UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [NO FEE REQUIRED]
For the fiscal year ended
December 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED]
For the transition period from
to
Commission file number
0-11985
Krupp Realty Limited
Partnership-V
(Exact name of registrant as specified in its
charter)
Massachusetts
04-2796207 (State or
other jurisdiction of
(IRS Employer
incorporation or organization)
Identification No.)
470 Atlantic Avenue, Boston, Massachusetts
02210
(Address of principal executive offices)
(Zip Code)
(Registrant's telephone number, including area
code) (617) 423-2233
Securities registered pursuant to Section
12(b) of the Act: None
Securities registered pursuant to Section
12(g) of the Act: Units of Investor
Limited Partner
Interest
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the
registrant was required to file such reports),
and (2) has been subject to such filing
requirements for the past 90 days. Yes X
No
Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and
will not be contained, to the best of
registrant's knowledge, in definitive proxy or
information statements incorporated by
reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ].
Aggregate market value of voting securities
held by non-affiliates: Not applicable.
Documents incorporated by reference: Part IV,
Item 14.
The exhibit index is located on pages 9-12.
The total number of pages in this document is
30.<PAGE>
PART I
This Form 10-K contains forward-looking
statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934.
Actual results could differ materially from
those projected in the forward-looking
statements as a result of a number of factors,
including those identified herein.
ITEM 1. BUSINESS
Krupp Realty Limited Partnership-V ("KRLP-V")
was formed on June 16, 1983 by filing a
Certificate of Limited Partnership in The
Commonwealth of Massachusetts. The Krupp
Corporation (a Massachusetts corporation) and
The Krupp Company Limited Partnership-II (a
Massachusetts limited partnership) are the
General Partners of KRLP-V. KRLP-V issued
all of the Original Limited Partner Interests
to The Krupp Company Limited Partnership-II.
On September 6, 1983, KRLP-V, pursuant to a
sales agent agreement, commenced the marketing
and sale of units of Investor Limited Partner
Interest ("Units") for $1,000 per Unit, 35,200
of which were sold. For further details, see
Note A to Consolidated Financial Statements
included in Item 8 (Appendix A) of this
report.
KRLP-V considers itself to be engaged only in
the industry segment of investment in real
estate. KRLP-V invested the net proceeds from
the offering in leveraged real estate. KRLP-V
originally invested in four multi-family
apartment complexes (Century II, Marine
Terrace, Fieldcrest Apartments and Park Place
Tower Apartments) and a joint venture in
Lakeview Tower Apartments (the "Joint
Venture") with Krupp Realty Limited
Partnership-IV, an affiliated limited
partnership. The aggregate purchase price of
the properties was approximately $67 million
and KRLP-V originally funded approximately
$2.3 million to the Joint Venture.
On March 20, 1989, the General Partners formed
Krupp Realty Park Place-Chicago Limited
Partnership ("Realty-V") as a prerequisite for
the refinancing of Park Place Tower Apartments
("Park Place"). At the same time, the General
Partners transferred ownership of Park Place
to Realty-V. The General Partner of Realty-V
is The Krupp Corporation ("Krupp Corp."). The
Limited Partner of Realty-V is KRLP-V. Krupp
Corp. has beneficially assigned its interest
in Realty-V to KRLP- V. KRLP-V and Realty-V
are collectively known as Krupp Realty Limited
Partnership-V and Subsidiary (collectively
referred to herein as the "Partnership").
The Partnership sold two of its apartment
complexes, Fieldcrest Apartments and Marine
Terrace, in 1992 and 1995, respectively. The
Partnership also received a distribution of
proceeds from the sale of the Joint Venture in
1992.
The Partnership's real estate investments are
subject to some seasonal fluctuations
resulting from changes in utility consumption
and seasonal maintenance expenditures.
However, the future performance of the
Partnership will depend upon factors which
cannot be predicted. Such factors include
general economic and real estate market
conditions, both on a national basis and in
those areas where the Partnership's real
estate investments are located, real estate
tax rates, operating expenses, energy costs,
government regulations and federal and state
income tax laws. The requirements for
compliance with federal, state and local
regulations to date have not had an adverse
effect on the Partnership's operations, and no
adverse effect therefrom is anticipated in the
future.
The Partnership's investments in real estate
are also subject to such risks as (i)
competition from existing and future projects
held by other owners in the locations of the
Partnership's properties, (ii) fluctuations
in rental income due to changes in occupancy
levels, (iii) possible adverse changes in
mortgage interest rates, (iv) possible
adverse changes in general economic and local
conditions, such as competitive over-building,
increases in unemployment, or adverse changes
in real estate zoning laws, (v) the possible
future adoption of rent control legislation
which would not permit the full amount of
increased costs to be passed on to tenants in
the form of rent increases, and (vi) other
circumstances over which the Partnership may
have little or no control.
As of December 31, 1997, the Partnership did
not employ any personnel.
ITEM 2. PROPERTIES
As of December 31, 1997, the Partnership had
leveraged investments in two apartment
complexes having an aggregate of 1,369 units.
One of the complexes has an additional 18,417
square feet of leasable commercial space.
A summary of the Partnership's real estate
investments is presented below. Schedule III
included in Item 8 (Appendix A) of this report
contains additional detailed information with
respect to individual properties.
<TABLE>
<CAPTION>
Total Units/ Average Occupancy
Current For the Year Ended
Year of Leasable December 31,
DescriptionAcquisitionSquare Footage1997199619951994 1993
Century II Apts.
<S> <C> <C> <C> <C> <C>
Cockeysville, Maryland 1984 468 Units 100% 96% 92% 92% 91%
Park Place Tower Apts. 901 Units 99% 96% 94% 94% 94%
Chicago, Illinois 1984 18,417 Sq. Ft. 64% 76% 83% 83% 80%
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
The Partnership is a defendant in a class
action suit related to the practice of giving
discounts for the early or timely payments of
rent at Park Place Apartments ("Park Place")
and Marine Terrace Apartments. The central
issue of the complaint is whether the
operative lease violated a Chicago municipal
ordinance relating to late fee charges because
it allowed tenants a discount if rent was paid
on or before the first of the month. The
allegation was that, notwithstanding the
stated rental rate and printed discount, the
practice represented an unlawful means of
exacting late fee charges. In addition to
seeking damages for any "forfeited" discounts,
plaintiffs seek statutory damages of two
months rent per lease violation and reasonable
attorneys' fees. To be eligible for such
damages plaintiffs must prove that the
defendants deliberately used a provision
prohibited by the ordinance.
During 1994, the Court ruled in
favor of the defendants, and accepted the
Partnership's Motion to Dismiss the
Plaintiff's Third Amended Complaint. The
plaintiffs filed an appeal with the Appellate
Court of Illinois, First District. During
1996, the decision was reversed on appeal and
the case remanded to trial court for further
proceedings. The defendants intend to
vigorously defend this case. However, the
Partnership has recorded a provision of
$282,000, representing its share of the
discounts and late fees, plus estimated legal
costs, in the 1997 consolidated financial
statements. The ultimate outcome of the
potential punitive damages award related to
this litigation, including an estimate of
potential loss, cannot presently be
determined.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER
MATTERS
The transfer of Units is subject to certain
limitations contained in the Partnership
Agreement. There is no public market for the
Units and it is not anticipated that any such
public market will develop.
The number of Investor Limited Partners as of
December 31, 1997 was approximately 2,300.
One of the objectives of the Partnership is to
generate cash available for distribution. The
General Partners discontinued distributions
during 1990 due to insufficient operating
cash flow. However, during 1993, the
Partnership distributed $27,888 which was
equivalent to the required withholding tax for
the state of Maryland which arose from the
sale of Fieldcrest Apartments. This amount
was paid to the state of Maryland for the
benefit of all Partners.
In 1995, the General Partners determined that
there was sufficient Cash Flow, as calculated
under section 8.2 (a) of the Partnership
Agreement ("Cash Flow"), and working capital
reserves to reinstate distributions. These
semiannual distributions, which commenced in
the first quarter of 1996, are paid at an
annual rate of $20.00 per Unit. The General
Partners believed there was sufficient Cash
Flow and working capital reserves to increase
the annual distribution rate to the current
rate of $40.00 per Unit in 1997.
The Partnership made the following
distributions to its Partners during the years
ended December 31, 1997 and 1996:
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996
Amount Per Unit Amount Per Unit
Limited Partners:
Investor Limited Partners
(35,200 Units
<S> <C> <C> <C> <C>
outstanding) $1,408,000 $40.00 $704,000 $20.00
Original Limited Partner 90,839 45,419
General Partners 15,140 7,570
$1,513,979 $756,989
</TABLE>
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected
financial information regarding the
Partnership's consolidated financial position
and operating results. This information
should be used in conjunction with
Management's Discussion and Analysis of
Financial Condition and Results of Operations
and the Consolidated Financial Statements and
Supplementary Data, which are included in
Items 7 and 8 of this report, respectively.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Total revenue $14,523,598 $13,660,261 $13,839,760 $13,652,413$13,684,206
Loss before gain from
capital transactions (304,383) (119,075) (795,377) (1,450,214) (3,921,897)
Gain on sale of
property - - 3,265,789 - -
Income (loss) before
extraordinary loss (304,383) (119,075) 2,470,412 (1,450,214) (3,921,897)
Extraordinary loss (288,156) - (93,215) - -
Net income (loss) (592,539) (119,075) 2,377,197 (1,450,214) (3,921,897)
Net income (loss)
allocated to:
Investor Limited
Partners (586,614) (117,884) 2,353,425 (1,435,712) (3,882,678)
Per Unit (16.67) (3.35) 66.86 (40.79) (110.30)
Original Limited
Partner - - - - -
General Partners (5,925) (1,191) 23,772 (14,502) (39,219)
Total assets at
December 31, 35,457,032 37,162,269 38,555,732 42,604,180 45,011,823
Long-term obligations
at December 31, 41,848,811 41,700,453 42,273,669 46,805,538 47,392,245
Distributions:
Investor Limited
Partners 1,408,000 704,000 - - 25,936
Per Unit 40.00 20.00 - - .74
Original
Limited Partner 90,839 45,419 - - 1,673
General Partners 15,140 7,570 - - 279
</TABLE>
The Selected Financial Data results for the periods presented are not comparable
due to the sale of Marine Terrace on July 19, 1995.
The per Unit distibutions for the years ended December 31, 1997, 1996, 1995,
1994 and 1993 were $40.00, $20.00, $0, $0 and $.74, respectively, none of which
represented a return of capital.
Prior performance of the Partnership is not necessarily indicative of future
operations.
ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements including those concerning
Management's expectations regarding the future financial performance and
future events. These forward-looking statements involve significant risk and
uncertainties, including those described herein. Actual results may differ
materially from those anticipated by such forward-looking statements.
Liquidity and Capital Resources
The Partnersip's ability to generate cash adequate to meet its needs is
dependent primarily upon the operating performance of its real estate
investments. Such ability would also be impacted by the future availability
of bank borrowing sources as current debt matures. These sources of liquidity
will be used by the Partnership for payment of expenses related to real estate
operations, capital improvements, debt service and other expenses. Cash Flow,
if any, as calculated under Section 8.2(a) of the Partnership Agreement, will
then be available for distribution to the Partners. In 1995, the General
Partners determined that there was sufficient Cash Flow and working capital
reserves to reinstate distributions. These semiannual distributions
commenced in the first quarter of 1996 at an annual rate of $20.00 per Unit.
Beginning with the distribution paid in February 1997, the annual distribution
rate was increased from $20.00 per Unit, to $40.00 per Unit, based on
sufficient cash flow and working capital reserves.
On July 19, 1995, the Partnership sold Marine Terrace Apartments, a 187-unit
apartment complex located in Chicago,Illinois, for cash proceeds and other
considerations which totaled $6,436,505. Proceeds from the sale were used
to pay closing costs of $44,152, to repay the existing mortgage note on the
property of $4,050,721 and to satisfy other Partnership liabilities. For
financial reporting purposes, the Partnership realized a gain of $3,265,789
on the sale. The gain was calculated as the difference between net
consideration received, less net book value of the property.
On December 10, 1997, the Partnership completed the refinancing of the Century
II Apartments ("Century") mortgage note. The property was refinanced with a
$11,000,000 non-recourse mortgage note payable at the rate of 6.75% per annum
with monthly principal and interest payments of $71,346. The Partnership
used the majority of the proceeds from the refinancing to repay the existing
mortgage note on the property of $10,309,332, pay closing costs of $227,478,
to pay a prepayment premium of $210,825 and to establish various escrows.
The Partnership's major capital improvement project, the repair of Park Place
Tower Apartments' ("Park Place") building facade, was completed in the fourth
quarter of 1995. The external improvements, along with extensive interior
improvements, were funded from established reserves and cash generated by the
property. The completion of these improvements has greatly enhanced the
appearance of the property and has resulted in both increased rents and
occupancy. The Partnership's properties, Century and Park Place, are
expected to spend approximately $2,408,000 for capital improvements in 1998
in order to remain competitive in their respective markets. These improvements
include floor covering, pavement upgrades and appliance replacements, as well
as interior improvements and refurbishment of the elevator and convenience
store at Park Place. The Partnership expects to fund these improvements from
established reserves and cash generated from property operations.
Operations
The following discussion relates to the operations of the Partnership and
its properties (Park Place Tower and Century II Apartments) for the years
ended December 31, 1997, 1996 and 1995.
1997 compared to 1996
Net loss, before extraordinary loss, increased in 1997 when compared to
1996 as the increase in total expenses more than offset the increase in
revenue.
Total revenue increased in 1997 when compared to 1996, primarily due to
increases in average occupancy at both Park Place and Century, as well
as increased rental rates at Park Place. Average occupancy rates at
Century increased from 96% to 100% in 1996 and 1997, respectively.
Average residential occupancy rates at Park Place rose from 96% to 99%
in 1996 and 1997, respectively. The Partnership's properties enjoy strong
occupancy as capital improvements, including an appliance replacement
program at Century and a new fitness center at Park Place, have strenthened
leasing efforts at the properties. Interest income decreased as investements
in commercial paper declined as a direct result of the 100% increase in the
semiannual distributions paid in 1997.
Total expenses increased in 1997 when compared to 1996 as a result of
increases in maintenance, real estate tax and depreciation expenses.
Maintenance expense increased due to payment of the insurance deductible
for flood damage at Park Place, repairs to the heating and air conditioning
system at Park Place and other preventive maintenance at both of the
Partnership's properties, including interior painting and drainage upgrades.
The increase in real estate tax expense was due to refunds of prior years'
real estate taxes received in 1996 for Park Place toward the 1986, 1987, 1988
and 1990 tax years totaling approximately $325,000. Additionally, 1997 real
estate tax expense increased due to an increase in the assessed value of
Park Place. Depreciation expense increased in conjunction with capital
improvement expenditures.
1996 compared to 1995
Net income, after giving effect to the sale of Marine Terrace, increased
in 1996 as compared to 1995 as in increase in revenue more than offset
the increase in total expenses.
Average residential occupancy at Century and Park Place increased 4% and
2% respectively from 1995 to 1996. This, as well as increased rental
rates at both properties, contributed to the rise in rental income,
excluding Marine Terrace's revenues. Interest income for the Partnership
increased in 1996, primarily from increased average cash and cash equivalent
balances during 1996 which resulted from the sale of Marine Terrace in the
third quarter of 1995.
Total expenses, after giving effect to the sale of Marine Terrace,
increased in 1996 as compared to 1995, as the rise in operating and
maintenance expenses more than offset the decrease in real estate taxes.
The increase in operating expense was due to prior years' insurance
refunds received in 1995 combined with an increase in advertising and
leasing at both Century and Park Place. These additional advertising
and leasing costs, along with the property enhancements discussed above,
increased occupancy rates at both properties and allowed management to
maintain these high occupancies throughout 1996. Maintenance expense
increased a flowers were replanted at Park Place and the interiors of
the buildings at both Century and Park Place were painted in 1996.
The decrease in real estate taxes was attributed to the successful
petition for the reassessment of prior years' real estate taxes on Park
Place in 1996. The Partership received real estate tax refunds related
to the 1986, 1987, 1988, and 1990 tax years totaling approximately $325,000
in 1996. The refunds were reflected as reductions in the 1996 real estate
tax expense. The increase in depreciation expense was directly related
to the extensive capital improvement project at Park Place which was
completed in 1995.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
SEE APPENDIX A TO THIS REPORT.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership has no directors or executive officers. Information as
to the directors and executive officers of The Krupp Corporation, which is
a General Partner of KRLP-V and The Krupp Company Limited Partnership-II,
the other General Partner of KRLP-V, is as follows:
Position with
Name and Age The Krupp Corporation
Douglas Krupp (51) President and Co-Chairman of the Board
George Krupp (53) Co-Chairman of the Board
Wayne H. Zarozny (39)Treasurer
Douglas Krupp is Co-Chairman and Co-Founder
of The Berkshire Group. Established in 1969
as the Krupp Companies, this real estate-based
firm expanded over the years within its areas
of expertise including investment program
sponsorship, property and asset management,
mortgage banking, healthcare facility
ownership and the management of the company.
Mr. Krupp is a graduate of Bryant College. In
1989 he received an honorary Doctor of Science
in Business Administration from this
institution and was elected trustee in 1990.
Mr. Krupp is Chairman of the Board and a
Director of both Berkshire Realty Company,
Inc. (NYSE-BRI) and Harborside Healthcare
(NYSE-HBR). Mr. Krupp also serves as Chairman
of the Board and Trustee of Krupp Government
Income Trust and as Chairman of the Board and
Trustee of Krupp Government Income Trust II.
George Krupp is Douglas Krupp's brother.
George Krupp is the Co-Chairman and Co-
Founder of The Berkshire Group. Established
in 1969 as the Krupp Companies, this real
estate-based firm expanded over the years
within its areas of expertise including
investment program sponsorship, property and
asset management, mortgage banking and
healthcare facility ownership. Mr. Krupp
received his undergraduate education from the
University of Pennsylvania and Harvard
University Extension School and holds a
Master's degree in History from Brown
University.
Wayne H. Zarozny is Vice President of the
Berkshire Group. Mr. Zarozny has held several
positions within The Berkshire Group since
joining the company in 1986 and is currently
responsible for accounting and financial
reporting, treasury, accounts payable and
payroll activities. Prior to joining The
Berkshire Group, he was an audit supervisor
for Panell Kerr Forster International and on
the audit staff of Deloitte, Haskins and
Sells, in Boston. He received a B.S. degree
from Bryant College, a Master's degree in
Business Administration from Clark University
and is a Certified Public Accountant.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no directors or executive officers.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of December 31, 1997, beneficial owners of record owning more than 5%
of the Partnership's 35,200 outstanding Units were as follows:
Title Name and Address Amount and Nature Percent
of of of of
Class Beneficial Owner Beneficial Ownership Class
Investor Equity Resource Fund XIX L.P.
Limited 14 Story Street
Partner Cambridge, MA 02138
Units 125.00 Units .35%
Investor Equity Resource General Fund
L.P.
Limited 14 Story Street
Partner Cambridge, MA 02138
Units 20.00 Units .06%
Investor Equity Resource Fund XVII L.P.
Limited 14 Story Street
Partner Cambridge, MA 02138
Units 1,559.50 Units 4.43%
Investor Equity Fund XIX L.P.
Limited 14 Story Street
Partner Cambridge, MA 02138
Units 225.00 Units .64%
Total 1,929.50 Units 5.48%
On that date, the General Partners or their affiliates owned 53 Units
(.15% of the total outstanding) of the Partnership in addition to their
General and Original Limited Partner Interests.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Partnership does not have any directors, executive officers or
nominees for election as director.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Consolidated Financial Statements - see Index to Consolidated
Financial Statements and Schedule included under Item 8
(Appendix A), on page F-2 of this Report.
2. Consolidated Financial Statement Schedule - see Index to
Consolidated Financial Statements and Schedule included under
Item 8 (Appendix A), on page F-2 of this Report. All other
schedules are omitted as they are not applicable, not required
or the information is provided in the Consolidated Financial
Statements or the Notes thereto.
(b) Exhibits:
Number and Description Under Regulation S-K
The following reflects all applicable Exhibits required under Item 601
of Regulation S-K.
(4) Instruments defining the rights of security holders including
indentures:
(4.1) Amended Agreement of Limited Partnership dated as of
July 27, 1983 [Exhibit A to Prospectus included in
Registrant's Registration Statement on Form S-11 (File
2-84645)].*
(4.2) Amended Certificate of Limited Partnership filed with
the Massachusetts Secretary of State on December 16,
1983 [Exhibit 4.2 to Registrant's Report on Form 10-K
for 1983 (File 2-84645)].*
(10) Material Contracts:
Park Place Apartments
(10.1) Purchase and Sale Agreement dated April 24, 1984 between
Douglas Krupp and Sheldon J. Mandell, Howard J. Mandell,
Jerome W. Mandell and Norman Mandell [Exhibit 1 to
Registrant's Report on Form 8-K dated May 4, 1984 (File
No. 2-84645)].*
(10.2) Assignment of Beneficial Interest in Land Trust dated May
1, 1984 by Sheldon J. Mandell, Howard J. Mandell, Jerome
W. Mandell and Norman Mandell to Krupp Realty Limited
Partnership-V. [Exhibit 10.9 to Registrant's Report on
Form 10-K for the year ended November 30, 1984 (File No.
