SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
[ X] Annual Report Pursuant to Section l3 or l5(d)
of the Securities Exchange Act of l934
For the fiscal year ended December 31, 1996
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission File Number 0-11083
ONE LIBERTY PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
MARYLAND 13-3147497
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
60 Cutter Mill Road, Great Neck, New York 11021
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (5l6)466-3l00
Securities registered pursuant to Section l2(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, par value $1.00 American Stock Exchange
$16.50 Cumulative Convertible
Preferred Stock, par value $1.00 American Stock Exchange
Securities registered pursuant to Section l2(g) of the Act:
NONE
Indicate by check mark whether the registrant (l) has filed all reports required
to be filed by Section l3 or l5(d) of the Securities Exchange Act of l934 dur-
ing the preceding l2 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 [ ].
As of March 3, 1997 the aggregate market value of all voting stock (Common Stock
and Preferred Stock) held by non-affiliates of the Registrant was approximately
$20,400,000.
As of March 3, 1997, the Registrant had 1,489,501 shares of Common Stock and
808,776 shares of $16.50 Cumulative Convertible Preferred Stock outstanding.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
The proxy statement for the Registrant's Annual Meeting of Stockholders,
scheduled for June 6, 1997, will be filed with the Securities and Exchange
Commission within 120 days after the end of the Registrant's fiscal year covered
by this Form 10-K. The information required by Part III (Item 10-Directors and
Executive Officers of the Registrant, Item 11 -Executive Compensation, Item 12
- - Security Ownership of Certain Beneficial Owners and Management, and Item 13 -
Certain Relationships and Related Transactions) will be incorporated by
reference from the definitive proxy statement to be filed by the Registrant
pursuant to Regulation 14A under the Securities Exchange Act of 1934.
<PAGE>
Part I
Item 1. - Business
General
One Liberty Properties, Inc. (with its wholly-owned subsidiaries and a
majority owned limited liability company being referred to herein as the
"Company" or "One Liberty") is a self managed real estate investment trust
("REIT") incorporated under the laws of Maryland on December 20, 1982. The
policy of the Company is to invest in improved, commercial real estate under
long-term net leases. Under the typical net lease, rental and other payments to
be made by the lessee are payable without diminution for any reason. The lessee,
in addition to its rent obligation, is generally responsible for payment of all
charges attributable to the property, such as taxes, assessments,water and sewer
rents and charges, governmental charges, and all utility and other charges
incurred in the operation of the property. The lessee, is also generally
responsible for maintaining the property, including ordinary maintenance and
repair and restoration following a casualty or partial condemnation. The rental
provisions in a net lease transaction may include, but may not be limited to,
rent payable on a stepped basis (rentals increase at specified intervals), an
indexed basis (rentals increase pursuant to a formula such as the consumer price
index), a percentage basis (minimum rental payments plus additional rentals in
the form of participation in the sales derived from the business conducted at
the property), or a combination of the foregoing.
In the year ending December 31, 1996 ("Fiscal 1996") the Company pur-
chased five net leased commercial properties containing approximately 211,600
square feet of rentable space for a total consideration of $19,940,570, and
placed mortgage financing of $10,375,000 on four of these properties. On
January 10, 1997, the Company closed on the financing of a fifth property in the
amount of $1,600,000. At fiscal year end the Company owned a total of 38
properties (including one property leased by the Company under a long term
ground lease) containing an aggregate of approximately 1,009,000 square feet of
rentable space.
Investment Policy
The Company's investment policies,as presently in effect, are set forth
in Section 17 of Article 3 of the By-Laws of the Company (the By-Laws,as amended
were filed as an exhibit to the Company's Form 10-Q for the quarter ended June
30, 1989 and an amendment thereto was filed as an exhibit to the Company's Form
10-Q for the quarter ended June 30, 1990). The current policy of the Company is
to purchase improved commercial real property which is net leased on a long term
basis. The Company's investment policies, as articulated in its by-laws, as
amended, are as follows:
Types of Investments -The Company is permitted to invest in any type of
real property, mortgage loans (and in both cases in interests therein) and other
investments of any nature, without limitation, provided such investment does not
adversely affect the Company's ability to qualify as a REIT under the Internal
Revenue Code. No limitation is set on the number of properties or mortgage loans
in which the Company may invest,the amount or percentage of the Company's assets
which may be invested in any specific property or on the concentration of
investments in any geographic area in the United States. The Company will
consider investments in any type of real property and in mortgage loans secured
by real property; however as stated above, the current policy of the Company is
to invest in improved, commercial real estate under long term net lease. The
Company does not intend to make construction loans or loans secured by mortgages
on undeveloped land.
Incurrence of Debt - The directors of the Company, in the exercise of
their business judgment, are permitted to determine the level of debt and the
terms and conditions of any financing or refinancing.
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The investment objectives of the Company are (i) to provide current
income; (ii) to provide the opportunity for increases in income and capital
appreciation;and (iii) to protect the Company's capital. In evaluating potential
net lease investments, the Company considers, among other factors (i)the current
and anticipated cash flow of the proposed net lease, (ii) the intrinsic value of
the property, given its location and use and the property's and the lessee's
adequacy to meet operational needs and lease obligations, (iii) the return on
equity to the Company, and (iv) potential for capital appreciation.
From time to time,the Company may invest in shares of another REIT or in
the shares of an entity not involved in real estate investments, provided that
any such investment does not adversely affect the Company's ability to qualify
as a REIT under the Internal Revenue Code.
Pursuant to current policy,after termination of any lease relating to any
of the Company's properties,the Company will seek to relet or sell such property
in a manner which will maximize the return to the Company,considering the income
and residual potential of such property. The Company may also consider the sale
or other disposition of any of the properties prior to termination of the
relevant leases if such sale or other disposition appears to be advantageous.
The Company may take purchase money obligations as part payment in lieu of cash
in connection with any sales and may take into account local custom and
prevailing market conditions in negotiating the terms of repayment. It will be
the Company's policy to reinvest any cash realized from the sale or other
disposition of properties, net of required distributions to shareholders, to
maintain its REIT status. Effective December 31, 1996 the initial term of the
net leases applicable to 11 properties leased to Payless ShoeSource, Inc.
terminated by the terms of the respective leases. Payless ShoeSource Inc.
renewed the leases with respect to four of the Payless Properties. As to the
other seven Payless Properties, two were under contract of sale as of December
31, 1996 (one of which closed in January 1997), two have been leased to other
entities and three are currently vacant. The Company is actively seeking to sell
or rent the three vacant properties. The non-renewal by Payless of five Payless
Properties will not have a material adverse effect on the Company's future
financial condition. However, it should be noted that during the year ended
December 31, 1996 the Company recorded a provision for valuation adjustment
totalling $659,000 against five of these properties.
Credit Agreement
On March 1, 1996 the Company entered into a revolving credit agreement
("Credit Agreement") with Bank Leumi Trust Company of New York ("Bank Leumi").
Borrowings under the Credit Agreement will be used to provide the Company with
funds to acquire properties. The Credit Agreement will mature February 28, 1999
with a right for the Company to extend the Credit Agreement until February 29,
2000. Bank Leumi has agreed to advance up to $5,000,000 on a revolving basis and
has agreed to a total $15,000,000 facility (including the $5,000,000 that Bank
Leumi has committed for) on a pro rata participating basis. At December 31, 1996
one institution has expressed an interest in participating to the extent of
$4,000,000. The Company pays interest under the Credit Agreement at the rate of
prime plus 1/2% on funds borrowed on an interest only basis, except that the net
proceeds of certain events (e.g. sale of property, financing of properties) must
be applied to reduce the loan.
As collateral for any advances taken by the Company under the Credit
Agreement, the Company has pledged the stock of each of its subsidiaries and
certain mortgages receivable, including the wrap around mortgage receivable the
Company holds on a property located on East 16th Street in New York City (see
"Mortgages Receivable" below). In order to obtain the senior mortgagee's consent
to the assignment of the Company's wrap around mortgage receivable as collateral
security for the loan, the Company guaranteed six months of debt service on the
senior mortgage. In addition the Company's subsidiaries have guaranteed all
loans under the Credit Agreement. The Company has agreed to maintain at least
<PAGE>
$250,000 on deposit with Bank Leumi.
The Credit Agreement contains affirmative and negative covenants including
a covenant that (i) through February 28, 1999 the Company's net worth will not
be less than the greater of $28,000,000 and two times (2x) the revolving credit
loans outstanding and thereafter the $28,000,000 increases to $30,000,000; (ii)
that cash flow for each fiscal year through the 1998 fiscal year shall be at
least $3,000,000, increasing to $3,400,000 for the 1999 fiscal year and
thereafter, and (iii) at least two of Fredric H. Gould, Matthew J. Gould and
Jeffrey A. Gould shall be involved in the day to day management of the Company.
During the 1996 fiscal year the full amount was taken down under the Credit
Agreement and thereafter a portion was repaid. At December 31, 1996, $3,900,000
was outstanding under the Credit Agreement and at March 3, 1997, $1,350,626 was
outstanding.
Mortgages Receivable
In 1992 and 1993 the Company, in order to take advantage of opportunities
to purchase mortgages receivable at a discount and/or to improve its return on
investment, invested in mortgages receivable and a senior secured note
receivable. The material receivables outstanding during Fiscal 1996 were as
follows:
In January, 1992 the Company made a first mortgage loan to an entity
substantially owned by Gould Investors L.P. ("Gould"), an affiliated
entity (see below), in the original principal amount of $1,200,000. The
mortgage had a maturity date of January 31,1995,carried an interest rate
of 11% through January 31, 1994 and thereafter at 10% per annum through
the maturity date, and provided for minimum amortization of $5,000 per
month. The mortgage was extended to January 31, 1997 and the interest
rate fixed at 11% per annum for the extended term. The $5,000 monthly
amortization continued during the extended term. The mortgage, which was
secured by a wraparound mortgage on the residential portion and a
commercial condominium unit,containing approximately 3,600 square feet of
retail space, in a building located on East 86th Street in Manhattan, New
York, was fully repaid in March 1996.
On July 30,1993, the Federal Deposit Insurance Corporation ("FDIC") sold,
to an entity related to the Company, a $23,000,000 first mortgage secured
by an office building located on East 16th Street in Manhattan, New York.
The sale was made by the FDIC pursuant to public auction. The successful
bidder paid $19,000,300 for the mortgage, which carries an interest rate
of 8% per annum. The office building which secures this mortgage is owned
by a partnership in which Gould is general partner and owns substantially
all partnership interests. Simultaneously with the closing an unrelated
party advanced $13,181,000, the Company advanced $6,080,000 (including
closing costs), and the mortgage was severed into a first mortgage of
$13,181,000 paying interest at 9 1/2% per annum held by such unrelated
party and a subordinate wrap mortgage of $9,819,000 held by the Company.
Both the first mortgage and wrap mortgage mature in 2005 at which time
the first mortgage will have been fully amortized and the wrap mortgage
will have a principal balance of approximately $4,000,000. The principal
balance of the wrap mortgage held by the Company was $8,387,263 at
December 31,1996 and the net principal balance was $5,732,445 at December
31, 1996.
<PAGE>
The building which secures the first mortgage and the wrap mortgage is net
leased to the City of New York. The lease expires in 2005 with one
renewal option of five years. The City has a limited right to terminate
the lease. The first mortgage and the wrap mortgage are nonrecourse.
In February, 1993 the Company purchased from an unrelated entity 28.9% of
a 16.67% portion of an indebtedness due to various institutions by BRT
Realty Trust ("BRT"), an affiliated entity. Fredric H. Gould, Chairman of
the Board of the Company, is Chairman of the Board (and Chief Executive
Officer) of BRT, Marshall Rose, Vice Chairman of the Board of the Company
is a Trustee of BRT, and Matthew Gould, Jeffrey Gould, Nathan Kupin,
Simeon Brinberg and David W. Kalish are officers of the Company and BRT.
In addition, Arthur Hurand is a trustee of BRT and a director of the
Company. The Company paid $3,215,142 for a $4,626,720 share of the
principal amount of such indebtedness. The principal earned interest of
prime plus 1% and required certain annual minimum principal payments. The
indebtedness was senior indebtedness and was collateralized by all of
BRT's mortgages receivable and up-stream guaranties by BRT's subsidiaries.
At December 31, 1995 the amount due to the Company on its share of this
receivable was $760,638, and the book value thereof was $528,575. This
loan was fully repaid in Fiscal 1996 with the last payment being made in
August 1996.
Gould owns 542,825 shares of the Company's Common Stock, representing
28.9% of the voting stock and 36.8% of the outstanding common stock of the
Company. The individual general partners of Gould, Fredric H. Gould and
Marshall Rose, are Chairman of the Board and Vice Chairman of the Board,
respectively, of the Company, Matthew Gould, President of the Company, is
an officer of the corporate Managing General Partner of Gould, and David
W. Kalish, Simeon Brinberg, Jeffrey Gould, Nathan Kupin and Mark Lundy,
officers of the Company, are officers of the Managing General Partner of
Gould.
<PAGE>
Executive Officers of the Company
The following sets forth information with respect to the executive
officers of the Company:
Name Age Position with the Company
Fredric H. Gould 61 Chairman of the Board of
the Company since
June, 1989
Marshall Rose 60 Vice Chairman of the Board
of the Company since
June, 1989
Matthew Gould 37 President and Chief
Executive Officer of the
Company since June, 1989
Simeon Brinberg 63 Vice President of the
Company since June, 1989
David W. Kalish 49 Vice President and Chief
Financial Officer of the
Company since June, 1990
Nathan Kupin 82 Senior Vice President of
the Company since
June, 1989
Jeffrey A. Gould 31 Vice President of the
Company since June,
1989
Mark H. Lundy 34 Secretary of the Company
since June, 1993
Seth D. Kobay 42 Vice President and
Treasurer of the Company
since August, 1994
Karen Dunleavy 38 Vice President, Financial
of the Company since
August, 1994
Each of the above listed executive officers will hold office until the next
annual meeting of the Board of Directors, scheduled for June 6, 1997, or until
their respective successors are elected and shall qualify. The information below
sets forth the business experience of the officers of the Company for at least
the past five years.
Fredric H. Gould - In addition to serving as Chairman of the Board of the
Company, Mr. Gould has served as Chairman of the Board of Trustees of BRT Realty
Trust, a real estate investment trust,since 1984 and as Chief Executive Officer
of BRT since March 1995. Since 1985 Mr. Gould has been an executive officer of
the managing general partner of Gould Investors L.P., a limited partnership
primarily engaged in the ownership and operation of real properties and he also
serves as an individual general partner of Gould Investors L.P. He is President
of REIT Management Corp., the Advisor to BRT Realty Trust, a director of BFS
Bankorp,Inc. and its subsidiary Bankers Federal Savings and Loan Association FSB
and a director of Sunstone Hotel Investors, Inc., a real estate investment
trust.
<PAGE>
Marshall Rose - In addition to serving as Vice Chairman of the Board of
Directors of the Company, Mr. Rose has served as a Trustee of BRT Realty Trust
since 1986. He is also an executive officer of the managing general partner of
Gould Investors L.P. since 1985 and an individual general partner of Gould
Investors L.P. Mr. Rose is also President and Chief Executive Officer of
Georgetown Equities, Inc., a real estate consulting firm. He is a director of
Estee Lauder, Inc. and Golden Book Family Entertainment, Inc.
Matthew Gould - In addition to serving as President and Chief Executive Officer
of the Company, Mr. Gould serves as a Vice President of REIT Management Corp.
since 1986, a Vice President of BRT Realty Trust and an officer of the managing
general partner of Gould Investors L.P. since 1986.
Simeon Brinberg - In addition to serving as Vice President of the Company, Mr.
Brinberg has been Secretary of BRT Realty Trust since 1983, a Senior Vice
President of BRT Realty Trust since 1988 and an officer of the managing general
partner of Gould Investors L.P. since 1988. He is a director of Witco
Corporation.
David W. Kalish - Mr. Kalish has served as Vice President and Chief Financial
Officer of the Company since June,1990. Mr. Kalish is also a Vice President and
Chief Financial Officer of BRT Realty Trust and chief financial officer of the
managing general partner of Gould Investors L.P. since June, 1990. Mr. Kalish
is a certified public accountant.
Nathan Kupin - In addition to serving as a Senior Vice President of the Company,
Mr. Kupin has been a Trustee and Vice President of BRT Realty Trust since 1983.
He is also Vice Chairman of the Board of Directors of the managing general
partner of Gould Investors L.P. and Director of the advisor to BRT Realty Trust.
Jeffrey A. Gould - Mr. Gould has served as Vice President of the Company since
1989. Mr. Gould was a Vice President of BRT Realty Trust from January 1988 to
March 1993, Executive Vice President and Chief Operating Officer of BRT Realty
Trust from March 1995 to March 1996 and President of BRT Realty Trust since
March 1996. He is also an officer of the managing general partner of Gould
Investors L.P.
Mark H. Lundy - In addition to being Secretary of the Company since June, 1993,
Mr. Lundy has been a Vice President of BRT Realty Trust since April 1993 and an
officer of the managing general partner of Gould Investors L.P. since July 1990.
Seth D. Kobay - In addition to serving as Vice President and Treasurer of the
Company, Mr. Kobay has been Vice President and Treasurer of BRT Realty Trust
since March 1994 and an officer of the managing general partner of Gould
Investors L.P. since 1986. Mr. Kobay is a certified public accountant.
Karen Dunleavy - In addition to serving as Vice President, Financial of the
Company,Ms. Dunleavy has been Treasurer of the managing general partner of Gould
Investors L.P. since 1986. Ms. Dunleavy is a certified public accountant.
Fredric H. Gould is Matthew and Jeffrey Gould's father.
<PAGE>
Item 2. - Properties
The Company, at December 31, 1996, owned fee title to thirty-seven
properties and a "sandwich" lease position with respect to one property. All
properties are "net leased" to unrelated third parties. The Company obtained
title insurance with respect to all properties owned by it in amounts equal to
their respective purchase prices, insuring that the Company holds fee simple
title to each property owned in fee and the leasehold position to the one lease
position the Company holds, free and clear of all liens and encumbrances, except
those approved by the Company and those which have been created since the
Company's acquisition of the properties, none of which materially impairs the
value of the properties.
The following sets forth information relating to the materially important
properties (the book value of which amounts to 10% or more of the total assets
of the Company) owned by the Company.
Madison Avenue Property
Description of Madison Avenue Property
The Madison Avenue Property, located on East 30th Street and Madison Avenue
in New York, New York, is improved with two multi-family residential properties
- - a twelve story elevator building and a seven story elevator building,
containing an aggregate of 126 apartments and ground floor retail stores. The
property is located in mid-Manhattan, in primarily a commercial area, with some
residential and hotels. The two buildings are located on a 14,658 square foot
plot of land, have frontage on both Madison Avenue and East 30th Street,and were
constructed separately and subsequently joined. The properties were constructed
in about 1910 and substantially renovated in approximately 1988.
Description of Madison Avenue Lease
Lease Term The Madison Avenue Property, owned in fee by the Company,is
leased to an unaffiliated entity for a term expiring February 28, 2038. If
Tenant exercises its right to convert the property to cooperative ownerships
then effective with the assignment of the lease the lease can be extended for
150 years. To the Company's knowledge, the Tenant is not contemplating a
cooperative conversion at the present time.
Amounts Payable Under the Madison Avenue Property Lease The basic
annual rental is $550,000 increasing to $600,000 in 1999 and by $50,000 each
five years thereafter. If the conversion option is exercised, the basic annual
rent is fixed for ten years from the date of conversion at the basic annual
rental then being paid, increasing by $75,000 each ten years thereafter. If the
conversion option is exercised, the Company is to receive a conversion premium
which the Company has agreed to divide 50-50 with BRT Realty Trust, provided the
conversion takes place on or before June 14, 2004. The Company acquired this
property from BRT Realty Trust, an affiliated entity in June 1994 (see Form 8-K
of the Company dated June 27, 1994).
The lease is a net lease and requires Tenant to pay, in addition to basic
annual rent, all real estate taxes and all utility and other charges applicable
to the property during the term.
Maintenance and Modifications Tenant, at its expense, is required to make
all structural and non-structural repairs and is required to maintain the
property in good repair and condition, reasonable wear and tear excepted.
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Tenant is permitted, under the lease, to make structural and non-structural
alterations, improvements and additions provided (i) any such alteration,
improvement or addition does not materially adversely affect the structural
integrity or strength of the buildings or the value of the property, or any
interest of Landlord and does not include structural demolition, and (ii)
if the anticipated cost exceeds a specified amount (currently $150,000,
increasing $50,000 each ten years commencing with 1999) Tenant is to give
Landlord prior notice and furnish Landlord with such information as Landlord may
reasonably request. In any event Tenant can't demolish any structural portions
of the buildings without consent of Landlord. The lease specifies other Tenant
obligations prior to Tenant commencing alterations, improvements or additions.
Insurance Tenant is required to maintain fire insurance, with extended
coverage, in an amount equal to 100% of replacement value, exclusive of footings
and foundations with the deductible not to exceed $25,000, increasing every five
years by the increase in the consumer price index. Tenant is also required to
maintain rent insurance, comprehensive general public liability insurance,
elevator and boiler insurance, and such other insurance, in such amounts, as
reasonably required by Landlord. In the opinion of the Company's management this
property is adequately covered by insurance.
Damage to or Condemnation of Madison Avenue Property In the event of a
casualty, Tenant at its expense, whether or not the insurance proceeds are
sufficient,is required to repair the damage and restore, replace and rebuild the
premises, at least to the extent of the value and as near as possible to the
character prior to the casualty.
If there is a condemnation of all or substantially all the premises,Tenant
may elect to terminate the lease, and in such event the lease shall terminate on
the date the condemning authority takes title to the property. In the event of
a condemnation of all or substantially all the property, the award is to be
divided between Landlord and Tenant in the proportion each party's interest in
the premises bears to the aggregate value of both party's interest in the
property, as determined by arbitration, provided the Landlord is to receive as
a priority payment an amount equal to the fixed annual rent then being paid
under the lease multiplied by 10, with interest from the date of taking and then
Tenant is to receive the greater of (i)the sum of all amounts paid by Tenant for
capital improvements, not to exceed $3,000,000 and (ii) all unpaid principal and
interest and other sums due on any leasehold mortgage.
If there is a partial taking Tenant,at its sole expense,is to repair and
reconstruct the premises. Any award is to be applied to such repair and
reconstruction, and if the award exceeds the cost of repair and reconstruction,
the excess is divided between Landlord and Tenant as provided in the Lease.
Mortgage
Simultaneously with its purchase of the property in June,1994 the Company
obtained a $4,250,000 non-recourse first mortgage loan from East New York
Savings Bank. The mortgage bears interest at 8.75% per annum during the initial
5 year term. The Company has an option to renew the mortgage for an additional
five year term upon payment of a 1% extension fee. The interest rate during the
extension period will be the greater of 8.75% or 275 basis points above U.S.
Treasuries as defined in the mortgage agreement. The mortgage is being amortized
based on a 25 year amortization schedule. At December 31, 1996 there was a
principal balance of $4,122,873 due on this mortgage. Assuming no payment is
made on principal in advance of the maturity date, the principal balance due at
maturity will be approximately $3,960,000. The Company has the option of
prepaying this mortgage in whole or in part provided that it pays a prepayment
premium of 3% if prepaid prior to June 14, 1997, decreasing by 1% each year
thereafter and if the Company exercises its option during the five year
extension period, the prepayment premium is 5% in the first year, decreasing by
1% each year thereafter during the extended term.
The Tenant has the right to mortgage its leasehold position under terms and
conditions set forth in the lease. Any fee mortgage on the premises is superior
to any leasehold mortgage.
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Total Petroleum Properties
Description of Total Petroleum Properties
Although the Total Petroleum Properties consist of thirteen separate
properties located in various towns and cities in the State of Michigan,they are
considered as one property for the purpose of determining if they are
"materially important" real properties. The Total Petroleum Properties are all
service stations and include gasoline pumping islands, a service area and a
retail building used as a convenience store. The Total Petroleum Properties are
on parcels of land ranging from 45,000 square feet to 183,000 square feet and
the buildings on the properties range from 6,000 square feet to 13,000 square
feet.
Description of Total Petroleum Leases
Lease Term The Total Petroleum Properties have 13 separate but identical
leases dated as of May 15,1991 (Total Petroleum Leases). The primary lease term
for the Total Petroleum Properties is 20 years ending on May 31, 2011. Total
Petroleum has the right to extend the leases for two 10 year renewal terms, but
the renewal option can only be exercised on an all or none basis. The Total
Petroleum Leases contain a cross default provision which provides that on a
monetary default resulting in the termination of a lease, the Landlord has a
right to terminate any or all of the other leases.
Amounts Payable under the Total Petroleum Leases The combined annual rent
for all 13 properties is $885,878 through May 14,1997, increasing by 3% each May
15th throughout the term of the lease. The leases are net leases, which requires
Total to pay all real estate taxes, assessments, and all utility charges.
