UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
-----------------
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 2-85270
-------
BALCOR EQUITY PENSION INVESTORS-I
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 36-3240345
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2355 Waukegan Road
Bannockburn, Illinois 60015
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 267-1600
--------------
Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
- -----------------------------
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ X ]
<PAGE>
PART I
Item 1. Business
- ----------------
Balcor Equity Pension Investors-I (the "Registrant") is a limited partnership
formed in 1983 under the laws of the State of Illinois. The Registrant raised
$179,614,500 from sales of Limited Partnership Interests. The Registrant's
operations consist exclusively of investment in and operation of
income-producing real property, and all financial information included in this
report relates to this industry segment.
The Registrant used the net offering proceeds to fund six loans and acquire
three real property investments. In prior years, three loans were prepaid and
the Registrant accepted deeds in lieu of foreclosure on two loans and
foreclosed on one additional loan. The Registrant sold four properties in 1996
and one in 1997. Currently, the Registrant owns one property as described under
"Item 2. Properties" and has no loans remaining.
The Partnership Agreement generally provides that the proceeds of any sale,
refinancing or other disposition of properties made by the Registrant will not
be reinvested, but will be distributed to the extent not required to meet the
Registrant's cash requirements. The Partnership Agreement also provides that
proceeds from the repayment of mortgage loans (including any sale proceeds of
properties acquired through foreclosure) within 14 years of the termination of
the offering may be used to make new mortgage loans. Any such new mortgage loan
would generally provide for repayment in full within 15 years after the
termination of the offering. The General Partner has no plans to make any new
mortgage loans on behalf of the Registrant.
The Registrant's remaining property is subject to certain competitive
conditions in the market in which it is located. See "Item 7. Liquidity and
Capital Resources" for additional information. The Registrant's remaining
property faces various levels of competition for retention of its tenants from
similar types of properties in the vicinities in which it is located. The
Registrant has no plans to change the current use of or to renovate its
remaining property.
Real estate values, especially for good quality, well located property,
increased significantly during 1996 due to a combination of readily available
capital, low interest rates, and decreased vacancy rates resulting from steady
demand and an acceptable level of new construction. While 1996 proved to be an
excellent year to sell real estate, projected yields by buyers on new
acquisitions have declined significantly due to competition and rising prices.
Although there will be variances by asset class and geographic area, the
investment climate is expected to remain strong for 1997. However, values could
begin to level off as they approach replacement cost triggering new
construction and an increase in capitalization rates.
Currently, office properties are attracting the most interest from real estate
investors. While new apartment construction has been underway since
<PAGE>
1995, the office sector has just entered its development phase in most markets
and new construction is generally only proceeding with strong tenant
pre-leasing. Occupancy rates are at their highest level in years, reaching the
90s in a vast number of markets. As a result, rents have finally begun to
increase at rates well in excess of inflation in many markets around the
country. As a result of these fundamentals, office properties have increasingly
become in strong demand by investors. Values increased significantly during
1996 and are expected to do so again in 1997. Suburban properties are
attracting attention as well. Still, office properties remain a highly volatile
sector where one new build-to-suit office building for a major tenant could
throw a market into relapse. In addition, office space is highly vulnerable to
corporate restructuring and the growing telecommuting trend. The Registrant
believes the combination of strong price increases and future volatility make
this an excellent time to sell office assets.
During August 1996, the Registrant sold the Oxford Square apartment complex in
an all cash sale for $10,500,000. During November 1996, the Registrant sold the
Oxford Hills apartment complex in an all cash sale for $22,278,500. During
December 1996, the Registrant sold the Park Center Office Buildings in an all
cash sale for $8,300,000. Additionally, in December 1996, the Registrant sold
the Pacific Center Office Buildings, which were owned by a joint venture
consisting of the Registrant and an affiliate, in an all cash sale for
$15,950,000. During March 1997, the Registrant sold the GSB Office Building and
has entered into a contract to sell the 8280 Greensboro Drive Office Building,
scheduled to close in April 1997. See "Item 7. Liquidity and Capital Resources"
for additional information.