0-11985)].*
(10.3) Addendum to Management Agreement between Krupp Realty
Park Place - Chicago Limited Partnership and Krupp Asset
Management Company, now known as Berkshire Property
Management [Exhibit 2 to Registrant's Report on Form 8-K
dated April 27, 1989 (File No. 0-11985)].*
(10.4) Agreement of Limited Partnership of Krupp Realty Park
Place - Chicago Limited Partnership dated March 15, 1989
[Exhibit 5 to Registrant's Report on Form 8-K dated April
27, 1989 (File No. 0-11985)].*
(10.5) Assignment of General Partners interests in Krupp Realty
Park Place - Chicago Limited Partnership by The Krupp
Corporation to Krupp Realty Limited Partnership-V dated
March 15, 1989 [Exhibit 6 to Registrant's Report on Form
8-K dated April 27, 1989 (File No. 0-11985)].*
(10.6) Written Consent of Directors of The Krupp Corporation
dated April 18, 1989 assigning beneficial interest in
Park Place Apartments to Krupp Realty Park Place -
Chicago Limited Partnership [Exhibit 7 to Registrant's
Report on Form 8-K dated April 27, 1989 (File No. 0-
11985)].*
(10.7) Property Management Agreement, dated May 4, 1984 between
Krupp Realty Limited Partnership-V, as Owner, and BRI OP
Limited Partnership, formerly known as Berkshire Property
Management, a subsidiary of Berkshire Realty Company,
Inc. [Exhibit 10.18 to Registrant's Report on Form 10-K
for the year ended November 30, 1984 (File No.
0-11985)].*
(10.8) Loan Modification/Cancellation Agreement dated September
14, 1993 between South Chicago Bank, as Trustee, and
Krupp Realty Park Place - Chicago Limited Partnership
(File No. 0-11985).*
(10.9) Modification to mortgage note dated September 14, 1993
between South Chicago Bank, as Trustee, and Government
National Mortgage Association (File No. 0-11985).*
(10.10) Modification of mortgage dated September 14, 1993
between South Chicago Bank, as Trustee, and Government
National Mortgage Association (File No. 0-11985).*
(10.11) Regulatory Agreement for Multifamily Housing Projects
dated September 14, 1993, between South Chicago Bank,
as Trustee, and Krupp Realty Park Place - Chicago
Limited Partnership (File No. 0-11985).*
Century II Apartments
(10.12) Agreement of Sale, dated September 18, 1984 between the
Partners of Century III Associates and Douglas Krupp
and related exhibits including Mortgage Notes and
Related Mortgages [Exhibit 1 to Registrant's Report on
Form 8-K dated October 11, 1984 (File No. 0-11985)].*
(10.13) Assignment of Partnership Interest in Century III
Associates dated October 10, 1984 by the Partners of
Century III Associates to The Krupp Company Limited
Partnership-II, The Krupp Corporation and Krupp Realty
Limited Partnership-V [Exhibit 2 to Registrant's Report
on Form 8-K dated October 11, 1984 (File No.
0-11985)].*
(10.14) Fifth, Sixth and Seventh Amended and Restated Limited
Partnership Agreement of Century III Associates Limited
Partnership [Exhibit 3 to Registrant's Report on Form
8-K dated October 11, 1984 (File No. 0-11985)].*
(10.15) Assignment of Beneficial Interest in Century III
Associates from The Krupp Company Limited
Partnership-II and The Krupp Corporation to Krupp
Realty Limited Partnership-V. [Exhibit 10.32 to
Registrant's Report on Form 10-K for the year ended
November 30, 1984 (File No. 0-11985)].*
(10.16) Property Management Agreement, dated October 11, 1984
between Krupp Realty Limited Partnership-V, as Owner,
and BRI OP Limited Partnership, formerly known as
Berkshire Property Management, an affiliate of
Berkshire Realty Company, Inc. [Exhibit 10.33 to
Registrant's Report on Form 10-K for the year ended
November 30, 1984 (File No. 0-11985)].*
(10.17) Third Amended and Restated Promissory Note dated April
27, 1989 between Century III Associates Limited
Partnership and Bankers United Life Assurance Company.
[Exhibit 8 to Registrant's Report on Form 8-K dated
April 27, 1989 (File No. 0-11985)].*
(10.18) Third Amended and Restated Deed of Trust dated April
27, 1989 between Century III Associates Limited
Partnership and Bankers United Life Assurance Company.
[Exhibit 9 to Registrant's Report on Form 8-K dated
April 27, 1989 (File No. 0-11985)].*
(10.19) Multifamily Note dated December 10, 1997 between
Century III Associates Limited Partnership and Reilly
Mortgage Group, Inc.+
(10.20) Multifamily Deed of Trust, Assignment of Rents, and
Security Agreement dated December 8, 1997 between
Century III Associates Limited Partnership and Trust
Company of Chicago and Reilly Mortgage Group, Inc.+
* Incorporated by reference.
+ Filed herein.
(c) Reports on Form 8-K
During the last quarter of the fiscal year ended December 31, 1997,
the Partnership did not file any reports on Form 8-K.<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, on the
24th day of March, 1998.
KRUPP REALTY LIMITED PARTNERSHIP-V
By:
The Krupp Corporation, a General Partner
By:/s/ Douglas Krupp
Douglas Krupp, President, Co-Chairman
(Principal Executive Officer)
and Director of The Krupp Corporation
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated, on the 24th day of March, 1998.
Signatures Titles
/s/ Douglas Krupp President, Co-Chairman (Principal Executive
Douglas Krupp Officer) and Director of The Krupp
Corporation, a General Partner.
/s/ George Krupp Co-Chairman (Principal Executive Officer)
George Krupp and Director of The Krupp Corporation, a
General Partner.
/s/ Wayne H. Zarozny Treasurer of The Krupp Corporation, a
Wayne H. Zarozny General Partner.
<PAGE>
APPENDIX A
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
ITEM 8 OF FORM 10-K
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
For the Year Ended December 31, 1997
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
Report of Independent Accountants F-3
Consolidated Balance Sheets at December 31,
1997 and
December 31, 1996 F-4
Consolidated Statements of Operations for the
years ended
December 31, 1997, 1996 and 1995 F-5
Consolidated Statements of Changes in
Partners' Deficit
for the years ended December 31, 1997, 1996
and 1995 F-6
Consolidated Statements of Cash Flows for the
years ended
December 31, 1997, 1996 and 1995 F-7
Notes to Consolidated Financial StatementsF-8 - F-15
Schedule III - Real Estate and Accumulated
Depreciation F-16 - F-17
All other schedules are omitted as they are
not applicable, not required, or the
information is provided in the consolidated
financial statements or the notes thereto.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Krupp Realty Limited Partnership-V and
Subsidiary:
We have audited the consolidated financial
statements and the financial statement
schedule of Krupp Realty Limited Partnership-V
and Subsidiary (the "Partnership") listed in
the index on page F-2 of this Form 10-K.
These financial statements and financial
statement schedule are the responsibility of
the Partnership's management. Our
responsibility is to express an opinion on
these financial statements and schedule based
on our audits.
We conducted our audits in accordance with
generally accepted auditing standards. Those
standards require that we plan and perform the
audit to obtain reasonable assurance about
whether the financial statements are free of
material misstatement. An audit includes
examining, on a test basis, evidence
supporting the amounts and disclosures in the
consolidated financial statements. An audit
also includes assessing the accounting
principles used and significant estimates made
by management, as well as evaluating the
overall consolidated financial statement
presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements
referred to above present fairly, in all
material respects, the consolidated financial
position of Krupp Realty Limited Partnership-V
and Subsidiary as of December 31, 1997 and
1996 and the consolidated results of its
operations and its cash flows for each of the
three years in the period ended December 31,
1997 in conformity with generally accepted
accounting principles. In addition, in our
opinion, the financial statement schedule
referred to above, when considered in relation
to the basic financial statements taken as a
whole, presents fairly, in all material
respects, the information required to be
included therein.
Boston, Massachusetts COOPERS &
LYBRAND L.L.P.
February 2, 1998
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-V AND
SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 1997 and 1996
<TABLE>
<CAPTION>
ASSETS
1997 1996
Multi-family apartment complexes, net of
accumulated depreciation of $41,602,481
<S> <C> <C>
and $38,066,263, respectively (Notes D and E)$30,790,070$32,598,192
Cash and cash equivalents (Note C) 802,726 1,767,094
Cash restricted for tenant security deposits 294,572 307,908
Replacement reserve and repair escrows (Note E) 399,771 689,656
Prepaid expenses and other assets 2,662,138 1,377,390
Deferred expenses, net of accumulated
amortization of $48,332 and $469,134,
respectively (Note F) 507,755 422,029
Total assets $35,457,032$37,162,269
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Mortgage notes payable (Notes D and E) $42,400,979$42,270,255
Accrued real estate taxes 1,950,000 1,660,000
Accrued expenses and other liabilities 1,249,087 1,242,050
Due to affiliates (Note F) - 26,480
Total liabilities 45,600,066 45,198,785
Commitments and contingencies (Note G)
Partners' deficit (Note H):
Investor Limited Partners
(35,200 Units outstanding) (9,366,783) (7,372,169)
Original Limited Partner (370,797) (279,958)
General Partners (405,454) (384,389)
Total Partners' deficit (10,143,034) (8,036,516)
Total liabilities and Partners' deficit $35,457,032$37,162,269
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
Revenue:
<S> <C> <C> <C>
Rental (Note I)$14,395,306 $13,489,627 $13,695,050
Interest income 128,292 170,634 144,710
Total revenue 14,523,598 13,660,261 13,839,760
Expenses:
Operating (Note F) 3,629,513 3,635,470 3,732,763
Maintenance 1,136,671 927,736 895,329
General and administrative
(Notes F and G) 324,660 323,652 170,943
Real estate taxes(Note J)2,280,910 1,621,545 2,201,309
Management fees (Note F) 475,569 442,295 512,462
Depreciation and amortization 3,600,639 3,387,658 3,405,153
Interest (Note E) 3,380,019 3,440,980 3,717,178
Total expenses 14,827,981 13,779,336 14,635,137
Loss before gain on sale of property
and extraordinary loss (304,383) (119,075) (795,377)
Gain on sale of property (Note D) - - 3,265,789
Income (loss) before
extraordinary loss(304,383) (119,075) 2,470,412
Extraordinary loss (Note E) (288,156) - (93,215)
Net income (loss) (Note K)$ (592,539)$ (119,075) $ 2,377,197
Allocation of net income (loss)(Note H):
Investor Limited Partners
(35,200 Units outstanding) $ (586,614)$ (117,884)$ 2,353,425
Per Unit of Investor
Limited Partner Interest:
Loss before gain on sale of
property and extraordinary
loss $ (8.56)$ (3.35) $ (22.37)
Gain on sale of property - - 91.85
Extraordinary loss (8.11) - (2.62)
Net income (loss) $ (16.67)$ (3.35)$ 66.86
Original Limited Partner:
Loss before gain on sale
of property and extra-
ordinary loss $ - $ - $ -
Gain on sale of property - - -
Extraordinary loss - - -
Net income (loss) $ - $ - $ -
General Partners:
Loss before gain on sale
of property and extra-
ordinary loss $ (3,044)$ (1,191) $ (7,954)
Gain on sale of property - - 32,658
Extraordinary loss (2,881) - (932)
Net income (loss) $ (5,925)$ (1,191)$ 23,772
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
For the Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Investor Original Total
Limited Limited General Partners'
Partners Partner Partners Deficit
Balance at
<S> <C> <C> <C> <C>
December 31, 1994$(8,903,710)$(234,539)$(399,400)$ (9,537,649)
Gain on sale of
property, net 3,233,131 - 32,658 3,265,789
Early extinguishment
of debt (92,283) - (932) (93,215)
Loss before
extraordinary loss (787,423) - (7,954) (795,377)
Balance at
December 31, 1995 (6,550,285) (234,539) (375,628) (7,160,452)
Distributions (704,000) (45,419) (7,570) (756,989)
Net loss (117,884) - (1,191) (119,075)
Balance at
December 31, 1996 (7,372,169) (279,958) (384,389) (8,036,516)
Distributions (Note H)(1,408,000)(90,839) (15,140) (1,513,979)
Early extinguishment
of debt (285,275) - (2,881) (288,156)
Loss before
extraordinary loss
(Note H) (301,339) - (3,044) (304,383)
Balance at
December 31, 1997$(9,366,783)$(370,797)$(405,454)$(10,143,034)
</TABLE>
The per Unit distributions for the years ended
December 31, 1997, 1996 and 1995 were $40.00,
$20.00 and $0, respectively, none of which
represents a return of capital for tax
purposes.
The accompanying notes are an integral
part of the consolidated financial statements.<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
Operating activities:
<S> <C> <C> <C>
Net income (loss) $ (592,539)$ (119,075)$ 2,377,197
Adjustments to reconcile
net income (loss) to net
cash provided by operating
activities:
Interest earned on replacement
reserve and repair escrows (17,068) (27,713) (30,520)
Depreciation and amortization 3,600,639 3,387,658 3,405,153
Gain on sale of property - - (3,265,789)
Extraordinary loss from early
extinguishment of debt 288,156 - 93,215
Changes in assets and liabilities:
Decrease in cash restricted for
tenant security deposits 13,336 130,341 78,078
Decrease (increase) in prepaid
expenses and other assets(1,284,748) (6,508) 197,690
Decrease in accounts payable (83) (37,352) (143,652)
Increase (decrease) in accrued
real estate taxes 290,000 - (235,473)
Increase (decrease) in accrued
expenses and other
liabilities 7,120 58,499 (36,033)
Decrease in due to affiliates (26,480) (7,847) (1,231,933)
Net cash provided by
operating activities 2,278,333 3,378,003 1,207,933
Investing activities:
Deposits to replacement reserve
escrow (212,912) (212,912) (212,912)
Withdrawals from replacement
reserve and repair escrows 519,865 280,477 432,971
Additions to fixed assets (1,728,096) (2,413,114) (1,539,727)
Net consideration received from
the sale of property - - 6,392,353
Increase (decrease) in accounts
payable related to fixed
asset additions - - (189,020)
Net cash provided by (used
in) investing
activities (1,421,143) (2,345,549) 4,883,665
Financing activities:
Proceeds from mortgage note payable 11,000,000 - -
Repayment of mortgage notes
payable (10,309,332) - (4,050,721)
Payment of prepayment premium (210,825) - (78,179)
Principal payments on
mortgage notes payable (559,944) (530,699) (538,813)
Increase in deferred expenses (227,478) - -
Distributions (1,513,979) (756,989) -
Net cash used in
financing activities (1,821,558) (1,287,688) (4,667,713)
Net increase (decrease) in
cash and cash equivalents (964,368) (255,234) 1,423,885
Cash and cash equivalents,
beginning of year 1,767,094 2,022,328 598,443
Cash and cash equivalents,
end of year $ 802,726$ 1,767,094$ 2,022,328
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A.Organization
Krupp Realty Limited Partnership-V ("KRLP-V")
was formed on June 16, 1983 by filing a
Certificate of Limited Partnership in The
Commonwealth of Massachusetts. KRLP-V
terminates on December 31, 2020, unless
earlier terminated upon the sale of the last
of KRLP-V's properties or the occurrence of
certain other events as set forth in the
Partnership Agreement.
KRLP-V issued all of the General Partner
Interests to The Krupp Corporation ("Krupp
Corp.") (a Massachusetts corporation) and The
Krupp Company Limited Partnership-II ("KCLP-
II") (a Massachusetts limited partnership), in
exchange for capital contributions aggregating
$1,000. Except under certain limited
circumstances upon termination of KRLP-V, the
General Partners are not required to make any
additional capital contributions. KRLP-V also
issued all of the Original Limited Partner
Interests to KCLP-II in exchange for a capital
contribution of $4,000.
On September 6, 1983, KRLP-V commenced the
marketing and sale of units of Investor
Limited Partner Interest ("Units") for $1,000
per Unit. The public offering was closed on
December 2, 1983 at which time a total of
35,200 Units had been sold for $35,200,000.
On March 20, 1989, the General Partners formed
Krupp Realty Park Place-Chicago Limited
Partnership ("Realty-V") as a prerequisite for
the refinancing of Park Place Tower Apartments
("Park Place"). At the same time, the General
Partners transferred ownership of Park Place
to Realty-V. The General Partner of Realty-V
is Krupp Corp. The Limited Partner of Realty-
V is KRLP-V. Krupp Corp. has beneficially
assigned its interest in Realty-V to KRLP-V.
KRLP-V and Realty-V are collectively known as
Krupp Realty Limited Partnership-V and
Subsidiary (collectively referred to herein as
the "Partnership").
B.Significant Accounting Policies
The Partnership uses the following accounting
policies for financial reporting purposes,
which may differ in certain respects from
those used for federal income tax purposes
(see Note K).
Basis of Presentation
The consolidated financial statements present
the consolidated assets, liabilities and
operations of the Partnership. All
intercompany balances and transactions have
been eliminated.
Risks and Uncertainties
The Partnership invests its cash primarily in
deposits and money market funds with
commercial banks. The Partnership has not
experienced any losses to date on its invested
cash.
The preparation of financial statements in
conformity with generally accepted accounting
principles requires management to make
estimates and assumptions that affect the
reported amount of assets and liabilities,
contingent assets and liabilities and revenues
and expenses during the reporting period.
Actual results could differ from those
estimates.
Continued<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-V AND
SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
Continued
B.Significant Accounting Policies, Continued
Cash and Cash Equivalents
The Partnership includes all short-term
investments with maturities of three months or
less from the date of acquisition in cash and
cash equivalents. The cash investments are
recorded at cost, which approximates current
market values.
Rental Revenues
Leases require the payment of base rent
monthly in advance. Rental revenues are
recorded on the accrual basis.
Depreciation
Depreciation is provided for by the use of the
straight-line method over estimated useful
lives of the related assets as follows:
Buildings and improvements5 to 25 years
Appliances, carpeting and equipment3 to 8
years
Impairment of Long-Lived Assets
Real estate assets and equipment are stated at
depreciated cost. Pursuant to Statement of
Financial Accounting Standards Opinion No.
121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be
Disposed of", impairment losses are recorded
on long-lived assets used in operations on a
property by property basis, when events and
circumstances indicate that the assets might
be impaired and the estimated undiscounted
cash flows to be generated by those assets are
less than the carrying amount of those assets.
Upon determination that an impairment has
occurred, those assets shall be reduced to
fair value.
Deferred Expenses
Costs of obtaining and recording mortgages on
the properties are amortized over the term of
the related mortgage notes using the straight-
line method.
Income Taxes
The Partnership is not liable for federal or
state income taxes as Partnership income or
loss is allocated to the Partners for income
tax purposes. In the event that the
Partnership's tax returns are examined by the
Internal Revenue Service or state taxing
authority and the examination results in a
change in the Partnership's taxable income or
loss, such change will be reported to the
Partners.
Reclassifications
Certain prior year balances have been
reclassified to conform with current year
consolidated financial statement presentation.
Continued<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-V AND
SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
Continued
C. Cash and Cash Equivalents
Cash and cash equivalents consisted of the following:
<TABLE>
<CAPTION>
December 31,
1997 1996
<S> <C> <C>
Cash and money market accounts $ 802,726$ 282,482
Commercial paper - 1,484,612
$ 802,726$ 1,767,094
</TABLE>
D.Disposition of Real Estate Investment
On July 19, 1995, the Partnership sold Marine
Terrace Apartments, a 187-unit apartment
complex located in Chicago, Illinois, for cash
proceeds and other considerations which
totaled $6,436,505. Proceeds from the sale
were used to pay closing costs of $44,152, to
repay the existing mortgage note on the
property of $4,050,721 and to satisfy other
Partnership liabilities. For financial
reporting purposes, the Partnership realized
a gain of $3,265,789 on the sale. The gain
was calculated as the difference between net
consideration received, less net book value of
the property.