Maintenance and Modifications Total Petroleum is required,at its expense,
to maintain the Total Petroleum Properties in good repair and is responsible to
keep each property in reasonably clean condition. The Tenant at its sole expense
may make any non-structural alterations, additions, replacements or improvements
to the property without the Landlord's consent. The lessee is required to obtain
the Landlord's prior written consent for structural alterations, additions,
replacements or improvements which consent will not be unreasonably withheld.
Insurance Total Petroleum is required to maintain insurance at its expense
providing for fire with standard extended risk coverage to the extent of the
full replacement cost.So long as the Tenant's net worth exceeds $100,000,000 the
deductible may be that which is provided in Total Petroleum's master corporate
insurance policy, and if its net worth falls below $100,000,000 then the
deductible shall not exceed $250,000 without Landlord's consent. In Management's
opinion the Total Petroleum Properties are adequately covered by insurance.
Damage to or Condemnation of Property If any of the Total Petroleum
Properties is damaged or destroyed by fire or other casualty there is to be no
rent abatement and Total Petroleum is required to repair and restore the
premises in a reasonable diligent manner. If, however, the premises are rendered
untenantable,Total Petroleum may terminate the lease in which event it shall pay
to the Company an amount sufficient to restore the premises to the condition
existing as of the date the lease was executed, reasonable wear and tear
excepted.
If all or any part of any of the properties is taken by condemnation so as
to render the remaining portion of the property unsuitable for lessee's
business, then the rent due under the lease shall be equitably adjusted until
such time as the Tenant provides Landlord with written notice that it is
electing to terminate the lease. If however, the Tenant does not vacate the
property within ninety days of such taking then it is conclusively presumed
that such taking is not extensive enough to render the premises unsuitable for
Total Petroleum's business. In the event of a taking, damages awarded are
payable as follows: (i) Total Petroleum is entitled to the portion of the award
attributable to the value of its leasehold and (ii) Landlord is entitled to the
value of its reversion. In allocating between the value of the leasehold and the
reversion, the value of improvements and betterments made by the lessee is to be
equitably divided between leasehold and reversion. Each party is entitled to
file a claim in any condemnation proceeding.
<PAGE>
Option to Purchase Total Petroleum has been granted an option to purchase
all locations at fair market value, excluding the value of the improvements made
by it. This option may be exercised during the last six months of the term of
the lease. Fair market value is to be determined by an appraisal process.
Right of First Refusal Total Petroleum has been granted a right of first
refusal to purchase a Total Petroleum Property from the Company for the same
purchase price and on the same terms and conditions as a bonafide offer to
purchase received by the Company from an unrelated party which is engaged in, or
plans to engage in the business of selling petroleum products, which offer the
Company intends to accept.
Mortgage
The Total Petroleum Properties are owned free and clear of mortgages.
Fort Myers, Florida Property
Description of Fort Myers, Florida Property
The Fort Myers property, acquired in November 1996, is located at 13751
South Tamiami Trail (US Highway 41 and Daniels Road), a developed commercial/
retail area in Lee County. The property, part of the Market Square Shopping
Center, is approximately 6 miles south of the Fort Meyers downtown business
district. The property is approximately .72 acres with parking rights to the
entire Market Square Shopping Center. The property is improved with a 29,993
square foot, free standing single story retail store completed in 1996, leased
to Barnes & Noble Super Stores, Inc. The superstore is a prototypical Barnes &
Noble Super Store, selling at discount hard cover and paperback books of all
types, computer software, CD's and tapes and containing a Starbucks Coffee shop.
Description of Barnes & Noble Lease
Lease Term The property is leased to Barnes & Noble Superstores, Inc.
pursuant to a net lease which has an initial term of 20 years expiring November
2016. The Tenant has the right to extend the lease for 4 additional 5 year
terms.
Amounts Payable under the Lease
The annual fixed rent under the lease is $467,000 for the first five years,
$513,000 for years 6 through 10, $559,000 for years 11 through 15 and $605,000
for years 16 through 20. The lease requires the Tenant to pay all real estate
taxes, assessments, water and sewer and utility charges and other governmental
charges.
Maintenance and Modifications
The Company is not required to make any alterations, reconstructions,
additions, improvements or repairs of any kind to the property. Tenant is
required to maintain the property and make all repairs, structural and non-
structural. The Tenant cannot make alterations to the building without the
Company's consent, which is not to be unreasonably withheld, but Tenant can make
exterior and interior non-structural alterations without Landlord's consent
provided Tenant complies with all legal requirements.
<PAGE>
Insurance
Tenant is required to carry at its expense all risk insurance covering the
building and improvements to the extent of their full replacement value, boiler
and machinery insurance, and liability insurance. In management's opinion, this
property is adequately covered by insurance.
Damage to or Condemnation of Property
If the premises is damaged by fire or other casualty and the premises
cannot be repaired and restored within eighteen months of the casualty or if the
casualty occurs during the last three years of the term, or any renewal term,
such that the cost of rebuilding or repairs exceeds 20% of the replacement cost,
Tenant or Landlord may terminate the lease, but if Landlord exercises its right
to terminate, Tenant can void such exercise by exercising any right it may have
to extend. If the lease cannot be or is not terminated after a casualty then
Tenant at its cost shall rebuild or repair the premises, and all insurance
proceeds are to be applied to the cost of rebuilding or repair.
In the event of a condemnation of any part of the building or a substantial
portion of the premises Tenant shall have the right, subject to the Company's
right to substitute compatible parking and/or facilities (a) to terminate the
lease as of the date of taking, or (b) continue the lease with an appropriate
rent reduction. If Tenant does not or may not elect to terminate the lease, the
Tenant shall restore the premises remaining after the taking and the Company
shall make the condemnation proceeds, or as much thereof as is necessary for the
reconstruction, available to Tenant. In the event of termination of the lease
because of condemnation both Landlord and Tenant can seek to recover
compensation and damage from the condemning authority for injury or loss
sustained by them.
Mortgage The Fort Myers property is encumbered by a first mortgage held
by Southtrust Bank of Alabama, National Association in the original principal
amount of $3,250,000. The loan bears interest at 7.8% per annum and matures
January 1, 2004. The loan provides for amortization over 25 years. There had
not been any payments on the mortgage as of December 31, 1996 and assuming no
payment is made on principal in advance of the maturity date, the principal
balance due at maturity will be approximately $2,889,000. The Company has the
right to prepay this mortgage but there shall be due at the time of prepayment
a premium equal to the amount required to compensate the mortgagee for its loss
of investment (a yield maintenance formula).
* * * * *
The following sets forth the information as to other important properties
owned by the Company:
The Payless Properties
Description of Payless Properties
At December 31, 1996 the Company owned eleven properties leased to Payless
ShoeSource Inc. These properties were originally leased to The May Department
Stores ("May") and assigned by May to Payless ShoeSource, Inc. ("Payless"). May
remains liable under those Payless leases which were extended. The initial term
with respect to the leases referable to these 11 properties expired on December
31, 1996. Payless has extended the leases on four of the eleven properties, two
were under contract of sale on December 31,1996 (one of which closed in January,
1997) two have been leased to other entities, and three were vacant (and are
vacant as of the date of this Form 10-K). The Company is actively seeking a
buyer or tenant for the three vacant properties.
<PAGE>
The typical Payless Property is a freestanding one story building
containing approximately 3,100 square feet of space on a parcel of land
containing approximately 15,000 square feet and located on a major commercial
thoroughfare.
Description of Payless Leases
Lease Term The Payless Properties have separate but substantially
identical leases ("Payless Leases") which expire on December 31, 2001 with
Payless having the right to extend each of their leases for three additional
terms of five years each. The other two leases expire on December 31, 1999.
Amounts Payable for the Payless Properties The aggregate annual minimum
rental for the Payless Properties(including the two properties leased to others)
is $243,986 until December 31, 1999, and $201,309 from January 1, 2000 through
December 31, 2001.
These leases are "net leases" and the tenant is required to pay, all taxes,
assessments, levies, fees, water and sewer rents, charges, licenses, permit fees
and all governmental charges with respect to these properties, and all utility
and other charges incurred in the operation of each of the properties.
Maintenance Each tenant is required, at its expense to maintain the
properties, structural or otherwise, in a neat, clean and orderly condition,
reasonable wear and tear excepted.
Mortgage
The Company owns these properties on a free and clear basis.
Greenwood Village, Colorado Property
Description of Greenwood Village, Colorado Property
The Greenwood Village, Colorado Property, acquired in April, 1996, is 3.2
acres with 140 parking spaces. It is located at 9000 East Peakview Avenue, one
block north of Arapaho Road (a major shopping corridor), approximately 10 miles
south of downtown Denver. The property is improved with a 45,000 square foot
single story retail sporting goods store leased to Gart Bros. Sporting Goods
Company. The building was completed in November 1995.
Description of Gart Brothers' Lease
Lease Term The property is leased to Gart Bros. Sporting Goods Company
pursuant to a "net lease" which has an initial term of 20 years ending January
31, 2016. The tenant has the right to extend the lease for three additional five
year terms.
Amounts Payable under the Lease The annual basic rent payable under the
lease is $423,000 per annum increasing to $450,000 in November 2005. Tenant is
required to pay all real estate taxes, assessment, water, sewer and other
governmental charges and common area maintenance. Commencing in November 2000
in addition to annual basic rent the Tenant is required to pay percentage rent
equal to 2 1/2% of gross sales in excess of a specified minimum.
<PAGE>
Maintenance
Landlord is responsible to maintain the foundation, exterior walls
(excluding doors, windows and store fronts) and roof. Tenant is required at its
expense to make all other repairs and replacements and to keep the demised
premises in good, clean condition.
Mortgage
The property is encumbered by a first mortgage held by USA Life Insurance
Company, Inc. in the original principal amount of $2,725,000. The loan bears
interest at 8.75% is amortizing over a 25 year period and is due on March 31,
2006. At December 31, 1996 $2,706,872 was due and owing on this mortgage.
Hauppauge, New York Property
Description of Hauppauge, New York Property
The Hauppauge, New York Property, acquired in July, 1996, is located at
415-425 Rabro Drive in Hauppauge, Long Island, New York. The property, an
irregularly shaped plot comprising 6.031 acres, is improved with a 65,120 square
foot, one story, industrial flex building of which 35% is comprised of finished
office space. The property was built in 1982 and contains 245 parking spaces.
Description of Robotic Vision Systems Lease
Lease Term The property is leased to Robotic Vision Systems, Inc. pursuant
to a net lease which, as amended and extended, has a term expiring March 31,
2001.
Amounts Payable under the Lease The annual basic rent payable under the
lease is $553,520 increasing to $586,080 on April 1, 1998. Tenant is required
to pay all real estate taxes,utility charges and insurance premiums. The Tenant
has the right, effective September 1,1997 (on four months prior notice) to "put"
back to the Landlord 15,370 square feet and if the tenant exercises that right
the basic rent reduces to $422,875 per annum through March 31, 1998, increasing
to $447,750 per annum at April 1, 1998, and Tenant's proportionate share of real
estate taxes and other expenses will reduce proportionately.
Maintenance and Modifications
Tenant is required to keep the demised premises in a clean and well kept
condition and is responsible for exterior repairs and maintenance.
Mortgage
The property is encumbered by a first mortgage held by North Fork Bank in
the original principal amount of $2,000,000. The loan bears interest at 9.35%
per annum, is amortizing over 20 years and is due on October 1, 2000. At
December 31, 1996 $1,994,250 was due and owing on this mortgage.
General
This property is owned by Elpans, LLC, a limited liability company in which
the Company owns a 90% interest. After pari passu repayment of capital and a
pari passu 12% return, the Company is entitled to an additional 3% return.
Thereafter, the Company is entitled to 66.67% of all cash distributions.
<PAGE>
Clayton County (Atlanta), Georgia Property
Description of Clayton County (Atlanta), Georgia Property
The Clayton County, Georgia Property is located at 1987 Mount Zion Road,
approximately 13 miles south of downtown Atlanta. The property, which is 5.5
acres, is improved with a 50,400 square foot single story building completed in
1994, containing 233 parking spaces. The property is leased to The Sports
Authority Inc. for use as a retail sporting goods super store and shares an
entrance with a Publix Supermarket.
Description of Sports Authority Lease
The property is leased to The Sports Authority, Inc. pursuant to a net
lease which has an initial term of 20 years expiring October 28, 2014. The
Tenant has a right to extend the lease for 4 additional 5 year terms.
Amounts Payable under the Lease
The annual basic rent under the lease is $390,600, increasing to $441,000
in November 1999 and increasing each five years thereafter. The lease requires
the Tenant to pay all real estate taxes,assessments, water and sewer charges and
other governmental charges. Tenant is required to pay Landlord percentage rent
of 1 1/4% of the amount by which gross sales exceeds a specified breakpoint.
Maintenance
Landlord is required to maintain and repair the roof,exterior walls, floor
slabs and structural parts of the demised premises. Tenant is obligated to make
all repairs to the demised premises, pylon signs and common areas which Landlord
is not obligated to maintain under the Lease.
Mortgage
The property is encumbered by a first mortgage held by MetLife Capital
Corporation in the original principal amount of $2,400,000. The loan bears
interest at the rate 8.45% per annum, is amortizing over 25 years and is due on
September 1, 2006. On December 31, 1996 $2,392,916 was due and owing on the
mortgage.
Lewisville (Dallas), Texas
Description of Lewisville (Dallas), Texas Property
The Lewisville, Texas property acquired in October, 1996 is located at 490
Oak Bend Drive (the service road of Interstate 35-E) in Lewisville, Texas. The
property is located approximately 7 miles north of the Dallas-Fort Worth Airport
and approximately 13 miles from the Dallas city limits. The property shares an
entrance with the Ridge Village Shopping Center,which includes among others, Old
Navy, Circuit City, Comp USA, Marshalls and Linens N' Things. The property
contains approximately 1.98 acres, is improved with a 21,043 square foot (16,243
square feet on ground level and an additional 4,800 square feet of mezzanine)
single story retail store completed in 1996 and has 116 parking spaces.
Description of Just For Feet, Inc. Lease
Lease Term The property is leased to Just For Feet, Inc. pursuant to a net
lease which has an initial term of approximately 20 years expiring October 31,
2016. The Tenant has the right to extend the lease for 2 additional five year
terms.
<PAGE>
Amounts Payable under the Lease
The annual basic rent under the lease is $355,560, increasing in November
2001 to $391,131 per annum and increasing each five years thereafter. The lease
requires the tenant to pay all real estate taxes, assessments, water and sewer
and other governmental charges.
Maintenance
Tenant is to maintain the premises in good repair and appearance and is to
make all structural and non-structural repairs. Landlord has given to Tenant the
right to assert claims against any contractor or sub-contractors if Tenant
becomes aware of any defects in the construction of the Premises.
Mortgage
The property is encumbered by a first mortgage held by Security Mutual Life
Insurance Company of New York in the original principal amount of $1,600,000.
The loan, which closed on January 10, 1997, bears interest at 8 3/4% per annum
and matures on January 1, 2017. On January 1, 2007 there is an interest rate
adjustment to 1 3/4% over ten year treasuries. The loan will amortize over 20
years.
<PAGE>
Item 3. Legal Proceedings
There are no pending material legal proceedings to which the Company is a
party.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this Form 10-K.
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters
The following table sets forth the high and low prices for the Common Stock
of the Company as reported by the American Stock Exchange and the per share cash
distributions paid by the Company on the Common Stock during each quarter of the
years ended December 31, 1995 and 1996:
l995 High Low Dividend
First Quarter 10 7/8 10 1/4 $ .125
Second Quarter 12 3/4 10 1/4 $ .30
Third Quarter 13 3/4 12 1/4 $ .30
Fourth Quarter 14 1/8 12 3/4 $ .30*
l996 High Low Dividend
First Quarter 14 1/8 13 $ .30
Second Quarter 13 5/8 13 3/8 $ .30
Third Quarter 13 1/2 12 5/8 $ .30
Fourth Quarter 13 1/2 12 5/8 $ .30*
The following table sets forth the high and low prices for the $16.50
Cumulative Convertible Preferred Stock of the Company as reported by the
American Stock Exchange and the per share cash distributions paid by the Company
on the Preferred Stock during each quarter of the years ended December 31, 1995
and 1996:
1995 High Low Dividend
First Quarter 16 7/8 15 3/4 $ .40
Second Quarter 17 1/8 15 3/4 $ .40
Third Quarter 16 7/8 16 1/8 $ .40
Fourth Quarter 16 7/8 16 1/4 $ .40**
1996 High Low Dividend
First Quarter 16 7/8 16 1/4 $ .40
Second Quarter 17 16 1/4 $ .40
Third Quarter 16 7/8 16 1/4 $ .40
Fourth Quarter 17 1/8 16 1/4 $ .40**
*A cash distribution of $.30 was paid on the Common Stock on January 2,
1997 and January 3, 1996. These two distributions are reflected as being paid
in the 1996 and 1995 fourth quarters, respectively.
**A cash distribution of $.40 per share was paid on the Preferred Stock on
January 2, 1997 and January 3, 1996. These two distributions are reflected as
being paid in the fourth quarter of 1996 and 1995, respectively.
The Common Stock and Preferred Stock of the Company trade on the American
Stock Exchange, under the symbols OLP and OLP Pr, respectively. As of March 1,
1997 there were 345 common and 186 preferred stockholders of record and the
Company estimates that at such date there were approximately 1,650 and 750
beneficial owners of the Company's Common and Preferred Stock, respectively.
<PAGE>
Item 6. Selected Financial Data
The following are highlights of the Company's operations which are derived
from the audited financial statements of the Company for the years ended
December 31, 1996, 1995, 1994, 1993 and 1992.
<TABLE>
<CAPTION>
Income Statement Data 1996 1995 1994
<S> <C> <C> <C>
Revenues $ 5,511,556 $ 4,890,962 $ 4,041,378
Gain on sale of
investments -- -- --
Provision for valuation
adjustment and
impairment ( 659,000) -- --
Net income 2,173,952 3,096,302 2,861,137
Calculation of net
income applicable to
common stockholders:
Net income 2,173,952 3,096,302 2,861,137
Less: dividends and
accretion on preferred
stock 1,448,359 1,446,519 1,444,703
Net income applicable
to common stockholders $ 725,593 $ 1,649,783 $ 1,416,434
Weighted average
number of common
shares outstanding 1,447,413 1,409,371 1,356,989
Net income per common
share $ .50 $ 1.17 $ 1.04
Cash distributions
per share of:
Common Stock $ 1.20 $ 1.03 $ .86
Preferred Stock 1.60 1.60 1.60
Balance Sheet Data
Total real estate
investments, net $42,889,213 $24,253,765 $10,996,534
Investments in U.S.
Government obligations
and securities -- 1,274,747 3,972,256
Mortgages and note
receivables 6,049,033 7,564,716 16,096,224
Total assets 52,522,988 38,040,246 37,652,773
Total liabilities 21,987,633 7,532,267 7,680,937
Redeemable convertible
preferred stock 12,950,792 12,796,475 12,643,998
Total stockholders'
equity 17,442,841 17,711,504 17,327,838
</TABLE>
<PAGE>
<TABLE>
Income Statement Data 1993 1992
<S> <C> <C>
Revenues $ 3,348,419 $ 2,967,919
Gain on sale of
investments 168,631 303,130
Provision for valuation
adjustment and
impairment (258,744) --
Net income 2,435,269 2,436,315
Calculation of net
income applicable to
common stockholders:
Net income 2,435,269 2,463,315
Less: dividends and
accretion on preferred
stock 1,442,907 1,442,372
Net income applicable
to common stockholders $ 992,362 $ 993,943
Weighted average
number of common
shares outstanding 1,338,619 1,338,619
Net income per common
share $ .74 $ .74
Cash distributions
per share of:
Common Stock $ .94 $ .70
Preferred Stock 1.60 1.60
Balance Sheet Data
Total real estate
investments, net $ 5,627,909 $ 6,271,828
Investments in U.S.
Government obligations
and securities 4,856,453 13,954,329
Mortgages and note
receivable 17,274,039 10,614,040
Total assets 32,383,674 32,339,558
Total liabilities 3,360,236 3,199,045
Redeemable convertible
preferred stock 12,493,337 12,344,472
Total stockholders'
equity 16,530,101 16,796,041
</TABLE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
At December 31, 1996, the Company's primary sources of liquidity were
approximately $2,479,000 in cash and cash equivalents and a $5,000,000 revolving
credit agreement(discussed below), of which $1,100,000 was available. Long term
debt at December 31, 1996 consisted of $16,846,921 of mortgages payable which is
secured by certain real estate investments. During January 1997, mortgage
financing in the amount of $1,600,000 was obtained on a property purchased
during October 1996. The proceeds were used to partially pay down the $3,900,000
outstanding under the credit agreement. At March 3, 1997 $1,350,626 was
outstanding under the credit agreement.
In March, 1996 the Company entered into a $5 million revolving credit
agreement with Bank Leumi Trust Company of New York ("Bank Leumi"). Borrowings
under the credit agreement will provide the Company with funds, when needed, to
acquire additional properties. The credit agreement matures February 28, 1999
with a right for the Company to extend the agreement until February 29, 2000.
Under the terms of this agreement the Company has the ability to add additional
lenders to provide a maximum total facility of $15,000,000. The Company is
currently negotiating with several banks to increase the facility to the maxi-
mum. At December 31, 1996, one institution has expressed an interest in
participating to the extent of $4,000,000.
The Company is currently in discussions concerning the acquisition of
additional net leased properties. In management's judgement, cash provided from
operations, the Company's cash position and cash available under the Credit
Agreement and from the anticipated inclusion of other banks to the Credit
Agreement will provide adequate funds for cash distributions to shareholders,
operating expenses and future investments. It will continue to be the Company's
policy to make sufficient cash distributions to shareholders in order for the
Company to maintain its real estate investment trust status under the Internal
Revenue Code.
In connection with the lease agreements with Total Petroleum, Inc. ("Total
Petroleum") consummated in 1991, the Company agreed to expend certain funds to
remediate environmental problems discovered at certain locations that were net
leased to Total Petroleum. It was agreed that the net cost to the Company would
not exceed $350,000 per location, with any excess cost being the responsibility
of Total Petroleum. At that time the Company deposited $2,000,000 with an
independent escrow agent to insure compliance by the Company with its obliga-
tions with respect to the environmental clean up. The escrow agent held
approximately $1,288,000 as of December 31,1996 which the Company deems adequate
to cover any additional environmental costs.
<PAGE>
Results of Operations
Comparison of Years ended December 31, 1996 and 1995
In view of the Company's acquisition of nineteen properties in 1995 and
five properties in 1996, rental income increased by $1,512,831 to $4,178,288 for
the year ended December 31, 1996 from $2,665,457 for the year ended December 31,
1995. The straight-lining of rents during the year ended December 31, 1996
contributed $218,061 to the increase in rental income.
The decrease in interest income from related parties of $746,112 for the
year ended December 31,1996 from $1,878,262 for the year ended December 31, 1995
to $1,132,150 for the year ended December 31, 1996 is substantially due to
accelerated principal collections during 1995 on a senior note receivable which
resulted in unusually large amortization of the discount on such note during
1995 and additionally, resulted in a substantial decrease in interest earned on
such note during 1996. This note was collected in full during August,1996. Also
contributing to the decrease in interest earned was the payoff in full during
March 1996 of an $845,000 mortgage receivable.
Interest and other income decreased to $201,118 in 1996 from $333,303 in
1995 primarily due to a decrease in interest earned on U.S. Government
securities resulting from the sale of such investments, the proceeds of which
were used to purchase properties.
A $232,946 increase in depreciation and amortization expense to $712,591
results from depreciation on properties acquired during 1995 and 1996. Also
contributing to the increase was the amortization of capitalized costs incurred
in connection with the Company obtaining a bank credit facility and placing
mortgages on its properties.
The increase in interest-mortgages payable from $453,684 in 1995 to
$891,953 in 1996 is due to interest paid on mortgages placed in connection with
property acquisitions during 1995 and 1996. Interest - bank note payable
amounted to $110,185 during 1996 resulting from borrowings under the revolving
credit agreement.
General and administrative costs of $663,201 reflect an increase of $86,264
from the prior year expense of $576,937 and is due to a combination of factors
including various fees and other costs incurred with the implementation and
maintenance of the Company's distribution reinvestment plan and an increase in
professional fees.
At December 31, 1996 the Company owned five properties leased to a chain
of retail stores, all of which expired on December 31, 1996. Two of these
properties were under contract of sale on December 31, 1996 (one sale closed in
January, 1997), and three were vacant. The Company is actively seeking a buyer
or tenant for the three vacant properties. The Company has recorded a provision
for valuation adjustment on the two properties under contract of sale since the
sales prices are lower than the carrying amounts. In addition, the Company has
determined that the estimated fair value of the three vacant properties is lower
than their carrying amounts and thus the Company has taken a provision for the
difference. The total provision taken on these five properties amounts to
$659,000. There was no comparable provision taken in 1995.