The timing of the termination of the Registrant and final distribution of cash
will depend upon the nature and extent of liabilities and contingencies which
exist or may arise. Such contingencies may include legal and other fees
stemming from litigation involving the Registrant including, but not limited
to, the lawsuits discussed in "Item 3. Legal Proceedings." In the absence of
any contingency, the reserves will be paid within twelve months of the last
property being sold. In the event a contingency exists, reserves may be held by
the Registrant for a longer period of time.
The Registrant received notice of an unsolicited offer for the purchase of
Limited Partnership Interests ("tender offer") on March 6, 1997. The tender
offer was made by Madison Partnership Liquidity Investors XX, LLC and stated
that their primary motive in making the offer is to make a profit from the
purchase of the Interests. Madison Partnership Liquidity Investors XX, LLC is
seeking to acquire up to 4.9% of the total Interests outstanding in the
Registrant.
The Registrant received notice of an unsolicited offer for the purchase of
Limited Partnership Interests on December 2, 1996. The tender offer was made by
First Trust Co., L.P. and stated that their primary motive in making the offer
is to make a profit from the purchase of the Interests. First Trust Co., L.P.
is seeking to acquire up to 4.9% of the total Interests outstanding in the
<PAGE>
Registrant. The Registrant will incur administrative costs in responding to
these tender offers and may incur additional costs if additional tender offers
are made in the future. The General Partner cannot predict with any certainty
what impact these tender offers or any future tender offers will have on the
operations or management of the Registrant.
The Registrant, by virtue of its ownership of real estate is subject to federal
and state laws and regulations covering various environmental issues.
Management of the Registrant utilizes the services of environmental consultants
to assess a wide range of environmental issues and to conduct tests for
environmental contamination as appropriate. The General Partner is not aware of
any potential liability due to environmental issues or conditions that would be
material to the Registrant.
The officers and employees of Balcor Equity Partners-I, the General Partner of
the Registrant, and its affiliates perform services for the Registrant. The
Registrant currently has no employees engaged in its operations.
Other Information
- -----------------
8280 Greensboro Drive Office Building
- -------------------------------------
In 1985, the Registrant funded a $28,500,000 first mortgage loan collateralized
by the 8280 Greensboro Drive Office Building, McLean, Virginia. Pursuant to a
1987 loan modification, the Registrant funded an additional $7,000,000, for a
total funding of $35,500,000. The Registrant obtained title to the property
through foreclosure in 1990.
As previously reported, on January 6, 1997, the Registrant contracted to sell
the property to an unaffiliated party, Trammel Crow NE, Inc., a Delaware
corporation, for a sale price of $30,750,000. On January 21, 1997, the
purchaser exercised its option to terminate the agreement of sale. Pursuant to
the agreement of sale, the earnest money previously deposited by the purchaser
and interest accrued thereon has been returned to the purchaser.
On March 11, 1997, the Registrant contracted to sell the property to an
unaffiliated party, RREEF America L.L.C., a Delaware limited liability company.
The sale price is $30,000,000. The purchaser has deposited $50,000 into an
escrow account as earnest money and is obligated to deposit an additional
$250,000 upon completion of the purchaser's due diligence review. The remaining
portion of the sale price will be payable in cash at closing, which is
scheduled to occur on April 16, 1997 or such earlier date as may be agreed upon
by the Registrant and the purchaser. From the proceeds of the sale, the
Registrant will pay $600,000 as a brokerage commission to an affiliate of the
third party providing property management services for the property. The
Registrant will receive the remaining proceeds of approximately $29,400,000,
less closing costs. Neither the General Partner nor any affiliate will receive
a brokerage commission in connection with the sale of the property. The General
Partner will be reimbursed by the Registrant for actual expenses incurred in
connection with the sale.
<PAGE>
Affiliates of the General Partner sold three other properties to the purchaser
during 1996.
The closing is subject to the satisfaction of numerous terms and conditions.
There can be no assurance that all of the terms and conditions will be complied
with and, therefore, it is possible the sale of the property may not occur.