E. Mortgage Notes Payable
The properties owned by the Partnership are
pledged as collateral for the non-recourse
mortgage notes outstanding at December 31,
1997 and 1996. Mortgage notes payable
consisted of the following:
<TABLE>
<CAPTION>
Annual
Interest
Principal Rate
Property 1997 1996 1997 1996
Maturity Date
Century II
<S> <C> <C> <C> <C> <C>
Apartments $11,000,000 $10,450,896 6.75% 10.625% January 1, 2008
Park Place
Tower Apartments 31,400,979 31,819,359 6.75% 6.750%May 1, 2024
Total $42,400,979 $42,270,255
</TABLE>
Continued
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
E.Mortgage Notes Payable, Continued
Century II Apartments
On December 10, 1997, the Partnership
completed the refinancing of the Century II
Apartments mortgage note. The property was
refinanced with a $11,000,000 non-recourse
mortgage note payable at the rate of 6.75% per
annum with monthly principal and interest
payments of $71,346. The mortgage note, which
is collateralized by the property, matures on
January 1, 2008 at which time the remaining
principal (approximately $9,401,537) and
accrued interest are due. The note may be
prepaid, subject to a prepayment penalty, at
any time with 30 days notice. The Partnership
used the majority of the proceeds from the
refinancing to repay the existing mortgage
note on the property of $10,309,332, pay
closing costs of $227,478, to pay a prepayment
premium of $210,825 and to establish various
escrows. The prepayment premium as well as
unamortized deferred mortgage costs of
$77,331, are reported in the Statement of
Operations as an extraordinary loss from early
extinguishment of debt for the year ended
December 31, 1997.
At December 31, 1996, the property was subject
to a non-recourse first mortgage note of
$11,000,000, which was payable in equal
monthly installments of principal and interest
of $104,844, based on a 25-year amortization
schedule.
Based on the borrowing rates currently
available to the Partnership for bank loans
with similar terms and average maturities, the
fair value of long term debt is approximately
$10,470,000 and $11,430,000 for the years
ended December 31, 1997 and 1996,
respectively.
Park Place Tower Apartments
The property is subject to a non-recourse
mortgage note in the original amount of
$33,000,000, dated September 15, 1993, held by
the U.S. Department of Housing and Urban
Development ("HUD"). The note is payable in
equal monthly installments of principal and
interest of $212,783, based on a 31-year
amortization. At maturity, all unpaid
principal (approximately $1,457,000) and any
accrued interest are due. The note may not be
prepaid prior to October 1, 1998. In the
event prepayment of principal occurs any time
after this date, a prepayment premium shall be
due, based on a declining premium rate of 5%
to 0% of the outstanding principal balance
over a period of 5 years. As stipulated in
the Regulatory Agreement with HUD, the
Partnership makes monthly deposits of $17,743
in an established reserve for replacements to
be used for improvements. Under the terms of
the loan, HUD restricts the distribution of
funds to Surplus Cash, as defined by HUD in
the Regulatory Agreement.
Since the mortgage note cannot be prepaid
prior to October 1, 1998, the fair market
value cannot be determined.
Continued
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
E. Mortgage Notes Payable, Continued
Marine Terrace Apartments
In conjunction with the sale of the property
on July 19, 1995, the Partnership prepaid the
non-recourse first mortgage note of
$4,050,721. As a result of the retirement of
debt, the Partnership incurred a prepayment
premium of $78,179. The prepayment premium,
as well as unamortized deferred mortgage costs
of $15,036, are reported in the Statement of
Operations as an extraordinary loss from early
extinguishment of debt for the year ended
December 31, 1995.
The aggregate scheduled principal amounts of
long-term borrowings due during the five years
ending December 31, 2002 are $552,168,
$600,689, $642,513, $687,250 and $735,102.
During the years ended December 31, 1997, 1996
and 1995, the Partnership paid $3,221,886,
$3,280,828 and $3,555,694 of interest on its
mortgage notes, respectively.
F.Related Party Transactions
The Partnership pays property management fees
to an affiliate of the General Partners for
management services. Pursuant to the
management agreements, management fees are
payable monthly at a rate of 5% of the gross
receipts from the properties under management.
The affiliate of the General Partners sold
these management agreements to BRI OP Limited
Partnership, a subsidiary of Berkshire Realty
Company Inc., a publicly traded real estate
investment trust and an affiliate of the
General Partners, on February 28, 1997. The
Partnership also reimburses affiliates of the
General Partners for certain expenses incurred
in connection with the operation of the
Partnership and its properties including
administrative expenses.
Amounts accrued or paid to the General
Partners' affiliates during the years ended
December 31, 1997, 1996 and 1995 were as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Property management fees $475,569 $442,295 $512,462
Expense reimbursements 317,432 288,226 267,147
C harged to operations $793,001 $730,521 $779,609
</TABLE>
Due to affiliates consisted of expense reimbursements of $26,480
at December 31, 1996.
In addition to the amounts above, refinancing costs of $110,000
were paid to the General Partners' affiliates during the year
ended December 31, 1997.
Continued<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
G.Legal Proceeding
The Partnership is a defendant in a class
action suit related to the practice of giving
discounts for the early or timely payments of
rent at Park Place Apartments ("Park Place")
and Marine Terrace Apartments, a previously
owned property. The central issue of the
complaint is whether the operative lease
violated a Chicago municipal ordinance
relating to late fee charges because it
allowed tenants a discount if rent was paid on
or before the first of the month. The
allegation was that, notwithstanding the
stated rental rate and printed discount, the
practice represented an unlawful means of
exacting late fee charges. In addition to
seeking damages for any "forfeited" discounts,
plaintiffs seek statutory damages of two
months rent per lease violation and reasonable
attorneys' fees. To be eligible for such
damages plaintiffs must prove that the
defendants deliberately used a provision
prohibited by the ordinance.
During 1994, the Court ruled in favor of the
defendants, and accepted the Partnership's
Motion to Dismiss the Plaintiff's Third
Amended Complaint. The plaintiffs filed an
appeal with the Appellate Court of Illinois,
First District. During 1996, the decision was
reversed on appeal and the case remanded to
trial court for further proceedings. The
defendants intend to vigorously defend this
case. However, the Partnership has recorded a
provision of $282,000, representing its share
of the discounts and late fees, plus estimated
legal costs, in the 1997 consolidated
financial statements. The ultimate outcome of
the litigation, including an estimate of
potential loss, cannot presently be
determined.
H.Partners' Deficit
Under the terms of the Partnership Agreement,
losses from operations are allocated 99% to
the Investor Limited Partners and 1% to the
General Partners and profits from operations
are allocated 93% to the Investor Limited
Partners, 6% to the Original Limited Partner
and 1% to the General Partners until such time
that the Investor Limited Partners have
received a return of their total invested
capital plus a 9% per annum cumulative return
thereon and thereafter, 65% to the Investor
Limited Partners, 28% to the Original Limited
Partner and 7% to the General Partners.
Profits from Capital Transactions are
allocated first, to the Investor Limited
Partners until they have received a return of
their total invested capital. Thereafter,
profits from Capital Transactions are
allocated in accordance with the Partnership
Agreement. Losses from Capital Transactions
are allocated 99% to the Investor Limited
Partners and 1% to the General Partners.
Notwithstanding anything above, the General
Partners shall be allocated at least 1% of all
profits and losses from Capital Transactions.
Under the Partnership Agreement, cash
distributions are made on the same basis as
the allocations of profits described above.
Pursuant to the Partnership Agreement,
proceeds from Capital Transactions shall first
be applied to the payment of all debts and
liabilities of the Partnership and second to
fund reserves for contingent liabilities. The
remaining net cash proceeds shall then be
distributed in accordance with the Partnership
Agreement.
Continued<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
H. Partners' Deficit, Continued
As of December 31, 1997, the following cumulative partner
contributions and allocations have been made since inception of
the Partnership:
<TABLE>
<CAPTION>
Investor Original
Limited Limited General
Partners Partner Partners Total
<S> <C> <C> <C> <C>
Capital contributions$ 35,200,000$ 4,000 $ 1,000 $ 35,205,000
Syndication costs (4,501,000) - - (4,501,000)
Distributions (6,211,303) (387,737) (64,622) (6,663,662)
Net income (loss)
before capital
transactions (40,529,444) 12,940 (409,256) (40,925,760)
Net gains on capital
transactions 6,674,964 - 67,424 6,742,388
Balance at
December 31, 1997$ (9,366,783)$(370,797)$(405,454)$(10,143,034)
</TABLE>
I. Future Base Rents Due Under Commercial Operating Leases
Future base rent receivable under commercial operating leases
for the years 1998 through 2002 and thereafter is as follows:
1998 $80,834
1999 90,040
2000 58,443
2001 41,889
2002 30,000
Thereafter 39,360
J.Real Estate Taxes
During the third quarter of 1996, the
Partnership successfully petitioned for the
reassessment of prior years' real estate taxes
on Park Place Tower Apartments. The
Partnership received tax refunds toward the
1986, 1987, 1988 and 1990 real estate taxes
totaling approximately $325,000, which was
reflected as a reduction in the 1996 real
estate tax expense.
Continued<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
K. Federal Income Taxes
For federal income tax purposes, the Partnership is depreciating
property using the Accelerated Cost Recovery System ("ACRS") and
the Modified Accelerated Cost Recovery System ("MACRS")
depending on which is applicable.
The reconciliation of the net income (loss) reported in the
accompanying Consolidated Statement of Operations with the net
income (loss) reported in the Partnership's federal income tax
return for the years ended December 31, 1997, 1996 and 1995 is
as follows:
<TABLE>
<CAPTION>
1997 1996 1995
Net income (loss) per Consolidated
<S> <C> <C> <C>
Statement of Operations $ (592,539) $ (119,075)$ 2,377,197
Difference between book and tax
depreciation 317,863 (30,155) 540
Difference between book and tax
gain on sale of property - - 962,454
Difference between book and tax
legal adjustment 113,526 168,474 -
Net income (loss) for federal
income tax purposes $ (161,150)$ 19,244 $ 3,340,191
The allocation of the net loss for federal income tax purposes
for 1997 is as follows:
Portfolio Passive
Income Loss Total
General Partners $ 1,254 $ (2,865)$ (1,611)
Original Limited Partner - - -
Investor Limited Partners 124,106 (283,645) (159,539)
$ 125,360 $ (286,510)$ (161,150)
</TABLE>
During the years ended December 31, 1997, 1996
and 1995 the per Unit net income (loss) to the
Investor Limited Partners for federal income
tax purposes were ($4.58), $.54 and $93.94,
respectively.
The basis of the Partnership's assets for
financial reporting purposes exceeded its tax
basis by approximately $8,063,500 and
$8,400,000 at December 31, 1997 and 1996,
respectively. The basis of the Partnership's
liabilities for financial reporting purposes
exceeded its tax basis by approximately
$282,000 and $168,000 at December 31, 1997 and
1996, respectively.<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
<TABLE>
<CAPTION>
Costs
Capitalized
Subsequent to
Initial Cost to Partnership Acquisition
Buildings & Buildings &Depreciable
Description Encumbrances Land Improvements Improvements Life
Century II
Apartments
Cockeysville,
<C> <C> <C> <C> <C> <S><C>
Maryland $ 11,000,000 $1,049,868 $ 13,948,246 $ 4,351,0253 to 25 Yrs.
Park Place Tower
Apartments
Chicago, Illinois 31,400,979 2,877,561 38,230,448 11,935,4033 to 25 Yrs.
Total $ 42,400,979 $3,927,429 $ 52,178,694 $16,286,428
Gross Amounts Carried at
End of Year
Buildings Year
and Accumulated
Construction Year
Description Land Improvements Total Depreciation Completed Acquired
Century II
Apartments
Cockeysville,
Maryland $1,049,868 $18,299,271 $19,349,139 $11,684,831 1971 1984
Park Place Tower
Apartments
Chicago, Illinois 2,877,561 50,165,851 53,043,412 29,917,650 1973 1984
Total $3,927,429 $ 68,465,122 $72,392,551$ 41,602,481
</TABLE>
Continued<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
(Continued)
December 31, 1997
Reconciliation of Real Estate and Accumulated Depreciation for
each of the three years in the period ended December 31, 1997:
<TABLE>
<CAPTION>
1997 1996 1995
Real Estate
Balance at
<S> <C> <C> <C>
beginning of year $70,664,455 $68,251,341 $73,325,592
Acquisitions and
improvements 1,728,096 2,413,114 1,539,727
Sale of property - - (6,613,978)
Balance at end of year$72,392,551 $70,664,455 $68,251,341
1997 1996 1995
Accumulated Depreciation
Balance at
beginning of year $38,066,263 $34,745,814 $34,905,809
Depreciation expense 3,536,218 3,320,449 3,327,419
Sale of property - - (3,487,414)
Balance at end of year $41,602,481 $38,066,263
$34,745,814
</TABLE>
Note:The Partnership uses the cost basis for property valuation
for both income tax and financial statement purposes. The
aggregate cost of the Partnership's real estate for federal income
tax purposes was $72,396,372 and the aggregate accumulated
depreciation for federal income tax purposes was $(49,667,880), at
December 31, 1997.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Krupp Realty
Fund 5 Financial Statements for the nine months ended December 31, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 802,726
<SECURITIES> 0
<RECEIVABLES> 1,198,179<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,158,302
<PP&E> 72,948,638<F2>
<DEPRECIATION> (41,650,813)<F3>
<TOTAL-ASSETS> 35,457,032
<CURRENT-LIABILITIES> 3,199,087
<BONDS> 42,400,331<F4>
0
0
<COMMON> (10,143,034)<F5>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 35,457,032
<SALES> 0
<TOTAL-REVENUES> 14,523,598<F6>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 11,447,962<F7>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,380,019
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 288,156<F8>
<CHANGES> 0
<NET-INCOME> (592,539)<F9>
<EPS-PRIMARY> 0<F9>
<EPS-DILUTED> 0<F9>
<FN>
<F1>Includes all receivables grouped in "prepaid expenses and other assets" on the
Balance Sheet.
<F2>Multi-family complexes of $72,392,551 and deferred expenses of $556,087.
<F3>Accumulated depreciation of $41,602,481 and accumulated amortization of
deferred expenses of $48,332.
<F4>Represents mortgage notes payable.
<F5>Represents total deficit of the General Partners and Limited Partners of
($405,454) and ($9,737,580), respectively.
<F6>Includes all revenue of the Partnership.
<F7>Includes operating expenses of $5,566,413, real estate taxes of $2,280,910 and
depreciation and amortization of $3,600,639.
<F8>Represents prepayment penalty on Century old mortgage note $210,825 and
unamortized deferred mortgage costs on the old mortgage note $77,331.
<F9>Net loss allocated ($5,925) to the General Partners and ($586,614) to the
Limited Partners. Average net loss per Unit of Limited Partners interest is
($16.67) on 35,200 Units outstanding.
</FN>
</TABLE>
Loan No. 904707938
MULTIFAMILY NOTE
(MULTISTATE)
US $11,000,000.00<PAGE>
December ____, 1997
FOR VALUE RECEIVED, the undersigned
("Borrower") jointly and severally (if more
than one) promises to pay to the order of
REILLY MORTGAGE GROUP, INC., a District of
Columbia corporation, the principal sum of
Eleven Million and No/100ths Dollars
(US $11,000,000.00), with interest on the
unpaid principal balance at the annual rate
of Six and Three-Quarters percent (6.75%).
1. Defined Terms. As used in this
Note, (i) the term "Lender" means the holder
of this Note, and (ii) the term
"Indebtedness" means the principal of,
interest on, or any other amounts due at any
time under, this Note, the Security
Instrument or any other Loan Document,
including prepayment premiums, late charges,
default interest, and advances to protect the
security of the Security Instrument under
Section 12 of the Security Instrument.
"Event of Default" and other capitalized
terms used but not defined in this Note shall
have the meanings given to such terms in the
Security Instrument.
2. Address for Payment. All payments
due under this Note shall be payable at 2000
Corporate Ridge, Suite 925, McLean, Virginia
22102, or such other place as may be
designated by written notice to Borrower from
or on behalf of Lender.
3. Payment of Principal and Interest.
Principal and interest shall be paid as
follows:
(a) Unless disbursement of principal is
made by Lender to Borrower on the first day
of the month, interest for the period
beginning on the date of disbursement and
ending on and including the last day of the
month in which such disbursement is made
shall be payable simultaneously with the
execution of this Note. Interest under this
Note shall be computed on the basis of a 360-
day year consisting of twelve 30-day months.
(b) Consecutive monthly installments
of principal and interest, each in the amount
of Seventy One Thousand Three Hundred Forty
Five and 79/100ths Dollars (US $71,345.79),
shall be payable on the first day of each
month beginning on February 1, 1998, until
the entire unpaid principal balance evidenced
by this Note is fully paid. Any accrued
interest remaining past due for 30 days or
more shall be added to and become part of the
unpaid principal balance and shall bear
interest at the rate or rates specified in
this Note, and any reference below to
"accrued interest" shall refer to accrued
interest which has not become part of the
unpaid principal balance. Any remaining
principal and interest shall be due and
payable on January 1, 2008 or on any earlier
date on which the unpaid principal balance of
this Note becomes due and payable, by
acceleration or otherwise (the "Maturity
Date"). The unpaid principal balance shall
continue to bear interest after the Maturity
Date at the Default Rate set forth in this
Note until and including the date on which it
is paid in full.
(c) Any regularly scheduled monthly
installment of principal and interest that is
received by Lender before the date it is due
shall be deemed to have been received on the
due date solely for the purpose of
calculating interest due.
4. Application of Payments. If at any
time Lender receives, from Borrower or
otherwise, any amount applicable to the
Indebtedness which is less than all amounts
due and payable at such time, Lender may
apply that payment to amounts then due and
payable in any manner and in any order
determined by Lender, in Lender's discretion.
Borrower agrees that neither Lender's
acceptance of a payment from Borrower in an
amount that is less than all amounts then due
and payable nor Lender's application of such
payment shall constitute or be deemed to
constitute either a waiver of the unpaid
amounts or an accord and satisfaction.
5. Security. The Indebtedness is
secured, among other things, by a multifamily
mortgage, deed to secure debt or deed of
trust dated as of the date of this Note (the
"Security Instrument"), and reference is made
to the Security Instrument for other rights
of Lender as to collateral for the
Indebtedness.
6. Acceleration. If an Event of
Default has occurred and is continuing, the
entire unpaid principal balance, any accrued
interest, the prepayment premium payable
under Paragraph 10, if any, and all other
amounts payable under this Note and any other
Loan Document shall at once become due and
payable, at the option of Lender, without any
prior notice to Borrower. Lender may
exercise this option to accelerate regardless
of any prior forbearance.
7. Late Charge. If any monthly amount
payable under this Note or under the Security
Instrument or any other Loan Document is not
received by Lender within ten (10) days after
the amount is due, Borrower shall pay to
Lender, immediately and without demand by
Lender, a late charge equal to five percent
of such amount. Borrower acknowledges that
its failure to make timely payments will
cause Lender to incur additional expenses in
servicing and processing the loan evidenced
by this Note (the "Loan"), and that it is
extremely difficult and impractical to
determine those additional expenses.
Borrower agrees that the late charge payable
pursuant to this Paragraph represents a fair
and reasonable estimate, taking into account
all circumstances existing on the date of
this Note, of the additional expenses Lender
will incur by reason of such late payment.
The late charge is payable in addition to,
and not in lieu of, any interest payable at
the Default Rate pursuant to Paragraph 8.
8. Default Rate. So long as (a) any
monthly installment under this Note remains
past due for 30 days or more, or (b) any
other Event of Default has occurred and is
continuing, interest under this Note shall
accrue on the unpaid principal balance from
the earlier of the due date of the first
unpaid monthly installment or the occurrence
of such other Event of Default, as
applicable, at a rate (the "Default Rate")
equal to the lesser of 4 percentage points
above the rate stated in the first paragraph
of this Note or the maximum interest rate
which may be collected from Borrower under
applicable law. If the unpaid principal
balance and all accrued interest are not paid
in full on the Maturity Date, the unpaid
principal balance and all accrued interest
shall bear interest from the Maturity Date at
the Default Rate. Borrower also acknowledges
that its failure to make timely payments will
cause Lender to incur additional expenses in
servicing and processing the Loan, that,
during the time that any monthly installment
under this Note is delinquent for more than
30 days, Lender will incur additional costs
and expenses arising from its loss of the use
of the money due and from the adverse impact
on Lender's ability to meet its other
obligations and to take advantage of other
investment opportunities, and that it is
extremely difficult and impractical to
determine those additional costs and
expenses. Borrower also acknowledges that,
during the time that any monthly installment
under this Note is delinquent for more than
30 days or any other Event of Default has
occurred and is continuing, Lender's risk of
nonpayment of this Note will be materially
increased and Lender is entitled to be
compensated for such increased risk.
Borrower agrees that the increase in the rate
of interest payable under this Note to the
Default Rate represents a fair and reasonable
estimate, taking into account all
circumstances existing on the date of this
Note, of the additional costs and expenses
Lender will incur by reason of the Borrower's
delinquent payment and the additional
compensation Lender is entitled to receive
for the increased risks of nonpayment
associated with a delinquent loan.