Comparison of Years ended December 31, 1995 and 1994
Total revenues increased to $4,890,962 for the year ended December 31, 1995
from $4,041,378 for the year ended December 31, 1994. The increase of
approximately $850,000 is the result of a substantial increase in rental income,
offset in part by decreases in interest, dividends and other income, resulting
from Management's decision during 1994 to concentrate on investments in improved
real estate net leased on a long term basis. Rental income increased by
$1,682,084, from $983,373 in 1994 to $2,665,457 in 1995, primarily due to rents
earned on sixteen properties acquired from Gould Investors L.P. ("Gould") in
January 1995 ("January 1995 Transaction") and four other properties acquired
during 1995 and 1994. Interest income from related parties decreased from
$2,361,013 in 1994 to $1,878,262 in 1995, principally due to the extinguishment
of a mortgage receivable as part of the January 1995 Transaction. The decrease
was partly offset by an increase in the discount amortization of a senior note
receivable resulting from an increase in principal collections on such note
during 1995.
<PAGE>
Dividends from related party decreased to $13,940 in 1995 from $270,000 in
1994 due to the transfer of preferred shares of BRT Realty Trust as part of the
January 1995 Transaction. Interest and other income decreased to $333,303 in
1995 from $426,992 in 1994 primarily due to a decrease in the amount received or
accrued from the Michigan Underground Storage Tank Fund Administration.
The $242,804 increase in depreciation and amortization from $236,841 in
1994 to $479,645 in 1995 results substantially from depreciation on properties
acquired during 1995 and 1994. The decrease in interest-mortgages payable from
$484,440 in 1994 to $453,684 in 1995 is the net result of the elimination of
interest paid on a $2,753,700 mortgage loan which was fully repaid in March
1995, offset by interest paid on new mortgages obtained in connection with
property acquisitions during 1995 and 1994.
Effective January 1, 1995, the Company became self-managed, thereby
eliminating the management fee. In connection with the January 1995 Transaction,
the Company must pay annual fixed leasehold rent on one property of $289,000
through April 2010. There was no such expense in 1994.
General and administrative costs increased in 1995 to $576,937 from
$355,874 in 1994 substantially due to salary and related payroll costs for the
Company's President, as the Company converted to self-management effective
January 1995. To a lesser extent, the increase results from additional payroll
charges, as the Company's level of activity increased.
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary data listed in Items 14(a)(1)
and 14(a)(2) hereof are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None
PART III
Information required by Part III (Item 10 - "Directors and Executive
Officers of the Registrant", Item 11 - "Executive Compensation", Item 12
- -"Security Ownership of Certain Beneficial Owners and Management" and Item 13
- -"Certain Relationships and Related Transactions") will be contained in the
definitive proxy statement to be filed within 120 days of the end of the
Company's fiscal year.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K
(a) Documents filed as part of this Report:
1. The following financial statements of the Company are included in
this Report on Form 10-K:
Page
- Report of independent auditors F-1
- Statements:
Consolidated Balance Sheets F-2
Consolidated Statements of Income F-3
Consolidated Statements of
Stockholders' Equity F-4
Consolidated Statements
of Cash Flows F-5-F-6
Notes to Consolidated
Financial Statements F-7-F-21
2. Financial Statement Schedules:
- Schedule III-Real Estate
and Accumulated Depreciation F-22-F-23
- Schedule IV-Mortgage Loans on
Real Estate F-24-F-25
All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements or the
notes thereto.
3. Exhibits
3.1 Articles of Incorporation, as amended, of the Company, filed as Exhibit
3.1 to the Company's Form 10-Q for the quarter ended September 30, 1985,
which Exhibit is incorporated herein by reference.
3.2 Amendment to Articles of Incorporation, filed as Exhibit to the
Company's Form 10-Q for the quarter ended June 30, 1989, which Exhibit
is incorporated herein by reference.
3.3 Amendment to Articles of Incorporation, filed as an Exhibit to the
Company's Form 10-Q for the quarter ended June 30, 1990, which Exhibit is
incorporated herein by reference.
3.4 By-Laws of the Company, as amended, filed as an Exhibit to the Company's
Form 10-Q for the quarter ended June 30, 1989, which Exhibit is
incorporated herein by reference.
3.5 Amendment to By-Laws filed as an Exhibit to the Company's Form 10-Q for
the quarter ended June 30, 1990, which Exhibit is incorporated herein by
reference.
10.1 Lease dated January 17,1989 and modification thereof dated as of February
15, 1989 between Crystal Management,Inc., as Landlord and Stamford Realty
Associates, Inc. as tenant with respect to Madison Avenue, New York, New
York, filed as an exhibit to the Company's Form 8-K dated June 27, 1994
and incorporated herein by reference.
10.2 Form of lease entered into with Total Petroleum with respect to 13 Total
Petroleum properties filed as an exhibit to the Company's Form 10-K dated
March 23, 1995 and incorporated herein by reference.
10.3 Lease dated November 7, 1996 between OLP Ft. Myers, Inc. and Barnes &
Noble Superstores, Inc. with respect to the Fort Myers, Florida property.
This exhibit is filed herewith.
10.4 Credit Agreement dated March 1, 1996 between the Company and Bank Leumi
Trust Company of New York filed as an exhibit to the Company's Form 10-K
for the year ended December 31,1995,which Exhibit is incorporated herein
by reference.
21.1 Subsidiaries of registrant (filed herewith)
(b) No reports on Form 8-K were filed by the Registrant during the last
quarter of the period covered by this report.
<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 of the undersigned, thereunto duly authorized.
ONE LIBERTY PROPERTIES, INC.
Dated: March 26, 1997
By:________________________
/s/ Matthew Gould
Matthew Gould, President
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 in the capacities indicated on the dates indicated.
Signature Title Date
_________________________
/s/Fredric H. Gould Chairman of the March 26, 1997
Fredric H. Gould Board of Directors
_________________________
/s/Matthew Gould President and
Matthew Gould Chief Executive
Officer March 26, 1997
_________________________
/s/Marshall Rose Director March 26, 1997
Marshall Rose
_________________________
/s/Joseph A. Amato Director March 26, 1997
Joseph A. Amato
_________________________
/s/Charles Biederman Director March 26, 1997
Charles Biederman
_________________________
/s/Arthur Hurand Director March 26, 1997
Arthur Hurand
__________________________
/s/David W. Kalish Vice President
David W. Kalish and Chief Financial
Officer March 26, 1997
<PAGE>
ONE LIBERTY PROPERTIES, INC.
and SUBSIDIARIES
Consolidated Financial Statements
December 31, 1996
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
One Liberty Properties, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of One Liberty
Properties, Inc. and subsidiaries (the "Company") as of December 31, 1996 and
1995, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1996. Our audits also included the financial statement schedules listed in the
Index at Item 14(a). These financial statements and schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedules based on our audits. We
conducted our audits in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
One Liberty Properties, Inc. and subsidiaries at December 31, 1996 and 1995, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly, in all material respects,
the information set forth therein.
New York, New York
February 26, 1997 /s/ Ernst & Young LLP
F-1
<PAGE>
<TABLE>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
ASSETS
<CAPTION>
December 31,
1996 1995
<S> <C> <C>
Real estate investments,at cost(Notes 3, 4,5 and 6)
Land $ 11,040,590 $ 7,299,417
Buildings 33,695,317 18,154,919
---------- ----------
44,735,907 25,454,336
Less accumulated depreciation 1,846,694 1,200,571
--------- ---------
42,889,213 24,253,765
Mortgages receivable - less unamortized discount -
(substantially all from related parties)
(Notes 3 and 6) 6,049,033 7,036,141
Senior secured note receivable-less unamortized
discount - (related party) (Note 3) - 528,575
Cash and cash equivalents 2,478,580 3,844,409
Unbilled rent receivable 304,828 86,767
Rent, interest, deposits and other receivables 66,908 696,790
Investments in U.S. Government obligations and
securities - (Note 2) - 1,274,747
Investment in BRT Realty Trust - (related party) -
(Notes 2 and 3) 199,068 127,704
Deferred financing costs 480,640 129,282
Other 54,718 62,066
------ ------
$ 52,522,988 $ 38,040,246
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgages payable (Note 6) $ 16,846,921 $ 6,590,154
Note payable - bank (Note 6) 3,900,000 -
Accounts payable and accrued expenses 475,109 193,767
Dividends payable 765,603 748,346
------- -------
21,987,633 7,532,267
---------- ---------
Commitments and contingencies (Notes 4, 7 and 8) - -
Minority interest in subsidiary 141,722 -
------- --------
Redeemable Convertible Preferred Stock,
$1 par value; $1.60 cumulative annual dividend;
2,300,000 shares authorized; 808,776 shares
issued; liquidation and redemption values
of $16.50 (Note 7) 12,950,792 12,796,475
---------- ----------
Stockholders' equity (Note 6):
Common Stock, $1 par value; 25,000,000
shares authorized; 1,473,642 and
1,416,119 shares issued and outstanding 1,473,642 1,416,119
Paid-in capital 13,650,737 13,218,757
Net unrealized gain (loss) on
available-for-sale securities (Note 2) 97,673 (6,758)
Accumulated undistributed net income 2,220,789 3,083,386
--------- ---------
17,442,841 17,711,504
---------- ----------
$ 52,522,988 $ 38,040,246
============== ==============
</TABLE>
See accompanying notes.
F-2
<PAGE>
<TABLE>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
<CAPTION>
Consolidated Statements of Income
Year Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Revenues:
Rental income (Note 4) $ 4,178,288 $ 2,665,457 $ 983,373
Interest from related parties (Note 3) 1,132,150 1,878,262 2,361,013
Dividends from related party (Note 3) - 13,940 270,000
Interest and other income 201,118 333,303 426,992
------- ------- -------
5,511,556 4,890,962 4,041,378
--------- --------- ---------
Expenses:
Depreciation and amortization 712,591 479,645 236,841
Interest - mortgages payable 891,953 453,684 484,440
Interest - bank 110,185 - -
Management fee (Note 8) - - 103,086
Leasehold rent 288,833 284,394 -
General and administrative (Note 8) 663,201 576,937 355,874
Provision for valuation adjustment of real
estate - (Note 5) 659,000 - -
------- --------- ---------
3,325,763 1,794,660 1,180,241
--------- --------- ---------
Operating income before minority interest in earnings
of subsidiary 2,185,793 3,096,302 2,861,137
Minority interest in earnings of subsidiary (11,841) - -
------- --------- ---------
Net income $ 2,173,952 $ 3,096,302 $ 2,861,137
=========== =========== ===========
Calculation of net income applicable to common stockholders:
Net income $ 2,173,952 $ 3,096,302 $ 2,861,137
Less dividends and accretion on preferred stock 1,448,359 1,446,519 1,444,703
--------- --------- ---------
Net income applicable to common stockholders $ 725,593 $ 1,649,783 $ 1,416,434
=========== =========== ===========
Weighted average number of common
shares outstanding 1,447,413 1,409,371 1,356,989
========= ========= =========
Net income per common share (Note 2) $ .50 $ 1.17 $ 1.04
=========== =========== ===========
Cash distributions per share:
Common Stock $ 1.20 $ 1.03 $ .86
=========== =========== ===========
Preferred Stock $ 1.60 $ 1.60 $ 1.60
=========== =========== ===========
</TABLE>
See accompanying notes.
F-3
<PAGE>
<TABLE>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
For the three years ended December 31, 1996
<CAPTION>
Net Unrealized
Gain (Loss) on Accumulated
Common Paid-in Available-for- Undistributed
Stock Capital Sale Securities Net Income Total
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1993 $ 1,338,619 $ 12,854,707 $ - $ 2,336,775 $
16,530,101
Net income - - - 2,861,137 2,861,137
Distributions - Common Stock
($.86 per share) - - - (1,173,347) (1,173,347)
Distributions - Preferred Stock
($1.60 per share) - - - (1,294,042) (1,294,042)
Accretion on Preferred Stock - (150,661) - - (150,661)
Exercise of options 60,500 529,063 - - 589,563
Net unrealized loss on available-
for-sale securities (Note 2) - - (34,913) - (34,913)
------------ ------------ ------------- ------------ ------------
Balances, December 31, 1994 1,399,119 13,233,109 (34,913) 2,730,523 17,327,838
Net income - - - 3,096,302 3,096,302
Distributions - Common Stock
($1.03 per share) - - - (1,449,397) (1,449,397)
Distributions - Preferred Stock
($1.60 per share) - - - (1,294,042) (1,294,042)
Accretion on Preferred Stock - (152,477) - - (152,477)
Exercise of options 17,000 138,125 - - 155,125
Net unrealized gain on available-
for-sale securities (Note 2) - - 28,155 - 28,155
------------ ------------ --------- ----------- ----------
Balances, December 31, 1995 1,416,119 13,218,757 (6,758) 3,083,386 17,711,504
Net income - - - 2,173,952 2,173,952
Distributions - Common Stock
($1.20 per share) - - - (1,742,507) (1,742,507)
Distributions - Preferred Stock
($1.60 per share) - - - (1,294,042) (1,294,042)
Accretion on Preferred Stock - (154,317) - - (154,317)
Exercise of options 23,500 190,937 - - 214,437
Shares issued through dividend
reinvestment plan 34,023 395,360 - - 429,383
Net unrealized gain on available-
for-sale securities (Note 2) - - 104,431 - 104,431
----------- ----------- --------- ----------- ----------
Balances, December 31, 1996 $ 1,473,642 $ 13,650,737 $ 97,673 $ 2,220,789 $ 17,442,841
=========== ============ ============= ============= ============
</TABLE>
See accompanying notes.
F-4
<PAGE>
<TABLE>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows Year Ended December 31,
<CAPTION>
1996 1995 1994
<S>
<C> <C> <C>
Cash flows from operating activities:
Net income $ 2,173,952 $ 3,096,302 $ 2,861,137
Adjustments to reconcile net income to net cash
provided by operating activities:
(Increase) decrease in rental income from
straightlining of rent (218,061) 86,780 48,866
Provision for valuation adjustment 659,000 - -
Depreciation and amortization 712,591 479,645 236,841
Minority interest in earnings of subsidiary 11,841 - -
Changes in assets and liabilities:
Decrease (increase) in rent, interest, deposits and
other receivables 611,739 (328,461) (103,526)
Increase (decrease) in accounts payable
and accrued expenses 281,342 (5,123) 49,726
------- ------ ------
Net cash provided by operating activities 4,232,404 3,329,143 3,093,044
--------- --------- ---------
Cash flows from investing activities:
Additions to real estate (19,940,571) (3,819,323) (5,549,182)
Costs of acquisition of real estate and mortgage receivable
from Gould Investors L.P. - related party - (90,514) -
Collection of mortgages receivable - (including $961,789,
$148,291 and $236,625 from related parties in 1996,
1995 and 1994) 987,108 169,388 249,712
Collection of senior secured note receivable - BRT Realty
Trust - related party 528,575 1,579,618 928,103
Sale of U.S. Government obligations and
securities, net 1,310,553 2,806,713 739,188
Net investment by minority interest in subsidiary 129,881 - -
Other (2,248) (14,986) -
---------- --------- ---------
Net cash (used in) provided by investing activities (16,986,702) 630,896 (3,632,179)
----------- ------- ----------
Cash flows from financing activities:
Proceeds from bank borrowings, net of repayments 3,900,000 - -
Proceeds from mortgages payable 10,375,000 2,413,350 4,250,000
Satisfaction of mortgage payable - (2,753,700) -
Payment of financing costs (392,826) (85,225) (100,355)
Repayment of mortgages payable (118,233) (53,143) (20,053)
Exercise of stock options 214,437 155,125 589,563
Cash distributions - Common Stock (1,725,250) (1,199,451) (1,132,319)
Cash distributions - Preferred Stock (1,294,042) (1,294,042) (1,294,042)
Issuance of shares through dividend reinvestment plan 429,383 - -
---------- --------- ---------
Net cash provided by (used in) financing activities 11,388,469 (2,817,086) 2,292,794
---------- ---------- ---------
Net (decrease) increase in cash and cash equivalents (1,365,829) 1,142,953 1,753,659
Cash and cash equivalents at beginning of year 3,844,409 2,701,456 947,797
--------- --------- -------
Cash and cash equivalents at end of year $ 2,478,580 $ 3,844,409 $ 2,701,456
============ ============ ============
</TABLE>
See accompanying notes.
F-5
<PAGE>
<TABLE>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows - Continued
<CAPTION>
Year Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Supplemental disclosures of cash flow imformation:
Cash paid during the year for interest expense $ 914,506 $ 467,116 $ 430,076
Cash paid during the year for income taxes 59,437 43,784 10,981
Supplemental schedule of noncash investing and financing activities:
Acquisition of real estate and mortgage receivable
from Gould Investors L.P., a related party - (9,861,729) -
Consideration for acquisition from Gould Investors L.P.:
Extinguishment of mortgage receivable - 6,850,000 -
Transfer of BRT preferred stock - 2,455,355 -
Transfer of BRT common stock - 556,374 -
Accretion on Preferred Stock 154,317 152,477 150,661
Net unrealized gain (loss) on available-for-sale securities 104,431 (6,758) (34,913)
</TABLE>
See accompanying notes.
F-6
<PAGE>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996
NOTE 1 - ORGANIZATION AND BACKGROUND
One Liberty Properties, Inc. (the "Company") was incorporated in 1982 in
the state of Maryland. The Company is a self-managed Real Estate Investment
Trust ("REIT") which currently participates in net leasing transactions and has
engaged in other real property transactions and invested in real property
mortgages.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of One Liberty
Properties, Inc., its wholly-owned subsidiaries and a majority-owned limited
liability company. Material intercompany items and transactions have been
eliminated. The Company, its subsidiaries and its majority-owned limited
liability company are hereinafter referred to as the Company.
Reclassification of Financial Statements
Certain amounts reported in previous consolidated financial statements have
been reclassified in the accompanying consolidated financial statements to
conform to the current year's presentation.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Income Recognition
Rental income includes the base rent that each tenant is required to pay in
accordance with the terms of their respective leases reported on a straight-line
basis over the initial term of the lease. Mortgage receivable discount is
amortized over the remaining life, utilizing the interest method, based on the
Company's evaluation of the collectibility of the carrying amount of the
mortgage. Note receivable discount is amortized over the remaining life, based
on principal collections.
F-7
<PAGE>
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Measurement of Loan Impairment
During the year ended December 31, 1995 the Company adopted Statement of
Financial Accounting Standards No. 114 ("SFAS #114"), Accounting by Creditors
for Impairment of a Loan. SFAS #114 defines impairment as the probability that
all amounts due under a loan agreement will not be collected according to the
contractual terms.
The Company did not have any impaired loans at December 31, 1996 and
December 31, 1995.
Depreciation
Depreciation of buildings is computed on the straight-line method over an
estimated useful life of 40 years for commercial properties and 27 and one half
years for residential properties.
Deferred Financing Costs
Mortgage and credit line costs are deferred and amortized on a
straight-line basis over the terms of the respective debt obligations.
Federal Income Taxes
The Company has qualified as a real estate investment trust under the
applicable provisions of the Internal Revenue Code. Under these provisions, the
Company will not be subject to federal income taxes on amounts distributed to
stockholders providing it distributes substantially all of its taxable income
and meets certain other conditions.
All distributions made during 1996 were attributable to ordinary income.
Distributions made during 1995 included approximately 8% attributable to capital
gains, with the balance to ordinary income.
F-8
<PAGE>
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Investments in Debt and Equity Securities
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards #115, Accounting for Certain Investments in Debt and Equity
Securities. The SFAS addresses accounting and reporting for (1) investments in
equity securities that have readily determinable fair values and (2) all
investments in debt securities. The Company has determined in accordance with
SFAS #115 that its investment in common shares of BRT Realty Trust ("BRT"), a
related party of the Company (see Note 3 as to the Company's relationship to
BRT), and its investment (at December 31, 1995) in U.S. Government obligations
and securities are "available-for-sale" securities. The accounting treatment of
such securities at December 31, 1996 and 1995 is fair value, with unrealized
holding gains and losses excluded from earnings and reported as a separate
component of stockholders' equity.
The Company's investment in 30,048 common shares of BRT, purchased at a
cost of $97,656 has a fair market value at December 31, 1996 of $199,068
resulting in an unrealized holding gain of $101,412. In addition, the Company
has invested $18,847 in equity securities which have a fair market value of
$15,108 at December 31, 1996. The aggregate net unrealized holding gain of
$97,673 is included as a separate component of stockholders' equity.
Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
Mortgages receivable: Two mortgage loans of the Company with outstanding
balances aggregating $316,588 are currently fixed at interest rates which
approximate market. Accordingly, these balances approximate their fair values.
The remaining mortgage loan was purchased by the Company at a discount, which is
being amortized by the Company over the life of the mortgage. The Company
expects to receive a yield to maturity of approximately 14.5%. The Company
estimates the fair value of the loan to approximate its face amount of
$8,387,263 at December 31, 1996. The loan is being carried on the balance sheet
at $5,732,445, the difference representing the remaining unamortized discount of
$2,654,818.
Cash and short term investments: The carrying amounts reported in the
balance sheet for these instruments approximate their fair values.
F-9
<PAGE>
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Investment in BRT Realty Trust: Since this investment is considered
"available-for- sale", it is reported in the balance sheet based upon quoted
market price.
Note and mortgages payable: The Company determined the estimated fair value
of its debt by discounting future cash payments at their effective rates of
interest, which approximate current market rates of interest for similar loans.
Accordingly, there is no material difference between their carrying amount and
fair value.
Redeemable convertible preferred stock: Based on the December 31, 1996
quoted market price per share of $16.625, the fair value of the Company's
redeemable convertible preferred stock is $13,445,901.
Accretion on Preferred Stock
The Company has Preferred Stock outstanding which is both redeemable and
convertible. The stock was initially recorded in the financial statements at its
fair value based upon the initial average trades on the American Stock Exchange.
The amount by which the redemption value exceeds the carrying value is being
accreted using the interest method over the life of the redemption period.
Stock Based Compensation
Effective for the year ended December 31, 1996, the Company adopted
Statement of Financial Accounting Standards No. 123, ("FASB 123"), Accounting
for Stock-Based Compensation. In accordance with the provisions of FASB 123, the
Company applies Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees, and related interpretations in accounting for its stock
option plans and accordingly, does not recognize compensation expense. During
1995 and 1996, no stock options were granted and accordingly the adoption of
FASB 123 had no effect on reported net earnings and earnings per share.
Earnings Per Common Share
Primary earnings per common share data is based upon the weighted average
number of common shares and assumed equivalent shares outstanding during the
year, after giving effect to the dividends and accretion relating to the
Company's Preferred Stock. The Preferred Stock is not considered a common stock
equivalent for the purpose of computing earnings per share because their assumed
conversion is anti- dilutive. The assumed exercise of outstanding share options,
using the treasury stock method, is not materially dilutive for the primary
F-10
<PAGE>
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
primary earnings per common share computation.
Fully diluted earnings per common share is based on an increase in the
number of common shares that would be outstanding assuming the exercise of
common share options. Since fully diluted earnings per share amounts are not
materially dilutive, such amounts are not presented.
Cash Equivalents
Cash equivalents consist of highly liquid investments with maturities of
three months or less when purchased.
Valuation Allowance on Real Estate Owned
During the year ended December 31, 1996, the Company adopted Statement of
Financial Accounting Standards No. 121 ("FASB 121"), Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
which requires the Company make a review of each real estate asset held for use
for which indicators of impairment are present, to determine whether the
carrying amount of the asset will be recovered. Recognition of impairment is
required if the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amount. Measurement is based upon the
fair market value of the asset. FASB 121 also requires that long-lived assets
that are expected to be disposed of be reported at the lower of carrying amount
or fair value less costs to sell.
NOTE 3 - REAL ESTATE PURCHASES (RELATED PARTY),MORTGAGES AND SENIOR SECURED NOTE
RECEIVABLE AND PRINCIPAL RELATED PARTY TRANSACTIONS
Real Estate Purchases
On January 19, 1995, the Company acquired from Gould Investors L.P.
("Gould") in a single transaction, sixteen net leased real estate properties
(including the reacquisition of thirteen retail locations net leased to Total
Petroleum and sold to Gould in December 1991 for an aggregate consideration of
$8,107,020) and one mortgage receivable. The properties are all net leased on a
long term basis to third parties with current expirations ranging from 2004 to
2051, and have certain tenant renewal rights. The consideration paid for the
F-11
<PAGE>
NOTE 3 - REAL ESTATE PURCHASES (RELATED PARTY),MORTGAGES AND SENIOR SECURED NOTE
RECEIVABLE AND PRINCIPAL RELATED PARTY TRANSACTIONS (Continued)
properties was comprised of 1) the extinguishment of a $6,850,000 mortgage loan
($33,145 and $685,000 were included in "Interest from related parties" in the
consolidated statement of income for the years ended December 31, 1995 and 1994,
respectively) which the Company held on thirteen of the acquired properties and
2) 1,030,000 restricted convertible preferred shares of BRT and 173,719
Beneficial Shares of BRT owned by the Company. The closing price of the BRT
Beneficial Shares on the New York Stock Exchange on January 19, 1995 (the date
of the transaction) was $3 5/8. The preferred shares did not trade publicly. The
Company's Board of Directors received, prior to and as a condition to
consummation of the transaction, valuation analyses on the sixteen properties
acquired and an opinion from an independent investment banker relating to the
fairness of the transaction. The Company recorded the assets acquired at the
carrying amount of the assets exchanged (plus transaction costs), resulting in a
reclassification from investments in BRT and mortgages receivable to real estate
investments, at cost.