GSB Office Building
- -------------------
As previously reported, on December 11, 1996, the Registrant contracted to sell
the GSB Office Building, Bala Cynwyd, Pennsylvania, to an unaffiliated party,
Berwind Property Group, a Pennsylvania corporation. The sale price is
$19,750,000. The Registrant and the purchaser agreed to extend the closing date
from February 5, 1997 and the sale closed on March 6, 1997. In addition, the
purchaser assigned its rights under the agreement of sale to one of its
affiliates, City Line Investors, L.P. From the proceeds of the sale, the
Registrant paid $391,500 as a brokerage commission to an affiliate of the third
party providing property management services for the property and $246,995 in
closing costs. The Registrant received the remaining proceeds of $19,111,505.
Of such proceeds, $500,000 is being retained by the Registrant and will not be
available for use or distribution by the Registrant until December 1997.
Item 2. Properties
- ------------------
As of December 31, 1996, the Registrant owned the two properties described
below, both of which are owned in fee simple:
Location Description of Property
- -------- -----------------------
McLean, Virginia 8280 Greensboro Drive Office Building: a
nine-story office building containing approximately 197,000 square feet.
Bala Cynwyd, Pennsylvania *GSB Office Building: a twelve-story office
building containing approximately 228,000 square feet.
* This property was sold during March 1997. See Note 14 of Notes to Financial
Statements for additional information.
The average occupancy rates and effective average rental rates for each of the
last five years for the two properties owned by the Registrant at December 31,
1996 are described below.
1996 1995 1994 1993 1992
8280 Greensboro Drive
Occupancy rate 98% 98% 96% 94% 94%
Effective rent $15.93 $13.04 $14.16 $12.59 $15.18<PAGE>
GSB Office Building
Occupancy rate 98% 92% 93% 93% 93%
Effective rent $14.38 $16.24 $14.51 $14.70 $14.44
Information regarding tenants occupying 10% or more of the leasable square feet
of the properties is provided below:
Scheduled
Lease Lease
Square Base Rent Expiration Renewal
Property Tenant Feet Per Annum Date Option
GSB Builing Germantown 61,067 $895,101 6/2003 Yes
Bank
(Banking)
8280 Deltek 66,281 $1,170,354 3/2002 Yes
Greensboro Systems Inc.
Drive Office (Computer
Building Data)
McGuire, 45,006 $788,667 8/2000 Yes
Woods,
Battle, &
Booth (Law
Firm)
Real estate taxes incurred in 1996 for these two properties totaled $457,920.
The Federal tax basis of the Registrant's two properties totaled $69,821,905 as
of December 31, 1996. For Federal income tax purposes, the acquisition costs of
the properties are depreciated over useful lives ranging from 15 to 40 years,
using ACRS and straight-line methods. Other minor assets are depreciated over
their applicable recovery periods.
In the opinion of the General Partner, the Registrant has provided for adequate
insurance coverage for its real estate investment properties.
See Notes to Financial Statements for other information regarding real property
investments.
Item 3. Legal Proceedings
- -------------------------
Proposed Class Action
- ---------------------
On August 30, 1996, a proposed class action complaint was filed, Lenore Klein
vs. Lehman Brothers, Inc., et al., Superior Court of New Jersey, Law Division,
Union County, Docket No. Unn-L-5162-96). The Registrant, additional limited
<PAGE>
partnerships which were sponsored by The Balcor Company (together with the
Partnership, the "Affiliated Partnerships"), American Express Company, Lehman
Brothers, Inc., additional limited partnerships sponsored by the predecessor of
Lehman Brothers, Inc. (together with the Registrant and the Affiliated
Partnerships, the "Defendant Partnerships") and Smith Barney Holdings, Inc. are
the named defendants in the action. The complaint was amended on October 18,
1996 to add additional plaintiffs. The amended complaint alleges, among other
things, common law fraud and deceit, negligent misrepresentation, breach of
contract, breach of fiduciary duty and violation of certain New Jersey statutes
relating to the disclosure of information in the offering of limited
partnership interests in the Defendant Partnerships. The amended complaint
seeks judgment for compensatory damages equal to the amount invested in the
Defendant Partnerships by the proposed class plus interest; general damages for
injuries arising from the defendants' alleged actions; equitable relief,
including rescission, on certain counts; punitive damages; treble damages on
certain counts; recovery from the defendants of all profits received by them as
a result of their alleged actions relating to the Defendant Partnerships;
attorneys' fees and other costs.