9. Limits on Personal Liability.
(a) Except as otherwise provided in
this Paragraph 9, Borrower shall have no
personal liability under this Note, the
Security Instrument or any other Loan
Document for the repayment of the
Indebtedness or for the performance of any
other obligations of Borrower under the Loan
Documents, and Lender's only recourse for the
satisfaction of the Indebtedness and the
performance of such obligations shall be
Lender's exercise of its rights and remedies
with respect to the Mortgaged Property and
any other collateral held by Lender as
security for the Indebtedness. This
limitation on Borrower's liability shall not
limit or impair Lender's enforcement of its
rights against any guarantor of the
Indebtedness or any guarantor of any
obligations of Borrower.
(b) Borrower shall be personally liable
to Lender for the repayment of a portion of
the Indebtedness equal to zero percent (0%)
of the original principal balance of this
Note, plus any other amounts for which
Borrower has personal liability under this
Paragraph 9.
(c) In addition to Borrower's personal
liability under Paragraph 9(b), Borrower
shall be personally liable to Lender for the
repayment of a further portion of the
Indebtedness equal to any loss or damage
suffered by Lender as a result of (1) failure
of Borrower to pay to Lender upon demand
after an Event of Default all Rents to which
Lender is entitled under Section 3(a) of the
Security Instrument and the amount of all
security deposits collected by Borrower from
tenants then in residence; (2) failure of
Borrower to apply all insurance proceeds and
condemnation proceeds as required by the
Security Instrument; or (3) failure of
Borrower to comply with Section 14(d) or (e)
of the Security Instrument relating to the
delivery of books and records, statements,
schedules and reports.
(d) For purposes of determining
Borrower's personal liability under Paragraph
9(b) and Paragraph 9(c), all payments made by
Borrower or any guarantor of this Note with
respect to the Indebtedness and all amounts
received by Lender from the enforcement of
its rights under the Security Instrument
shall be applied first to the portion of the
Indebtedness for which Borrower has no
personal liability.
(e) Borrower shall become personally
liable to Lender for the repayment of all of
the Indebtedness upon the occurrence of any
of the following Events of Default: (1)
Borrower's acquisition of any property or
operation of any business not permitted by
Section 33 of the Security Instrument; (2) a
Transfer (including, but not limited to, a
lien or encumbrance) that is an Event of
Default under Section 21 of the Security
Instrument, other than a Transfer consisting
solely of the involuntary removal or
involuntary withdrawal of a general partner
in a limited partnership or a manager in a
limited liability company; or (3) fraud or
written material misrepresentation by
Borrower or any officer, director, partner,
member or employee of Borrower in connection
with the application for or creation of the
Indebtedness or any request for any action or
consent by Lender.
(f) In addition to any personal
liability for the Indebtedness, Borrower
shall be personally liable to Lender for (1)
the performance of all of Borrower's
obligations under Section 18 of the Security
Instrument (relating to environmental
matters); (2) the costs of any audit under
Section 14(d) of the Security Instrument; and
(3) any costs and expenses incurred by Lender
in connection with the collection of any
amount for which Borrower is personally
liable under this Paragraph 9, including fees
and out of pocket expenses of attorneys and
expert witnesses and the costs of conducting
any independent audit of Borrower's books and
records to determine the amount for which
Borrower has personal liability.
(g) To the extent that Borrower has
personal liability under this Paragraph 9,
Lender may exercise its rights against
Borrower personally without regard to whether
Lender has exercised any rights against the
Mortgaged Property or any other security, or
pursued any rights against any guarantor, or
pursued any other rights available to Lender
under this Note, the Security Instrument, any
other Loan Document or applicable law. For
purposes of this Paragraph 9, the term
"Mortgaged Property" shall not include any
funds that (1) have been applied by Borrower
as required or permitted by the Security
Instrument prior to the occurrence of an
Event of Default or (2) Borrower was unable
to apply as required or permitted by the
Security Instrument because of a bankruptcy,
receivership, or similar judicial proceeding.
10. Voluntary and Involuntary
Prepayments.
(a) A prepayment premium shall be
payable in connection with any prepayment
made under this Note as provided below:
(1) Borrower may voluntarily
prepay all of the unpaid principal balance of
this Note on the last Business Day of a
calendar month if Borrower has given Lender
at least 30 days prior notice of its
intention to make such prepayment. Such
prepayment shall be made by paying (A) the
amount of principal being prepaid, (B) all
accrued interest, (C) all other sums due
Lender at the time of such prepayment, and
(D) the prepayment premium calculated
pursuant to Schedule A. For all purposes
including the accrual of interest, any
prepayment received by Lender on any day
other than the last calendar day of the month
shall be deemed to have been received on the
last calendar day of such month. For
purposes of this Note, a "Business Day" means
any day other than a Saturday, Sunday or any
other day on which Lender is not open for
business. Borrower shall not have the option
to voluntarily prepay less than all of the
unpaid principal balance.
(2) Upon Lender's exercise of any
right of acceleration under this Note,
Borrower shall pay to Lender, in addition to
the entire unpaid principal balance of this
Note outstanding at the time of the
acceleration, (A) all accrued interest and
all other sums due Lender, and (B) the
prepayment premium calculated pursuant to
Schedule A.
(3) Any application by Lender of
any collateral or other security to the
repayment of any portion of the unpaid
principal balance of this Note prior to the
Maturity Date and in the absence of
acceleration shall be deemed to be a partial
prepayment by Borrower, requiring the payment
to Lender by Borrower of a prepayment
premium. The amount of any such partial
prepayment shall be computed so as to provide
to Lender a prepayment premium computed
pursuant to Schedule A without Borrower
having to pay out-of-pocket any additional
amounts.
(b) Notwithstanding the provisions of
Paragraph 10(a), no prepayment premium shall
be payable with respect to (A) any prepayment
made no more than 90 days before the Maturity
Date, or (B) any prepayment occurring as a
result of the application of any insurance
proceeds or condemnation award under the
Security Instrument.
(c) Schedule A is hereby incorporated
by reference into this Note.
(d) Any permitted or required
prepayment of less than the unpaid principal
balance of this Note shall not extend or
postpone the due date of any subsequent
monthly installments or change the amount of
such installments, unless Lender agrees
otherwise in writing.
(e) Borrower recognizes that any
prepayment of the unpaid principal balance of
this Note, whether voluntary or involuntary
or resulting from a default by Borrower, will
result in Lender's incurring loss, including
reinvestment loss, additional expense and
frustration or impairment of Lender's ability
to meet its commitments to third parties.
Borrower agrees to pay to Lender upon demand
damages for the detriment caused by any
prepayment, and agrees that it is extremely
difficult and impractical to ascertain the
extent of such damages. Borrower therefore
acknowledges and agrees that the formula for
calculating prepayment premiums set forth on
Schedule A represents a reasonable estimate
of the damages Lender will incur because of a
prepayment.
(f) Borrower further acknowledges that
the prepayment premium provisions of this
Note are a material part of the consideration
for the Loan, and acknowledges that the terms
of this Note are in other respects more
favorable to Borrower as a result of the
Borrower's voluntary agreement to the
prepayment premium provisions.
11. Costs and Expenses. Borrower shall
pay all expenses and costs, including fees
and out-of-pocket expenses of attorneys and
expert witnesses and costs of investigation,
incurred by Lender as a result of any default
under this Note or in connection with efforts
to collect any amount due under this Note, or
to enforce the provisions of any of the other
Loan Documents, including those incurred in
post-judgment collection efforts and in any
bankruptcy proceeding (including any action
for relief from the automatic stay of any
bankruptcy proceeding) or judicial or non-
judicial foreclosure proceeding.
12. Forbearance. Any forbearance by
Lender in exercising any right or remedy
under this Note, the Security Instrument, or
any other Loan Document or otherwise afforded
by applicable law, shall not be a waiver of
or preclude the exercise of that or any other
right or remedy. The acceptance by Lender of
any payment after the due date of such
payment, or in an amount which is less than
the required payment, shall not be a waiver
of Lender's right to require prompt payment
when due of all other payments or to exercise
any right or remedy with respect to any
failure to make prompt payment. Enforcement
by Lender of any security for Borrower's
obligations under this Note shall not
constitute an election by Lender of remedies
so as to preclude the exercise of any other
right or remedy available to Lender.
13. Waivers. Presentment, demand,
notice of dishonor, protest, notice of
acceleration, notice of intent to demand or
accelerate payment or maturity, presentment
for payment, notice of nonpayment, grace, and
diligence in collecting the Indebtedness are
waived by Borrower and all endorsers and
guarantors of this Note and all other third
party obligors.
14. Loan Charges. If any applicable
law limiting the amount of interest or other
charges permitted to be collected from
Borrower in connection with the Loan is
interpreted so that any interest or other
charge provided for in any Loan Document,
whether considered separately or together
with other charges provided for in any other
Loan Document, violates that law, and
Borrower is entitled to the benefit of that
law, that interest or charge is hereby
reduced to the extent necessary to eliminate
that violation. The amounts, if any,
previously paid to Lender in excess of the
permitted amounts shall be applied by Lender
to reduce the unpaid principal balance of
this Note. For the purpose of determining
whether any applicable law limiting the
amount of interest or other charges permitted
to be collected from Borrower has been
violated, all Indebtedness that constitutes
interest, as well as all other charges made
in connection with the Indebtedness that
constitute interest, shall be deemed to be
allocated and spread ratably over the stated
term of the Note. Unless otherwise required
by applicable law, such allocation and
spreading shall be effected in such a manner
that the rate of interest so computed is
uniform throughout the stated term of the
Note.
15. Commercial Purpose. Borrower
represents that the Indebtedness is being
incurred by Borrower solely for the purpose
of carrying on a business or commercial
enterprise, and not for personal, family or
household purposes.
16. Counting of Days. Except where
otherwise specifically provided, any
reference in this Note to a period of "days"
means calendar days, not Business Days.
17. Governing Law. This Note shall be
governed by the law of the jurisdiction in
which the Land is located.
18. Captions. The captions of the
paragraphs of this Note are for convenience
only and shall be disregarded in construing
this Note.
19. Notices. All notices, demands and
other communications required or permitted to
be given by Lender to Borrower pursuant to
this Note shall be given in accordance with
Section 31 of the Security Instrument.
20. Consent to Jurisdiction and Venue.
Borrower agrees that any controversy arising
under or in relation to this Note shall be
litigated exclusively in the jurisdiction in
which the Land is located (the "Property
Jurisdiction"). The state and federal courts
and authorities with jurisdiction in the
Property Jurisdiction shall have exclusive
jurisdiction over all controversies which
shall arise under or in relation to this
Note. Borrower irrevocably consents to
service, jurisdiction, and venue of such
courts for any such litigation and waives any
other venue to which it might be entitled by
virtue of domicile, habitual residence or
otherwise.
21. WAIVER OF TRIAL BY JURY. BORROWER
AND LENDER EACH (A) AGREES NOT TO ELECT A
TRIAL BY JURY WITH RESPECT TO ANY ISSUE
ARISING OUT OF THIS NOTE OR THE RELATIONSHIP
BETWEEN THE PARTIES AS LENDER AND BORROWER
THAT IS TRIABLE OF RIGHT BY A JURY AND (B)
WAIVES ANY RIGHT TO TRIAL BY JURY WITH
RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY
SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS
WAIVER OF RIGHT TO TRIAL BY JURY IS
SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND
VOLUNTARILY WITH THE BENEFIT OF COMPETENT
LEGAL COUNSEL.
ATTACHED SCHEDULES. The following
Schedules are attached to this Note:
|X | Schedule A Prepayment Premium
(required)
| | Schedule B Modifications
to Multifamily Note
IN WITNESS WHEREOF, Borrower has signed
and delivered this Note or has caused this
Note to be signed and delivered by its duly
authorized representative.
BORROWER:
CENTURY III
ASSOCIATES LIMITED
PARTNERSHIP, a
Maryland limited
partnership
ATTEST/WITNESS: By: The Krupp
Corporation, a Massachusetts
corporation, General Partner
__________________________ By:
_____________________________
Stephen C. Parthum, its Duly
Authorized Agent
04-
3074016
Borrower's
Social Security/Employer
ID Number
PAY TO THE ORDER OF FEDERAL HOME
LOAN MORTGAGE CORPORATION WITHOUT
RECOURSE
This _____ day of December, 1997
REILLY MORTGAGE GROUP, INC.
By: __________________________________
, its Vice President<PAGE>
<PAGE>
SCHEDULE A
PREPAYMENT PREMIUM
Any prepayment premium payable under
Paragraph 10 of this Note shall be computed
as follows:
(a) If the prepayment is made between
the date of this Note and the date that is
114 months after the first day of the first
calendar month following the date of this
Note (the "Yield Maintenance Period"), the
prepayment premium shall be the greater of:
(i) 1.0% of the unpaid principal
balance of this Note; or
(ii) the product obtained by
multiplying:
(A) the amount of principal being
prepaid,
by
(B) the excess (if any) of the
Monthly Note Rate over the Assumed
Reinvestment Rate,
by
(C) the Present Value Factor.
For purposes of subparagraph (ii),
the following definitions shall apply:
Monthly Note Rate: one-twelfth
(1/12) of the annual interest rate
of the Note, expressed as a decimal
calculated to five digits.
Prepayment Date: in the case of a
voluntary prepayment, the date on
which the prepayment is made; in
any other case, the date on which
Lender accelerates the unpaid
principal balance of the Note.
Assumed Reinvestment Rate: one-
twelfth (1/12) of the yield rate as
of the date 5 Business Days before
the Prepayment Date, on the 6.125%
U.S. Treasury Security due August
1, 2007, as reported in The Wall
Street Journal, expressed as a
decimal calculated to five digits.
In the event that no yield is
published on the applicable date
for the Treasury Security used to
determine the Assumed Reinvestment
Rate, Lender, in its discretion,
shall select the non-callable
Treasury Security maturing in the
same year as the Treasury Security
specified above with the lowest
yield published in The Wall Street
Journal as of the applicable date.
If the publication of such yield
rates in The Wall Street Journal is
discontinued for any reason, Lender
shall select a security with a
comparable rate and term to the
Treasury Security used to determine
the Assumed Reinvestment Rate. The
selection of an alternate security
pursuant to this Paragraph shall be
made in Lender's discretion.
Present Value Factor: the factor
that discounts to present value the
costs resulting to Lender from the
difference in interest rates during
the months remaining in the Yield
Maintenance Period, using the
Assumed Reinvestment Rate as the
discount rate, with monthly
compounding, expressed numerically
as follows:
n = number of months remaining in
Yield Maintenance Period
ARR = Assumed Reinvestment Rate
(b) If the prepayment is made after the
expiration of the Yield Maintenance Period
but more than 90 days before the Maturity
Date, the prepayment premium shall be 1.0% of
the unpaid principal balance of this Note.
<PAGE>
SCHEDULE B
MODIFICATIONS TO MULTIFAMILY NOTE
Prepared by, and after recording Loan No.
904707938
return to:
Robert B. Joselow, Esq.
SEEGER POTTER RICHARDSON
LUXTON JOSELOW & BROOKS, L.L.P.
2121 K Street, N.W., Suite 700
Washington, D.C. 20037
MULTIFAMILY DEED OF TRUST,
ASSIGNMENT OF RENTS
AND SECURITY AGREEMENT
(MARYLAND)
<PAGE>
MULTIFAMILY DEED OF TRUST,
ASSIGNMENT OF RENTS AND
SECURITY AGREEMENT
THIS MULTIFAMILY DEED OF TRUST, ASSIGNMENT OF
RENTS AND SECURITY AGREEMENT (the
"Instrument") is made this ______ day of
December, 1997, by CENTURY III ASSOCIATES
LIMITED PARTNERSHIP, a limited partnership
organized and existing under the laws of
Maryland, whose address is c/o Berkshire
Mortgage Finance, 1000 Parkwood Circle, Suite
900, Atlanta, Georgia 30339, as grantor
("Borrower"), to James R. Kozuch, as trustee
("Trustee"), for the benefit of REILLY
MORTGAGE GROUP, INC., a corporation organized
and existing under the laws of the District
of Columbia, whose address is 2000 Corporate
Ridge, Suite 925, McLean, Virginia 22102, as
beneficiary ("Lender").
Borrower, in consideration of the
Indebtedness and the trust created by this
Instrument, irrevocably grants, conveys and
assigns to Trustee, in trust, with power of
sale, the Mortgaged Property, including the
Land located in Baltimore County, State of
Maryland and described in Exhibit A attached
to this Instrument, and authorizes Trustee to
sell the Mortgaged Property upon default by
any lawful means, as provided in this
Instrument, and assents to the passage of a
decree for the sale of the Mortgage Property.
TO SECURE TO LENDER the repayment of the
Indebtedness evidenced by Borrower's
Multifamily Note payable to Lender, dated as
of the date of this Instrument, and maturing
on January 1, 2008, in the principal amount
of $11,000,000.00, and all renewals,
extensions and modifications of the
Indebtedness, and the performance of the
covenants and agreements of Borrower
contained in the Loan Documents.
Borrower represents and warrants that
Borrower is lawfully seized of the Mortgaged
Property and has the right, power and
authority to grant, convey and assign the
Mortgaged Property, and that the Mortgaged
Property is unencumbered. Borrower covenants
that Borrower will warrant and defend
specially the title to the Mortgaged Property
against all claims and demands, subject to
any easements and restrictions listed in a
schedule of exceptions to coverage in any
title insurance policy issued to Lender
contemporaneously with the execution and
recordation of this Instrument and insuring
Lender's interest in the Mortgaged Property.
Covenants. Borrower and Lender covenant and
agree as follows:
1.DEFINITIONS. The following terms, when used
in this Instrument (including when used in
the above recitals), shall have the following
meanings:
(a)"Borrower" means all persons or entities
identified as "Borrower" in the first
paragraph of this Instrument, together with
their successors and assigns.
(b)"Collateral Agreement" means any separate
agreement between Borrower and Lender for the
purpose of establishing replacement reserves
for the Mortgaged Property, establishing a
fund to assure the completion of repairs or
improvements specified in that agreement, or
assuring reduction of the outstanding
principal balance of the Indebtedness if the
occupancy of or income from the Mortgaged
Property does not increase to a level
specified in that agreement, or any other
agreement or agreements between Borrower and
Lender which provide for the establishment of
any other fund, reserve or account.
(c)"Controlling Entity" means an entity which
owns, directly or indirectly through one or
more intermediaries, (A) a general
partnership interest or more than 50% of the
limited partnership interests in Borrower (if
Borrower is a partnership or joint venture),
(B) a manager's interest in Borrower or more
than 50% of the ownership or membership
interests in Borrower (if Borrower is a
limited liability company), or (C) more than
50% of any class of voting stock of Borrower
(if Borrower is a corporation).
(d)"Environmental Permit" means any permit,
license, or other authorization issued under
any Hazardous Materials Law with respect to
any activities or businesses conducted on or
in relation to the Mortgaged Property.
(e)"Event of Default" means the occurrence of
any event listed in Section 22.
(f)"Fixtures" means all property which is so
attached to the Land or the Improvements as
to constitute a fixture under applicable law,
including: machinery, equipment, engines,
boilers, incinerators, installed building
materials; systems and equipment for the
purpose of supplying or distributing heating,
cooling, electricity, gas, water, air, or
light; antennas, cable, wiring and conduits
used in connection with radio, television,
security, fire prevention, or fire detection
or otherwise used to carry electronic
signals; telephone systems and equipment;
elevators and related machinery and
equipment; fire detection, prevention and
extinguishing systems and apparatus; security
and access control systems and apparatus;
plumbing systems; water heaters, ranges,
stoves, microwave ovens, refrigerators,
dishwashers, garbage disposers, washers,
dryers and other appliances; light fixtures,
awnings, storm windows and storm doors;
pictures, screens, blinds, shades, curtains
and curtain rods; mirrors; cabinets,
paneling, rugs and floor and wall coverings;
fences, trees and plants; swimming pools; and
exercise equipment.
(g) "Governmental Authority" means any
board, commission, department or body of any
municipal, county, state or federal
governmental unit, or any subdivision of any
of them, that has or acquires jurisdiction
over the Mortgaged Property or the use,
operation or improvement of the Mortgaged
Property.
(h) "Hazardous Materials" means
petroleum and petroleum products and
compounds containing them, including
gasoline, diesel fuel and oil; explosives;
flammable materials; radioactive materials;
polychlorinated biphenyls ("PCBs") and
compounds containing them; lead and lead-
based paint; asbestos or asbestos-containing
materials in any form that is or could become
friable; underground or above-ground storage
tanks, whether empty or containing any
substance; any substance the presence of
which on the Mortgaged Property is prohibited
by any federal, state or local authority; any
substance that requires special handling; and
any other material or substance now or in the
future defined as a "hazardous substance,"
"hazardous material," "hazardous waste,"
"toxic substance," "toxic pollutant,"
"contaminant," or "pollutant" within the
meaning of any Hazardous Materials Law.