In connection with the Total Petroleum lease agreement, the Company
deposited $2,000,000 with an independent escrow agent, which represents the
estimated maximum amount to remediate environmental problems discovered at
certain locations. The agreement limits the maximum payment to approximately
$350,000 per location. The escrow agent holds approximately $1,288,000 in escrow
as of December 1996, which the Company believes is adequate to cover any
additional environmental costs.
At December 31, 1996 and 1995 Gould owned 542,825 and 715,227 shares of the
common stock of the Company or 36.8% and 50.5% of the equity interest and 28.9%
and 39.3% of the voting rights, respectively.
At December 31, 1996 and 1995, the Company owned 30,048 shares of
Beneficial Interest of BRT, accounting for less than 1% of the total voting
power of BRT. For the years ended December 31, 1995 and 1994, the Company earned
$13,940 and $270,000, respectively, on its shares of BRT preferred stock which
was disposed of January 1995.
F-12
<PAGE>
NOTE 3 - REAL ESTATE PURCHASES (RELATED PARTY),MORTGAGES AND SENIOR SECURED NOTE
RECEIVABLE AND PRINCIPAL RELATED PARTY TRANSACTIONS (Continued)
Mortgages Receivable
Mortgages receivable at December 31, 1996 and 1995 consist of the following:
1996 1995
Affiliates
(i) Entity substantially owned by
Gould Investors L.P. (net of
unamortized discount of
$2,654,818 and $2,982,418) $ 5,732,445 $ 5,834,234
(ii) Entity substantially owned
by Gould Investors L.P. - 860,000
Non-affiliates
Other 316,588 341,907
------- -------
$ 6,049,033 $ 7,036,141
============ ============
(i) On July 30, 1993, as a result of a public auction, the Federal Deposit
Insurance Corporation sold to an entity related to the Company, for a
consideration of $19,000,300, a $23,000,000 first mortgage, providing for an
interest rate of 8% per annum, secured by a single tenant office building
located in Manhattan, New York. The office building which secures this mortgage
is owned by a partnership in which Gould is General Partner and in which Gould
owns substantially all of the partnership interests. Simultaneously with the
purchase, $13,181,000 was advanced by an unrelated party, $6,080,000 (which
includes closing costs) was advanced by the Company, and the mortgage was
severed into a first mortgage of $13,181,000 paying interest at 9 1/2% per annum
held by the unrelated party and a subordinate wrap mortgage of $9,819,000 held
by the Company. Both the first mortgage and the wrap mortgage mature in 2005 at
which time the first mortgage will be fully amortized and the wrap mortgage will
have a principal balance of approximately $4,000,000. The Company receives
monthly principal and interest payments of $79,318 and at December 31, 1996 and
1995 its principal balance had been reduced to approximately $8,387,000 and
$8,817,000, respectively. The original discount of $3,738,400 is being amortized
by the Company over the life of the mortgage. The Company expects to receive a
yield to maturity of approximately 14.5%. Interest income, including
amortization of the discount of $327,600, $319,500 and $310,200, amounted to
$848,200, $861,750 and $873,459 for the years ended 1996, 1995 and 1994,
respectively.
F-13
<PAGE>
NOTE 3 - REAL ESTATE PURCHASES (RELATED PARTY),MORTGAGES AND SENIOR SECURED NOTE
RECEIVABLE AND PRINCIPAL RELATED PARTY TRANSACTIONS (Continued)
The building which secures the first mortgage and the wrap mortgage is
leased in its entirety to the City of New York. The lease expires in 2005 with
an option to renew for an additional five years and provides the City with a
limited right of termination. The first mortgage and the wrap mortgage are
nonrecourse to the owner of the building.
(ii) In January 1992, the Company made a first mortgage loan to a
partnership in which Gould is General Partner and in which Gould owns
substantially all of the partnership interests, in the amount of $1,200,000. The
mortgage was paid in full during March, 1996. The mortgage note bore interest at
11% per annum, through January 31, 1994, 10% through January 31, 1995 and 11%
through March 1996 with minimum amortization of $5,000 per month. The interest
income amounted to $22,343, $96,863 and $99,859 for the years ended 1996, 1995
and 1994, respectively.
The transactions listed above in items (i) and (ii) were approved by the
independent directors of the Company. The directors who are affiliated with the
Company and Gould abstained from the voting on these transactions.
Annual maturities of mortgages receivable during the next five years and
thereafter are summarized as follows:
Year Ending December 31,
1997 $ 724,259
1998 484,097
1999 508,251
2000 532,820
2001 555,356
2002 and thereafter 5,899,068
---- ---------
Total 8,703,851
Less: Unamortized discount 2,654,818
---------
Net carrying amount - mortgages receivable $ 6,049,033
============
F-14
<PAGE>
NOTE 3 - REAL ESTATE PURCHASES (RELATED PARTY),MORTGAGES AND SENIOR SECURED NOTE
RECEIVABLE AND PRINCIPAL RELATED PARTY TRANSACTIONS (Continued)
Senior Secured Note Receivable
On February 26, 1993 the Company purchased from an unrelated entity 28.9%
of a 16.67% portion of an indebtedness due to various institutions by BRT. The
Company paid $3,215,142 for a $4,626,720 share of the principal amount of such
indebtedness. The discount of $1,411,578 was amortized by the Company as
principal payments were received. The principal earned interest at prime plus
one percent. At December 31, 1996 and 1995 the Company's portion of the
indebtedness has been reduced to zero and $760,638, respectively, and the
carrying amount net of unamortized discount amounted to $528,575 at December 31,
1995. The purchase of the portion of this indebtedness was approved by the
independent directors of the Company. The directors who are affiliated with the
Company and BRT abstained from the voting on this transaction.
NOTE 4 - REAL ESTATE INVESTMENTS AND MINIMUM FUTURE RENTALS
The rental properties owned at December 31, 1996 are leased under
noncancellable operating leases to corporate tenants with current expirations
ranging from 1999 to 2051, with certain tenant renewal rights. All lease
agreements are net lease arrangements which require the tenant to pay not only
rent but all the expenses of the leased property including maintenance, taxes,
utilities and insurance. Certain lease agreements provide for periodic rental
increases and others provide for increases based on the consumer price index.
Year Ending
December 31,
1997 $ 5,007,052
1998 5,061,293
1999 5,136,141
2000 5,057,352
2001 5,091,661
F-15
<PAGE>
NOTE 4 - REAL ESTATE INVESTMENTS AND MINIMUM FUTURE RENTALS
(Continued)
Included in the minimum future rentals is a property owned in fee by an
unrelated third party. The Company pays annual fixed leasehold rent of $288,833
through April 2010 and has a right to extend the lease for up to three 15 year
and one 14 year renewal options.
At December 31, 1996, the Company has recorded an unbilled rent receivable
aggregating $304,828, representing rent reported on a straight-line basis in
excess of rental payments required under the initial term of the respective
leases. This amount is to be billed and received pursuant to the lease terms
over the next twenty years. The minimum future rentals presented above include
amounts applicable to the repayment of these unbilled rent receivables.
For the year ended December 31, 1996, the following assets generated
revenues for the Company in amounts exceeding 10% of the Company's total
revenues:
For the Year Ended December 31, 1996
Description Revenue % of Total Revenues
Mortgage receivable-related party(a) $848,200 15.39%
Total Petroleum properties (b) 1,092,714 19.83
(a) See note 3 -- Mortgages Receivable (i) for other information.
(b) Total Petroleum, an operator of combination gas station and retail
convenience stores, is a tenant in thirteen of the Company's
properties, all located in the State of Michigan.
NOTE 5 - PROVISION FOR VALUATION ADJUSTMENT
At December 31, 1996 the Company owned eleven properties leased to a retail
chain of stores. The initial term with respect to the leases expired on December
31, 1996. The tenant extended the leases on four of the eleven properties, two
have been leased to another entity, two were under contract of sale on December
31, 1996 (one sale closed in January, 1997), and three were vacant (and are
still vacant). The Company is actively seeking a buyer or tenant for the three
vacant properties.
F-16
<PAGE>
NOTE 5 - PROVISION FOR VALUATION ADJUSTMENT (Continued)
The Company has recorded a provision for valuation adjustment on the two
properties under contract of sale based on the sales prices. In addition, the
Company has determined that the estimated fair value of the three vacant
properties are lower than their carrying amounts and thus, the Company has
provided a provision for the differences. The total provision taken on these
five properties during the year ended December 31,1996 which amounts to $659,000
has been presented as a reduction to real estate investments on the balance
sheet.
NOTE 6 - DEBT OBLIGATIONS
Debt obligations consist of the following:
In January 1997, the Company closed on the financing of one of its
properties in the amount of $1,600,000. After giving effect to such financing,
scheduled principal repayments during the next five years and thereafter are as
follows:
Year Ending
December 31,
1997 $ 264,187
1998 293,956
1999 4,243,096
2000 2,970,245
2001 211,266
2002 and thereafter 10,464,171
----------
Total $ 18,446,921
==============
Note Payable - Bank: On March 1, 1996 the Company entered into a revolving
credit agreement ("Credit Agreement") with Bank Leumi Trust Company of New York
("Bank Leumi"). Borrowings under the Credit Agreement are being used to provide
the Company with funds to acquire properties. The Credit Agreement will mature
February 28, 1999 with a right for the Company to extend the Credit Agreement
until February 29, 2000. Bank Leumi has agreed to advance up to
F-17
<PAGE>
NOTE 6 - DEBT OBLIGATIONS (Continued)
$5,000,000 on a revolving basis and to a total $15,000,000 facility
(including the $5,000,000) on a pro rata participating basis. The Company pays
interest under the Credit Agreement at the rate of prime plus 1/2% on funds
borrowed on an interest only basis, except that the net proceeds of certain
events (e.g. sale of property, financing of properties) must be applied to
reduce the loan.
At December 31, 1996, $3,900,000 was outstanding under the Credit Agreement.
NOTE 7 - REDEEMABLE CONVERTIBLE PREFERRED STOCK
The Preferred Stock has the following rights, qualifications and
conditions: (i) a cumulative dividend preference of $1.60 per share per annum;
(ii) a liquidation preference of $16.50 per share; (iii) a right to convert each
share of Preferred Stock at any time into .825 of a share of Common Stock; (iv)
redeemable by the Company after July 1, 1996 at $16.90 per share and at premiums
declining to $16.50 on July 1, 1998 and thereafter; (v) an option by each
preferred holder to put the Preferred Stock to the Company at $16.50 per share
for the period commencing July 1, 1999 and ending on September 28, 1999; and
(vi) one-half vote per share.
NOTE 8 - MANAGEMENT AGREEMENT AND OTHER RELATED PARTY TRANSACTIONS
On January 1,1995, the Company became self-managed incurring payroll and payroll
related costs for the Company's President of $172,640 and $137,460 for the years
ended December 31, 1996 and 1995, respectively. From July 1989 through December
31, 1994 the Company was managed by an entitiy ("Manager") controlled by the
Chairman and Vice Chairman of the Company's Board of Directors,and its President
all of whom are officers of the managing general partner of Gould.
F-18
<PAGE>
NOTE 8 - MANAGEMENT AGREEMENT AND OTHER RELATED PARTY
TRANSACTIONS (Continued)
In addition to the Manager's fee which amounted to $103,086 during the year
ended December 31, 1994, the Company paid $42,500 to the Manager for services
rendered in connection with obtaining mortgage financing on a property the
Company purchased in June 1994.
Gould charged the Company $175,969, $210,357 and $167,727 during the years
ended December 31, 1996, 1995, and 1994, respectively, for allocated general and
administrative expenses and payroll based on time incurred by various employees.
A company controlled by certain directors and officers of the Company was
paid mortgage brokerage fees of $24,134 during the year ended December 31, 1995.
See Note 3 for other related party transaction information.
NOTE 9 - STOCK OPTIONS
On December 6, 1996, the directors of the Company adopted the 1996 Stock
Option Plan (Incentive/Nonstatutory Stock Option Plan), whereby a maximum of
125,000 shares of common stock of the Company are reserved for issuance to
employees, officers, directors, consultants and advisors to the Company.
Incentive stock options are granted at per share amounts at least equal to their
fair market value at the date of grant, whereas for nonstatutory stock options
the exercise price may be any amount determined by the Board of Directors. The
options will expire no later than ten years after the date on which the option
was granted. No options have been granted under this plan.
On November 17, 1989, the directors of the Company granted, under the 1989
Stock Option Plan, options to purchase a total of 110,000 shares of Common Stock
at $11 per share to a number of the Company's officers and employees. In 1994,
one officer exercised 20,000 of these options and the balance expired. On June
6, 1991, the directors of the Company granted to each of the three independent
directors of the Company an option to purchase 5,000 shares of Common Stock at
$9.125 per share. During 1995 and 1996, two directors exercised 10,000 of these
options and during 1996 the remaining 5,000 options expired. On March 4, 1993,
the Board of Directors granted, also under the 1989 Stock Option Plan, options
to purchase a total of 100,000 common shares at $9.125 per share to a number of
officers and employees of the Company.
F-19
<PAGE>
NOTE 9 - STOCK OPTIONS (Continued)
Stock options under the 1989 Stock Option Plan are granted at per share
amounts at least equal to their fair market value at the date of grant. The
options are cumulatively exercisable at a rate of 25% per annum and expire five
years after the date of grant.
A maximum of 225,000 common shares were reserved for issuance under the
1989 Stock Option Plan, of which 95,000 are available for grant at December 31,
1996.
Changes in the number of common shares under all option arrangements are
summarized as follows:
<TABLE>
Year Ended December 31,
1996 1995 1994
<C> <C> <C>
Outstanding at beginning of period 57,500 74,500 225,000
Granted - - -
Option prices per share granted - - -
Exercisable at end of period 29,000 32,500 20,750
Exercised 23,500 17,000 60,500
Expired 5,000 - -
Outstanding at end of period 29,000 57,500 74,500
Option prices per share outstanding $9.125 $9.125 $9.125
</TABLE>
NOTE 10 - DISTRIBUTION REINVESTMENT PLAN
In May, 1996, the Company implemented a Distribution Reinvestment Plan (the
"Plan"). The Plan provides owners of record of 100 shares or more of its common
and/or preferred stock the opportunity to reinvest cash distributions in
newly-issued common stock of the Company, at a five percent discount from the
market price. No open market purchases are made under the Plan. On July 2, 1996,
October 2, 1996 and January 2, 1997 the Company issued 18,859, 15,164 and 15,859
common shares, respectively, under the Plan.
F-20
<PAGE>
NOTE 11 - QUARTERLY FINANCIAL DATA (UNAUDITED):
<TABLE>
<CAPTION>
Quarter Ended
Total
March 31 June 30 September 30 December 31 For Year
(In thousands, except per share data)
1996
<C> <C> <C> <C> <C>
Revenues (b) $1,094 $1,288 $1,594 $1,536 $5,512
Net income (a) (b) 577 368 791 438 2,174
Net income applicable to 215 6 429 76 726
common stockholders (b)
Net income per common share (b) 0.15 - 0.29 0.05 .50 (c)
(a) Net income reflects provision for valuation adjustment of real estate
amounting to $314,000, $145,000 and $200,000 for the quarters ending June 30,
1996, September 30, 1996 and December 31, 1996, respectively.
(b) Includes approximately $41,000, $103,000 and $88,000 (or $.03, $.07 and
$.06 per common share) of income from accelerated payments on the Senior Secured
Note Receivable (see Note 3) for the quarters ending March 31, 1996, June 30,
1996 and September 30, 1996, respectively.
(c) Calculated on weighted average shares outstanding during the year.
Quarter Ended
Total
March 31 June 30 September 30 December 31 For Year
(In thousands, except per share data)
1995
<C> <C> <C> <C> <C>
Revenues (d) $1,217 $1,178 $1,367 $1,129 $4,891
Net income (d) 742 740 907 707 3,096
Net income applicable to 380 378 545 347 1,650
common stockholders (d)
Net income per common share (d) 0.27 0.27 0.39 0.24 1.17 (e)
(d) Includes approximately $156,000, $118,000, $315,000 and $105,000 (or
$.11, $.08, $.22 and $.07 per common share) of income from accelerated principal
payments on the Senior Secured Note Receivable (see Note 3) for the quarters
ending March 31, 1995, June 30, 1995, September 30, 1995 and December 31, 1995,
respectively.
(e) Calculated on weighted average shares outstanding during the year.
</TABLE>
F-21
<PAGE>
<TABLE>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
<CAPTION>
Schedule III - Consolidated Real Estate and Accumulated Depreciation
December 31, 1996
Gross Amount at Which Carried At
Initial Cost to Company December 31, 1996
Encumbrances Land Buildings Land Buildings Total
Free Standing
Retail Locations:
<C> <C> <C> <C> <C> <C>
Ft. Myers, FL $3,250,000 $1,013,915 $4,055,659 $1,013,915 $4,055,659 $5,069,574
Denver, CO 2,706,872 811,896 3,247,582 811,896 3,247,582 4,059,478
Atlanta, GA 2,392,916 802,721 3,210,886 802,721 3,210,886 4,013,607
Lewisville, TX (b) - 685,737 2,742,946 685,737 2,742,946 3,428,683
Miscellaneous 2,380,009 5,437,357 12,720,127 5,192,678 12,305,806 17,498,484
Apartment Building:
New York, NY 4,122,874 1,109,836 4,439,346 1,109,836 4,439,346 5,549,182
Office/Flex:
Hauppauge, NY 1,994,250 671,582 2,697,646 671,582 2,697,646 3,369,228
Land Under
Improvements:
Miscellaneous - 752,225 - 752,225 - 752,225
Industrial:
Miami, FL - - 995,446 - 995,446 995,446
---------- ---------- ---------- ---------- ---------- ----------
$16,846,921 $11,285,269 $34,109,638 $11,040,590 $33,695,317 $44,735,907
=========== =========== =========== =========== =========== ===========
Life on Which
Depreciation
Latest Income
Statement
Accumulated Date Of Date Computed
Depreciation Construction Acquired (Years)
Free Standing
Retail Locations:
<C> <C> <C> <C>
Ft. Myers, FL $12,674 1996 November 7, 1996 40
Denver, CO 57,509 1995 April 9, 1996 40
Atlanta, GA 30,102 1994 August 14, 1996 40
Lewisville, TX (b) 14,286 1996 October 11, 1996 40
Miscellaneous 1,242,303 Various Various
Apartment Building:
New York, NY 410,304 1910 June 14, 1994 27.5
Office/Flex:
Hauppauge, NY 30,781 1982 July 16, 1996 40
Land Under
Improvements:
Miscellaneous - Various Various -
Industrial:
Miami, FL 48,735 1967 January 19, 1995 40
---------
$1,846,694
==========
</TABLE>
F-22
<PAGE>
<TABLE>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
<CAPTION>
NOTES TO SCHEDULE III - CONSOLIDATED REAL ESTATE
AND ACCUMULATED DEPRECIATION
(a) Reconciliation of "Real Estate and Accumulated Depreciation"
Year Ended December 31,
1996 1995 1994
Investment in real estate:
<C> <C> <C>
Balance, beginning of year $ 25,454,336 $ 11,750,268 $ 6,201,086
Addition - land and buildings 19,940,571 13,704,068 5,549,182
Less valuation allowance (d) (659,000) - -
----------- ---------- ----------
Balance, end of year $ 44,735,907 $ 25,454,336 $11,750,268
============ ============ ===========
Accumulated depreciation:
Balance, beginning of year $ 1,200,571 $ 753,734 $ 573,177
Addition - depreciation 646,123 446,837 180,557
------- ------- -------
Balance, end of year $ 1,846,694 $ 1,200,571 $ 753,734
============ ============ =============
</TABLE>
(b) In January 1997, the Company closed on the financing on this property
in the amount of $1,600,000.
(c) The aggregate cost of the properties is the same for federal income tax
purposes.
(d) During the year ended December 31, 1996, the Company took a provision
for valuation adjustment of real estate totaling $659,000. See Note 5 to the
consolidated financial statements for other information.
F-23
<PAGE>
<TABLE>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
<CAPTION>
Schedule IV - Mortgage Loans on Real Estate
December 31, 1996
Carrying
Description Number Maturity Face Amount Amount of
of Loans Interest Rate Date Periodic Payment Terms of Mortgage Mortgage
First mortgage loans:
<C> <C> <C> <C> <C> <C>
Land and building/retail 1 9.75% Month to $3,550 monthly allocated to $263,798 $263,798
Bad Axe, MI Month interest and principal.
Land and building/office 1 14.5%(b) Feb-05 $79,318 monthly allocated 8,387,263 (c) 5,732,445
New York, NY to interest and principal,
balance of $4,073,525 due
at maturity.
Second mortgage loan:
Land and building/commercial 1 10.25% Oct-01 $1,158 monthly allocated to 52,790 52,790
- ------ ------
Seattle, WA interest and principal, self-
liquidates by maturity
Total 3 $8,703,851 $6,049,033
= ========== ==========
</TABLE>
F-24
<PAGE>
<TABLE>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
<CAPTION>
Schedule IV - Mortgage Loans on Real Estate
December 31, 1996
Notes to the Schedule:
(a) The following summary reconciles mortgages receivable at their carrying
values:
1996 1995
<C> <C>
Balance at beginning of year $ 7,036,141 $ 13,988,031
Additions:
New mortgage loan (d) - 67,498
Amortization of discount 327,600 319,500
Deductions:
Cancellation of mortgage receivable
from Gould Investors L.P. (e) - 6,850,000
Collections of principal 1,314,708 488,888
--------- -------
$ 6,049,033 $ 7,036,141
============ ===========
(b) Represents the expected yield to maturity which includes amortization
of discount and interest collections.
(c) The face amount of mortgage is before an unamortized discount of
$2,654,818. Mortgage was pledged as collateral to line of credit.
(d) Acquired mortgage when Company acquired fee title to the land. See Note
3 to consolidated financial statements for other information.
(e) Mortgage was cancelled when the Company acquired fee title to the
properties. See Note 3 to consolidated financial statements for other
information.
</TABLE>
F-25
<PAGE>
EXHIBIT 10.3
BARNES & NOBLE BOOKSELLERS
LEASE AGREEMENT
DATED: November 7, 1996
TENANT: BARNES & NOBLE SUPERSTORES, INC.
LANDLORD: OLP FT. MYERS, INC.
PREMISES: BARNES & NOBLE BOOKSELLERS
13751 S. Tamiami Trail
Ft. Myers, Lee County, Florida
<PAGE>
TABLE OF CONTENTS
PAGE
1. DEMISE AND PREMISES.............................................-1-
2. TERM OF LEASE, HOLDOVER AND OPTIONS.............................-1-
3. RENT AND OTHER SUMS.............................................-2-
4. CONSTRUCTION OF THE PREMISES....................................-3-
5. DELIVERY AND ACCEPTANCE OF THE PREMISES.........................-3-
6. COVENANT OF TITLE AND QUIET ENJOYMENT...........................-4-
7. USE OF PREMISES.................................................-4-
8. REAL ESTATE TAXES...............................................-5-
9. MAINTENANCE BY LANDLORD.........................................-6-
10. MAINTENANCE BY TENANT...........................................-6-
11. CONSTRUCTION, ALTERATIONS, ADDITIONS AND
IMPROVEMENTS....................................................-7-
12. SIGNS...........................................................-9-
13. LANDLORD'S RIGHT OF ENTRY.......................................-9-
14. UTILITIES.......................................................-10-
15. PARKING.........................................................-10-
16. VISIBILITY AND ACCESS...........................................-10-
17. ASSIGNMENT AND SUBLEASING.......................................-11-
18. INSURANCE.......................................................-11-
19. INDEMNITY.......................................................-13-
20. RELEASE AND WAIVER OF SUBROGATION...............................-14-
-i-
<PAGE>
21. FIRE AND CASUALTY DAMAGE........................................-14-
22. CONDEMNATION....................................................-16-
23. DEFAULT.........................................................-17-
24. HAZARDOUS MATERIALS.............................................-21-
25. SUBORDINATION AND NON-DISTURBANCE...............................-23-
26. NOTICES............................ ............................-24-
27. MEMORANDUM OF LEASE.............................................-25-
28. LIENS...........................................................-25-
29. (INTENTIONALLY OMITTED).........................................-25-
30. FORCE MAJEURE...................................................-25-
31. BROKERS.........................................................-25-
32. LANDLORD'S SUBORDINATION........................................-26-
33. ESTOPPEL CERTIFICATES...........................................-26-
34. INTENTIONALLY DELETED...........................................-26-
35. MISCELLANEOUS...................................................-26-
36. EXHIBITS........................................................-28-
37. GUARANTY OF LEASE...............................................-29-
EXHIBIT A - Legal Description
EXHIBIT B - Site Plan of the Premises
EXHIBIT C - (Intentionally Omitted)
EXHIBIT D - Tenant's Final Plans
EXHIBIT E - Tenant's Work Letter Regarding Tenant's Improvements
EXHIBIT F - Subordination, Non-Disturbance and Attornment Agreement
EXHIBIT G - Memorandum of Lease
EXHIBIT H - Guaranty of Lease
<PAGE>
-ii-
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "Lease") is made and entered into by and between
OLP FT. MYERS, INC., a Florida corporation ("Landlord"), whose address is 60
Cutter Mill Road, Suite 303, Great Neck, New York 11021, and whose Federal
taxpayer identification number is 11-3335638, and BARNES & NOBLE SUPERSTORES,
INC., a Delaware corporation ("Tenant"), whose Federal taxpayer identification
number is 74-2225928. The Effective Date of the Lease is the date of last
execution (as defined in Paragraph below) and is hereby established as November
7, 1996.
