrison
Its: President
SELLER:
NORTH KENT PARTNERS LIMITED PARTNERSHIP, an
Illinois limited partnership
By: North Kent Partners, Inc., an Illinois
corporation, its general partner
By: /s/Jerry M. Ogle
----------------------------------
Name: Jerry M. Ogle
----------------------------------
Its: Managing Director and Secretary
----------------------------------
Date of acceptance by Seller:
, 1998
<PAGE>
[North Kent Mall Theater Parcel]
_________________ of Insignia Mortgage & Investment Company ("Seller's Broker")
executed this Agreement in its capacity as a real estate broker and
acknowledges that the fee or commission due it from Seller as a result of the
transaction described in this Agreement is as set forth in that certain Listing
Agreement, dated September 18, 1986, between Seller and Seller's Broker (as
amended, the "Listing Agreement"). Seller's Broker also acknowledges that
payment of the aforesaid fee or commission is conditioned upon the Closing and
the receipt of the Purchase Price by the Seller. Seller's Broker agrees to
deliver a receipt to the Seller at the Closing for the fee or commission due
Seller's Broker and a release, in the appropriate form, stating that no other
fees or commissions are due to it from Seller or Purchaser.
INSIGNIA MORTGAGE & INVESTMENT COMPANY
By:
Its:
<PAGE>
Exhibits
----------
A - Legal
B - Personal Property
C - Escrow Agreement
D - Title Commitment
E - Deed
F - Bill of Sale
G - Assignment and Assumption of Intangible Property
H - Service Contracts
I - Intentionally Omitted
J - Non-Foreign Affidavit
<PAGE>
TERMINATION AGREEMENT
THIS TERMINATION AGREEMENT (this "Agreement") is made and entered into to
be effective as of the 2nd day of March, 1998, by and between THE STRATUS
CORPORATION, an Illinois corporation ("Purchaser"), and NORTH KENT PARTNERS
LIMITED PARTNERSHIP, an Illinois limited partnership ("Seller").
W I T N E S S E T H:
WHEREAS, Seller and Purchaser are parties to that certain Agreement of
Sale entered into as of January 21, 1998 (the "Original Agreement"), and that
certain Escrow Agreement entered into as of January 21, 1998 (the "Escrow
Agreement"), pursuant to which Seller agreed to sell to Purchaser, and
Purchaser agreed to purchase from Seller, the Property (as defined in the
Original Agreement); and
WHEREAS, Seller and Purchaser now desire to terminate the Original
Agreement and the Escrow Agreement pursuant to the terms and provisions set
forth herein.
NOW, THEREFORE, for and in consideration of the premises and mutual
agreements contained herein, the payment of Ten and No/100 Dollars ($10.00) and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Seller and Purchaser agree as follows:
1. All capitalized terms used in this Agreement, to the extent not
otherwise expressly defined herein, shall have the same meanings ascribed to
such terms in the Original Agreement.
2. Seller and Purchaser hereby agree that if the Lease Termination
Agreement between Seller and United Artists Theatre Circuit, Inc., a Maryland
corporation (the "Lease Termination") is fully executed and Seller has received
all consideration due to it under the Lease Termination then the Original
Agreement and Escrow Agreement will be terminated as of the date first written
above and shall be of no further legal force and effect.
3. As additional consideration hereunder, Seller and Purchaser hereby
release and forever discharge each other, and their respective partners,
officers, directors, agents, trustees, beneficiaries, and employees, of and
from any and all claims, acts, damages, demands, rights of action and causes of
action which each party ever had, now has or in the future may have against the
other, arising from or in any way connected with the Original Agreement.
4. This Agreement may be executed in several counterparts, each
constituting a duplicate original, but all such counterparts shall constitute
one and the same instrument. This Agreement may be executed by facsimile
signature by the parties hereto, and such facsimile signatures shall have the
same force and effect as if manually signed.
[EXECUTION PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, this Amendment is executed to be effective as of the
date first set forth above.
PURCHASER:
THE STRATUS CORPORATION, an Illinois corporation
By: /s/Michael P. Morrison
---------------------
Name: Michael P. Morrison
Its: President
SELLER:
NORTH KENT PARTNERS LIMITED PARTNERSHIP, an
Illinois limited partnership
By: North Kent Partners, Inc., an Illinois
corporation, its general partner
By: /s/Jerry M. Ogle
-----------------------------------
Name: Jerry M. Ogle
-----------------------------------
Its: Managing Director and Secretary
-----------------------------------
<PAGE>
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<PERIOD-END> DEC-31-1997
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<ALLOWANCES> 0
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0
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