(i) "Hazardous Materials Laws" means
all federal, state, and local laws,
ordinances and regulations and standards,
rules, policies and other governmental
requirements, administrative rulings and
court judgments and decrees in effect now or
in the future and including all amendments,
that relate to Hazardous Materials and apply
to Borrower or to the Mortgaged Property.
Hazardous Materials Laws include, but are not
limited to, the Comprehensive Environmental
Response, Compensation and Liability Act, 42
U.S.C. Section 9601, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C.
Section 6901, et seq., the Toxic Substance
Control Act, 15 U.S.C. Section 2601, et seq.,
the Clean Water Act, 33 U.S.C. Section 1251,
et seq., and the Hazardous Materials
Transportation Act, 49 U.S.C. Section 5101,
and their state analogs.
(j) "Impositions" and "Imposition
Deposits" are defined in Section 7(a).
(k) "Improvements" means the buildings,
structures, improvements, and alterations now
constructed or at any time in the future
constructed or placed upon the Land,
including any future replacements and
additions.
(l) "Indebtedness" means the principal
of, interest on, and all other amounts due at
any time under, the Note, this Instrument or
any other Loan Document, including prepayment
premiums, late charges, default interest, and
advances as provided in Section 12 to protect
the security of this Instrument.
(m) "Initial Owners" means, with
respect to Borrower or any other entity, the
persons or entities who on the date of the
Note own in the aggregate 100% of the
ownership interests in Borrower or that
entity.
(n) "Land" means the land described in
Exhibit A.
(o) "Leases" means all present and
future leases, subleases, licenses,
concessions or grants or other possessory
interests now or hereafter in force, whether
oral or written, covering or affecting the
Mortgaged Property, or any portion of the
Mortgaged Property (including proprietary
leases or occupancy agreements if Borrower is
a cooperative housing corporation), and all
modifications, extensions or renewals.
(p) "Lender" means the entity
identified as "Lender" in the first paragraph
of this Instrument, or any subsequent holder
of the Note.
(q) "Loan Documents" means the Note,
this Instrument, all guaranties, all
indemnity agreements, all Collateral
Agreements, O&M Programs, and any other
documents now or in the future executed by
Borrower, any guarantor or any other person
in connection with the loan evidenced by the
Note, as such documents may be amended from
time to time.
(r) "Loan Servicer" means the entity
that from time to time is designated by
Lender to collect payments and deposits and
receive notices under the Note, this
Instrument and any other Loan Document, and
otherwise to service the loan evidenced by
the Note for the benefit of Lender. Unless
Borrower receives notice to the contrary, the
Loan Servicer is the entity identified as
"Lender" in the first paragraph of this
Instrument.
(s) "Mortgaged Property" means all of
Borrower's present and future right, title
and interest in and to all of the following:
(1) the Land;
(2) the Improvements;
(3) the Fixtures;
(4) the Personalty;
(5) all current and future rights,
including air rights,
development rights, zoning
rights and other similar
rights or interests,
easements, tenements,
rights-of-way, strips and
gores of land, streets,
alleys, roads, sewer rights,
waters, watercourses, and
appurtenances related to or
benefitting the Land or the
Improvements, or both, and all
rights-of-way, streets, alleys
and roads which may have been
or may in the future be
vacated;
(6) all proceeds paid or to be
paid by any insurer of the
Land, the Improvements, the
Fixtures, the Personalty or
any other part of the
Mortgaged Property, whether or
not Borrower obtained the
insurance pursuant to Lender's
requirement;
(7) all awards, payments and other
compensation made or to be
made by any municipal, state
or federal authority with
respect to the Land, the
Improvements, the Fixtures,
the Personalty or any other
part of the Mortgaged
Property, including any awards
or settlements resulting from
condemnation proceedings or
the total or partial taking of
the Land, the Improvements,
the Fixtures, the Personalty
or any other part of the
Mortgaged Property under the
power of eminent domain or
otherwise and including any
conveyance in lieu thereof;
(8) all contracts, options and
other agreements for the sale
of the Land, the Improvements,
the Fixtures, the Personalty
or any other part of the
Mortgaged Property entered
into by Borrower now or in the
future, including cash or
securities deposited to secure
performance by parties of
their obligations;
(9) all proceeds from the
conversion, voluntary or
involuntary, of any of the
above into cash or liquidated
claims, and the right to
collect such proceeds;
(10) all Rents and Leases;
(11) all earnings, royalties,
accounts receivable, issues
and profits from the Land, the
Improvements or any other part
of the Mortgaged Property, and
all undisbursed proceeds of
the loan secured by this
Instrument and, if Borrower is
a cooperative housing
corporation, maintenance
charges or assessments payable
by shareholders or residents;
(12) all Imposition Deposits;
(13) all refunds or rebates of
Impositions by any municipal,
state or federal authority or
insurance company (other than
refunds applicable to periods
before the real property tax
year in which this Instrument
is dated);
(14) all tenant security deposits
which have not been forfeited
by any tenant under any Lease;
and
(15) all names under or by which
any of the above Mortgaged
Property may be operated or
known, and all trademarks,
trade names, and goodwill
relating to any of the
Mortgaged Property.
(t) "Note" means the Multifamily Note
described on page 1 of this Instrument,
including all schedules, riders, allonges and
addenda, as such Multifamily Note may be
amended from time to time.
(u) "O&M Program" is defined in
Section 18(a).
(v) "Personalty" means all furniture,
furnishings, equipment, machinery, building
materials, appliances, goods, supplies,
tools, books, records (whether in written or
electronic form), computer equipment
(hardware and software) and other tangible
personal property (other than Fixtures) which
are used now or in the future in connection
with the ownership, management or operation
of the Land or the Improvements or are
located on the Land or in the Improvements,
and any operating agreements relating to the
Land or the Improvements, and any surveys,
plans and specifications and contracts for
architectural, engineering and construction
services relating to the Land or the
Improvements and all other intangible
property and rights relating to the operation
of, or used in connection with, the Land or
the Improvements, including all governmental
permits relating to any activities on the
Land.
(w) "Property Jurisdiction" is defined
in Section 30(a).
(x) "Rents" means all rents (whether
from residential or non-residential space),
revenues and other income of the Land or the
Improvements, including parking fees, laundry
and vending machine income and fees and
charges for food, health care and other
services provided at the Mortgaged Property,
whether now due, past due, or to become due,
and deposits forfeited by tenants.
(y) "Taxes" means all taxes,
assessments, vault rentals and other charges,
if any, general, special or otherwise,
including all assessments for schools, public
betterments and general or local
improvements, which are levied, assessed or
imposed by any public authority or quasi-
public authority, and which, if not paid,
will become a lien, on the Land or the
Improvements.
(z) "Transfer" means (A) a sale,
assignment, transfer or other disposition
(whether voluntary, involuntary or by
operation of law); (B) the granting, creating
or attachment of a lien, encumbrance or
security interest (whether voluntary,
involuntary or by operation of law); (C) the
issuance or other creation of an ownership
interest in a legal entity, including a
partnership interest, interest in a limited
liability company or corporate stock; (D)
the withdrawal, retirement, removal or
involuntary resignation of a partner in a
partnership or a member or manager in a
limited liability company; or (E) the merger,
dissolution, liquidation, or consolidation of
a legal entity or the reconstitution of one
type of legal entity into another type of
legal entity. "Transfer" does not include
(i) a conveyance of the Mortgaged Property at
a judicial or non-judicial foreclosure sale
under this Instrument or (ii) the Mortgaged
Property becoming part of a bankruptcy estate
by operation of law under the United States
Bankruptcy Code. For purposes of defining
the term "Transfer," the term "partnership"
shall mean a general partnership, a limited
partnership, a joint venture and a limited
liability partnership, and the term "partner"
shall mean a general partner, a limited
partner and a joint venturer.
2. UNIFORM COMMERCIAL CODE SECURITY
AGREEMENT. This Instrument is also a security
agreement under the Uniform Commercial Code
for any of the Mortgaged Property which,
under applicable law, may be subject to a
security interest under the Uniform
Commercial Code, whether acquired now or in
the future, and all products and cash and
non-cash proceeds thereof (collectively, "UCC
Collateral"), and Borrower hereby grants to
Lender a security interest in the UCC
Collateral. Borrower shall execute and
deliver to Lender, upon Lender's request,
financing statements, continuation statements
and amendments, in such form as Lender may
require to perfect or continue the perfection
of this security interest. Borrower shall
pay all filing costs and all costs and
expenses of any record searches for financing
statements that Lender may require. Without
the prior written consent of Lender, Borrower
shall not create or permit to exist any other
lien or security interest in any of the UCC
Collateral. If an Event of Default has
occurred and is continuing, Lender shall have
the remedies of a secured party under the
Uniform Commercial Code, in addition to all
remedies provided by this Instrument or
existing under applicable law. In exercising
any remedies, Lender may exercise its
remedies against the UCC Collateral
separately or together, and in any order,
without in any way affecting the availability
of Lender's other remedies. This Instrument
constitutes a financing statement with
respect to any part of the Mortgaged Property
which is or may become a Fixture.
3. ASSIGNMENT OF RENTS; APPOINTMENT OF
RECEIVER; LENDER IN POSSESSION.
(a) As part of the consideration for
the Indebtedness, Borrower absolutely and
unconditionally assigns and transfers to
Lender all Rents. It is the intention of
Borrower to establish a present, absolute and
irrevocable transfer and assignment to Lender
of all Rents and to authorize and empower
Lender to collect and receive all Rents
without the necessity of further action on
the part of Borrower. Promptly upon request
by Lender, Borrower agrees to execute and
deliver such further assignments as Lender
may from time to time require. Borrower and
Lender intend this assignment of Rents to be
immediately effective and to constitute an
absolute present assignment and not an
assignment for additional security only. For
purposes of giving effect to this absolute
assignment of Rents, and for no other
purpose, Rents shall not be deemed to be a
part of the "Mortgaged Property" as that term
is defined in Section 1(s). However, if this
present, absolute and unconditional
assignment of Rents is not enforceable by its
terms under the laws of the Property
Jurisdiction, then the Rents shall be
included as a part of the Mortgaged Property
and it is the intention of the Borrower that
in this circumstance this Instrument create
and perfect a lien on Rents in favor of
Lender, which lien shall be effective as of
the date of this Instrument.
(b) After the occurrence of an Event of
Default, Borrower authorizes Lender to
collect, sue for and compromise Rents and
directs each tenant of the Mortgaged Property
to pay all Rents to, or as directed by,
Lender. However, until the occurrence of an
Event of Default, Lender hereby grants to
Borrower a revocable license to collect and
receive all Rents, to hold all Rents in trust
for the benefit of Lender and to apply all
Rents to pay the installments of interest and
principal then due and payable under the Note
and the other amounts then due and payable
under the other Loan Documents, including
Imposition Deposits, and to pay the current
costs and expenses of managing, operating and
maintaining the Mortgaged Property, including
utilities, Taxes and insurance premiums (to
the extent not included in Imposition
Deposits), tenant improvements and other
capital expenditures. So long as no Event of
Default has occurred and is continuing, the
Rents remaining after application pursuant to
the preceding sentence may be retained by
Borrower free and clear of, and released
from, Lender's rights with respect to Rents
under this Instrument. From and after the
occurrence of an Event of Default, and
without the necessity of Lender entering upon
and taking and maintaining control of the
Mortgaged Property directly, or by a
receiver, Borrower's license to collect Rents
shall automatically terminate and Lender
shall without notice be entitled to all Rents
as they become due and payable, including
Rents then due and unpaid. Borrower shall
pay to Lender upon demand all Rents to which
Lender is entitled. At any time on or after
the date of Lender's demand for Rents, Lender
may give, and Borrower hereby irrevocably
authorizes Lender to give, notice to all
tenants of the Mortgaged Property instructing
them to pay all Rents to Lender, no tenant
shall be obligated to inquire further as to
the occurrence or continuance of an Event of
Default, and no tenant shall be obligated to
pay to Borrower any amounts which are
actually paid to Lender in response to such a
notice. Any such notice by Lender shall be
delivered to each tenant personally, by mail
or by delivering such demand to each rental
unit. Borrower shall not interfere with and
shall cooperate with Lender's collection of
such Rents.
(c) Borrower represents and warrants to
Lender that Borrower has not executed any
prior assignment of Rents (other than an
assignment of Rents securing indebtedness
that will be paid off and discharged with the
proceeds of the loan evidenced by the Note),
that Borrower has not performed, and Borrower
covenants and agrees that it will not
perform, any acts and has not executed, and
shall not execute, any instrument which would
prevent Lender from exercising its rights
under this Section 3, and that at the time of
execution of this Instrument there has been
no anticipation or prepayment of any Rents
for more than two months prior to the due
dates of such Rents. Borrower shall not
collect or accept payment of any Rents more
than two months prior to the due dates of
such Rents.
(d) If an Event of Default has occurred
and is continuing, Lender may, regardless of
the adequacy of Lender's security or the
solvency of Borrower and even in the absence
of waste, enter upon and take and maintain
full control of the Mortgaged Property in
order to perform all acts that Lender in its
discretion determines to be necessary or
desirable for the operation and maintenance
of the Mortgaged Property, including the
execution, cancellation or modification of
Leases, the collection of all Rents, the
making of repairs to the Mortgaged Property
and the execution or termination of contracts
providing for the management, operation or
maintenance of the Mortgaged Property, for
the purposes of enforcing the assignment of
Rents pursuant to Section 3(a), protecting
the Mortgaged Property or the security of
this Instrument, or for such other purposes
as Lender in its discretion may deem
necessary or desirable. Alternatively, if an
Event of Default has occurred and is
continuing, regardless of the adequacy of
Lender's security, without regard to
Borrower's solvency and without the necessity
of giving prior notice (oral or written) to
Borrower, Lender may apply to any court
having jurisdiction for the appointment of a
receiver for the Mortgaged Property to take
any or all of the actions set forth in the
preceding sentence. If Lender elects to seek
the appointment of a receiver for the
Mortgaged Property at any time after an Event
of Default has occurred and is continuing,
Borrower, by its execution of this
Instrument, expressly consents to the
appointment of such receiver, including the
appointment of a receiver ex parte if
permitted by applicable law. Lender or the
receiver, as the case may be, shall be
entitled to receive a reasonable fee for
managing the Mortgaged Property. Immediately
upon appointment of a receiver or immediately
upon the Lender's entering upon and taking
possession and control of the Mortgaged
Property, Borrower shall surrender possession
of the Mortgaged Property to Lender or the
receiver, as the case may be, and shall
deliver to Lender or the receiver, as the
case may be, all documents, records
(including records on electronic or magnetic
media), accounts, surveys, plans, and
specifications relating to the Mortgaged
Property and all security deposits and
prepaid Rents. In the event Lender takes
possession and control of the Mortgaged
Property, Lender may exclude Borrower and its
representatives from the Mortgaged Property.
Borrower acknowledges and agrees that the
exercise by Lender of any of the rights
conferred under this Section 3 shall not be
construed to make Lender a mortgagee-in-
possession of the Mortgaged Property so long
as Lender has not itself entered into actual
possession of the Land and Improvements.
(e) If Lender enters the Mortgaged
Property, Lender shall be liable to account
only to Borrower and only for those Rents
actually received. Lender shall not be
liable to Borrower, anyone claiming under or
through Borrower or anyone having an interest
in the Mortgaged Property, by reason of any
act or omission of Lender under this
Section 3, and Borrower hereby releases and
discharges Lender from any such liability to
the fullest extent permitted by law.
(f) If the Rents are not sufficient to
meet the costs of taking control of and
managing the Mortgaged Property and
collecting the Rents, any funds expended by
Lender for such purposes shall become an
additional part of the Indebtedness as
provided in Section 12.
(g) Any entering upon and taking of
control of the Mortgaged Property by Lender
or the receiver, as the case may be, and any
application of Rents as provided in this
Instrument shall not cure or waive any Event
of Default or invalidate any other right or
remedy of Lender under applicable law or
provided for in this Instrument.
4. ASSIGNMENT OF LEASES; LEASES
AFFECTING THE MORTGAGED PROPERTY.
(a) As part of the consideration for
the Indebtedness, Borrower absolutely and
unconditionally assigns and transfers to
Lender all of Borrower's right, title and
interest in, to and under the Leases,
including Borrower's right, power and
authority to modify the terms of any such
Lease, or extend or terminate any such Lease.
It is the intention of Borrower to establish
a present, absolute and irrevocable transfer
and assignment to Lender of all of Borrower's
right, title and interest in, to and under
the Leases. Borrower and Lender intend this
assignment of the Leases to be immediately
effective and to constitute an absolute
present assignment and not an assignment for
additional security only. For purposes of
giving effect to this absolute assignment of
the Leases, and for no other purpose, the
Leases shall not be deemed to be a part of
the "Mortgaged Property" as that term is
defined in Section 1(s). However, if this
present, absolute and unconditional
assignment of the Leases is not enforceable
by its terms under the laws of the Property
Jurisdiction, then the Leases shall be
included as a part of the Mortgaged Property
and it is the intention of the Borrower that
in this circumstance this Instrument create
and perfect a lien on the Leases in favor of
Lender, which lien shall be effective as of
the date of this Instrument.
(b) Until Lender gives notice to
Borrower of Lender's exercise of its rights
under this Section 4, Borrower shall have all
rights, power and authority granted to
Borrower under any Lease (except as otherwise
limited by this Section or any other
provision of this Instrument), including the
right, power and authority to modify the
terms of any Lease or extend or terminate any
Lease. Upon the occurrence of an Event of
Default, the permission given to Borrower
pursuant to the preceding sentence to
exercise all rights, power and authority
under Leases shall automatically terminate.
Borrower shall comply with and observe
Borrower's obligations under all Leases,
including Borrower's obligations pertaining
to the maintenance and disposition of tenant
security deposits.
(c) Borrower acknowledges and agrees
that the exercise by Lender, either directly
or by a receiver, of any of the rights
conferred under this Section 4 shall not be
construed to make Lender a mortgagee-in-
possession of the Mortgaged Property so long
as Lender has not itself entered into actual
possession of the Land and the Improvements.
The acceptance by Lender of the assignment of
the Leases pursuant to Section 4(a) shall not
at any time or in any event obligate Lender
to take any action under this Instrument or
to expend any money or to incur any expenses.
Lender shall not be liable in any way for any
injury or damage to person or property
sustained by any person or persons, firm or
corporation in or about the Mortgaged
Property. Prior to Lender's actual entry
into and taking possession of the Mortgaged
Property, Lender shall not (i) be obligated
to perform any of the terms, covenants and
conditions contained in any Lease (or
otherwise have any obligation with respect to
any Lease); (ii) be obligated to appear in
or defend any action or proceeding relating
to the Lease or the Mortgaged Property; or
(iii) be responsible for the operation,
control, care, management or repair of the
Mortgaged Property or any portion of the
Mortgaged Property. The execution of this
Instrument by Borrower shall constitute
conclusive evidence that all responsibility
for the operation, control, care, management
and repair of the Mortgaged Property is and
shall be that of Borrower, prior to such
actual entry and taking of possession.
(d) Upon delivery of notice by Lender
to Borrower of Lender's exercise of Lender's
rights under this Section 4 at any time after
the occurrence of an Event of Default, and
without the necessity of Lender entering upon
and taking and maintaining control of the
Mortgaged Property directly, by a receiver,
or by any other manner or proceeding
permitted by the laws of the Property
Jurisdiction, Lender immediately shall have
all rights, powers and authority granted to
Borrower under any Lease, including the
right, power and authority to modify the
terms of any such Lease, or extend or
terminate any such Lease.
(e) Borrower shall, promptly upon
Lender's request, deliver to Lender an
executed copy of each residential Lease then
in effect. All Leases for residential
dwelling units shall be on forms approved by
Lender, shall be for initial terms of at
least six months and not more than two years,
and shall not include options to purchase.
(f) Borrower shall not lease any
portion of the Mortgaged Property for non-
residential use except with the prior written
consent of Lender and Lender's prior written
approval of the Lease agreement. Borrower
shall not modify the terms of, or extend or
terminate, any Lease for non-residential use
(including any Lease in existence on the date
of this Instrument) without the prior written
consent of Lender. Borrower shall, without
request by Lender, deliver an executed copy
of each non-residential Lease to Lender
promptly after such Lease is signed. All
non-residential Leases, including renewals or
extensions of existing Leases, shall
specifically provide that (1) such Leases are
subordinate to the lien of this Instrument;
(2) the tenant shall attorn to Lender and any
purchaser at a foreclosure sale, such
attornment to be self-executing and effective
upon acquisition of title to the Mortgaged
Property by any purchaser at a foreclosure
sale or by Lender in any manner; (3) the
tenant agrees to execute such further
evidences of attornment as Lender or any
purchaser at a foreclosure sale may from time
to time request; (4) the Lease shall not be
terminated by foreclosure or any other
transfer of the Mortgaged Property; (5) after
a foreclosure sale of the Mortgaged Property,
Lender or any other purchaser at such
foreclosure sale may, at Lender's or such
purchaser's option, accept or terminate such
Lease; and (6) the tenant shall, upon receipt
after the occurrence of an Event of Default
of a written request from Lender, pay all
Rents payable under the Lease to Lender.