1. DEMISE AND PREMISES 1.1 Landlord, in consideration of the rents
hereinafter reserved and agreed to be paid by Tenant, hereby leases to Tenant
and Tenant hereby leases from Landlord the real property situated within the
City of Ft. Myers, County of Lee, State of Florida, containing land area of
approximately 31,315 square feet (the "Land"), together with all improvements
thereon, including the building constructed thereon (the "Building") containing
approximately 29,993 square feet of leasable area, and the exclusive use and
benefit of all of Landlord's appurtenant rights, privileges and easements.
1.2 The Land and the Building and all other improvements to be constructed
on the Land pursuant hereto are collectively referred to as the "Premises." The
Land is more particularly described in Exhibit A, and the proposed Building
footprint is outlined on the site plan of the Premises attached as Exhibit B.
2. TERM OF LEASE, HOLDOVER AND OPTIONS
2.1 The term of this Lease shall commence on the Effective Date set forth
above (the "Commencement Date") and shall end on the last day of the twentieth
(20th) Lease Year (as defined in Paragraph ), plus, if applicable, the number of
additional days required such that the expiration of the term of this Lease,
including any extensions thereof, shall not occur during the months of September
through and including January. The term of this Lease may be extended as
provided in Paragraph 2.3 below.
2.2 Should Tenant continue to occupy the Premises, or any part thereof,
after the expiration of the term of this Lease, unless otherwise agreed in
writing, such occupancy shall constitute and be construed as a tenancy from
month to month on the same terms and conditions as otherwise set forth in this
Lease, except that the Fixed Rent payable during such tenancy shall be increased
to 125% times the amount thereof payable at the expiration of the term of this
Lease, and either Landlord or Tenant may terminate such tenancy upon thirty (30)
days written notice to the other.
2.3 Tenant shall have the right, privilege and option to extend the term of
this Lease for four (4) successive periods of five (5) years each under the same
terms and conditions of this Lease then in effect, except that the rental paid
for any option period shall be the amount indicated in Paragraph 3.2 below.
Tenant, if it elects to exercise any option, shall do so
<PAGE>
giving Landlord written notice at least one hundred eighty (180) days prior
to the expiration of the then existing term of this Lease. Notwithstanding the
foregoing, in the event Tenant does not exercise any of its extension options in
the time period or in the manner provided in this Paragraph 2.3, each such
option shall nevertheless continue in full force and effect and shall not lapse
until fifteen (15) days after Landlord has notified Tenant in writing to inquire
whether Tenant desires to exercise such option.
3. RENT AND OTHER SUMS
3.1 Annualized Fixed Rent: Tenant agrees and covenants to pay Landlord,
commencing on the date specified in Paragraph 3.3 below, an annual fixed rent in
the sums set forth in Paragraph 3.2 below ("Fixed Rent"). Fixed Rent shall be
payable in advance, without demand, on the first day of each calendar month in
equal monthly installments and shall not be increased, abated or diminished
except as set forth herein.
3.2 Fixed Rent shall be determined as follows:
(a) Annual Fixed Rent for the first (1st) through fifth (5th) Lease Years
shall equal FOUR HUNDRED SIXTY-SEVEN THOUSAND AND NO/100 DOLLARS ($467,000.00)
per Lease Year.
(b) The annual Fixed Rent for the sixth (6th) through tenth
(10th) Lease Years shall equal FIVE HUNDRED THIRTEEN THOUSAND AND NO/100 DOLLARS
($513,000.00) per Lease Year.
(c) The annual Fixed Rent for the eleventh (11th) through fifteenth (15th)
Lease Years shall equal FIVE HUNDRED FIFTY-NINE THOUSAND AND NO/100 DOLLARS
($559,000.00) per Lease Year.
(d) The annual Fixed Rent for the sixteenth (16th) through twentieth (20th)
Lease Years shall equal SIX HUNDRED FIVE THOUSAND AND NO/100 DOLLARS
($605,000.00) per Lease Year.
(e) The annual Fixed Rent for the twenty-first (21st) through
twenty-fifth (25th) Lease Years (i.e., the first option period) shall equal
SIX HUNDRED FIFTY-ONE THOUSAND AND NO/100 DOLLARS ($651,000.00) per
Lease Year.
(f) The annual Fixed Rent for the twenty-sixth (26th) through
thirtieth (30th) Lease Years (i.e., the second option period) shall equal SIX
HUNDRED NINETY-SEVEN THOUSAND AND NO/100 DOLLARS ($697,000.00) per Lease Year.
(g) The annual Fixed Rent for the thirty-first (31st) through
thirty-fifth (35th) Lease Years (i.e., the third option period) shall
equal SEVEN HUNDRED FORTY-THREE THOUSAND AND NO/100 DOLLARS ($743,000.00) per
Lease Year.
-2-
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(h) The annual Fixed Rent for the thirty-sixth (36th) through fortieth
(40th) Lease Years (i.e., the fourth option period) shall equal SEVEN HUNDRED
EIGHTY-NINE THOUSAND AND NO/100 DOLLARS ($789,000.00) per Lease Year.
3.3 Tenant's obligation to pay Fixed Rent and other charges hereunder shall
commence on the Commencement Date. If the Commencement Date is not the first day
of a calendar month, or if Fixed Rent is increased during any month, the Fixed
Rent or increased Fixed Rent amount, as applicable, for any such partial month
shall be prorated, and shall be payable with the next monthly installment of
Fixed Rent due hereunder.
3.4 Each of the foregoing amounts of Fixed Rent and other sums shall be
paid to Landlord without demand and without deduction, set-off, claim or
counterclaim of any nature whatsoever which Tenant may have or allege to have
against Landlord, except as specifically provided hereunder, and all such
payments shall, upon receipt by Landlord, be and remain the sole and absolute
property of Landlord. All such Rent and other sums shall be paid to Landlord in
legal tender of the United States at the address to which notices to Landlord
are to be given or to such other party or to such other address as Landlord may
designate from time to time by written notice to Tenant. If Landlord shall at
any time accept any such Fixed Rent or other sums after the same shall become
due and payable, such acceptance shall not excuse a delay upon subsequent
occasions, or constitute or be construed as a waiver of any of Landlord's rights
hereunder. If Tenant fails to make any payment of Fixed Rent or any other sums
or amounts to be paid by Tenant hereunder on or before ten (10) days following
Tenant's receipt of written notice that the same is past due, such past due
payment shall bear interest at the rate set forth in Paragraph 23.6 hereof, from
the date such payment became due to the date of payment thereof by Tenant. Such
interest shall constitute additional Rent and shall be due and payable with the
next installment of the Fixed Rent due hereunder.
3.5 A "Lease Year" is defined as the twelve (12) full calendar months
following the Commencement Date plus any partial calendar month in which the
Commencement Date occurs, and each period of twelve (12) full calendar months
thereafter.
4. CONSTRUCTION OF THE PREMISES Tenant has, at Tenant's sole expense and in
substantial compliance with the terms of this Lease, all applicable codes,
statutes, ordinances, rules, regulations, orders and requirements regulating the
use by Tenant of the Premises, including the Occupational Health and Safety Act
and the Americans with Disabilities Act and recorded restrictions affecting the
Premises ("Legal Requirements"), completely constructed the Premises and all
required improvements thereto (the "Tenant's Improvements") in substantial
accordance with the plans and specifications attached as Exhibit D ("Tenant's
Final Plans") and the terms and conditions set forth in Exhibit E ("Tenant's
Work Letter").
5. DELIVERY AND ACCEPTANCE OF THE PREMISES
5.1 Tenant acknowledges that neither Landlord nor any agent of Landlord has
made any representation or warranty with respect to the Land or with respect to
the suitability fitness thereof for the conduct of Tenant's business or for any
<PAGE>
other purpose and Tenant accepts the Premises in an "as is" condition. Tenant
acknowledges that it has received and approved copies of all property
title documents described in the title evidence provided to Landlord. Tenant
shall comply with all recorded restrictions affecting the Premises and the
Building as of the Commencement Date or, subject to Tenant's consent pursuant
hereto, which shall not unreasonably be withheld or delayed, which are recorded
during the Term.
5.2 Tenant has opened for business at the Premises as of the Commencement
Date.
6. COVENANT OF TITLE AND QUIET ENJOYMENT
Landlord is vested with fee simple title to the Premises and has full right
and lawful authority to lease the Premises to Tenant pursuant to the terms
hereof. Landlord covenants with Tenant to keep Tenant in quiet enjoyment and
possession of the Premises during the term of this Lease, provided Tenant is not
in default under this Lease. Landlord shall not, unless compelled to do so by
applicable governmental authorities or requirements, take or consent to any
action which would adversely impact the zoning classification, the vehicular and
pedestrian ingress and egress between the Premises and adjacent rights-of-way,
and the provision of utilities to the Premises, as all of the foregoing exist as
of the Commencement Date.
7. USE OF PREMISES
7.1 Tenant shall initially use the Premises for the purpose of the display
and retail sale or rental of books, books on tape, books on CD-ROM, books on
other recorded media, magazines, periodicals, newspapers, recorded music, video
tapes, video games, computer software, and other merchandise typically sold or
rented in Tenant's other Florida stores. Thereafter, subject to applicable law
and to the provisions of Paragraph 7.2 below, Tenant may use the Premises for
any lawful retail use. Tenant may also operate within the Premises or grant a
concession or sublease for a "coffee bar" or similar operation providing its
customers with coffee, tea, pastries and related items, either for sale or
complimentary at Tenant's sole option.
7.2 Notwithstanding the provisions of Paragraph 7.1, the Premises shall not
be used for any of the following purposes: (i) any bowling alley; (ii) any
nightclub, bar (except in connection with a restaurant use) or discotheque;
(iii) any second-hand or surplus store; (iv) any mobile home park or trailer
court; (v) any dumping, disposing, incineration or reduction of garbage
(exclusive of appropriately screened dumpsters and/or recycling bins located in
the rear of any building); (vi) any fire sale, bankruptcy sale (unless pursuant
to a court order) or auction house operation; (vii) any gas station; (viii) any
central laundry or dry cleaning plant or laundromat (except that this
prohibition shall not be applicable to on-site services provided solely for
pick-up and delivery by the ultimate consumer, including nominal supporting
facilities; (ix) any automobile, truck, trailer or RV sales, leasing, display or
repair; (x) any skating rink; (xi) any veterinary hospital (except in connection
with a pet shop) or animal raising facilities; (xii) any mortuary; (xiii) any
store in which a material portion of the inventory is not available for sale or
rental to children under 18 years of age because such inventory explicitly deals
with, relates to, or depicts human sexuality, or in which any of the inventory
constitutes drug paraphernalia of the type associated with or sold by so-called
"head shops"; (xiv) a factory or manufacturing facility; (xv) any industrial
<PAGE>
usage such as a warehouse, processing or rendering plant; (xvi) any "flea
market"; (xvii) any off-track betting operation; (xviii) any massage parlor or
carnival; (xix) any beauty or barber school; or (xx) any use which is prohibited
under any restrictive covenants or other title exceptions affecting the
Premises.
7.3 Tenant, at its expense, shall (a) promptly comply with all governmental
requirements, whether or not compliance therewith shall require structural
changes in the Premises; (b) procure and maintain all permits, licenses and
other authorizations required for the use of the Premises or any part thereof
then being made and for the lawful and proper installation, operation and
maintenance of all equipment and appliances necessary or appropriate for the
operation and maintenance of the Premises; and (c) comply with all restrictive
covenants or other title exceptions affecting the Premises. Further, in addition
to Tenant's other payment obligations under this Lease, Tenant shall pay all
sums charged, levied or assessed under any restrictive covenants or other title
exceptions affecting the Premises promptly as the same become due and shall
furnish Landlord evidence of payment thereof.
8. REAL ESTATE TAXES
8.1 For purposes of this Article 8, "Real Property Taxes and Assessments"
shall mean only the taxes and assessments imposed by municipal, county, state
and district governmental authorities (as distinguished from federal
governmental authorities) against the owners of real property, solely as a
result of and relating to the ownership or use of the subject property
separately from any other property of the owner of the subject property. Real
property taxes and assessments shall, if necessary, be prorated based on a three
hundred sixty-five (365) day year to take into account any partial tax year in
which the Commencement Date and the expiration of the Lease term occur. Nothing
contained in this Lease, however, shall be deemed or construed to include within
real property taxes and assessments: (i) any transfer, documentary or stamp tax;
(ii) any tax upon the income, profits or business of Landlord; (iii) any
personal property taxes, capital levy, or franchise taxes which are imposed on
any property other than the Premises; or (iv) payroll taxes, inheritance or
estate taxes even though such taxes may become a lien against the Premises, but
shall include any sales or other such tax that may be imposed on the Fixed Rent
itself or any additional rent.
8.2 Subject to the provisions of Paragraph 8.6 below, Tenant shall pay, as
additional rent, any and all real property taxes, sales taxes on the rents, and
assessments relating to the Premises during the term of this Lease. Tenant shall
make any such payment on or before the later of (i) the due date thereof or (ii)
thirty (30) days after Landlord provides Tenant with a copy of the tax bill
therefor (if sent directly to Landlord by the taxing authority). Landlord shall
be responsible for any interest or penalties caused by its delay in forwarding
any tax bills to Tenant. The Premises shall be separately assessed and a tax
bill issued to Tenant separate from any other property if permitted under
applicable law.
8.3 If any general or special assessment is assessed against the Premises,
Landlord shall elect to pay the assessment in installments over the longest
period of time allowed by applicable law, and only those installments (or
partial installments) attributable to the term of this Lease shall be considered
<PAGE>
in determining Tenant's tax liability for such assessment. Notwithstanding
the foregoing, Tenant shall be obligated to pay, over the Lease term, any and
all assessments or similar charges for special improvements heretofore installed
or installed in connection with the initial development of the Premises pursuant
to the Tenant's Work Letter, such as the widening of the exterior roads and the
installation and/or hook up to sewer and sewer lines, sanitary and storm
drainage systems and other utility lines and systems (whether public or
private), unless and except to the extent that payment of the same are included
in the purchase price or other amounts paid by Landlord for the acquisition,
development and construction of the Premises.
8.4 Landlord shall immediately pay over to Tenant any real property tax and
assessment refunds or rebates (net of collection costs therefor) paid to
Landlord and relating to taxes and assessments paid by Tenant and attributable
to the term of this Lease.
8.5 Landlord shall provide Tenant with a copy of any increased tax
assessment within fifteen (15) days of its receipt. Tenant shall have the right
to contest any assessment or the validity of any tax. Tenant agrees to indemnify
Landlord and hold Landlord harmless from all out of pocket costs and expenses
arising out of any contest made by Tenant.
8.6 Notwithstanding the provisions of this Article 8, if the Premises are
sold by Landlord to a bona fide purchaser for value within the first five (5)
years of the term of this Lease and such sale has resulted in an increase in ad
valorem real estate taxes with respect to the Premises, then the party which is
then the Landlord under this Lease shall be responsible for the incremental
portion of such real estate taxes which is attributable to the increase.
9. MAINTENANCE BY LANDLORD
9.1 Landlord shall not be required to make any alterations,
reconstructions, replacements, changes, additions, improvements or repairs of
any kind or nature whatsoever to the Premises or any portion thereof (including,
without limitation, any portion of the Building or any other improvements or any
personalty) at any time during the term of this Lease.
10. MAINTENANCE BY TENANT
10.1 Subject to Articles 21 and 22, Tenant shall maintain all portions of
the Building and all other improvements in the Premises in good repair and
condition, shall make all repairs thereto, both inside and outside, structural
and non-structural, ordinary and extraordinary, howsoever the necessity or
desirability for repairs may occur, and whether or not necessitated by wear,
tear, obsolescence or defects, latent or otherwise, and shall use all reasonable
precautions to prevent waste, damage or injury. Tenant shall also, at its own
cost and expense, put, keep, replace and maintain all landscaping, signs,
sidewalks, roadways, driveways and parking areas, if any, within the Premises in
good repair and in good, safe and substantial order and condition and free from
dirt, standing water, rubbish and other obstructions or obstacles. Any
"Environmental Cleanup Work" (as hereinafter defined) shall be neither a
Landlord nor a Tenant maintenance item, but shall be governed solely by the
provisions of Article 24 hereof.
<PAGE>
10.2 Tenant shall use reasonable care and diligence to keep and maintain
the Premises free from waste or nuisance and, subject to Articles 21 and 22,
shall deliver the Premises to Landlord broom clean at the expiration of this
Lease, reasonable wear and tear excepted.
11. CONSTRUCTION, ALTERATIONS, ADDITIONS AND IMPROVEMENTS
11.1 Except as hereinafter expressly provided in Paragraph 11.3, no portion
of the Premises shall be demolished, removed or altered by Tenant in any manner
whatsoever without the prior written consent and approval of Landlord, which
shall not be unreasonably withheld. Notwithstanding the foregoing, however,
Tenant shall be entitled and obligated to undertake all alterations to the
Premises required by any applicable law or ordinance including, without
limitation, any alterations required by Legal Requirements and, in such event,
Tenant shall comply with the provisions of Paragraph 11.2 below.
11.2 All construction alterations, additions or improvements made by Tenant
which are permanently attached to and made part of the Premises shall become the
property of the Landlord at the expiration of the Lease term, except for signs,
trade fixtures, furnishings, machinery and equipment not constituting "fixtures"
used in the Premises and furnished by Tenant. For Federal income tax purposes,
Tenant's signs, trade fixtures and furnishings are defined herein as equipment.
11.3 Tenant shall have the right at all times to erect or install cabinets,
shelves, electrical outlets, machinery, air conditioning or heating equipment
and trade fixtures and other equipment, provided Tenant complies with the Legal
Requirements. Tenant shall also have the right to make exterior or interior
alterations to the Premises of a non-structural nature without Landlord's
consent provided (i) Tenant shall comply with all Legal Requirements in
connection therewith and (ii) with respect to any fixtures (other than trade
fixtures) or mechanical systems (including, without limitation, HVAC units)
removed from the Premises in the course of such non-structural alterations,
Tenant agrees to replace the same with an item of similar value or function.
Notwithstanding that Tenant is not required to obtain Landlord's consent to any
alterations described in this Paragraph 11.3, Tenant shall nonetheless give
Landlord thirty (30) days prior written notice of any such contemplated
alterations, including copies of any and all plans and specifications therefor.
11.4 Notwithstanding the ownership of the alterations, additions or
improvements to the Premises, Tenant retains the right to depreciation
deductions of all such alterations, additions or improvements made subsequent to
the Effective Date hereof at Tenant's expense and not paid or reimbursed by
Landlord pursuant to the terms hereof and the Purchase Agreement.
11.5 (a) Tenant shall not create or cause to be imposed, claimed or filed
upon the Premises, or any portion thereof, or upon the interest of Landlord
therein, any lien, charge or encumbrance whatsoever. If, because of any act or
omission of Tenant, any such lien, charge or encumbrance shall be imposed,
claimed or filed, Tenant shall, at its sole cost and expense, cause the same to
be fully paid and satisfied or otherwise discharged of record (by bonding or
otherwise) and Tenant shall indemnify and save and hold Landlord harmless from
and against any and all costs, liabilities, suits, penalties, claims and demands
<PAGE>
whatsoever, and from and against any and all attorneys' fees, at both trial
and all appellate levels, resulting or on account thereof and therefrom. In the
event that Tenant shall fail to comply with the foregoing provisions of this
section, Landlord shall have the option of paying, satisfying or otherwise
discharging (by bonding or otherwise) such lien, charge or encumbrance and
Tenant agrees to reimburse Landlord, upon demand and as additional rent, for all
sums so paid and for all costs and expenses incurred by Landlord in connection
therewith, together with interest thereon at the rate set forth in Paragraph
23.6 hereof, until paid.
(b) Landlord's interest in the Premises shall not be subjected to liens of
any nature by reason of Tenant's construction, alteration, renovation, repair,
restoration, replacement or reconstruction of any improvements on or in the
Premises, or by reason of any other act or omission of Tenant (or of any person
claiming by, through or under Tenant) including, but not limited to, mechanics'
and materialmen's liens. All persons dealing with Tenant are hereby placed on
notice that such persons shall not look to Landlord or to Landlord's credit or
assets (including Landlord's interest in the Premises) for payment or
satisfaction of any obligations incurred in connection with the construction,
alteration, renovation, repair, restoration, replacement or reconstruction
thereof by or on behalf of Tenant. Tenant has no power, right or authority to
subject Landlord's interest in the Premises to any mechanic's or materialmen's
lien or claim of lien. If a lien, a claim of lien or an order for the payment of
money shall be imposed against the Premises on account of work performed, or
alleged to have been performed, for or on behalf of Tenant, Tenant shall, within
thirty (30) days after written notice of the imposition of such lien, claim or
order, cause the Premises to be released therefrom by the payment of the
obligation secured thereby or by furnishing a bond or by any other method
prescribed or permitted by law. If a lien is released, Tenant shall thereupon
furnish Landlord with a written instrument of release in form for recording or
filing in the appropriate office of land records of the County in which the
Premises is located, and otherwise sufficient to establish the release as a
matter of record.
(c) Tenant may, at its option, contest the validity of any lien or claim of
lien if Tenant shall have first posted an appropriate and sufficient bond in
favor of the claimant or paid the appropriate sum into court, if permitted by
law, and thereby obtained the release of the Premises from such lien. If
judgment is obtained by the claimant under any lien, Tenant shall pay the same
immediately after such judgment shall have become final and the time for appeal
therefrom has expired without appeal having been taken. Tenant shall, at its own
expense, defend the interests of Tenant and Landlord in any and all such suits;
provided, however, that Landlord may, at its election, engage its own counsel
and assert its own defenses, in which event Tenant shall cooperate with Landlord
and make available to Landlord all information and data which Landlord deems
necessary or desirable for such defense.
(d) If required by the laws of the State in which the Premises is located,
prior to commencement by Tenant of any work on the Premises which shall have
been previously permitted by Landlord as provided in this Lease, Tenant shall
record or file a notice of the commencement of such work (the "Notice of
Commencement") in the land records of the County in which the Premises are
located, identifying Tenant as the party for whom such work is being performed,
stating such other matters as may be required by law and requiring the service
of copies of all notices, liens or claims of lien upon Landlord. Any such Notice
<PAGE>
of Commencement shall clearly reflect that the interest of Tenant in the
Premises is that of a leasehold estate and shall also clearly reflect that the
interest of Landlord as the fee simple owner of the Premises shall not be
subject to mechanics or materialmen's liens on account of the work which is the
subject of such Notice of Commencement. A copy of any such Notice of
Commencement shall be furnished to and approved by Landlord and its attorneys
prior to the recording or filing thereof, as aforesaid.
12. SIGNS
12.1 Landlord hereby approves the dimensions, color, content and design of
Tenant's current building signage existing as of the Commencement Date and
agrees that Tenant may, at its expense, erect and maintain its standard signs on
the Premises, provided that Tenant complies with all Legal Requirements and
shall first obtain all necessary sign permits for its signage.
12.2 During the term hereof Tenant shall not be required to remove its
signs unless required to do so by Legal Requirements. Tenant may at any time
remodel or replace the sign facia to conform with Tenant's then standard signage
so long as such signage does not violate Legal Requirements, provided that
Tenant may repair or replace any damaged or worn signs to their pre-existing
condition notwithstanding any changes in deed or master lease restrictions made
subsequent to the Commencement Date or, to the extent legally allowed, sign
ordinances enacted or amended subsequent to the Commencement Date. Tenant shall
have the right to affix window appliques, interior signs and other treatments
commonly used at Tenant's other locations so long as they comply with applicable
Legal Requirements. Tenant shall remove all signs and appliques at the
expiration or earlier termination of this Lease, and shall repair any damage
caused by such removal. Unless permitted under any matter of public record as of
the Commencement Date or subsequently approved by Tenant, Landlord shall not
allow any signage other than Tenant's to be erected on the Premises without
Tenant's consent, which consent may be withheld in Tenant's sole discretion.