The defendants intend to vigorously contest this action. No class has been
certified as of this date. The Registrant believes it has meritorious defenses
to contest the claims. It is not determinable at this time whether or not an
unfavorable decision in this action would have a material adverse impact on the
Registrant.
Proposed Class and Derivative Action Lawsuits
- ---------------------------------------------
On June 14, 1996, a proposed class and derivative action complaint was filed,
Dee vs. Walton Street Capital Acquisition II, LLC (Circuit Court of Cook
County, Illinois, County Department, Chancery Division ("Chancery Court"), Case
No. 96 CH 06283) (the "Dee Case"), naming the General Partner and the general
partners (the "Balcor Defendants") of nine other limited partnerships sponsored
by The Balcor Company (together with the Registrant, the "Affiliated
Partnerships"), as well as the Affiliated Partnerships, as defendants.
Additional defendants were Insignia Management Group ("Insignia") and Walton
Street Capital Acquisition II, LLC ("Walton") and certain of their affiliates
and principals (collectively, the "Walton and Insignia Defendants"). The
complaint alleged, among other things, that the tender offers for the purchase
of limited partnership interests in the Affiliated Partnerships made by a joint
venture consisting of affiliates of Insignia and Walton were coercive and
unfair.
On July 1, 1996, another proposed class action complaint was filed in the
Chancery Court, Anderson vs. Balcor Mortgage Advisors (Case No. 96 CH 06884)
(the "Anderson Case"). An amended complaint consolidating the Dee and Anderson
Cases (the "Dee/Anderson Case") was filed on July 25, 1996.
The complaint seeks to assert class and derivative claims again the Walton and
Insignia Defendants and alleges that, in connection with the tender offers, the
Walton and Insignia Defendants misused the Balcor Defendants' and Insignia's
<PAGE>
fiduciary positions and knowledge in breach of the Walton and Insignia
Defendants' fiduciary duty and in violation of the Illinois Securities and
Consumer Fraud Acts. The plaintiffs amended their complaint on October 8, 1996,
adding additional claims. The plaintiffs requested certification as a class and
derivative action, unspecified compensatory damages and rescission of the
tender offers. Each of the defendants filed motions to dismiss the complaint.
On January 7, 1997, the Chancery Court denied the plaintiffs' motion for leave
to amend the complaint and dismissed the matter with prejudice.
On February 3, 1997, the plaintiffs filed a Notice of Appeal of the Chancery
Court's order to the Appellate Court of Illinois.
The Balcor Defendants intend to vigorously contest this action. No class has
been certified as of this date. The Registrant believes it has meritorious
defenses to contest the claims. It is not determinable at this time whether or
not an unfavorable decision in this action would have a material adverse impact
on the Registrant.
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
No matters were submitted to a vote of the Limited Partners of the Registrant
during 1996.
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
- ---------------------------------------------------------------------
Matters
- -------
There has not been an established public market for Limited Partnership
Interests and it is not anticipated that one will develop. For information
regarding previous distributions, see Management's Discussion and Analysis of
Financial Condition and Results of Operations.
As of December 31, 1996, the number of record holders of Limited Partnership
Interests of the Registrant was 17,359.