(g) Borrower shall not receive or
accept Rent under any Lease (whether
residential or non-residential) for more than
two months in advance.
5. PAYMENT OF INDEBTEDNESS;
PERFORMANCE UNDER LOAN DOCUMENTS; PREPAYMENT
PREMIUM. Borrower shall pay the Indebtedness
when due in accordance with the terms of the
Note and the other Loan Documents and shall
perform, observe and comply with all other
provisions of the Note and the other Loan
Documents. Borrower shall pay a prepayment
premium in connection with certain
prepayments of the Indebtedness, including a
payment made after Lender's exercise of any
right of acceleration of the Indebtedness, as
provided in the Note.
6. EXCULPATION. Borrower's personal
liability for payment of the Indebtedness and
for performance of the other obligations to
be performed by it under this Instrument is
limited in the manner, and to the extent,
provided in the Note.
7. DEPOSITS FOR TAXES, INSURANCE AND
OTHER CHARGES.
(a) Borrower shall deposit with Lender
on the day monthly installments of principal
or interest, or both, are due under the Note
(or on another day designated in writing by
Lender), until the Indebtedness is paid in
full, an additional amount sufficient to
accumulate with Lender the entire sum
required to pay, when due (1) any water and
sewer charges which, if not paid, may result
in a lien on all or any part of the Mortgaged
Property, (2) the premiums for fire and other
hazard insurance, rent loss insurance and
such other insurance as Lender may require
under Section 19, (3) Taxes, and (4) amounts
for other charges and expenses which Lender
at any time reasonably deems necessary to
protect the Mortgaged Property, to prevent
the imposition of liens on the Mortgaged
Property, or otherwise to protect Lender's
interests, all as reasonably estimated from
time to time by Lender, plus one-sixth of
such estimate. The amounts deposited under
the preceding sentence are collectively
referred to in this Instrument as the
"Imposition Deposits". The obligations of
Borrower for which the Imposition Deposits
are required are collectively referred to in
this Instrument as "Impositions". The amount
of the Imposition Deposits shall be
sufficient to enable Lender to pay each
Imposition before the last date upon which
such payment may be made without any penalty
or interest charge being added. Lender shall
maintain records indicating how much of the
monthly Imposition Deposits and how much of
the aggregate Imposition Deposits held by
Lender are held for the purpose of paying
Taxes, insurance premiums and each other
obligation of Borrower for which Imposition
Deposits are required. Any waiver by Lender
of the requirement that Borrower remit
Imposition Deposits to Lender may be revoked
by Lender, in Lender's discretion, at any
time upon notice to Borrower.
(b) Imposition Deposits shall be held
in an institution (which may be Lender, if
Lender is such an institution) whose deposits
or accounts are insured or guaranteed by a
federal agency. Lender shall not be
obligated to open additional accounts or
deposit Imposition Deposits in additional
institutions when the amount of the
Imposition Deposits exceeds the maximum
amount of the federal deposit insurance or
guaranty. Lender shall apply the Imposition
Deposits to pay Impositions so long as no
Event of Default has occurred and is
continuing. Unless applicable law requires,
Lender shall not be required to pay Borrower
any interest, earnings or profits on the
Imposition Deposits. Borrower hereby pledges
and grants to Lender a security interest in
the Imposition Deposits as additional
security for all of Borrower's obligations
under this Instrument and the other Loan
Documents. Any amounts deposited with Lender
under this Section 7 shall not be trust
funds, nor shall they operate to reduce the
Indebtedness, unless applied by Lender for
that purpose under Section 7(e).
(c) If Lender receives a bill or
invoice for an Imposition, Lender shall pay
the Imposition from the Imposition Deposits
held by Lender. Lender shall have no
obligation to pay any Imposition to the
extent it exceeds Imposition Deposits then
held by Lender. Lender may pay an
Imposition according to any bill, statement
or estimate from the appropriate public
office or insurance company without inquiring
into the accuracy of the bill, statement or
estimate or into the validity of the
Imposition.
(d) If at any time the amount of the
Imposition Deposits held by Lender for
payment of a specific Imposition exceeds the
amount reasonably deemed necessary by Lender
plus one-sixth of such estimate, the excess
shall be credited against future installments
of Imposition Deposits. If at any time the
amount of the Imposition Deposits held by
Lender for payment of a specific Imposition
is less than the amount reasonably estimated
by Lender to be necessary plus one-sixth of
such estimate, Borrower shall pay to Lender
the amount of the deficiency within 15 days
after notice from Lender.
(e) If an Event of Default has occurred
and is continuing, Lender may apply any
Imposition Deposits, in any amounts and in
any order as Lender determines, in Lender's
discretion, to pay any Impositions or as a
credit against the Indebtedness. Upon payment
in full of the Indebtedness, Lender shall
refund to Borrower any Imposition Deposits
held by Lender.
8. COLLATERAL AGREEMENTS. Borrower
shall deposit with Lender such amounts as may
be required by any Collateral Agreement and
shall perform all other obligations of
Borrower under each Collateral Agreement.
9. APPLICATION OF PAYMENTS. If at any
time Lender receives, from Borrower or
otherwise, any amount applicable to the
Indebtedness which is less than all amounts
due and payable at such time, then Lender may
apply that payment to amounts then due and
payable in any manner and in any order
determined by Lender, in Lender's discretion.
Neither Lender's acceptance of an amount
which is less than all amounts then due and
payable nor Lender's application of such
payment in the manner authorized shall
constitute or be deemed to constitute either
a waiver of the unpaid amounts or an accord
and satisfaction. Notwithstanding the
application of any such amount to the
Indebtedness, Borrower's obligations under
this Instrument and the Note shall remain
unchanged.
10. COMPLIANCE WITH LAWS. Borrower
shall comply with all laws, ordinances,
regulations and requirements of any
Governmental Authority and all recorded
lawful covenants and agreements relating to
or affecting the Mortgaged Property,
including all laws, ordinances, regulations,
requirements and covenants pertaining to
health and safety, construction of
improvements on the Mortgaged Property, fair
housing, zoning and land use, and Leases.
Borrower also shall comply with all
applicable laws that pertain to the
maintenance and disposition of tenant
security deposits. Borrower shall at all
times maintain records sufficient to
demonstrate compliance with the provisions
of this Section 10. Borrower shall take
appropriate measures to prevent, and shall
not engage in or knowingly permit, any
illegal activities at the Mortgaged Property
that could endanger tenants or visitors,
result in damage to the Mortgaged Property,
result in forfeiture of the Mortgaged
Property, or otherwise materially impair the
lien created by this Instrument or Lender's
interest in the Mortgaged Property. Borrower
represents and warrants to Lender that no
portion of the Mortgaged Property has been or
will be purchased with the proceeds of any
illegal activity.
11. USE OF PROPERTY. Unless required
by applicable law, Borrower shall not (a)
except for any change in use approved by
Lender, allow changes in the use for which
all or any part of the Mortgaged Property is
being used at the time this Instrument was
executed, (b) convert any individual dwelling
units or common areas to commercial use, (c)
initiate or acquiesce in a change in the
zoning classification of the Mortgaged
Property, or (d) establish any condominium or
cooperative regime with respect to the
Mortgaged Property.
12. PROTECTION OF LENDER'S SECURITY.
(a) If Borrower fails to perform any of
its obligations under this Instrument or any
other Loan Document, or if any action or
proceeding is commenced which purports to
affect the Mortgaged Property, Lender's
security or Lender's rights under this
Instrument, including eminent domain,
insolvency, code enforcement, civil or
criminal forfeiture, enforcement of Hazardous
Materials Laws, fraudulent conveyance or
reorganizations or proceedings involving a
bankrupt or decedent, then Lender at Lender's
option may make such appearances, disburse
such sums and take such actions as Lender
reasonably deems necessary to perform such
obligations of Borrower and to protect
Lender's interest, including (1) payment of
fees and out of pocket expenses of attorneys,
accountants, inspectors and consultants, (2)
entry upon the Mortgaged Property to make
repairs or secure the Mortgaged Property, (3)
procurement of the insurance required by
Section 19, and (4) payment of amounts which
Borrower has failed to pay under Sections 15
and 17.
(b) Any amounts disbursed by Lender
under this Section 12, or under any other
provision of this Instrument that treats such
disbursement as being made under this
Section 12, shall be added to, and become
part of, the principal component of the
Indebtedness, shall be immediately due and
payable and shall bear interest from the date
of disbursement until paid at the "Default
Rate", as defined in the Note.
(c) Nothing in this Section 12 shall
require Lender to incur any expense or take
any action.
13. INSPECTION. Lender, its agents,
representatives, and designees may make or
cause to be made entries upon and inspections
of the Mortgaged Property (including
environmental inspections and tests) during
normal business hours, or at any other
reasonable time.
14. BOOKS AND RECORDS; FINANCIAL
REPORTING.
(a) Borrower shall keep and maintain at
all times at the Mortgaged Property or the
management agent's offices, and upon Lender's
request shall make available at the Mortgaged
Property, complete and accurate books of
account and records (including copies of
supporting bills and invoices) adequate to
reflect correctly the operation of the
Mortgaged Property, and copies of all written
contracts, Leases, and other instruments
which affect the Mortgaged Property. The
books, records, contracts, Leases and other
instruments shall be subject to examination
and inspection at any reasonable time by
Lender.
(b) Borrower shall furnish to Lender
all of the following:
(1) within 120 days after the end
of each fiscal year of
Borrower, a statement of
income and expenses for
Borrower's operation of the
Mortgaged Property for that
fiscal year, a statement of
changes in financial position
of Borrower relating to the
Mortgaged Property for that
fiscal year and, when
requested by Lender, a balance
sheet showing all assets and
liabilities of Borrower
relating to the Mortgaged
Property as of the end of that
fiscal year;
(2) within 120 days after the end
of each fiscal year of
Borrower, and at any other
time upon Lender's request, a
rent schedule for the
Mortgaged Property showing the
name of each tenant, and for
each tenant, the space
occupied, the lease expiration
date, the rent payable for the
current month, the date
through which rent has been
paid, and any related
information requested by
Lender;
(3) within 120 days after the end
of each fiscal year of
Borrower, and at any other
time upon Lender's request, an
accounting of all security
deposits held pursuant to all
Leases, including the name of
the institution (if any) and
the names and identification
numbers of the accounts (if
any) in which such security
deposits are held and the name
of the person to contact at
such financial institution,
along with any authority or
release necessary for Lender
to access information
regarding such accounts;
(4) within 120 days after the end
of each fiscal year of
Borrower, and at any other
time upon Lender's request, a
statement that identifies all
owners of any interest in
Borrower and any Controlling
Entity and the interest held
by each, if Borrower or a
Controlling Entity is a
corporation, all officers and
directors of Borrower and the
Controlling Entity, and if
Borrower or a Controlling
Entity is a limited liability
company, all managers who are
not members;
(5) upon Lender's request,
quarterly income and expense
statements for the Mortgaged
Property;
(6) upon Lender's request at any
time when an Event of Default
has occurred and is
continuing, monthly income and
expense statements for the
Mortgaged Property;
(7) upon Lender's request, a
monthly property management
report for the Mortgaged
Property, showing the number
of inquiries made and rental
applications received from
tenants or prospective tenants
and deposits received from
tenants and any other
information requested by
Lender; and
(8) upon Lender's request, a
balance sheet, a statement of
income and expenses for
Borrower and a statement of
changes in financial position
of Borrower for Borrower's
most recent fiscal year.
(c) Each of the statements, schedules
and reports required by Section 14(b) shall
be certified to be complete and accurate by
an individual having authority to bind
Borrower, and shall be in such form and
contain such detail as Lender may reasonably
require. Lender also may require that any
statements, schedules or reports be audited
at Borrower's expense by independent
certified public accountants acceptable to
Lender.
(d) If Borrower fails to provide in a
timely manner the statements, schedules and
reports required by Section 14(b), Lender
shall have the right to have Borrower's books
and records audited, at Borrower's expense,
by independent certified public accountants
selected by Lender in order to obtain such
statements, schedules and reports, and all
related costs and expenses of Lender shall
become immediately due and payable and shall
become an additional part of the Indebtedness
as provided in Section 12.
(e) If an Event of Default has occurred
and is continuing, Borrower shall deliver to
Lender upon written demand all books and
records relating to the Mortgaged Property or
its operation.
(f) Borrower authorizes Lender to
obtain a credit report on Borrower at any
time.
15. TAXES; OPERATING EXPENSES.
(a) Subject to the provisions of
Section 15(c) and Section 15(d), Borrower
shall pay, or cause to be paid, all Taxes
when due and before the addition of any
interest, fine, penalty or cost for
nonpayment.
(b) Subject to the provisions of
Section 15(c), Borrower shall pay the
expenses of operating, managing, maintaining
and repairing the Mortgaged Property
(including insurance premiums, utilities,
repairs and replacements) before the last
date upon which each such payment may be made
without any penalty or interest charge being
added.
(c) As long as no Event of Default
exists and Borrower has timely delivered to
Lender any bills or premium notices that it
has received, Borrower shall not be obligated
to pay Taxes, insurance premiums or any other
individual Imposition to the extent that
sufficient Imposition Deposits are held by
Lender for the purpose of paying that
specific Imposition. If an Event of Default
exists, Lender may exercise any rights Lender
may have with respect to Imposition Deposits
without regard to whether Impositions are
then due and payable. Lender shall have no
liability to Borrower for failing to pay any
Impositions to the extent that any Event of
Default has occurred and is continuing,
insufficient Imposition Deposits are held by
Lender at the time an Imposition becomes due
and payable or Borrower has failed to provide
Lender with bills and premium notices as
provided above.
(d) Borrower, at its own expense, may
contest by appropriate legal proceedings,
conducted diligently and in good faith, the
amount or validity of any Imposition other
than insurance premiums, if (1) Borrower
notifies Lender of the commencement or
expected commencement of such proceedings,
(2) the Mortgaged Property is not in danger
of being sold or forfeited, (3) Borrower
deposits with Lender reserves sufficient to
pay the contested Imposition, if requested by
Lender, and (4) Borrower furnishes whatever
additional security is required in the
proceedings or is reasonably requested by
Lender, which may include the delivery to
Lender of the reserves established by
Borrower to pay the contested Imposition.
(e) Borrower shall promptly deliver to
Lender a copy of all notices of, and invoices
for, Impositions, and if Borrower pays any
Imposition directly, Borrower shall promptly
furnish to Lender receipts evidencing such
payments.
16. LIENS; ENCUMBRANCES. Borrower
acknowledges that, to the extent provided in
Section 21, the grant, creation or existence
of any mortgage, deed of trust, deed to
secure debt, security interest or other lien
or encumbrance (a "Lien") on the Mortgaged
Property (other than the lien of this
Instrument) or on certain ownership interests
in Borrower, whether voluntary, involuntary
or by operation of law, and whether or not
such Lien has priority over the lien of this
Instrument, is a "Transfer" which constitutes
an Event of Default and subjects Borrower to
personal liability under the Note.
17. PRESERVATION, MANAGEMENT AND
MAINTENANCE OF MORTGAGED PROPERTY. Borrower
(a) shall not commit waste or permit
impairment or deterioration of the Mortgaged
Property, (b) shall not abandon the Mortgaged
Property, (c) shall restore or repair
promptly, in a good and workmanlike manner,
any damaged part of the Mortgaged Property to
the equivalent of its original condition, or
such other condition as Lender may approve in
writing, whether or not insurance proceeds or
condemnation awards are available to cover
any costs of such restoration or repair, (d)
shall keep the Mortgaged Property in good
repair, including the replacement of
Personalty and Fixtures with items of equal
or better function and quality, (e) shall
provide for professional management of the
Mortgaged Property by a residential rental
property manager satisfactory to Lender under
a contract approved by Lender in writing, and
(f) shall give notice to Lender of and,
unless otherwise directed in writing by
Lender, shall appear in and defend any action
or proceeding purporting to affect the
Mortgaged Property, Lender's security or
Lender's rights under this Instrument.
Borrower shall not (and shall not permit any
tenant or other person to) remove, demolish
or alter the Mortgaged Property or any part
of the Mortgaged Property except in
connection with the replacement of tangible
Personalty.
18. ENVIRONMENTAL HAZARDS.
(a) Except for matters covered by a
written program of operations and maintenance
approved in writing by Lender (an "O&M
Program") or matters described in
Section 18(b), Borrower shall not cause or
permit any of the following:
(1) the presence, use, generation,
release, treatment,
processing, storage (including
storage in above ground and
underground storage tanks),
handling, or disposal of any
Hazardous Materials on or
under the Mortgaged Property
or any other property of
Borrower that is adjacent to
the Mortgaged Property;
(2) the transportation of any
Hazardous Materials to, from,
or across the Mortgaged
Property;
(3) any occurrence or condition on
the Mortgaged Property or any
other property of Borrower
that is adjacent to the
Mortgaged Property, which
occurrence or condition is or
may be in violation of
Hazardous Materials Laws; or
(4) any violation of or
noncompliance with the terms
of any Environmental Permit
with respect to the Mortgaged
Property or any property of
Borrower that is adjacent to
the Mortgaged Property.
The matters described in clauses (1) through
(4) above are referred to collectively in
this Section 18 as "Prohibited Activities or
Conditions".
(b) Prohibited Activities and
Conditions shall not include the safe and
lawful use and storage of quantities of (1)
pre-packaged supplies, cleaning materials and
petroleum products customarily used in the
operation and maintenance of comparable
multifamily properties, (2) cleaning
materials, personal grooming items and other
items sold in pre-packaged containers for
consumer use and used by tenants and
occupants of residential dwelling units in
the Mortgaged Property; and (3) petroleum
products used in the operation and
maintenance of motor vehicles from time to
time located on the Mortgaged Property's
parking areas, so long as all of the
foregoing are used, stored, handled,
transported and disposed of in compliance
with Hazardous Materials Laws.
(c) Borrower shall take all
commercially reasonable actions (including
the inclusion of appropriate provisions in
any Leases executed after the date of this
Instrument) to prevent its employees, agents,
and contractors, and all tenants and other
occupants from causing or permitting any
Prohibited Activities or Conditions.
Borrower shall not lease or allow the
sublease or use of all or any portion of the
Mortgaged Property to any tenant or subtenant
for nonresidential use by any user that, in
the ordinary course of its business, would
cause or permit any Prohibited Activity or
Condition.
(d) If an O&M Program has been
established with respect to Hazardous
Materials, Borrower shall comply in a timely
manner with, and cause all employees, agents,
and contractors of Borrower and any other
persons present on the Mortgaged Property to
comply with the O&M Program. All costs of
performance of Borrower's obligations under
any O&M Program shall be paid by Borrower,
and Lender's out-of-pocket costs incurred in
connection with the monitoring and review of
the O&M Program and Borrower's performance
shall be paid by Borrower upon demand by
Lender. Any such out-of-pocket costs of
Lender which Borrower fails to pay promptly
shall become an additional part of the
Indebtedness as provided in Section 12.
(e) Borrower represents and warrants to
Lender that, except as previously disclosed
by Borrower to Lender in writing:
(1) Borrower has not at any time
engaged in, caused or
permitted any Prohibited
Activities or Conditions;
(2) to the best of Borrower's
knowledge after reasonable and
diligent inquiry, no
Prohibited Activities or
Conditions exist or have
existed;
(3) except to the extent
previously disclosed by
Borrower to Lender in writing,
the Mortgaged Property does
not now contain any
underground storage tanks,
and, to the best of Borrower's
knowledge after reasonable and
diligent inquiry, the
Mortgaged Property has not
contained any underground
storage tanks in the past. If
there is an underground
storage tank located on the
Property which has been
previously disclosed by
Borrower to Lender in writing,
that tank complies with all
requirements of Hazardous
Materials Laws;
(4) Borrower has complied with all
Hazardous Materials Laws,
including all requirements for
notification regarding
releases of Hazardous
Materials. Without limiting
the generality of the
foregoing, Borrower has
obtained all Environmental
Permits required for the
operation of the Mortgaged
Property in accordance with
Hazardous Materials Laws now
in effect and all such
Environmental Permits are in
full force and effect;
(5) no event has occurred with
respect to the Mortgaged
Property that constitutes, or
with the passing of time or
the giving of notice would
constitute, noncompliance with
the terms of any Environmental
Permit;
(6) there are no actions, suits,
claims or proceedings pending
or, to the best of Borrower's
knowledge after reasonable and
diligent inquiry, threatened
that involve the Mortgaged
Property and allege, arise out
of, or relate to any
Prohibited Activity or
Condition; and
(7) Borrower has not received any
complaint, order, notice of
violation or other
communication from any
Governmental Authority with
regard to air emissions, water
discharges, noise emissions or
Hazardous Materials, or any
other environmental, health or
safety matters affecting the
Mortgaged Property or any
other property of Borrower
that is adjacent to the
Mortgaged Property.