12.3 Landlord agrees that Tenant may, at its expense, and provided that the
same is permitted under applicable Legal Requirements, erect and maintain its
standard sign panel on any pylon or monument sign located on the Premises.
12.4 Notwithstanding any provision contained in this Lease to the contrary,
for so long as Tenant is operating its business within the Premises, Landlord
shall not be permitted at any time during the term of this Lease (except as
hereinafter provided) to erect or maintain any signage whatsoever (including,
without limitation, for sale or for rent signs) on or about the Premises, except
that, during the three (3) months prior to the impending expiration of this
Lease, Landlord may erect or place on or about the Premises in a reasonable
location a for sale or for rent sign provided such sign is not larger than three
feet (3') wide by three feet (3') tall.
13. LANDLORD'S RIGHT OF ENTRY 13.1 Landlord and its authorized agents may
enter the Premises, after prior written notice and during Tenant's normal
<PAGE>
business hours (except in the case of an emergency posing imminent threat
of injury to persons or damage to property), for the following purposes: (i) to
inspect the general conditions and state of repair and any other condition of
the Premises and (ii) to show the Premises to any prospective purchaser or
mortgagee. If requested by Tenant, such entry by Landlord shall be under the
supervision of Tenant. Landlord shall not interfere with or create a hazard to
Tenant's normal business operations during such entry.
13.2 Commencing one hundred and fifty (150) days prior to the expiration of
the term of this Lease, Landlord may enter the Premises during Tenant's normal
business hours to show the Premises to prospective tenants.
14. UTILITIES
14.1 Tenant shall pay before delinquency all charges for gas, water,
electricity and any other utility services used solely on the Premises during
the term hereof by Tenant.
14.2 The Premises is individually metered for each utility service, having
the service connections specified in Exhibit D and as otherwise customarily
provided.
15. PARKING
Landlord shall not (subject to matters of public record as of the
Commencement Date or subsequently approved by Tenant) grant to any party other
than Tenant and its employees, customers and other invitees the right to use all
driveways and parking spaces within or adjacent to the Premises. Tenant hereby
acknowledges that Landlord is not the fee simple owner of the driveways or
parking areas adjacent to the Premises. Landlord does, however, have rights and
easements to use such areas pursuant to that certain Construction, Operation and
Reciprocal Easement Agreement (as amended, the "REA"), dated as of August 13,
1992, filed under O.R. Book 2320, Page 3637 of the Official Public Records of
Lee County, Florida. The rights and easements under the REA are part of the
appurtenances which Landlord is leasing to Tenant pursuant to this Lease. Tenant
further acknowledges that its rights to use the parking areas and driveways are
subject to the terms and conditions of the REA; provided, however, should
Landlord's or Tenant's rights and privileges under the REA be adversely affected
by another party to the REA or occupant of the Shopping Center, upon Tenant's
request, Landlord hereby agrees to enforce its rights under the REA (or assist
Tenant in enforcing Landlord's rights under the REA, in any event, at no cost to
Landlord) against any other party to the REA or occupant of the Shopping Center.
Landlord shall not be in default under this Lease in the event another party to
the REA or other occupant of the Shopping Center violates the terms of the REA,
so long as Landlord is in compliance with the provisions of this Article 15.
16. VISIBILITY AND ACCESS
Landlord agrees that, during the term of this Lease, it will not, subject
to Landlord's right to comply with the requirements of applicable governmental
authority (provided such requirements are not imposed as a result of a
Landlord-initiated activity), construct or consent to the construction of any
building, sign, tower or other structure or improvement, or plant any tree or
other growing plant, or make any other change whatsoever in the Premises, or add
<PAGE>
or change any restrictions or other rights, encumbrances or appurtenances
relating to the Premises. In the event that Landlord violates the terms of this
Article , and such violation continues for a period exceeding thirty (30) days
from the date Tenant delivers to Landlord written notice of such violation, in
addition to all other available rights and remedies at law or in equity, Tenant,
at its option, may terminate this Lease upon written notice to the Landlord.
17. ASSIGNMENT AND SUBLEASING
17.1 Tenant shall have the right at all times during this Lease to assign
this Lease or enter into a sublease or subleases for all or portions of the
Premises without Landlord's consent provided that the use of the Premises by any
such assignee or sublessee complies with the provisions of Paragraph 17.2
hereof. Tenant agrees to give Landlord written notice of any and all assignments
of this Lease and subleases of the Premises. Any assignment by Tenant shall not
operate to release Tenant of its liabilities hereunder (including during any
extension of the term pursuant to Paragraph 2.3 hereof) unless otherwise agreed
to in writing by Landlord.
17.2 Any assignee or sublessee of Tenant shall be subject to the use
restrictions contained in Paragraph 7.1 and Paragraph 7.2 hereof.
17.3 Provided any assignee of Landlord assumes in writing all of Landlord's
obligations under this Lease arising from and after the date of any such
assignment, and so notifies Tenant, Landlord may assign its interest in this
Lease during the term hereof, and Landlord shall thereupon be released from all
future obligations under this Lease with respect to events occurring or other
matters arising after Tenant receives notice of such assignment and assumption;
provided, however, Tenant shall make all payments required under this Lease to
Landlord, or its successors in interest, unless and until Tenant is notified of
such assignment, and Tenant is in no way liable to any assignee for any rentals
due hereunder until Tenant is so notified.
18. INSURANCE
18.1 Tenant shall during the Lease term, at its sole expense, maintain
in full force the following types and amounts of insurance coverage:
(a) General liability insurance issued by one or more insurance carriers,
insuring against liability for injury to or death of persons and loss of or
damage to property occurring in and on the Premises. Such liability insurance
shall name Landlord, and Landlord's mortgagee if requested, as an additional
insured. The coverage limits for such liability insurance shall be at least
Three Million Dollars ($3,000,000.00) combined single limits for bodily injury
and property damage per occurrence; provided, however, said minimum coverage
limits shall, within thirty (30) days of Tenant's receipt of Landlord's written
request therefor, be increased to the minimum amount of liability insurance
coverage then customarily required to be carried by national retailers for sites
similar to the Premises in the State of Florida and then customarily required of
Tenant in a majority of its bookstore leases in the State of Florida executed
during the one (1) year period prior to the date of Landlord's request;
<PAGE>
(b) All risk property damage insurance and a standard extended coverage
endorsement issued by one or more insurance carriers covering the Building and
all other improvements to the Premises to the extent of their full replacement
value exclusive of foundation and excavation costs, insuring against loss or
damage caused by: (i) fire, flood, windstorm and other hazards and perils
generally included under extended coverage; (ii) sprinkler leakage; (iii)
vandalism and malicious mischief; and (iv) boiler and machinery, all in an
amount which reasonably assures there will be sufficient proceeds to replace the
improvements and personal property in the event of a loss against which such
insurance is issued. All insurance required under this Article 18, and all other
insurance maintained by Tenant on the Premises in excess of or in addition to
that required under this Article 18, shall be carried in favor of Landlord and
Tenant, as their respective interests may appear (and Landlord's mortgagee or
any collateral assignee of Landlord's rights under this Lease, if requested);
(c) Tenant shall provide and keep in full force and effect workers'
compensation insurance, in a form prescribed by the laws of the State in which
the Premises is located, and employers' liability insurance;
(d) Tenant shall, prior to the commencement of and during any permitted
rehabilitation, replacement, reconstruction, restoration, renovation or
alteration to the Premises, provide and keep in full force and effect builders'
risk insurance in accordance with the requirements of this Article;
(e) Tenant shall provide, keep and maintain in full force and effect
business interruption insurance, without a provision for co-insurance, in an
amount sufficient to pay Fixed Rent, operating expenses, taxes and insurance for
the Premises for a period of at least twelve (12) months; and
(f) In addition, Tenant shall, at Landlord's request, provide, keep and
maintain in full force and effect such other insurance for such risks and in
such amounts as may from time to time be commonly insured against in the case of
business operations similar to those contemplated by this Lease to be conducted
by Tenant on the Premises.
18.2 In the event Tenant shall fail to procure insurance required under
this Article and fail to maintain the same in full force and effect continuously
during the term of this Lease, Landlord shall be entitled to procure the same
and Tenant shall immediately reimburse Landlord for such premium expense as
additional rent.
18.3 Tenant may comply with its insurance obligations hereunder by
endorsement to any blanket policy of insurance. Tenant shall deliver to Landlord
certificates issued by the insurance carrier or carriers for each policy of
insurance which it is required to maintain by this Lease within ten (10) days
after request therefor. Any insurance required by this Article to be procured by
one party for the benefit of another party shall contain a provision that the
insurance cannot be terminated without thirty (30) days prior written notice to
the other party. All insurance required of a party under this Article 18 shall
be for periods of not less than one year and shall be maintained with insurance
<PAGE>
companies qualified to do business in the state in which the Premises are
located, with such companies and the form of such policies being otherwise
reasonably acceptable to the other party.
18.4 Tenant shall not knowingly conduct any operation in the Premises which
would cause suspension or cancellation of the all risk property damage
insurance.
19. INDEMNITY
19.1 Subject to the terms and provisions of Paragraph 19.2 hereof, Tenant
and Landlord (each an "Indemnitor") will indemnify the other (each an
"Indemnitee") against, and hold Indemnitee harmless from, all claims,
liabilities, demands or causes of action, including all reasonable expenses of
the Indemnitee incidental thereto, for injury to or death of any person and,
subject to Article 20 below, damage to any property arising within or on the
Premises, and caused by Indemnitor's negligent act or omission or the negligent
act or omission of any employee or agent of Indemnitor. The liability of
Indemnitor to indemnify Indemnitee as hereinabove set forth shall not extend to
any matter against which Indemnitee shall be effectively protected by insurance,
provided that, if any such liability shall exceed the amount of the effective
and collectible insurance in question, the liability of Indemnitor shall apply
to such excess.
19.2 Landlord shall not be liable to Tenant, its employees, agents,
business invitees, licensees, customers, clients, family members or guests for
any damage, injury, loss, compensation or claim, including, but not limited to,
claims for the interruption of or loss to Tenant's business, based on, arising
out of or resulting from any cause whatsoever (other than the negligence of
Landlord or Landlord's breach of this Lease or wilful misconduct), including,
but not limited to: (a) repairs to any portion of the Premises; (b) interruption
in Tenant's use of the Premises; (c) any accident or damage resulting from the
use or operation (by Landlord, Tenant or any other person or persons) of any
equipment within the Premises, including without limitation, heating, cooling,
electrical or plumbing equipment or apparatus; (d) the termination of this Lease
by reason of the condemnation or destruction of the Premises in accordance with
the provisions of this Lease; (e) any fire, robbery, theft, mysterious
disappearance or other casualty; (f) the actions of any other person or persons;
and (g) any leakage or seepage in or from any part or portion of the Premises,
whether from water, rain or other precipitation that may leak into, or flow
from, any part of the Premises, or from drains, pipes or plumbing fixtures in
the Improvements. Any goods, property or personal effects stored or placed by
the Tenant or its employees in or about the Premises shall be at the sole risk
of the Tenant.
19.3 Except to the extent of Landlord's obligations under Paragraph 19.1
above, the Tenant shall defend, indemnify and save and hold Landlord harmless
from and against any and all liabilities, obligations, losses, damages,
injunctions, suits, actions, fines, penalties, claims, demands, costs and
expenses of every kind or nature (other than those arising from the negligence
of Landlord or Landlord's breach of this Lease or wilful misconduct), including
reasonable attorneys' fees and court costs, incurred by Landlord, arising
directly or indirectly from or out of: (a) any accident, injury or damage which
shall happen at, in or upon the Premises, however occurring; (b) any matter or
thing growing out of the condition, occupation, maintenance, alteration, repair,
use or operation of the Premises or any part thereof by Tenant or by any
<PAGE>
employee, agent, invitee, customer, licensee or contractor of Tenant, or
the operation of the business contemplated by this Lease to be conducted
thereon, thereat, therein, or therefrom; (c) any failure of Tenant to comply
with any laws, ordinances, requirements, orders, directions, rules or
regulations of any governmental authority; or (d) any other act or omission of
Tenant, its employees, agents, invitees, customers, licensees or contractors.
19.4 Tenant shall promptly notify Landlord of any claim, action, proceeding
or suit instituted or threatened against Tenant or Landlord of which Tenant
receives notice or of which Tenant acquires knowledge. In the event Landlord is
made a party to any action for damages or other relief against which Tenant has
indemnified Landlord, as aforesaid, Tenant shall defend Landlord, pay all costs
and shall provide effective counsel to Landlord in such litigation or, at
Landlord's option, shall pay all reasonable attorneys' fees and costs incurred
by Landlord in connection with its own defense or settlement of said litigation.
20. RELEASE AND WAIVER OF SUBROGATION
Landlord and Tenant hereby waive and release each other of and from any and
all rights of recovery, claim, action or cause of action against each other,
their agents, officers, directors, partners and employees, for any loss or
damage that may occur to the Building or any other improvements to the Premises
or any personal property, including building contents, within the Premises, by
reason of fire or the elements of nature or other events to the extent covered
by insurance coverage carried under this Lease, regardless of cause or origin
including negligence of Landlord or Tenant and their agents, officers,
directors, partners and employees. Landlord and Tenant shall immediately give
written notice of the terms of the mutual waivers contained in this Article 20
to each of their respective insurance companies (if any, Tenant acknowledging
that Landlord may not carry any such insurance) which have issued policies of
insurance covering all risk property damage, and shall have the insurance
policies properly endorsed to reflect the insurance company's acknowledgment of
such waiver and the absence of any subrogation rights. Each party shall provide
to the other, annually within ten (10) days after request therefor, evidence
that its all risk property damage insurance policies have been so endorsed.
21. FIRE AND CASUALTY DAMAGE
21.1 If the Premises should be damaged by fire or other casualty (a) at any
time during the term of this Lease and the Premises could not, with timely and
diligent best efforts, be repaired and restored within eighteen (18) months of
the casualty, or (b) during the last three (3) years of the term of this Lease,
or any renewal thereof, such that the cost of rebuilding or repairs exceeds
twenty percent (20%) of the replacement cost of the Premises, then Tenant may,
at its discretion, failing which Landlord may (unless, with respect to clause
"b" above, Tenant exercises any right it may have to extend the term of this
Lease), at its discretion, within thirty (30) days after the determination of
the cost of such rebuilding and repairs and estimated time for completion,
terminate this Lease on written notice to the other party. In the event Landlord
exercises its rights under clause "b" of the preceding sentence to terminate
this Lease, such termination shall be voided if, within thirty (30) days from
Tenant's receipt of Landlord's notice of termination, Tenant exercises any right
<PAGE>
it may have to extend the term of this Lease. In such event, the Lease
shall terminate on the later of (a) the expiration of coverage benefits under
the business interruption insurance to be carried under the terms of this Lease
or (b) one hundred and eighty (180) days after the date of such notice; and
Fixed Rent and all other charges payable by Tenant hereunder shall abate as of
the date of termination and all insurance proceeds, other than for business
interruption coverage, shall be payable to Landlord. In such event, however,
Tenant shall, at its expense, promptly make any repairs necessary to render the
Premises safe and free from any nuisance, and Landlord shall release available
insurance proceeds for payment of such necessary repairs.
21.2 If the Premises should be damaged and this Lease cannot be or is not
terminated pursuant to Paragraph 21.1 above, then Tenant shall, at its sole cost
and risk, proceed forthwith to rebuild or repair the Premises in compliance with
all Legal Requirements and otherwise to substantially the condition which
existed prior to such damage, except that Tenant shall have the right to make
changes to the Premises in the course of such restoration, subject to Landlord's
reasonable approval of such changes.
21.3 The cost of rebuilding and repair of the Premises and the number of
days within which the Premises can be rebuilt or repaired shall be determined by
an independent contractor mutually acceptable to both Landlord and Tenant.
21.4 If this Lease cannot be or is not terminated by Landlord or Tenant
pursuant to Paragraph 21.1 above, then all casualty insurance proceeds payable
with respect to any damage or destruction of the Premises shall be applied
solely to the cost of the rebuilding or repair of the damage or destruction. In
the event the insurance proceeds are insufficient to cover the costs of the
rebuilding or repairs, the excess costs shall be borne by the Tenant.
21.5 In the event of a casualty resulting in a loss payment for the
Building and other improvements in an amount greater than FIFTY THOUSAND AND
NO/100 DOLLARS ($50,000.00), the proceeds of all insurance policies maintained
by Tenant shall be deposited in Landlord's name in an escrow account at a bank
or other financial institution designated by Landlord, and shall be used by
Tenant for the repair, reconstruction or restoration of the Building and
improvements. Such proceeds shall be disbursed periodically by Landlord upon
certification of the architect or engineer having supervision of the work that
such amounts are the amounts paid or payable for the repair, reconstruction or
restoration. Tenant shall, at the time of establishment of such escrow account
and from time to time thereafter until said work shall have been completed and
paid for, furnish Landlord with adequate evidence that at all times the
undisbursed portion of the escrowed funds, together with any funds made
available by Tenant, is sufficient to pay for the repair, reconstruction or
restoration in its entirety. Tenant shall obtain, and make available to
Landlord, receipted bills and, upon completion of each portion of said work,
full and final waivers of lien. In the event of a casualty resulting in a loss
payment for the Improvements in an amount equal to or less than the amount
stated above, the proceeds shall be paid to Tenant, and shall be applied towards
repair, reconstruction and restoration.
21.6 Notwithstanding that Tenant is not required, under certain
circumstances, to deposit insurance proceeds with Landlord to be disbursed for
<PAGE>
the costs of repairs under this Article , Tenant shall nonetheless give
Landlord reasonable prior written notice of any such repairs including copies of
any and all plans and specifications therefor.
22. CONDEMNATION
22.1 In the event any part of the Building or a "substantial portion of the
Premises" as defined in Paragraph 22.3 is taken or condemned by any competent
authority, Tenant shall have the right subject to Landlord being able in a
timely manner to substitute comparable parking and/or facilities: (a) to
terminate this Lease as of the first day following the earlier of the date of
title transfer or the date of the taking of possession by the condemning
authority, or (b) to continue the Lease in full force and effect with a reduced
Fixed Rent commensurate with the reduced leasable square footage of the Building
and/or reduced utility of the Premises, as demonstrated by Tenant, in lieu of
the amount of Fixed Rent otherwise provided herein, which reduction in Fixed
Rent shall be effective on the date the taking of possession by the condemning
authority. Tenant shall give notice to Landlord of its election, within thirty
(30) days after the date Landlord notifies Tenant of the impending condemnation.
22.2 If Tenant does or may not elect to terminate this Lease as set forth
herein, then Tenant shall commence and diligently continue thereafter to restore
any portion of the Premises remaining after the taking to substantially the same
condition and tenantability as existed immediately preceding the taking,
provided that Landlord makes all condemnation proceeds, or so much thereof as
are necessary for such reconstruction, available to Tenant.
22.3 For the purposes of Paragraph 22.1, a "substantial portion of the
Common Areas" is defined to mean either of the following: (i) ten percent (10%)
or more of the parking spaces within the "Parking Field" (as shown and labeled
on Exhibit B hereto) unless there exists, after such taking, a parking ratio of
at least five (5) spaces in the Parking Field per one thousand (1,000) square
feet of space in the Building; or (ii) loss through the taking or condemnation
of adequate access via easements of record from the Premises to adjoining
streets or highways through those access points labeled on Exhibit B as
"Critical Access Ways"; provided, however, Landlord shall be deemed to have
"substitute[d] comparable . . . facilities" within the meaning of Paragraph 22.1
above in the event of the condemnation of the Daniels Road Critical Access Way
so long as there shall remain or be substituted an entranceway of reasonably
comparable size and function (to the Daniels Road Critical Access Way) from
Daniels Road to the overall shopping center of which the Premises is a part.
22.4 Termination of this Lease because of condemnation shall be without
prejudice to the rights of either Landlord or Tenant to recover from the
condemning authority compensation and damages for the injury or loss sustained
by them as a result of the taking. Without limiting the foregoing, Tenant shall
have the right to make a claim against the condemning authority for any positive
value of its leasehold estate, the value of its trade fixtures, furniture and
personal property, damages for interruption or relocation of business in the
Premises, loss of good will, moving and remodeling expenses and value of any
leasehold improvements made by Tenant on or to the Premises after the date of
the Lease.
<PAGE>
23. DEFAULT
23.1 (a) Tenant shall be in default under this Lease if and only if one of
the following events shall occur:
(i) Tenant shall fail to pay Fixed Rent when due and the failure shall
continue for a ten (10) day period after Tenant's receipt of written notice
thereof.
(ii) If Tenant shall breach any other term or covenant of or fail to
perform any of its other obligations under this Lease and the breach or failure
shall continue for a thirty-day period after Landlord shall have given Tenant
written notice of its failure to perform. However, if Tenant shall fail to
perform an obligation under this Lease, other than an obligation to pay Fixed
Rent or additional rent, and the failure cannot be reasonably cured by Tenant
within thirty (30) days after Landlord shall have given written notice of the
failure, Tenant shall not be in default if Tenant commences to cure the failure
within the thirty-day period and diligently thereafter prosecutes the cure to
the completion.
(iii) If Tenant shall desert or abandon the Premises (which shall not
include the mere discontinuance of Tenant's business operations at the Premises
so long as the Tenant properly maintains and preserves the Premises and is
otherwise fulfilling its obligations with respect to the preservation,
protection and maintenance of the Premises hereunder).
(iv) If, at any time during the term of this Lease, Tenant or "Guarantor"
(as hereinafter defined) shall file in any court, pursuant to any statute of
either the United States or of any State, a petition in bankruptcy or
insolvency, or for reorganization or arrangement, or for the appointment of a
receiver or trustee of all or any portion of Tenant's property, including,
without limitation, its leasehold interest in the Premises, or if Tenant shall
make an assignment for the benefit of its creditors or petitions for or enters
into an arrangement with its creditors.
(v) If, at any time during the term of this Lease, there shall be filed
against Tenant or Guarantor in any courts pursuant to any statute of the United
States or of any State, a petition in bankruptcy or insolvency, or for
reorganization, or for the appointment of a receiver or trustee of all or a
portion of Tenant's property, including, without limitation, its leasehold
interest in the Premises, and any such proceeding against Tenant shall not be
dismissed within sixty (60) days following the commencement thereof.
(vi) If Tenant's leasehold interest in the Premises or property therein
shall be seized under any levy, execution, attachment or other process of court
where the same shall not be vacated or stayed on appeal or otherwise within
thirty (30) days thereafter, or if Tenant's leasehold interest in the Premises
is sold by judicial sale and such sale is not vacated, set aside or stayed on
appeal or otherwise within thirty (30) days thereafter.
<PAGE>
(b) Intentionally Deleted.
23.2 If Tenant shall be in default under this Lease, Landlord, at any time
thereafter, shall have and may exercise any of the following rights and
remedies:
(a) Landlord may, pursuant to written notice thereof to Tenant, terminate
this Lease and, peaceably or pursuant to appropriate legal proceedings,
re-enter, retake and resume possession of the Premises for Landlord's own
account and, for Tenant's breach of and default under this Lease, recover
immediately from Tenant any and all rents and other sums and damages due or in
existence at the time of such termination, including, without limitation, (i)
all Fixed Rent and other sums, charges, payments, costs and expenses agreed
and/or required to be paid by Tenant to Landlord hereunder; (ii) all costs and
expenses of Landlord in connection with the recovery of possession of the
Premises, including reasonable attorneys' fees and court costs; (iii) all costs
and expenses of Landlord in connection with any reletting or attempted reletting
of the Premises or any part or parts thereof and properly allocable to the
remaining term of this Lease, including, without limitation, brokerage fees,
attorneys' fees and the cost of any alterations or repairs which may be
reasonably required to so relet the Premises, or any part or parts thereof; and
(iv) liquidated damages in an amount equal to the then present value of total
rentals for the remaining portion of the Lease term less the then present value
of the fair market rental for the premises for the remaining Lease term (fair
market rental shall be determined with the Premises to be let in "as is"
condition as vacated by Tenant, with any successor tenant to pay all costs of
appropriate modifications to the Premises, except to the extent of costs and
expenses of reletting or attempted reletting recovered from Tenant under
subsection "iii" of this Paragraph , and present value shall be calculated based
upon an discount rate of EIGHT PERCENT (8%) per annum).