Item 6. Selected Financial Data
- -------------------------------
Year ended December 31,
----------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
Total income $16,970,317 $17,688,318$17,358,359 $16,954,147 $16,933,654
Provision for
investment
property
writedowns None None None 7,300,000 6,100,000
Income (loss)
before gains on
sales of assets 2,215,797 2,236,014 1,205,826 (5,278,978) (1,652,405)
Net income (loss) 27,100,791 2,236,014 1,205,826 (5,278,978) (1,652,405)
Net income (loss)
per Limited Part-
nership Interest 73.72 4.66 2.11 (16.02) (6.30)
Total assets 84,820,412 76,467,433 78,832,718 83,318,884 93,878,245
Distributions per
Taxable Limited
Partnership
Interest(A) 7.00 8.50 10.00 10.75 13.75
Distributions per
Tax-exempt Limited
Partnership
Interest(A) 52.32 11.32 13.32 14.31 18.28
(A) These amounts include distributions of original capital of $43.00 per
Tax-exempt Interest for 1996. No distributions of original capital were paid to
Taxable Limited Partners during the last five years.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
- -----------------------------------------------------------------------
Results of Operations
- ---------------------
Operations
- ----------
Summary of Operations
- ---------------------
Balcor Equity Pension Investors-I (the "Partnership") recognized gains on the
sales of four properties during 1996. As a result, net income increased for
1996 as compared to 1995. Lower tenant related expenditures at certain of the
office buildings and lower expenditures for interior upgrades at the Oxford
Hills Apartments resulted in an increase in net income for 1995 as compared to
1994. Further discussion of the Partnership's operations is summarized below.
1996 Compared to 1995
- ---------------------
Rental income for 1996 decreased by approximately $361,000 as compared to 1995
due to lower rental rates at the GSB Office Building, and by approximately
$1,068,000 due to the sales of the Oxford Square and Oxford Hills Apartments,
and, to a lesser extent, the sale of the Park Center Office Building. This
decrease was partially offset by increased rental income of approximately
$678,000 at the Pacific Center and 8280 Greensboro Drive office buildings due
to improved rental rates.
Increased cash available for short-term investment primarily due to the 1996
property sales and the December 1995 Fairview III loan prepayment was the
primary reason for an increase in interest income on short-term investments
during 1996 as compared to 1995.
As a result of the Fairview Plaza III loan prepayment in 1995, interest income
on loan receivable ceased.
Amortization expense increased during 1996 as compared to 1995 due to
amortization of leasing commissions at the GSB Office Building capitalized
during the fourth quarter of 1995 and during 1996, as well as the write-off of
capitalized leasing commissions related to the Pacific Center Office Building,
which was sold in December 1996.
Property operating expense decreased by approximately $650,000 during 1996 when
compared to 1995. Approximately $500,000 of this decrease resulted from the
sales of the Oxford Hills and Oxford Square apartment complexes. Property
operating expense also decreased due to approximately $1,100,000 of structural
repairs and tenant improvements costs incurred during 1995 at the GSB and
Pacific Center Office Buildings. These decreases were partially offset by an
increase at the Park Center and 8280 Greensboro Drive office buildings due to
tenant and common areas improvement costs of approximately $950,000 incurred in
1996.
<PAGE>
Real estate taxes increased during 1996 as compared to 1995 by approximately
$97,000 as a result of higher assessments at the Pacific Center and 8280
Greensboro Drive office buildings. This increase was partially offset by a
decrease of approximately $76,000 due to the sale of the Oxford Square and
Oxford Hills apartments and, to a lesser extent, the sale of the Park Center
Office Building.
The Partnership incurred additional legal, consulting, postage and printing
costs in connection with its response to tender offers and certain related
litigation during 1996. As a result, administrative expense increased during
1996 as compared to 1995.
During 1996, the Partnership sold the Oxford Hills Apartments, Oxford Square
Apartments and Park Center Office Building and recognized gains of $2,214,430,
$13,451,440, and $2,627,586, respectively.
In December 1996, the Partnership sold the Pacific Center office building and
recognized a gain on sale of $8,881,597, of which $2,034,774 is the minority
joint venture partner's share, thus increasing the affiliate's minority
interest in income from the joint venture for 1996 as compared to 1995.
In connection with the 1995 Fairview Plaza III loan prepayment, the Partnership
recognized a loss on collection of mortgage loan receivable of $228,372
representing the difference between the amount prepaid under the contractual
terms of the note and the carrying amount of the note for financial statement
purposes.