The representations and warranties in this
Section 18 shall be continuing
representations and warranties that shall be
deemed to be made by Borrower throughout the
term of the loan evidenced by the Note, until
the Indebtedness has been paid in full.
(f) Borrower shall promptly notify
Lender in writing upon the occurrence of any
of the following events:
(1) Borrower's discovery of any
Prohibited Activity or
Condition;
(2) Borrower's receipt of or
knowledge of any complaint,
order, notice of violation or
other communication from any
Governmental Authority or
other person with regard to
present or future alleged
Prohibited Activities or
Conditions or any other
environmental, health or
safety matters affecting the
Mortgaged Property or any
other property of Borrower
that is adjacent to the
Mortgaged Property; and
(3) any representation or warranty
in this Section 18 becomes
untrue after the date of this
Agreement.
Any such notice given by Borrower shall not
relieve Borrower of, or result in a waiver
of, any obligation under this Instrument, the
Note, or any other Loan Document.
(g) Borrower shall pay promptly the
costs of any environmental inspections, tests
or audits ("Environmental Inspections")
required by Lender in connection with any
foreclosure or deed in lieu of foreclosure,
or as a condition of Lender's consent to any
Transfer under Section 21, or required by
Lender following a reasonable determination
by Lender that Prohibited Activities or
Conditions may exist. Any such costs
incurred by Lender (including the fees and
out-of-pocket costs of attorneys and
technical consultants whether incurred in
connection with any judicial or
administrative process or otherwise) which
Borrower fails to pay promptly shall become
an additional part of the Indebtedness as
provided in Section 12. The results of all
Environmental Inspections made by Lender
shall at all times remain the property of
Lender and Lender shall have no obligation to
disclose or otherwise make available to
Borrower or any other party such results or
any other information obtained by Lender in
connection with its Environmental
Inspections. Lender hereby reserves the
right, and Borrower hereby expressly
authorizes Lender, to make available to any
party, including any prospective bidder at a
foreclosure sale of the Mortgaged Property,
the results of any Environmental Inspections
made by Lender with respect to the Mortgaged
Property. Borrower consents to Lender
notifying any party (either as part of a
notice of sale or otherwise) of the results
of any of Lender's Environmental Inspections.
Borrower acknowledges that Lender cannot
control or otherwise assure the truthfulness
or accuracy of the results of any of its
Environmental Inspections and that the
release of such results to prospective
bidders at a foreclosure sale of the
Mortgaged Property may have a material and
adverse effect upon the amount which a party
may bid at such sale. Borrower agrees that
Lender shall have no liability whatsoever as
a result of delivering the results of any of
its Environmental Inspections to any third
party, and Borrower hereby releases and
forever discharges Lender from any and all
claims, damages, or causes of action, arising
out of, connected with or incidental to the
results of, the delivery of any of Lender's
Environmental Inspections.
(h) If any investigation, site
monitoring, containment, clean-up,
restoration or other remedial work ("Remedial
Work") is necessary to comply with any
Hazardous Materials Law or order of any
Governmental Authority that has or acquires
jurisdiction over the Mortgaged Property or
the use, operation or improvement of the
Mortgaged Property under any Hazardous
Materials Law, Borrower shall, by the earlier
of (1) the applicable deadline required by
Hazardous Materials Law or (2) 30 days after
notice from Lender demanding such action,
begin performing the Remedial Work, and
thereafter diligently prosecute it to
completion, and shall in any event complete
the work by the time required by applicable
Hazardous Materials Law. If Borrower fails
to begin on a timely basis or diligently
prosecute any required Remedial Work, Lender
may, at its option, cause the Remedial Work
to be completed, in which case Borrower shall
reimburse Lender on demand for the cost of
doing so. Any reimbursement due from
Borrower to Lender shall become part of the
Indebtedness as provided in Section 12.
(i) Borrower shall cooperate with any
inquiry by any Governmental Authority and
shall comply with any governmental or
judicial order which arises from any alleged
Prohibited Activity or Condition.
(j) Borrower shall indemnify, hold
harmless and defend (i) Lender, (ii) any
prior owner or holder of the Note, (iii) the
Loan Servicer, (iv) any prior Loan Servicer,
(v) the officers, directors, shareholders,
partners, employees and trustees of any of
the foregoing, and (vi) the heirs, legal
representatives, successors and assigns of
each of the foregoing (collectively, the
"Indemnitees") from and against all
proceedings, claims, damages, penalties and
costs (whether initiated or sought by
Governmental Authorities or private parties),
including fees and out of pocket expenses of
attorneys and expert witnesses, investigatory
fees, and remediation costs, whether incurred
in connection with any judicial or
administrative process or otherwise, arising
directly or indirectly from any of the
following:
(1) any breach of any
representation or warranty of
Borrower in this Section 18;
(2) any failure by Borrower to
perform any of its obligations
under this Section 18;
(3) the existence or alleged
existence of any Prohibited
Activity or Condition;
(4) the presence or alleged
presence of Hazardous
Materials on or under the
Mortgaged Property or any
property of Borrower that is
adjacent to the Mortgaged
Property; and
(5) the actual or alleged
violation of any Hazardous
Materials Law.
(k) Counsel selected by Borrower to
defend Indemnitees shall be subject to the
approval of those Indemnitees. However, any
Indemnitee may elect to defend any claim or
legal or administrative proceeding at the
Borrower's expense.
(l) Borrower shall not, without the
prior written consent of those Indemnitees
who are named as parties to a claim or legal
or administrative proceeding (a "Claim"),
settle or compromise the Claim if the
settlement (1) results in the entry of any
judgment that does not include as an
unconditional term the delivery by the
claimant or plaintiff to Lender of a written
release of those Indemnitees, satisfactory in
form and substance to Lender; or (2) may
materially and adversely affect Lender, as
determined by Lender in its discretion.
(m) Borrower's obligation to indemnify
the Indemnitees shall not be limited or
impaired by any of the following, or by any
failure of Borrower or any guarantor to
receive notice of or consideration for any of
the following:
(1) any amendment or modification
of any Loan Document;
(2) any extensions of time for
performance required by any
Loan Document;
(3) any provision in any of the
Loan Documents limiting
Lender's recourse to property
securing the Indebtedness, or
limiting the personal
liability of Borrower or any
other party for payment of all
or any part of the
Indebtedness;
(4) the accuracy or inaccuracy of
any representations and
warranties made by Borrower
under this Instrument or any
other Loan Document;
(5) the release of Borrower or any
other person, by Lender or by
operation of law, from
performance of any obligation
under any Loan Document;
(6) the release or substitution in
whole or in part of any
security for the Indebtedness;
and
(7) Lender's failure to properly
perfect any lien or security
interest given as security for
the Indebtedness.
(n) Borrower shall, at its own cost and
expense, do all of the following:
(1) pay or satisfy any judgment or
decree that may be entered
against any Indemnitee or
Indemnitees in any legal or
administrative proceeding
incident to any matters
against which Indemnitees are
entitled to be indemnified
under this Section 18;
(2) reimburse Indemnitees for any
expenses paid or incurred in
connection with any matters
against which Indemnitees are
entitled to be indemnified
under this Section 18; and
(3) reimburse Indemnitees for any
and all expenses, including
fees and out of pocket
expenses of attorneys and
expert witnesses, paid or
incurred in connection with
the enforcement by Indemnitees
of their rights under this
Section 18, or in monitoring
and participating in any legal
or administrative proceeding.
(o) In any circumstances in which the
indemnity under this Section 18 applies,
Lender may employ its own legal counsel and
consultants to prosecute, defend or negotiate
any claim or legal or administrative
proceeding and Lender, with the prior written
consent of Borrower (which shall not be
unreasonably withheld, delayed or
conditioned) may settle or compromise any
action or legal or administrative proceeding.
Borrower shall reimburse Lender upon demand
for all costs and expenses incurred by
Lender, including all costs of settlements
entered into in good faith, and the fees and
out of pocket expenses of such attorneys and
consultants.
(p) The provisions of this Section 18
shall be in addition to any and all other
obligations and liabilities that Borrower may
have under applicable law or under other
Loan Documents, and each Indemnitee shall be
entitled to indemnification under this
Section 18 without regard to whether Lender
or that Indemnitee has exercised any rights
against the Mortgaged Property or any other
security, pursued any rights against any
guarantor, or pursued any other rights
available under the Loan Documents or
applicable law. If Borrower consists of more
than one person or entity, the obligation of
those persons or entities to indemnify the
Indemnitees under this Section 18 shall be
joint and several. The obligation of Borrower
to indemnify the Indemnitees under this
Section 18 shall survive any repayment or
discharge of the Indebtedness, any
foreclosure proceeding, any foreclosure sale,
any delivery of any deed in lieu of
foreclosure, and any release of record of the
lien of this Instrument.
19. PROPERTY AND LIABILITY INSURANCE.
(a) Borrower shall keep the
Improvements insured at all times against
such hazards as Lender may from time to time
require, which insurance shall include but
not be limited to coverage against loss by
fire and allied perils, general boiler and
machinery coverage, and business income
coverage. Lender's insurance requirements
may change from time to time throughout the
term of the Indebtedness. If Lender so
requires, such insurance shall also include
sinkhole insurance, mine subsidence
insurance, earthquake insurance, and, if the
Mortgaged Property does not conform to
applicable zoning or land use laws, building
ordinance or law coverage. If any of the
Improvements is located in an area identified
by the Federal Emergency Management Agency
(or any successor to that agency) as an area
having special flood hazards, and if flood
insurance is available in that area, Borrower
shall insure such Improvements against loss
by flood.
(b) All premiums on insurance policies
required under Section 19(a) shall be paid in
the manner provided in Section 7, unless
Lender has designated in writing another
method of payment. All such policies shall
also be in a form approved by Lender. All
policies of property damage insurance shall
include a non-contributing, non-reporting
mortgage clause in favor of, and in a form
approved by, Lender. Lender shall have the
right to hold the original policies or
duplicate original policies of all insurance
required by Section 19(a). Borrower shall
promptly deliver to Lender a copy of all
renewal and other notices received by
Borrower with respect to the policies and all
receipts for paid premiums. At least 30 days
prior to the expiration date of a policy,
Borrower shall deliver to Lender the original
(or a duplicate original) of a renewal policy
in form satisfactory to Lender.
(c) Borrower shall maintain at all
times commercial general liability insurance,
workers' compensation insurance and such
other liability, errors and omissions and
fidelity insurance coverages as Lender may
from time to time require.
(d) All insurance policies and renewals
of insurance policies required by this
Section 19 shall be in such amounts and for
such periods as Lender may from time to time
require, and shall be issued by insurance
companies satisfactory to Lender.
(e) Borrower shall comply with all
insurance requirements and shall not permit
any condition to exist on the Mortgaged
Property that would invalidate any part of
any insurance coverage that this Instrument
requires Borrower to maintain.
(f) In the event of loss, Borrower
shall give immediate written notice to the
insurance carrier and to Lender. Borrower
hereby authorizes and appoints Lender as
attorney-in-fact for Borrower to make proof
of loss, to adjust and compromise any claims
under policies of property damage insurance,
to appear in and prosecute any action arising
from such property damage insurance policies,
to collect and receive the proceeds of
property damage insurance, and to deduct from
such proceeds Lender's expenses incurred in
the collection of such proceeds. This power
of attorney is coupled with an interest and
therefore is irrevocable. However, nothing
contained in this Section 19 shall require
Lender to incur any expense or take any
action. Lender may, at Lender's option, (1)
hold the balance of such proceeds to be used
to reimburse Borrower for the cost of
restoring and repairing the Mortgaged
Property to the equivalent of its original
condition or to a condition approved by
Lender (the "Restoration"), or (2) apply the
balance of such proceeds to the payment of
the Indebtedness, whether or not then due. To
the extent Lender determines to apply
insurance proceeds to Restoration, Lender
shall do so in accordance with Lender's then-
current policies relating to the restoration
of casualty damage on similar multifamily
properties.
(g) Lender shall not exercise its
option to apply insurance proceeds to the
payment of the Indebtedness if all of the
following conditions are met: (1) no Event
of Default (or any event which, with the
giving of notice or the passage of time, or
both, would constitute an Event of Default)
has occurred and is continuing; (2) Lender
determines, in its discretion, that there
will be sufficient funds to complete the
Restoration; (3) Lender determines, in its
discretion, that the rental income from the
Mortgaged Property after completion of the
Restoration will be sufficient to meet all
operating costs and other expenses,
Imposition Deposits, deposits to reserves and
loan repayment obligations relating to the
Mortgaged Property; and (4) Lender
determines, in its discretion, that the
Restoration will be completed before the
earlier of (A) one year before the maturity
date of the Note or (B) one year after the
date of the loss or casualty.
(h) If the Mortgaged Property is sold
at a foreclosure sale or Lender acquires
title to the Mortgaged Property, Lender shall
automatically succeed to all rights of
Borrower in and to any insurance policies and
unearned insurance premiums and in and to the
proceeds resulting from any damage to the
Mortgaged Property prior to such sale or
acquisition.
20. CONDEMNATION.
(a) Borrower shall promptly notify
Lender of any action or proceeding relating
to any condemnation or other taking, or
conveyance in lieu thereof, of all or any
part of the Mortgaged Property, whether
direct or indirect (a "Condemnation").
Borrower shall appear in and prosecute or
defend any action or proceeding relating to
any Condemnation unless otherwise directed by
Lender in writing. Borrower authorizes and
appoints Lender as attorney-in-fact for
Borrower to commence, appear in and
prosecute, in Lender's or Borrower's name,
any action or proceeding relating to any
Condemnation and to settle or compromise any
claim in connection with any Condemnation.
This power of attorney is coupled with an
interest and therefore is irrevocable.
However, nothing contained in this Section 20
shall require Lender to incur any expense or
take any action. Borrower hereby transfers
and assigns to Lender all right, title and
interest of Borrower in and to any award or
payment with respect to (i) any
Condemnation, or any conveyance in lieu of
Condemnation, and (ii) any damage to the
Mortgaged Property caused by governmental
action that does not result in a
Condemnation.
(b) Lender may apply such awards or
proceeds, after the deduction of Lender's
expenses incurred in the collection of such
amounts, at Lender's option, to the
restoration or repair of the Mortgaged
Property or to the payment of the
Indebtedness, with the balance, if any, to
Borrower. Unless Lender otherwise agrees in
writing, any application of any awards or
proceeds to the Indebtedness shall not extend
or postpone the due date of any monthly
installments referred to in the Note,
Section 7 of this Instrument or any
Collateral Agreement, or change the amount of
such installments. Borrower agrees to
execute such further evidence of assignment
of any awards or proceeds as Lender may
require.
21. TRANSFERS OF THE MORTGAGED PROPERTY
OR INTERESTS IN BORROWER. [RIGHT TO ONE
TRANSFER ONLY -- WITH LENDER APPROVAL]
(a) The occurrence of any of the
following events shall constitute an Event of
Default under this Instrument:
(1) a Transfer of all or any part
of the Mortgaged Property or
any interest in the Mortgaged
Property;
(2) if Borrower is a limited
partnership, a Transfer of (A)
any general partnership
interest, or (B) limited
partnership interests in
Borrower that would cause the
Initial Owners of Borrower to
own less than 51% of all
limited partnership interests
in Borrower;
(3) if Borrower is a general
partnership or a joint
venture, a Transfer of any
general partnership or joint
venture interest in Borrower;
(4) if Borrower is a limited
liability company, a Transfer
of (A) any membership interest
in Borrower which would cause
the Initial Owners to own less
than 51% of all the membership
interests in Borrower, or (B)
any membership or other
interest of a manager in
Borrower;
(5) if Borrower is a corporation,
(A) the Transfer of any voting
stock in Borrower which would
cause the Initial Owners to
own less than 51% of any class
of voting stock in Borrower or
(B) if the outstanding voting
stock in Borrower is held by
100 or more shareholders, one
or more transfers by a single
transferor within a 12-month
period affecting an aggregate
of 5% or more of that stock;
(6) if Borrower is a trust, (A) a
Transfer of any beneficial
interest in Borrower which
would cause the Initial Owners
to own less than 51% of all
the beneficial interests in
Borrower, or (B) the
termination or revocation of
the trust, or (C) the removal,
appointment or substitution of
a trustee of Borrower; and
(7) a Transfer of any interest in
a Controlling Entity which, if
such Controlling Entity were
Borrower, would result in an
Event of Default under any of
Sections 21(a)(1) through (6)
above.
Lender shall not be required to demonstrate
any actual impairment of its security or any
increased risk of default in order to
exercise any of its remedies with respect to
an Event of Default under this Section 21.
(b) The occurrence of any of the
following events shall not constitute an
Event of Default under this Instrument,
notwithstanding any provision of
Section 21(a) to the contrary:
(1) a Transfer to which Lender has
consented;
(2) a Transfer that occurs by
devise, descent, or by
operation of law upon the
death of a natural person;
(3) the grant of a leasehold
interest in an individual
dwelling unit for a term of
two years or less not
containing an option to
purchase;
(4) a Transfer of obsolete or worn
out Personalty or Fixtures
that are contemporaneously
replaced by items of equal or
better function and quality,
which are free of liens,
encumbrances and security
interests other than those
created by the Loan Documents
or consented to by Lender;
(5) the grant of an easement, if
before the grant Lender
determines that the easement
will not materially affect the
operation or value of the
Mortgaged Property or Lender's
interest in the Mortgaged
Property, and Borrower pays to
Lender, upon demand, all costs
and expenses incurred by
Lender in connection with
reviewing Borrower's request;
and
(6) the creation of a mechanic's,
materialman's, or judgment
lien against the Mortgaged
Property which is released of
record or otherwise remedied
to Lender's satisfaction
within 30 days of the date of
creation.
(c) Lender shall consent, one time only
and without any adjustment to the rate at
which the Indebtedness secured by this
Instrument bears interest, to a Transfer that
would otherwise violate this Section 21 if,
prior to the Transfer, Borrower has satisfied
each of the following requirements:
(1) the submission to Lender of
all information required by
Lender to make the
determination required by this
Section 21(c);
(2) the absence of any Event of
Default;
(3) the transferee meets all of
the eligibility, credit,
management and other standards
(including but not limited to
any standards with respect to
previous relationships between
Lender and the transferee and
the organization of the
transferee) customarily
applied by Lender at the time
of the proposed Transfer to
the approval of borrowers in
connection with the
origination or purchase of
similar mortgages on
multifamily properties;
(4) the Mortgaged Property, at the
time of the proposed Transfer,
meets all standards as to its
physical condition that are
customarily applied by Lender
at the time of the proposed
Transfer to the approval of
properties in connection with
the origination or purchase of
similar mortgages on
multifamily properties;
(5) the loan to value ratio at the
time of the proposed Transfer
is 70% or less ("loan to value
ratio" means the ratio of (A)
the outstanding principal
balance of the Indebtedness to
(B) the value of the Mortgaged
Property, as determined by
Lender, expressed as a
percentage);
(6) the debt service coverage
ratio for the last twelve full
months preceding the proposed
Transfer was 1.35 or more
("debt service coverage ratio"
means the ratio of (A) the
annual net operating income
from the Mortgaged Property's
operations during that month
which is available for
repayment of debt, after
deducting operating expenses,
to (B) the annual principal
and interest payable under the
Note); and
(7) in the case of a Transfer of
all or any part of the
Mortgaged Property, (A) the
execution by the transferee of
an assumption agreement that
is acceptable to Lender and
that, among other things,
requires the transferee to
perform all obligations of
Borrower set forth in the
Note, this Instrument and any
other Loan Documents, and may
require that the transferee
comply with any provisions of
this Instrument or any other
Loan Document which previously
may have been waived by
Lender, and (B) if a guaranty
has been executed and
delivered in connection with
the Note, this Instrument or
any of the other Loan
Documents, the transferee
causes one or more individuals
or entities acceptable to
Lender to execute and deliver
to Lender a guaranty in a form
acceptable to Lender;
(8) in the case of a Transfer of
any interest in a Controlling
Entity, if a guaranty has been
executed and delivered in
connection with the Note, this
Instrument or any of the other
Loan Documents, the Borrower
causes one or more individuals
or entities acceptable to
Lender to execute and deliver
to Lender a guaranty in a form
acceptable to Lender; and
(9) Lender's receipt of all of the
following:
(A) a review fee in the
amount of $2,000.00;
(B) a transfer fee in an
amount equal to 1% of the
unpaid principal balance
of the Indebtedness
immediately before the
applicable Transfer; and
(C) the amount of Lender's
out-of-pocket costs
(including reasonable
attorneys' fees) incurred
in reviewing the Transfer
request.