(b) Landlord may, pursuant to any prior notice required by law, and without
terminating this Lease, peaceably or pursuant to appropriate legal proceedings,
re-enter, retake and resume possession of the Premises for the account of
Tenant, make such alterations of and repairs to the Premises as may be
reasonably necessary in order to relet the same or any part or parts thereof and
relet or attempt to relet the Premises or any part or parts thereof for such
term or terms (which may be for a term or terms extending beyond the term of
this Lease), at such rents and upon such other terms and provisions as Landlord,
in its sole, but reasonable, discretion, may deem advisable. If Landlord relets
or attempts to relet the Premises, Landlord shall be the judge, in Landlord's
reasonable discretion, as to the terms and provisions of any new lease or
sublease and of whether or not a particular proposed new tenant or sublessee is
acceptable to Landlord. Upon any such reletting, all rents received by the
Landlord from such reletting shall be applied, (a) first, to the payment of all
costs and expenses of recovering possession of the Premises, (b) second, to the
payment of any costs and expenses of such reletting and properly allocable to
the remaining term of this Lease, including brokerage fees, attorneys' fees and
the cost of any alterations and repairs reasonably required for such reletting;
(c) third, to the payment of any indebtedness, other than Fixed Rent, due
hereunder from Tenant to the Landlord, (d) fourth, to the payment of all Fixed
Rent and other sums due and unpaid hereunder, and (e) fifth, the residue, if
any, shall be held by the Landlord and applied in payment of future Fixed Rents
as the same may become due and payable hereunder. If the rents received from
such reletting during any period shall be less than that required to be paid
<PAGE>
during that period by the Tenant hereunder, Tenant shall promptly pay any
such deficiency to the Landlord and failing the prompt payment thereof by Tenant
to Landlord, Landlord shall immediately be entitled to institute legal
proceedings for the recovery and collection of the same. Such deficiency shall
be calculated and paid at the time each payment of rent shall otherwise become
due under this Lease, or, at the option of Landlord, at the end of the term of
this Lease. Landlord shall, in addition, be immediately entitled to sue for and
otherwise recover from Tenant any other damages occasioned by or resulting from
any abandonment of the Premises or other breach of or default under this Lease
other than a default in the payment of rent. No such re-entry, retaking or
resumption of possession of the Premises by the Landlord for the account of
Tenant shall be construed as an election on the part of Landlord to terminate
this Lease unless a written notice of such intention shall be given to the
Tenant or unless the termination of this Lease be decreed by a court of
competent jurisdiction. Notwithstanding any such re-entry and reletting or
attempted reletting of the Premises or any part or parts thereof for the account
of Tenant without termination, Landlord may at any time thereafter, upon written
notice to Tenant, elect to terminate this Lease or pursue any other remedy
available to Landlord for Tenant's previous breach of or default under this
Lease. (c) Landlord may, without re-entering, retaking or resuming possession of
the Premises, sue for all Fixed Rent and all other sums, charges, payments,
costs and expenses due from Tenant to Landlord hereunder as they become due
under this Lease, as well as all other sums, charges, payments, costs and
expenses due and payable by Tenant to Landlord hereunder. Landlord may then
proceed to recover and collect all such unpaid Fixed Rent and other sums so sued
for by Tenant by distress, levy, execution or otherwise. Landlord shall use
reasonable efforts to relet the Premises in order to minimize or mitigate
Landlord's damages or Tenant's loss as a result of Tenant's breach of or default
under this Lease. (d) In addition to the remedies hereinabove specified and
enumerated, Landlord shall have and may exercise the right to invoke any
other remedies allowed at law or in equity as if the remedies of re-entry,
unlawful detainer proceedings and other remedies were not herein provided.
Accordingly, the mention in this Lease of any particular remedy shall not
preclude Landlord from having or exercising any other remedy at law or in
equity. Nothing herein contained shall be construed as precluding the Landlord
from having or exercising such lawful remedies as may be and become necessary in
order to preserve the Landlord's right or the interest of the Landlord in the
Premises and in this Lease, even before the expiration of any notice periods
provided for in this Lease (but not to include termination of this Lease or
dispossession of the Tenant hereunder), if under the particular circumstances
then existing the allowance of such notice periods will prejudice or will
endanger the rights and estate of the Landlord in this Lease and in the
Premises.
(e) If Tenant shall default in the performance of any term, provisions,
covenant or condition on its part to be performed hereunder, Landlord may, after
written notice and opportunity to cure to Tenant as set forth herein (or without
notice if, in Landlord's reasonable opinion, an emergency exists) perform the
same for the account and at the expense of Tenant. If, at any time and by reason
of such default, Landlord is compelled to pay, or elects to pay, any sum of
money or do any act which will require the payment of any sum of money, or is
compelled to incur any expense in the enforcement of its rights hereunder or
<PAGE>
otherwise, such sum or sums, together with interest thereon from the date
of demand for payment at the rate set forth in Paragraph 23.6 hereof, shall be
deemed additional rent hereunder and shall be repaid to Landlord by Tenant
promptly when billed therefor, and Landlord shall have all the same rights and
remedies in respect thereof as Landlord has in respect of the rents herein
reserved.
(f) The rights and remedies provided and available to Landlord in this
Lease are distinct, separate and cumulative remedies, and no one of them,
whether or not exercised by Landlord, shall be deemed to be in exclusion of any
other.
23.3 In the event this Lease is assigned or sublet by Tenant and Tenant
remains liable for the performance of Tenant's obligations of this Lease, and
should any default occur requiring notice as provided in this paragraph,
Landlord agrees that it will furnish Tenant with a copy of the notice at the
same time it is sent to the assignee or sublessee. In the event that the default
is not corrected by the assignee or sublessee during the specified time periods,
Tenant shall have an additional period of ten (10) days to correct the default,
and, upon correction of the default, Tenant shall have the right and option to
resume actual possession of the Premises as Tenant for the unexpired term of
this Lease in which event it shall have the continuing obligations of Tenant
under the Lease.
23.4 Should there be any default or breach of this Lease on the part of
Landlord, Tenant shall give Landlord notice thereof, and should Landlord fail to
correct the breach or default within thirty (30) days after the notice, Tenant
may remedy the breach or default and Landlord shall reimburse Tenant on demand
the reasonable costs incurred in good faith by Tenant in remedying any such
breach or default. If Landlord fails to reimburse Tenant for any such costs when
due, or if Landlord fails to pay any other sum owing to Tenant hereunder within
fifteen (15) days after the same is past due, then Tenant shall have the right
to deduct the same, together with interest from the date of demand at the rate
set forth in Paragraph 23.6 hereof, from rentals due or to become due Landlord,
or pursue any other legal or equitable remedy for which it is entitled. If
Tenant has not been reimbursed for its reasonable cost in remedying Landlord's
breach or default at the expiration of the term of this Lease, or if Landlord is
indebted to Tenant because of a breach or default of this Lease at the
expiration of the term, Tenant may, at its option, extend this Lease on the same
terms and conditions then in effect until the costs and indebtedness are fully
paid by application of all rental thereto. Provided, however, if Landlord shall
fail to perform an obligation under this Lease, and the failure cannot be cured
by Landlord within thirty (30) days after Tenant shall have given written notice
of the failure, Landlord shall not be in default if Landlord commences to cure
the failure within the thirty-day period and diligently thereafter prosecutes
the cure to the completion. In the event Tenant is awarded a money judgment
against Landlord, Tenant's sole recourse for satisfaction of such judgment shall
be limited to execution against the Premises or attachment upon any identifiable
rent, sales or other proceeds of the Premises receivable by Landlord from and
after Landlord's receipt of notice of default specifying the default upon which
Tenant ultimately obtains judgment.
23.5 If a dispute shall arise between the parties as to the performance of
any obligation, a party contending that an obligation is the other party's duty
<PAGE>
may perform the obligation under protest. The performance of an obligation
under protest shall not be regarded as voluntary performance. A party which
shall have performed an obligation under protest shall have the right to bring
suit for the recovery of the cost and expense of performance. If it shall be
determined that the other party was required to perform the obligation, the
other party shall reimburse the party that shall have performed the obligation
under protest for the cost and expense of performance.expense of performance.
23.6 In the event either party hereto fails to pay any sum due under this
Lease within ten (10) days from the due date specified in this Lease, such past
due amount shall accrue, and the failing party shall be liable for, interest
from the original due date until paid at an annual rate equal to the lesser of
(i) the prime rate then published in the Wall Street Journal plus three percent
(3%) or (ii) the maximum rate permitted by law.
24. HAZARDOUS MATERIALS
24.1 The following terms shall have the meanings ascribed to them
under this Paragraph 24.1:
(a) "Hazardous Materials" shall mean any chemical, substance, material or
combination thereof which is or may be hazardous to human health or safety or to
the environment due to its radioactivity, ignitability, infectiousness or other
harmful or potentially harmful properties or effects, including petroleum and
petroleum products, asbestos, radon, polychlorinated biphenyl ("PCBs") and all
of those chemicals, substances, materials or combinations thereof that are
listed, defined or regulated in any manner by any Environmental Law (defined
below).
(b) "Environmental Cleanup Work" shall mean any cleanup, remediation,
removal, construction, alteration, demolition, renovation or installation that
is required in connection with Hazardous Materials installed, used, stored,
handled or located on the Premises or disposed of from the Premises in order to
comply with any Environmental Law.
(c) "Environmental Law" shall mean any federal, state or local
environmental, health and/or safety-related law, and any related decision of the
courts, ordinance, rule, regulation, code, order, directive, guideline, permit
or permit condition.
24.2 Tenant hereby represents to Landlord the following, to the best of its
knowledge, as of the Effective Date:
(a) The Premises has not been used for the disposal of refuse or waste, or
for the generation, processing, manufacture, storage, handling, treatment,
release, discharge or disposal of any Hazardous Materials.
(b) The Premises is in compliance with all Environmental Laws.
(c) No (i) asbestos-containing materials, (ii) machinery, equipment or
fixtures containing PCBs, (iii) storage tanks for gasoline or any other
substance or (iv) urea formaldehyde foam insulation has been installed, used,
stored, handled or located on the Premises.
<PAGE>
24.3 Notwithstanding any other provision of this Lease, in the event that
Landlord shall fail to comply with, and pay all costs incurred in complying
with, any Environmental Law then in effect regarding the environmental state,
condition and quality of the Premises (including the performance of and payment
for any Environmental Cleanup Work and the preparation of any closure or other
required plans, but excluding, however, any compliance and/or costs related to
Hazardous Materials on the Premises as of the Effective Date hereof or
occasioned by the use, transportation, storage, spillage or discharge thereon,
therein or therefrom of any toxic or hazardous chemicals, compounds, materials
or substances, by Tenant, or by its employees, agents, invitees, customers,
licensees or contractors), and such failure materially interferes with Tenant's
ability to use and enjoy the Premises for the uses permitted, and such failure
continues for a period of thirty (30) days after Tenant shall have given written
notice to Landlord of such failure [provided, however, if the failure cannot be
cured within thirty (30) days, Landlord shall not be in default if Landlord
commences to cure the failure within the 30-day period and diligently thereafter
prosecutes the cure to completion], then Tenant shall have the right, as its
sole and exclusive remedy as a result thereof, to terminate this Lease by prior
written notice to Landlord, such termination to be effective as of the date set
forth in such notice.
24.4 (a) Tenant shall at all times during the term of this Lease keep the
Premises free of Hazardous Materials generated by, resulting from or being
incident to Tenant's use of the Premises, and neither Tenant nor any of its
employees, agents, invitees, licensees, contractors or subtenants (if permitted)
shall use, generate, manufacture, refine, treat, process, produce, store,
deposit, handle, transport, release, or dispose of Hazardous Materials in, on or
about the Premises or the groundwater thereof, in violation of any federal,
state or municipal law, decision, statute, rule, ordinance or regulation
currently in existence or hereafter enacted or rendered. Tenant shall give
Landlord prompt written notice of any claim received by Tenant from any person,
entity, or governmental agency that a release or disposal of Hazardous Materials
has occurred on the Premises or the groundwater thereof.
(b) Tenant shall not discharge or permit to be discharged into any septic
facility or sanitary sewer system serving the Premises any toxic or hazardous
sewage or waste other than that which is normal domestic waste water for the
type of business contemplated by this Lease to be conducted by Tenant on, in or
from the Premises. Any toxic or hazardous sewage or waste which is produced or
generated in connection with the use or operation of the Premises shall be
handled and disposed of as required by and in compliance with all Environmental
Laws or shall be pre-treated to the level of domestic wastewater prior to
discharge into any septic facility or sanitary sewer system serving the
Premises.
24.5 Notwithstanding any other provision of this Lease, Tenant shall and
hereby does agree to indemnify, protect, defend and hold harmless Landlord and
its partners, directors, officers, employees, shareholders, agents, contractors
and each of their respective successors and assigns from and against any and all
costs, claims, judgments, damages, penalties, fines, taxes, costs, liabilities,
losses and expenses arising at any time during or after the term of this Lease
as a result of or in connection with (a) the presence of any Hazardous Materials
<PAGE>
on the Premises as of the Effective Date hereof or as the direct result of
Tenant's activities on or in the Premises; (b) any contamination of the
Premises, or the groundwaters thereof, arising on or after the date Tenant takes
possession of the Premises and occasioned by the use, transportation, storage,
spillage or discharge thereon, therein or therefrom of any toxic or hazardous
chemicals, compounds, materials or substances, by Tenant, or by its employees,
agents, invitees, customers, licensees or contractors; or (c) any discharge of
toxic or hazardous sewage or waste materials from the Premises into any septic
facility or sanitary sewer system serving the Premises arising on or after the
date Tenant takes possession of the Premises, by Tenant or by its employees,
agents, invitees, customers, licensees or contractors.
24.6 Notwithstanding any other provision of this Lease, Landlord shall and
hereby does agree to indemnify, protect, defend and hold harmless Tenant and its
partners, directors, officers, employees, shareholders, agents, contractors and
each of their respective successors and assigns from and against any and all
costs, claims, judgments, damages, penalties, fines, taxes, costs, liabilities,
losses and expenses arising at any time during or after the term of this Lease
as a result of or in connection with (a) the presence of any Hazardous Materials
on the Premises as the direct result of Landlord's activities on, in or adjacent
to the Premises; (b) any contamination of the Premises, or the groundwaters
thereof, arising on or after the date Landlord became or becomes the owner of
the Premises and occasioned by the use, transportation, storage, spillage or
discharge thereon, therein or therefrom of any toxic or hazardous chemicals,
compounds, materials or substances, by Landlord or by its employees, agents,
invitees, customers, licensees or contractors; or (c) any discharge of toxic or
hazardous sewage or waste materials from the Premises into any septic facility
or sanitary sewer system serving the Premises arising on or after the date
Landlord became or becomes the owner of the Premises, by Landlord or by its
employees, agents, invitees, customers, licensees or contractors.
24.7 Tenant's and Landlord's obligations to each other under and pursuant
to the foregoing Paragraphs and shall survive the expiration or earlier
termination of this Lease.
25. SUBORDINATION AND NON-DISTURBANCE
25.1 Prior to the Commencement Date of this Lease, Landlord shall obtain
from the current holder of any mortgage or deed of trust encumbering all or any
part of the Premises, a Subordination, Non-Disturbance and Attornment Agreement
in the form set forth in Exhibit F, providing, among other things, that the
holder will recognize Tenant's lease of the Premises hereunder and will not
disturb Tenant's quiet possession of the Premises as long as Tenant is not in
default under provisions of this Lease. Tenant agrees not to unreasonably
withhold its consent to any changes reasonably required by Landlord's mortgagee
to the form attached as Exhibit F hereto. This Lease shall be subordinate to the
lien of any mortgages or deeds of trust hereafter placed upon Landlord's
interest in the Premises, provided that Landlord shall have first secured for
Tenant's benefit, with Tenant's joinder, a written Subordination,
Non-Disturbance and Attornment Agreement in substantially the form set forth in
Exhibit F, provided that Tenant shall not unreasonably withhold its consent to
any changes required by Landlord's mortgagee.
<PAGE>
25.2 If Landlord defaults in making payment under any mortgage or deed of
trust encumbering all or any part of the Premises, or if Landlord is in breach
or in default of any such mortgage or deed of trust in any respect, and the
holder thereof shall have declared a default thereunder, Tenant shall have the
right but not the duty, after written notice to Landlord, to make all payments
of Fixed Rent and other charges thereafter becoming due under this Lease to the
mortgagee or beneficiary thereunder in lieu of Landlord, and payments so made
shall discharge the obligation of Tenant hereunder with respect to such
payments.
26. NOTICES
26.1 Any notice required to be given under the terms of this Lease shall be
in writing, shall be sent by hand delivery, nationally recognized overnight
courier, or by U.S. mail, postage prepaid, via registered or certified mail
return receipt requested, and shall be effective upon the earlier of: (i)
receipt, or (ii) refusal to accept or attempted delivery to Landlord or Tenant
to the following addresses:
TENANT: Barnes & Noble Superstores, Inc.
122 Fifth Avenue
New York, New York 10011
Attention: Mitchell S. Klipper, Executive Vice President
with a copy to the same address, Attention: Lease Administration. For invoices
or statements, an additional copy shall be sent to Tenant at the following
address:
Accounts Payable Department
1400 Old Country Road
Westbury, New York 11590
Attention: Property Accounting
and also copy to: Drenner & Stuart, L.L.P.
301 Congress Avenue
Suite 2100
Austin, Texas 78701
Attention: Michael L. Robertson, Esq.
LANDLORD: OLP Ft. Myers, Inc.
60 Cutter Mill Road, Suite 303
Great Neck, New York 11021
Attention: Matthew J. Gould
with a copy to: OLP Ft. Myers, Inc.
60 Cutter Mill Road, Suite 303
Great Neck, New York 11021
Attention: Mark H. Lundy, Esq.
<PAGE>
26.2 Payments of Fixed Rent and other charges shall be forwarded to
Landlord at the address set forth on page 1 hereof via first class mail. If at
any time, or from time to time, there shall be more than one Landlord, the
Landlords shall designate a party to receive all notices and rent payments, and
service upon or payment to the designated party shall constitute service upon or
payment to all. Tenant shall not be required to issue multiple checks for any
single payment of Fixed Rent or other charges hereunder.
26.3 Either party may designate a new address for notice hereunder upon ten
(10) days' advance written notice to the other party in the manner set forth in
Paragraph 26.1 above.
27. MEMORANDUM OF LEASE
Landlord agrees, upon Tenant's request, to execute a Memorandum of Lease in
the form of Exhibit G. Tenant may record the Memorandum of Lease at its expense
following the Commencement Date. The provisions of this Lease shall control,
however, in regard to any omissions from the Memorandum of Lease or any
provisions hereof which may be in conflict with the Memorandum of Lease.
28. LIENS
If because of any act or omission of Tenant a mechanic's or other lien
shall be filed against the Premises, notwithstanding the provisions of Paragraph
11.5 above, Tenant shall, at Tenant's own cost and expense, within thirty (30)
days after notice of the filing thereof, cause the same to be cancelled and
discharged of record, or shall furnish Landlord with a surety bond issued by a
surety company protecting Landlord from any loss because of non-payment of such
lien claim. In the event Tenant posts a surety bond, Tenant shall be entitled to
contest any such lien claims by appropriate judicial proceedings.
29. (INTENTIONALLY OMITTED)
30. FORCE MAJEURE
Landlord and Tenant shall be excused for the period of any delay in
performance of any obligations hereunder when prevented from doing so by the
wrongful or negligent acts or omissions of the other party or by causes beyond
either party's control, which shall include all labor disputes, civil
disturbance, war, war-like operations, invasions, rebellion, hostilities,
military or usurped power, sabotage, governmental regulations or controls, fires
or other casualty, inability to obtain any material or service or acts of God.
Notwithstanding the foregoing, nothing contained in this Article shall excuse
either party from paying in a timely fashion any payments due under the terms of
this Lease.
31. BROKERS
Tenant and Landlord represent and warrant to each other that such party has
not had any dealings with any realtor, broker or agent in connection with this
Lease or the negotiation hereof, and each party agrees to defend, indemnify and
<PAGE>
hold the other party harmless from any cost, expense or liability,
including reasonable attorney's fees, for any breach of this representation.
Notwithstanding the foregoing, both Landlord and Tenant acknowledge that
Staubach Real Estate Services has acted as broker relative to the sale of the
Premises from Tenant to Landlord, and such broker's commission relative to such
sale and this Lease has been paid in full at the closing of such sale.
32. LANDLORD'S SUBORDINATION
Within fifteen (15) days after request from Tenant, Landlord shall execute
a subordination agreement in favor of any lender subordinating any liens arising
in favor of Landlord with respect to Tenant's trade fixtures and personal
property. Such subordination agreement shall be in a form reasonably acceptable
to Landlord, Tenant and Tenant's lender.
33. ESTOPPEL CERTIFICATES
Within fifteen (15) days after written request from a party hereto, the
other party shall execute, acknowledge and deliver to the requesting party an
estoppel certificate certifying: (i) that this Lease is unmodified and in full
force and effect (or, if there have been modifications, that this Lease is in
full force and effect, as modified, and stating the date and nature of each
modification; (ii) the date to which rental and other sums payable hereunder
have been paid; (iii) that no notice has been received by such other party of
any default which has not been cured, except as to defaults specified in the
estoppel certificate; and (iv) such other matters as may reasonably be requested
by the other party, its lender, assignee or purchaser (or proposed lender,
assignee or purchaser). Any such estoppel certificate may be relied upon by any
such purchaser, lender or assignee for estoppel purposes only, as an absolute
bar to any inconsistent action, allegation or position by Tenant, and no party
executing such estoppel certificate shall otherwise be liable for damages or
other losses as a result of inaccuracy in the information contained in such
estoppel certificate.
34. INTENTIONALLY DELETED
35. MISCELLANEOUS
35.1 The failure of Landlord or Tenant to insist upon prompt and strict
performance of any of the terms, conditions or undertakings of this Lease, or to
exercise any right herein conferred, in any one or more instances, shall not be
construed as a waiver of the same or any other term, condition, undertaking,
right or option.
35.2 The terms, covenants, agreements, conditions and undertakings
contained herein shall be binding upon and shall inure to the benefit of the
heirs, successors in interest and assigns of the parties hereto. Where more than
one party shall be the Landlord under this Lease, the word "Landlord" whenever
used in this Lease shall include all Landlords jointly and severally.
<PAGE>
35.3 This Lease contains the entire agreement between the parties hereto
and no representations, inducements, promises or agreements, oral or otherwise,
entered into prior to the execution of this Lease, will alter the covenants,
agreements and undertakings herein set forth. This Lease shall not be modified
in any manner, except by an instrument in writing executed by all parties.
35.4 If any term or provision of this Lease or the application thereof to
any person or circumstance shall, to any extent, be invalid or unenforceable,
the remainder of this Lease, or the application of such term or provision to
persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby and each term and provision of this
Lease shall be valid and be enforced to the fullest extent permitted by law. The
terms and provisions of this Lease shall not be construed against or in favor of
a party hereto merely because such party or its counsel is the draftsman of this
Lease.
35.5 All of the terms and words used in this Lease, regardless of the
number and gender in which they were used, shall be deemed and construed to
include any other number (singular and plural), and any other gender (masculine,
feminine or neuter), as the context or sense of this Lease or any paragraph or
clause hereof may require, the same as if the words had been fully and properly
written in the number and gender.
35.6 Any reference contained in this Lease to the "Effective Date" or
similar terms shall mean the last date on which any party required to execute or
initial this Lease does so, and such date shall be set forth in the first
paragraph of this Lease where indicated.
35.7 Tenant and Landlord each warrant and represent that the party signing
this Lease on behalf of each has authority to enter into this Lease and to bind
Tenant and Landlord, respectively, to the terms, covenants and conditions
contained herein. Each party shall deliver to the other, upon request, all
documents reasonably requested by the other evidencing such authority, including
a copy of all corporate resolutions, consents or minutes reflecting the
authority of persons or parties to enter into agreements on behalf of such
party.
35.8 Article or Paragraph headings or captions contained herein are
provided for convenience purposes only and shall not be considered in any way in
connection with the construction of the substantive terms and provisions of this
Lease.
35.9 This Lease shall be governed by and construed and enforced in
accordance with the internal substantive laws (but not the rules governing
conflicts of laws) of the state in which the Premises is located.
35.10 In the event either party hereto initiates litigation or hires legal
counsel to enforce or protect its rights under this Lease, the prevailing party
shall be entitled to recover from the unsuccessful party, in addition to any
other damages or relief awarded or obtained, all court costs and reasonable
attorneys', paralegals' and experts' fees and costs incurred in connection with
such litigation or action by legal counsel before trial, at trial and upon
appeal.
<PAGE>
35.11 Nothing contained in this Lease shall be construed to create a
partnership, joint venture or relationship of principal and agent between
Landlord and Tenant. No provision of this Lease shall be construed to confer any
rights or remedies upon any party other than Landlord and Tenant.
35.12 When used herein, the terms "including" and "includes" and similar
words or phrases shall be deemed to be terms of illustration only and not
limitation.
35.13 Landlord and Tenant acknowledge and agree that both parties intend
that this Lease shall be and constitute what is generally referred to as a
"triple net" or "absolute net" lease, such that, except as expressly provided
herein, Tenant shall be obligated hereunder to pay all costs and expenses
incurred with respect to, and associated with, the Premises and the business
operated thereon and therein; provided, however, that Landlord shall nonetheless
be obligated to pay any debt service on any mortgage encumbering Landlord's fee
simple interest in the Premises, and Landlord's personal income taxes with
respect to the rents received by Landlord under this Lease. Except as expressly
hereinabove provided, Landlord shall bear no cost or expense of any type or
nature with respect to, or associated with, the Premises.
35.14 TENANT AND LANDLORD HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT EITHER OF THEM OR THEIR HEIRS,
PERSONAL REPRESENTATIVES, SUCCESSORS OR ASSIGNS MAY HAVE TO A TRIAL
BY JURY IN RESPECT TO ANY LITIGATION ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS LEASE OR ANY AGREEMENT CONTEMPLATED TO BE
EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF
ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT TO LANDLORD'S
ACCEPTING THIS LEASE.
35.15 This Lease Agreement may be executed in multiple counterparts, each
of which shall be deemed an original and all of which together shall constitute
one and the same document.
36. EXHIBITS
All Exhibits referred to herein shall be considered a part hereof for all
purposes with the same force and effect as if copied at full length herein. The
Exhibits attached hereto are listed as follows:
EXHIBIT A - Legal Description
EXHIBIT B - Site Plan of the Premises
EXHIBIT C - (Intentionally Omitted)
EXHIBIT D - Tenant's Final Plans
EXHIBIT E - Tenant's Work Letter Regarding Tenant's Improvements
EXHIBIT F - Subordination, Non-Disturbance and Attornment Agreement
EXHIBIT G - Memorandum of Lease
EXHIBIT H - Guaranty of Lease
<PAGE>
37. GUARANTY OF LEASE
Concurrently with Tenant's execution and delivery of this Lease to
Landlord, Tenant shall cause its parent corporation, Barnes & Noble, Inc. (the
"Guarantor"), to execute and deliver to Landlord the Guaranty of Lease in the
form attached hereto as Exhibit H.
EXECUTED by Landlord and Tenant on the respective dates set forth
below, but effective as of the Effective Date.
WITNESSES: LANDLORD:
OLP FT. MYERS, INC.
/s/Mark H. Lundy
Name: Mark H. Lundy
By:/s/Matthew J. Gould Name:Matthew J. Gould
/s/ Dennis Hartin Title: President
Name: Dennis Hartin Date executed by Landlord: November 6, 1996
TENANT:
BARNES & NOBLE SUPERSTORES, INC.
/s/Jean M. Bollerman By:/s/Mitchell S. Klipper Name:Mitchell S. Klipper
Name: Jean M. Bollerman Title:Executive Vice President
Date executed by Tenant: November 6, 1996
/s/ Elizabeth S. Canare
Name: Elizabeth S. Canare
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
EXHIBIT B
SITE PLAN OF THE PREMISES
Site Plan prepared by Johnson Engineering, Inc., Ft. Myers, Florida,
dated June 1995, Project No. 20057, File No. 24-45-24, Sheet 2 of 6.
EXHIBIT C
(INTENTIONALLY OMITTED)
EXHIBIT D
TENANT'S FINAL PLANS
EXHIBIT E
TENANT'S WORK LETTER
REGARDING TENANT'S IMPROVEMENTS
This Tenant's Work Letter Regarding Tenant's Improvements ("Work Letter")
forms a part of that certain Lease Agreement (the "Lease") to which it is
attached, and sets forth various agreements regarding the Tenant's Improvements
(as defined below). If there is a conflict between the terms and provisions of
this Work Letter and the Lease, this Work Letter shall control. Terms which have
initial capital letters and are not otherwise defined in this Work Letter shall
have the meaning set forth in the Lease.
This Work Letter is a part of the Lease and shall be subject to all of its
terms and conditions, including all definitions contained therein. In
consideration of the mutual covenants hereinafter contained, Landlord and Tenant
mutually agree as set forth below.
SECTION I
PLANNING AND CONSTRUCTION DOCUMENTS
1.1 Final Plans. Landlord and Tenant have mutually approved the final plans
and specifications (the "Final Plans") for the Premises, as such Final Plans are
described on Exhibit D attached to the Lease. SECTION II
CONSTRUCTION OF TENANT'S IMPROVEMENTS
2.1 Tenant's Improvements. Tenant has, at Tenant's sole expense, completed
the construction of the improvements located on the Premises in substantial
accordance with the requirements of the Lease, this Work Letter and applicable
Legal Requirements, all in substantial conformance with the Final Plans, which
improvements shall constitute the "Tenant's Improvements." All of Tenant's
Improvements are and shall remain Landlord's property and shall be surrendered
to Landlord upon expiration or earlier termination of the Lease in accordance
with the provisions of the Lease.
2.2 Landlord's Obligations. Landlord is under no obligation to construct or
supervise construction of any of the Tenant's Improvements and any inspection by
Landlord shall not be construed as a representation that the Tenant's
Improvements are in compliance with the final plans and specifications therefor
or that the construction is free from faulty material or workmanship or that the
Tenant's Improvements are in conformance with any building codes or other
applicable regulations. All of the Tenant's Improvements have been undertaken
and performed in accordance with the provisions of the Lease, this Work Letter
and Legal Requirements.
<PAGE>
SECTION III
(INTENTIONALLY OMITTED)
SECTION IV
TENANT AND LANDLORD OBLIGATIONS
4.1 Conformance with Laws, Etc. All of Tenant's Improvements and Tenant
Work have been done in substantial conformity with applicable codes and
regulations of governmental authorities having jurisdiction over the project and
the Premises and all applicable restrictive covenants or other title exceptions
affecting the Premises, valid building permits and other necessary
authorizations from appropriate governmental agencies, when required, having
been obtained by Tenant at Tenant's expense and in accordance with the
requirements of the Lease and this Work Letter. Any of Tenant's Improvements not
acceptable to the applicable governmental authority shall be promptly corrected,
replaced or brought into compliance with such applicable codes and regulations
at Tenant's expense. Notwithstanding any failure by Landlord to object to any
such Tenant Work, Landlord shall have no responsibility therefor.
4.2 Liens. Without limiting the obligations of Tenant under Article 11 of
the Lease or otherwise, Tenant shall keep the Premises free from any mechanics',
materialmen's or other liens arising out of any work performed upon or materials
or furniture, fixtures or improvements delivered to the Premises including but
not limited to any Tenant's Improvement work performed, materials furnished or
obligations incurred by or for Tenant or any person or entity claiming by,
through or under Tenant. Landlord shall have the right at all times to post and
keep posted on the Premises any notices which it deems necessary for its
protection from such liens. If any such liens are filed and are not released of
record by payment or posting of a proper bond within thirty (30) days after such
filing, Landlord, may, without waiving its rights and remedies based on such
breach by Tenant and without releasing Tenant from any obligations hereunder or
under the Lease, cause such liens to be released by any means it shall deem
proper, including payment of the claim giving rise to such lien in which event
all amounts paid by Landlord shall immediately be due and payable by Tenant.
SECTION V
MISCELLANEOUS
5.1 Sole Obligations. Except as herein expressly set forth with respect to
the Tenant's Improvements, Landlord has no agreement with Tenant and has no
obligation to do any work with respect to the Premises. Any other work in the
Premises which may be permitted pursuant to the terms and conditions of the
Lease, including any alterations or improvements as contemplated in the Lease,
shall be done at Tenant's sole cost and expense and in accordance with the terms
and conditions of the Lease.
5.2 Applicability. This Work Letter shall not be deemed applicable to: (a)
any additional space added to the original Premises at any time, whether by the
exercise of any options under the Lease or otherwise, (b) any portion of the
original Premises or any additions thereto in the event of a renewal or
extension of the original Lease Term, whether by the exercise of any options
under the Lease or any amendment or supplement thereto or (c) any other work
other than as described herein or under the Final Plans.
5.3 Binding on Successors. Subject to the limitations on assignment and
subletting contained in the Lease, this Work Letter shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns.
5.4 Time of the Essence. Time is of the essence as to each and every term
and provision of this Work Letter. Except as otherwise provided, all references
herein to a "number of days" shall mean and refer to calendar days.
5.5 Attorneys' Fees. In any action to enforce or interpret the terms of
this Work Letter, the party prevailing in that action shall be entitled to
recover its reasonable attorneys' fees and costs of suit, both at trial and on
appeal.
5.6 Incorporation. This Work Letter is and shall be incorporated by
reference in the Lease and all of the terms and provisions of the Lease are
incorporated herein for all purposes. Except as expressly stated herein or in
the Lease, nothing contained herein shall limit Tenant's obligations under the
Lease. Any default by Tenant hereunder also constitutes a default under the
Lease, subject to the notice and cure provisions set forth therein.
<PAGE>
EXHIBIT F
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
THIS AGREEMENT is entered into as of the day of , 1996, between , a , with
a place of business at ("Mortgagee"), and Barnes & Noble Superstores, Inc., a
Delaware corporation, having an office at 122 Fifth Avenue, New York, New York
10011 ("Tenant").
Recitals
A. Mortgagee has made a loan to ("Landlord") in the original
principal amount of $ (the "Loan").
B. Mortgagee is the holder of a mortgage or deed of trust securing the Loan
(the "Mortgage") covering that certain parcel of land owned by Landlord and
described on Exhibit A, attached hereto and made a part hereof, together with
the improvements erected thereon, commonly known as " " (the "Premises").
C. By a certain Lease entered into between Landlord and Tenant, dated as of
_________________, 1996 (the "Lease"), Landlord leased the Premises to Tenant.
D. A copy of the Lease has been delivered to Mortgagee, the receipt of
which is hereby acknowledged.
E. The parties hereto desire to effect the subordination of the Lease to
the Mortgage and to provide for the non-disturbance of Tenant by, and the
attornment by Tenant to, the holder of the Mortgage or any purchaser under a
foreclosure or deed in lieu thereof.
Agreement
In consideration of the premises and the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
1. Mortgagee hereby consents to and approves the Lease and all of the
terms and conditions thereof.
2. Tenant covenants and agrees with Mortgagee that the Lease is hereby made
and shall continue hereafter to be subject and subordinate to the lien of the
Mortgage, and to all modifications and extensions thereof, with the same force
and effect as if the Mortgage had been executed and delivered prior to the
execution and delivery of the Lease and without regard to the order of priority
of recording the Mortgage, subject, however, to the provisions of this
Agreement.
<PAGE>
3. Tenant certifies that the Lease is presently in full force and effect
and unmodified and Tenant as of this date has no knowledge of any default,
charge, lien or claim of offset under the Lease.
4. Tenant shall give prompt written notice to Lender of all defaults by
Landlord of those obligations under the Lease which are of such a nature as to
give Tenant a right to terminate the Lease, to reduce rent, or to credit or
offset any amounts against future rents, and Lender shall have an additional ten
(10) days (but shall not be required) to cure the same in addition to the
applicable cure periods provided for under the Lease. No person or entity who
exercises a right, arising under the Mortgage or security instruments related
thereto or any assignment of the Lease, to receive the rents payable by Tenant
under the Lease shall thereby become obligated to Tenant for the performance of
any of the terms, covenants, conditions and agreements of Landlord under the
Lease until and unless (and only to the extent of obligations relating to
periods after) such person or entity obtains possession of the Premises. Tenant
shall make the payments to be made by Tenant under the Lease to such person or
entity upon receipt of written notice of the exercise of such rights. Such
receipt of rent by any other party shall not relieve Landlord of its obligations
under the Lease, and Tenant shall continue to look to Landlord only for
performance thereof until and unless (and only to the extent of obligations
relating to periods after) such other person or entity obtains possession of the
Premises.
5. Mortgagee agrees that, so long as Tenant is not in default under the
Lease:
(a) Tenant shall not be named or joined as a party or otherwise in any
suit, action or proceeding for foreclosure by the Mortgagee or to enforce any
rights under the Mortgage or the Loan.
(b) The possession by Tenant of the Premises and Tenant's rights under the
Lease shall not be disturbed, affected or impaired by (i) any suit, action or
proceeding under the Mortgage or the Loan or for foreclosure under the Mortgage,
or any other enforcement of any rights under the Mortgage or any other documents
pertaining to the Loan, (ii) any judicial or nonjudicial foreclosure, sale or
execution of the Premises, or any deed given in lieu of foreclosure, or (iii)
any default under the Mortgage or the Loan.
(c) All condemnation awards and insurance proceeds paid or payable with
respect to the Premises and received by Mortgagee shall be applied and paid in
the manner set forth in the Lease.
(d) Neither the Mortgage nor any other security instrument executed in
connection with the Loan shall cover or be construed as subjecting in any manner
to the lien thereof any trade fixtures, signs or other personal property at any
time furnished or installed by or for Tenant in or on the Premises.
6. If Mortgagee or any future holder of the Mortgage or any other
transferee under the Mortgage shall become the owner of the Premises by reason
of foreclosure of the Mortgage, or if the Premises shall be sold as a result of
any action or proceeding to foreclose the Mortgage, or by transfer of ownership
by deed given in lieu of foreclosure, the Lease shall continue in full force and
<PAGE>
effect, without necessity for executing any new lease, as a direct lease
between Tenant and the then owner of the Premises as "Landlord" under the Lease,
upon all of the same terms, covenants and provisions contained in the Lease, and
in such event:
(a) Tenant shall be bound to such new owner under all of the terms,
covenants and provisions of the Lease for the remainder of the term thereof
(including also any extension periods, if Tenant elects or has elected to
exercise its option to extend the term) and Tenant hereby agrees to attorn to
such new owner and to recognize such new owner as "Landlord" under the Lease;
and
(b) Such new owner shall be bound to Tenant under and hereby assumes all of
the terms, covenants and provisions of the Lease for the remainder of the term
thereof (including also any extension periods, if Tenant elects or has elected
to exercise its option to extend the term), and Tenant shall, from and after the
date such new owner succeeds to the interest of "Landlord" under the Lease, have
the same remedies against such new owner for the breach of any covenant
contained in the Lease; provided, however, that such new owner shall not (i) be
bound by any rent or additional rent which Tenant might have paid for more than
one month in advance to any prior landlord (including Landlord), or (ii) be
liable in any respect, whether by setoff under the Lease or otherwise (except
and other than for setoff rights specifically provided under the Lease), for any
breach of the Lease by or other act or omission of any prior landlord (including
Landlord), (iii) be bound by any amendment or modification of the Lease made
without Mortgagee's consent which would reduce fixed annual rent or any other
monetary obligation of Tenant or otherwise reduce any material right or benefit
to the Landlord under the Lease or (iv) be in any way responsible for any
deposit or security which was delivered to Landlord but which was not
subsequently delivered to Mortgagee..
7. Any notices or communications given under this Agreement shall be in
writing and shall be deemed given on the earlier of actual receipt or three (3)
days after deposit in the U.S. Mail, by registered or certified mail, return
receipt requested, postage prepaid, at the respective addresses set forth above,
or at such other address as the party entitled to notice may designate by
written notice as provided herein.
8. This Agreement shall bind and inure to the benefit the parties hereto
and their respective successors and assigns.
9. This Agreement contains the entire agreement between the parties and
cannot be changed, modified, waived or cancelled except by an agreement in
writing executed by the parties against whom enforcement of such modification,
change, waiver or cancellation is sought.
10. THIS AGREEMENT AND THE COVENANTS CONTAINED HEREIN SHALL RUN WITH AND SHALL
BIND THE LAND ON WHICH THE PREMISES IS LOCATED.
<PAGE>
EXECUTED as of the date first written above.
MORTGAGEE:
____________________________________________
By:_________________________________________
Name:_______________________________________
Title:______________________________________
TENANT:
BARNES & NOBLE SUPERSTORES, INC.
By:_________________________________________
Name:_______________________________________
Title:______________________________________
STATE OF
COUNTY OF
The foregoing instrument was acknowledged before me this day of , 1996, by
, as of ,a , on behalf of such . He/She is personally known to me or produced as
identification.
(NOTARY SEAL)
Printed Name:
Notary Public,
State of Commission #:
My commission expires:
<PAGE>
STATE OF
COUNTY OF
This instrument was acknowledged before me this ____ day of ________, 1996,
by , as of BARNES & NOBLE SUPERSTORES, INC., a Delaware corporation, on behalf
of said corporation. He/She is personally known to me or as produced as
identification.
(NOTARY SEAL) Printed Name:
Notary Public,
State of
Commission #:
My commission expires:
<PAGE>
EXHIBIT G
MEMORANDUM OF LEASE
THIS MEMORANDUM OF LEASE is entered into as of the day ,
1996 (the "Commencement Date"), by and between OLP FT. MYERS, INC., a Florida
corporation ("Landlord"), and BARNES & NOBLE SUPERSTORES, INC., a Delaware
corporation ("Tenant").
1. Pursuant to a Lease Agreement (the "Lease") executed by Landlord and
Tenant, dated of even date herewith, Landlord has leased and does hereby lease
to Tenant certain land described in Exhibit A attached hereto, together with all
improvements constructed or to be constructed thereon and all of Landlord's
appurtenant rights, privileges and easements (collectively, the "Premises").
2. The term of the Lease commenced on the Commencement Date set forth above
and shall expire upon the expiration of the twentieth (20th) Lease Year as
determined by the provisions of the Lease.
3. Tenant has an option to extend the term of the Lease for four (4)
periods of five (5) years each, on the same terms and conditions as stated in
the Lease.
4. By the terms of the Lease, Landlord's interest in the Premises may not
be subjected to liens of any nature by reason of Tenant's construction,
alteration, repair, restoration, replacement or reconstruction of any
improvements on or in the Premises, including those arising in connection with
or as an incident to the renovation of the improvements located on the Premises,
or by reason of any other act or omission of Tenant (or of any person claiming
by, through or under Tenant) including, but not limited to, mechanics' and
materialmen's liens. Accordingly, all persons dealing with Tenant are hereby
placed on notice that such persons shall not look to Landlord or to Landlord's
credit or assets (including Landlord's interest in the Premises) for payment or
satisfaction of any obligations incurred in connection with the construction,
alteration, repair, restoration, renovation, replacement or reconstruction
thereof by or on behalf of Tenant. Tenant has no power, right or authority to
subject Landlord's interest in the Premises to any mechanic's or materialmen's
lien or claim of lien.
5. This Memorandum of Lease is subject to all of the terms, conditions and
understandings set forth in the Lease, which are incorporated herein by
reference and made a part hereof, as though copied verbatim herein. The
provisions of this Memorandum of Lease constitute only a general description of
the content of the Lease with respect to matters set forth herein. Accordingly,
third parties are advised that the provisions of the Lease itself shall be
controlling with respect to all matters set forth herein. In the event of any
discrepancy between the provisions of the Lease and this Memorandum of Lease,
the provisions of the Lease shall take precedence and prevail over the
provisions of this Memorandum of Lease.
6. All rights of Tenant shall terminate upon the expiration or earlier
termination of the Lease, which may be evidenced by a written affidavit of such
<PAGE>
expiration or termination recorded or filed by Landlord among the appropriate
land records of the County in which the Premises is located.
EXECUTED as of the date first written above.
WITNESSES: LANDLORD:
OLP FT. MYERS, INC.
By: Name:
Name:
Title:
Date executed by Landlord: , 1996
Name:
TENANT:
BARNES & NOBLE SUPERSTORES, INC.
By:
Name:
Name:
Title:
Date executed by Tenant: , 1996
Name:
<PAGE>
STATE OF
COUNTY OF
The foregoing instrument was acknowledged before me this day of , 1996, by
, as of OLP FT. MYERS, INC., a Florida corporation, on behalf of said
corporation. He/She is personally known to me.
(NOTARY SEAL)
Printed Name:
Notary Public, State of
Commission #:
My commission expires:
STATE OF
COUNTY OF
The foregoing instrument was acknowledged before me this day of
, 1996, by , as
of BARNES & NOBLE SUPERSTORES, INC., a Delaware corporation, on behalf of said
corporation. He/She is personally known to me.
(NOTARY SEAL)
Printed Name:
Notary Public, State of
Commission #:
My commission expires:
<PAGE>
EXHIBIT H
GUARANTY OF LEASE
THIS GUARANTY OF LEASE (this "Guaranty") is made as of the day of , 19
, by Barnes & Noble, Inc., a Delaware corporation, whose address is 122 Fifth
Avenue, New York, New York 10011, hereinafter referred to as "Guarantor."
WITNESSETH:
A. , hereinafter referred to as "Landlord," and Barnes & Noble Superstores,
Inc., a Delaware corporation, hereinafter referred to as "Tenant," have executed
a certain Lease Agreement dated , 19 (the "Lease"), with respect to certain
premises containing approximately square feet of leasable area within the
shopping center known as , City of , State of (the "Premises").
B. In order to induce Landlord to lease the Premises to Tenant, Guarantor
has agreed to guarantee the performance of all of the terms, conditions,
covenants, obligations, liabilities and agreements contained in said Lease which
are required to be fulfilled or performed by Tenant, subject to, and in
accordance with the terms and provisions of, this Guaranty.
NOW, THEREFORE, in consideration of the premises set forth herein,
Guarantor does hereby agree as follows:
1. Guarantor hereby absolutely and unconditionally guarantees the full and
complete payment, fulfillment and performance of all of the terms, conditions,
covenants, obligations and liabilities required to be fulfilled or performed by
Tenant under the Lease (collectively called "Guaranteed Obligations"), including
but not limited to any and all payments to be made by Tenant under the Lease;
provided that Landlord shall give Guarantor notice of any Tenant default under
the Lease, at the address set forth above (or any subsequent address of which
Guarantor gives Landlord written notice in the manner provided for pursuant to
the Lease) and at the same time and in the same manner as notice to Tenant as
provided for under the Lease, and shall afford Guarantor the same period of time
to cure such default as provided under the Lease.
2. Guarantor waives exhaustion or recourse against Tenant and agrees that
Landlord shall not be first required to enforce against Tenant or any other
person any liability, obligation or duty guaranteed hereby before seeking
enforcement thereof against Guarantor. Suit may be brought and maintained
against Guarantor by Landlord to enforce any liability, obligation or duty
guaranteed hereby without joinder of Tenant or any other person. The liability
of Guarantor hereunder shall not be affected by any indulgence, compromise,
settlement or variation of terms which may be extended to Tenant by Landlord or
<PAGE>
as may otherwise be agreed upon by Landlord and Tenant, and shall not be
impaired, modified, changed, released or limited in any manner whatsoever by any
impairment, modification, change, release or limitation of the liability of
Tenant, or its estate in bankruptcy. Landlord and Tenant, without notice to or
consent by the undersigned Guarantor, may at any time or times enter into such
extensions, amendments or other covenants with respect to the Lease as they may
deem appropriate, and the undersigned Guarantor shall not be released thereby,
but shall continue to be fully liable for the payment and performance of all
liabilities, obligations and duties of Tenant under the Lease as so extended,
amended or otherwise modified.
3. Guarantor agrees that if Landlord shall employ an attorney to present,
enforce or defend Landlord's rights or remedies hereunder, Guarantor shall pay
any reasonable attorneys' fees, related legal expenses and costs of court
incurred by Landlord in connection therewith.
4. Except as otherwise expressly provided in this Guaranty, Guarantor
waives notice of acceptance of this Guaranty and notice of any liability to
which it may apply, and waives presentment, demand of payment or performance,
protest, notice of dishonor, nonpayment or nonperformance of any such
liabilities, and all other notices and demands of any kind and description
relating to the Guaranteed Obligations now or hereafter provided for by any
statute, law, rule or regulation.
5. The provisions of this Guaranty shall inure to the benefit of Landlord
and its successors and assigns.
6. No invalidity, irregularity or unenforceability of all or any part of
the Guaranteed Obligations or of any security or other recourse will affect,
impair or be a defense to this Guaranty. This Guaranty is a primary obligation
of Guarantor.
7. Guarantor represents and warrants that this Guaranty is a binding, legal
obligation of Guarantor.
8. This Guaranty is governed by the laws of the State of Florida.
9. Until all terms, covenants and conditions of the Lease and this Guaranty
are fully performed, Guarantor will not be released by any act or thing which
might, but for this provision, be deemed a legal or equitable discharge of a
surety.
<PAGE>
IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the date
first above written.
WITNESSES:
GUARANTOR:
BARNES & NOBLE, INC.
Name:
By:
Name:
Mitchell S. Klipper, Executive Vice President
<PAGE>
EXHIBIT 21.1
Subsidiaries of the Company
Company State of Incorporation
OLP Action, Inc. Michigan
OLP Arby's II South Carolina
OLP Iowa, Inc. Delaware
OLP Texas, Inc. Texas
OLP-TSA Georgia, Inc. Georgia
OLP Dixie Drive Houston, Inc. Texas
OLP Greenwood Village,
Colorado, Inc. Colorado
OLP Ft. Myers, Inc. Florida
OLP Rabro Drive Corp. New York
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET
AND STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000712770
<NAME> ONE LIBERTY PROPERTIES, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,479
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 52,523
<CURRENT-LIABILITIES> 0
<BONDS> 16,847
12,951
0
<COMMON> 1,474
<OTHER-SE> 15,969
<TOTAL-LIABILITY-AND-EQUITY> 52,523
<SALES> 0
<TOTAL-REVENUES> 5,512
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,326
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,174
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,174
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,174
<EPS-PRIMARY> .50
<EPS-DILUTED> .50
</TABLE>