22. EVENTS OF DEFAULT. The occurrence
of any one or more of the following shall
constitute an Event of Default under this
Instrument:
(a) any failure by Borrower to pay or
deposit when due any amount required by the
Note, this Instrument or any other Loan
Document;
(b) any failure by Borrower to maintain
the insurance coverage required by
Section 19;
(c) any failure by Borrower to comply
with the provisions of Section 33;
(d) fraud or material misrepresentation
or material omission by Borrower, any of its
officers, directors, trustees, general
partners or managers or any guarantor in
connection with (A) the application for or
creation of the Indebtedness, (B) any
financial statement, rent roll, or other
report or information provided to Lender
during the term of the Indebtedness, or (C)
any request for Lender's consent to any
proposed action, including a request for
disbursement of funds under any Collateral
Agreement;
(e) any Event of Default under
Section 21;
(f) the commencement of a forfeiture
action or proceeding, whether civil or
criminal, which, in Lender's reasonable
judgment, could result in a forfeiture of the
Mortgaged Property or otherwise materially
impair the lien created by this Instrument or
Lender's interest in the Mortgaged Property;
(g) any failure by Borrower to perform
any of its obligations under this Instrument
(other than those specified in Sections 22(a)
through (f)), as and when required, which
continues for a period of 30 days after
notice of such failure by Lender to Borrower.
However, no such notice or grace period shall
apply in the case of any such failure which
could, in Lender's judgment, absent
immediate exercise by Lender of a right or
remedy under this Instrument, result in harm
to Lender, impairment of the Note or this
Instrument or any other security given under
any other Loan Document;
(h) any failure by Borrower to perform
any of its obligations as and when required
under any Loan Document other than this
Instrument which continues beyond the
applicable cure period, if any, specified in
that Loan Document;
(i) any exercise by the holder of any
debt instrument secured by a mortgage, deed
of trust or deed to secure debt on the
Mortgaged Property of a right to declare all
amounts due under that debt instrument
immediately due and payable; and
(j) Borrower voluntarily files for
bankruptcy protection under the United States
Bankruptcy Code or voluntarily becomes
subject to any reorganization, receivership,
insolvency proceeding or other similar
proceeding pursuant to any other federal or
state law affecting debtor and creditor
rights, or an involuntary case is commenced
against Borrower by any creditor (other than
Lender) of Borrower pursuant to the United
States Bankruptcy Code or other federal or
state law affecting debtor and creditor
rights and is not dismissed or discharged
within 60 days after filing.
23. REMEDIES CUMULATIVE. Each right
and remedy provided in this Instrument is
distinct from all other rights or remedies
under this Instrument or any other Loan
Document or afforded by applicable law, and
each shall be cumulative and may be exercised
concurrently, independently, or successively,
in any order.
24. FORBEARANCE.
(a) Lender may (but shall not be
obligated to) agree with Borrower, from time
to time, and without giving notice to, or
obtaining the consent of, or having any
effect upon the obligations of, any guarantor
or other third party obligor, to take any of
the following actions: extend the time for
payment of all or any part of the
Indebtedness; reduce the payments due under
this Instrument, the Note, or any other Loan
Document; release anyone liable for the
payment of any amounts under this Instrument,
the Note, or any other Loan Document; accept
a renewal of the Note; modify the terms and
time of payment of the Indebtedness; join in
any extension or subordination agreement;
release any Mortgaged Property; take or
release other or additional security; modify
the rate of interest or period of
amortization of the Note or change the amount
of the monthly installments payable under the
Note; and otherwise modify this Instrument,
the Note, or any other Loan Document.
(b) Any forbearance by Lender in
exercising any right or remedy under the
Note, this Instrument, or any other Loan
Document or otherwise afforded by applicable
law, shall not be a waiver of or preclude the
exercise of any right or remedy. The
acceptance by Lender of payment of all or any
part of the Indebtedness after the due date
of such payment, or in an amount which is
less than the required payment, shall not be
a waiver of Lender's right to require prompt
payment when due of all other payments on
account of the Indebtedness or to exercise
any remedies for any failure to make prompt
payment. Enforcement by Lender of any
security for the Indebtedness shall not
constitute an election by Lender of remedies
so as to preclude the exercise of any other
right available to Lender. Lender's receipt
of any awards or proceeds under Sections 19
and 20 shall not operate to cure or waive any
Event of Default.
25. LOAN CHARGES. If any applicable
law limiting the amount of interest or other
charges permitted to be collected from
Borrower is interpreted so that any charge
provided for in any Loan Document, whether
considered separately or together with other
charges levied in connection with any other
Loan Document, violates that law, and
Borrower is entitled to the benefit of that
law, that charge is hereby reduced to the
extent necessary to eliminate that violation.
The amounts, if any, previously paid to
Lender in excess of the permitted amounts
shall be applied by Lender to reduce the
principal of the Indebtedness. For the
purpose of determining whether any applicable
law limiting the amount of interest or other
charges permitted to be collected from
Borrower has been violated, all Indebtedness
which constitutes interest, as well as all
other charges levied in connection with the
Indebtedness which constitute interest, shall
be deemed to be allocated and spread over the
stated term of the Note. Unless otherwise
required by applicable law, such allocation
and spreading shall be effected in such a
manner that the rate of interest so computed
is uniform throughout the stated term of the Note.
26. WAIVER OF STATUTE OF LIMITATIONS.
Borrower hereby waives the right to assert
any statute of limitations as a bar to the
enforcement of the lien of this Instrument or
to any action brought to enforce any Loan
Document.
27. WAIVER OF MARSHALLING.
Notwithstanding the existence of any other
security interests in the Mortgaged Property
held by Lender or by any other party, Lender
shall have the right to determine the order
in which any or all of the Mortgaged Property
shall be subjected to the remedies provided
in this Instrument, the Note, any other Loan
Document or applicable law. Lender shall
have the right to determine the order in
which any or all portions of the Indebtedness
are satisfied from the proceeds realized upon
the exercise of such remedies. Borrower and
any party who now or in the future acquires a
security interest in the Mortgaged Property
and who has actual or constructive notice of
this Instrument waives any and all right to
require the marshalling of assets or to
require that any of the Mortgaged Property be
sold in the inverse order of alienation or
that any of the Mortgaged Property be sold in
parcels or as an entirety in connection with
the exercise of any of the remedies permitted
by applicable law or provided in this
Instrument.
28. FURTHER ASSURANCES. Borrower shall
execute, acknowledge, and deliver, at its
sole cost and expense, all further acts,
deeds, conveyances, assignments, estoppel
certificates, financing statements, transfers
and assurances as Lender may require from
time to time in order to better assure,
grant, and convey to Lender the rights
intended to be granted, now or in the future,
to Lender under this Instrument and the Loan
Documents.
29. ESTOPPEL CERTIFICATE. Within 10
days after a request from Lender, Borrower
shall deliver to Lender a written statement,
signed and acknowledged by Borrower,
certifying to Lender or any person designated
by Lender, as of the date of such statement,
(i) that the Loan Documents are unmodified
and in full force and effect (or, if there
have been modifications, that the Loan
Documents are in full force and effect as
modified and setting forth such
modifications); (ii) the unpaid principal
balance of the Note; (iii) the date to which
interest under the Note has been paid; (iv)
that Borrower is not in default in paying the
Indebtedness or in performing or observing
any of the covenants or agreements contained
in this Instrument or any of the other Loan
Documents (or, if the Borrower is in default,
describing such default in reasonable
detail); (v) whether or not there are then
existing any setoffs or defenses known to
Borrower against the enforcement of any right
or remedy of Lender under the Loan Documents;
and (vi) any additional facts requested by
Lender.
30. GOVERNING LAW; CONSENT TO
JURISDICTION AND VENUE.
(a) This Instrument, and any Loan
Document which does not itself expressly
identify the law that is to apply to it,
shall be governed by the laws of the
jurisdiction in which the Land is located
(the "Property Jurisdiction").
(b) Borrower agrees that any
controversy arising under or in relation to
the Note, this Instrument, or any other Loan
Document shall be litigated exclusively in
the Property Jurisdiction. The state and
federal courts and authorities with
jurisdiction in the Property Jurisdiction
shall have exclusive jurisdiction over all
controversies which shall arise under or in
relation to the Note, any security for the
Indebtedness, or any other Loan Document.
Borrower irrevocably consents to service,
jurisdiction, and venue of such courts for
any such litigation and waives any other
venue to which it might be entitled by virtue
of domicile, habitual residence or otherwise.
31. NOTICE.
(a) All notices, demands and other
communications ("notice") under or concerning
this Instrument shall be in writing. Each
notice shall be addressed to the intended
recipient at its address set forth in this
Instrument, and shall be deemed given on the
earliest to occur of (1) the date when the
notice is received by the addressee; (2) the
first Business Day after the notice is
delivered to a recognized overnight courier
service, with arrangements made for payment
of charges for next Business Day delivery; or
(3) the third Business Day after the notice
is deposited in the United States mail with
postage prepaid, certified mail, return
receipt requested. As used in this
Section 31, the term "Business Day" means any
day other than a Saturday, a Sunday or any
other day on which Lender is not open for
business.
(b) Any party to this Instrument may
change the address to which notices intended
for it are to be directed by means of notice
given to the other party in accordance with
this Section 31. Each party agrees that it
will not refuse or reject delivery of any
notice given in accordance with this
Section 31, that it will acknowledge, in
writing, the receipt of any notice upon
request by the other party and that any
notice rejected or refused by it shall be
deemed for purposes of this Section 31 to
have been received by the rejecting party on
the date so refused or rejected, as
conclusively established by the records of
the U.S. Postal Service or the courier
service.
(c) Any notice under the Note and any
other Loan Document which does not specify
how notices are to be given shall be given in
accordance with this Section 31.
32. SALE OF NOTE; CHANGE IN SERVICER.
The Note or a partial interest in the Note
(together with this Instrument and the other
Loan Documents) may be sold one or more times
without prior notice to Borrower. A sale may
result in a change of the Loan Servicer.
There also may be one or more changes of the
Loan Servicer unrelated to a sale of the
Note. If there is a change of the Loan
Servicer, Borrower will be given notice of
the change.
33. SINGLE ASSET BORROWER. Until the
Indebtedness is paid in full, Borrower (a)
shall not acquire any real or personal
property other than the Mortgaged Property
and personal property related to the
operation and maintenance of the Mortgaged
Property; (b) shall not operate any business
other than the management and operation of
the Mortgaged Property; and (c) shall not
maintain its assets in a way difficult to
segregate and identify.
34. SUCCESSORS AND ASSIGNS BOUND. This
Instrument shall bind, and the rights granted
by this Instrument shall inure to, the
respective successors and assigns of Lender
and Borrower. However, a Transfer not
permitted by Section 21 shall be an Event of
Default.
35. JOINT AND SEVERAL LIABILITY. If
more than one person or entity signs this
Instrument as Borrower, the obligations of
such persons and entities shall be joint and
several.
36. RELATIONSHIP OF PARTIES; NO THIRD
PARTY BENEFICIARY.
(a) The relationship between Lender and
Borrower shall be solely that of creditor and
debtor, respectively, and nothing contained
in this Instrument shall create any other
relationship between Lender and Borrower.
(b) No creditor of any party to this
Instrument and no other person shall be a
third party beneficiary of this Instrument or
any other Loan Document. Without limiting
the generality of the preceding sentence, (1)
any arrangement (a "Servicing Arrangement")
between the Lender and any Loan Servicer for
loss sharing or interim advancement of funds
shall constitute a contractual obligation of
such Loan Servicer that is independent of the
obligation of Borrower for the payment of the
Indebtedness, (2) Borrower shall not be a
third party beneficiary of any Servicing
Arrangement, and (3) no payment by the Loan
Servicer under any Servicing Arrangement will
reduce the amount of the Indebtedness.
37. SEVERABILITY; AMENDMENTS. The
invalidity or unenforceability of any
provision of this Instrument shall not affect
the validity or enforceability of any other
provision, and all other provisions shall
remain in full force and effect. This
Instrument contains the entire agreement
among the parties as to the rights granted
and the obligations assumed in this
Instrument. This Instrument may not be
amended or modified except by a writing
signed by the party against whom enforcement
is sought.
38. CONSTRUCTION. The captions and
headings of the sections of this Instrument
are for convenience only and shall be
disregarded in construing this Instrument.
Any reference in this Instrument to an
"Exhibit" or a "Section" shall, unless
otherwise explicitly provided, be construed
as referring, respectively, to an Exhibit
attached to this Instrument or to a
Section of this Instrument. All Exhibits
attached to or referred to in this Instrument
are incorporated by reference into this
Instrument. Any reference in this Instrument
to a statute or regulation shall be construed
as referring to that statute or regulation as
amended from time to time. Use of the
singular in this Agreement includes the
plural and use of the plural includes the
singular. As used in this Instrument, the
term "including" means "including, but not
limited to."
39. LOAN SERVICING. All actions
regarding the servicing of the loan evidenced
by the Note, including the collection of
payments, the giving and receipt of notice,
inspections of the Property, inspections of
books and records, and the granting of
consents and approvals, may be taken by the
Loan Servicer unless Borrower receives notice
to the contrary. If Borrower receives
conflicting notices regarding the identity of
the Loan Servicer or any other subject, any
such notice from Lender shall govern.
40. DISCLOSURE OF INFORMATION. Lender
may furnish information regarding Borrower or
the Mortgaged Property to third parties with
an existing or prospective interest in the
servicing, enforcement, evaluation,
performance, purchase or securitization of
the Indebtedness, including but not limited
to trustees, master servicers, special
servicers, rating agencies, and organizations
maintaining databases on the underwriting and
performance of multifamily mortgage loans.
Borrower irrevocably waives any and all
rights it may have under applicable law to
prohibit such disclosure, including but not
limited to any right of privacy.
41. NO CHANGE IN FACTS OR
CIRCUMSTANCES. All information in the
application for the loan submitted to Lender
(the "Loan Application") and in all financial
statements, rent rolls, reports, certificates
and other documents submitted in connection
with the Loan Application are complete and
accurate in all material respects. There has
been no material adverse change in any fact
or circumstance that would make any such
information incomplete or inaccurate.
42. SUBROGATION. If, and to the extent
that, the proceeds of the loan evidenced by
the Note are used to pay, satisfy or
discharge any obligation of Borrower for the
payment of money that is secured by a pre-
existing mortgage, deed of trust or other
lien encumbering the Mortgaged Property (a
"Prior Lien"), such loan proceeds shall be
deemed to have been advanced by Lender at
Borrower's request, and Lender shall
automatically, and without further action on
its part, be subrogated to the rights,
including lien priority, of the owner or
holder of the obligation secured by the Prior
Lien, whether or not the Prior Lien is
released.
43. ACCELERATION; REMEDIES. At any
time during the existence of an Event of
Default, Lender, at Lender's option, may
declare the Indebtedness to be immediately
due and payable without further demand, and
may invoke the power of sale and any other
remedies permitted by Maryland law or
provided in this Instrument or in any other
Loan Document. Borrower acknowledges that
the power of sale granted in this Instrument
may be exercised by Lender without prior
judicial hearing. Lender shall be entitled
to collect all costs and expenses incurred in
pursuing such remedies, including attorneys'
fees, costs of documentary evidence,
abstracts and title reports.
If Lender invokes the power of sale,
Lender shall mail or cause Trustee to mail
written notice of sale to Borrower in the
manner prescribed by Maryland law. Trustee
shall give notice of sale and shall sell the
Mortgaged Property according to Maryland law.
Trustee may sell the Mortgaged Property at
the time and place and under the terms
designated in the notice of sale in one or
more parcels and in such order as Trustee may
determine. Trustee may postpone sale of all
or any part of the Mortgaged Property by
public announcement at the time and place of
any previously scheduled sale. Lender or
Lender's designee may purchase the Mortgaged
Property at any sale.
Trustee shall deliver to the purchaser
at the sale, within a reasonable time after
the sale, a deed conveying the Mortgaged
Property so sold without any express or
implied covenant or warranty. The recitals
in Trustee's deed shall be prima facie
evidence of the truth of the statements made
in those recitals. Trustee shall apply the
proceeds of the sale in the following order:
(a) to all costs and expenses of the sale,
including Trustee's fees not to exceed 3% of
the gross sale price, attorneys' fees and
costs of title evidence; (b) to the
Indebtedness in such order as Lender, in
Lender's discretion, directs; and (c) the
excess, if any, to the person or persons
legally entitled to the excess.
Borrower hereby assents to the passage
of a decree for the sale of the Mortgaged
Property pursuant to Lender's exercise of its
rights under this Section.
44. RELEASE. Upon payment of the
Indebtedness, Lender or Trustee shall release
this Instrument. Borrower shall pay Lender's
or Trustee's reasonable costs incurred in
releasing this Instrument.
45. SUBSTITUTE TRUSTEE. Lender, at
Lender's option, may from time to time remove
Trustee and appoint a successor trustee by an
instrument recorded in the city or county in
which this Instrument is recorded. Without
conveyance of the Mortgaged Property, the
successor trustee shall succeed to all the
title, power and duties conferred upon the
Trustee in this Instrument and by applicable
law.
46. PROTECTIVE PAYMENTS. Any amounts
disbursed by Lender under Section 12, or
under any other provision of this Instrument
that treats such disbursement as being made
under Section 12, shall be immediately due
and payable, shall bear interest from the
date of disbursement until paid at the
"Default Rate", as defined in the Note, and,
together with the interest thereon, shall be
a lien on the Mortgaged Property and secured
by this Instrument. This Section shall
supersede Section 12(b).
47. WAIVER OF TRIAL BY JURY. BORROWER
AND LENDER EACH (A) COVENANTS AND AGREES NOT
TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY
ISSUE ARISING OUT OF THIS INSTRUMENT OR THE
RELATIONSHIP BETWEEN THE PARTIES AS BORROWER
AND LENDER THAT IS TRIABLE OF RIGHT BY A JURY
AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY
WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT
ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE.
THIS WAIVER OF RIGHT TO TRIAL BY JURY IS
SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND
VOLUNTARILY WITH THE BENEFIT OF COMPETENT
LEGAL COUNSEL.
ATTACHED EXHIBITS. The following
Exhibits are attached to this Instrument:
|X| Exhibit A Description of
the Land (required).
|X| Exhibit B Modifications
to Instrument
IN WITNESS WHEREOF, Borrower has signed
and delivered this Instrument or has caused
this Instrument to be signed and delivered by
its duly authorized representative.
BORROWER:
CENTURY III ASSOCIATES
LIMITED PARTNERSHIP,
a Maryland limited
partnership
ATTEST/WITNESS: By: The Krupp
Corporation, a Massachusetts corporation,
General Partner
______________________ By:
__________________________________[SEAL]
Stephen C.
Parthum, its Duly Authorized Agent
Borrower's
Address:
c/o Berkshire
Mortgage Finance
1000 Parkwood
Circle, Suite 900
Atlanta,
Georgia 30339
STATE OF GEORGIA, ______________ County ss:
I hereby certify that on this ____ day of
December, 1997, before me, the subscriber, a
Notary Public of the State of Georgia, in and
for the County of ____________, personally
appeared Stephen C. Parthum, who acknowledged
himself to be the duly authorized agent of
The Krupp Corporation, a Massachusetts
corporation, general partner of Century III
Associates Limited Partnership, a limited
partnership, and on behalf of said limited
partnership did acknowledge that he, as such
duly authorized agent being authorized so to
do, executed the foregoing instrument for the
purposes therein contained, by signing the
name of the corporation by himself as
____________________.
As Witness: my hand and notarial seal.
My Commission Expires:
___________________________
Notary Public
<PAGE>
EXHIBIT A
[DESCRIPTION OF THE LAND]
<PAGE>
EXHIBIT B
MODIFICATIONS TO INSTRUMENT
The following modifications are made to the
text of the Instrument that precedes this
Exhibit:
Section 21 is amended as follows:
The One Percent (1%) transfer fee
provided in Section 21 (c)(9)(B) of the
Instrument shall be waived one time only
subject to the approval by Lender of the
transferee in accordance with Section 21(c)
of the Instrument.
<PAGE>
AFFIDAVIT
DISTRICT OF COLUMBIA ss:
I hereby certify that on this ____ day of
December, 1997, before me, the subscriber, a
Notary Public of the District aforesaid,
personally appeared
__________________________, the agent for the
party or parties secured by the foregoing
Instrument, and made oath in due form of law
that the consideration recited in the
foregoing Instrument is true and bona fide,
as therein set forth, that the amount of the
loan secured by the foregoing Instrument was
disbursed by the party or parties secured to
Borrower or to the person responsible for
disbursement of funds in the closing
transaction or its respective agent at a time
no later than the execution and delivery by
Borrower of the foregoing Instrument, and
that he/she is the duly authorized agent of
the said party or parties secured to make
this affidavit.
As Witness: my hand and notarial seal.
My Commission Expires:
__________________________________
Notary Public