1995 Compared to 1994
- ---------------------
Increased cash available for short-term investment and higher average interest
rates were the primary reasons for an increase in interest income on short-term
investments during 1995 as compared to 1994.
In December 1995, the Fairview Plaza III loan receivable was prepaid in full.
In connection with this prepayment, the Partnership received a prepayment
premium of $187,270 which was recorded as interest income on loan receivable.
This resulted in an increase in interest on loan receivable for 1995 as
compared to 1994.
The Fairview Plaza III Office Building loan was on non-accrual status before
the loan was prepaid, whereby income was recorded only as cash payments were
received from the borrower. Pursuant to the terms of the January 1992
modification of the loan, the Partnership received payments totaling
approximately $356,000 and $388,000 during each of the years ended December 31,
1995 and 1994, respectively. Of the amounts received, approximately $195,000
was recorded as interest income and $161,000 as a principal reduction in 1995,
and approximately $221,000 as interest income and $167,000 as a principal
reduction in 1994. Interest income is presented net of mortgage servicing fees
in the financial statements.
<PAGE>
As a result of the Fairview Plaza III loan prepayment, deferred fees relating
to loan application and processing were fully amortized. This resulted in an
increase in amortization of deferred expenses in 1995 as compared to 1994.
Lower tenant related expenditures at the Pacific Center, GSB and 8280
Greensboro Drive office buildings and lower expenditures for interior upgrades
at the Oxford Hills Apartments resulted in lower property operating expenses
for 1995 as compared to 1994.
A lower assessed value and tax rate in 1995 at the Oxford Hills Apartments
resulted in a decrease in real estate tax expense in 1995 as compared to 1994.
The Pacific Center Office Building generated income in 1995 due to lower tenant
related expenditures, which resulted in affiliate's minority interest in income
from the joint venture for 1995 as compared to a loss during 1994.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership as of December 31, 1996 increased by
approximately $38,987,000 as compared to December 31, 1995 primarily due to the
proceeds received from the sales of four properties. Cash flow of approximately
$5,271,000 provided by operating activities consists primarily of the cash flow
generated from the property operations and interest income on short-term
investments, which was partially offset by administrative expenses. Cash
provided by investing activities of approximately $54,374,000 consists
primarily of net proceeds of approximately $55,463,000 from the sale of four
properties, and the payment of $1,089,000 for improvements to properties. Cash
used in financing activities of approximately $20,658,000 consists primarily of
distributions to Partners and distributions to the joint venture
partner-affiliate. Proceeds from the sale of Oxford Square Apartments were
distributed to Tax-exempt Limited Partners in October 1996 as discussed below.
Additionally, in January 1997, the Partnership distributed proceeds of
approximately $38,000,000 from the fourth quarter property sales, as discussed
below.
The Partnership classifies the cash flow performance of its properties as
either positive, a marginal deficit or a significant deficit. A deficit is
considered to be significant if it exceeds $250,000 annually or 20% of the
property's rental and service income. The Partnership defines cash flow
generated from its properties as an amount equal to the property's revenue
receipts less property related expenditures. During the years ended December
31, 1996 and 1995, all of the properties owned by the Partnership generated
positive cash flow for the year or prior to the sale of the properties except
for the Park Center Office Building which generated a marginal cash flow
deficit in 1995 due to significant leasing costs incurred at the property. As
of December 31, 1996, the occupancy rates at the GSB and 8280 Greensboro Drive
office buildings were 98%.
During August 1996, the Partnership sold the Oxford Square apartment complex in
an all cash sale for $10,500,000. During November 1996, the Registrant sold the
<PAGE>
Oxford Hills apartment complex in an all cash sale for $22,278,500. During
December 1996, the Partnership sold the Park Center Office Buildings in an all
cash sale for $8,300,000. Additionally, in December 1996, the Partnership sold
the Pacific Center Office Buildings, which were owned by a joint venture
consisting of the Partnership and an affiliate, in an all cash sale for
$15,950,000. During March 1997, the Partnership sold the GSB Office Building
and entered into a contract to sell the 8280 Greensboro Drive Office Building,
scheduled to close in April 1997.
The timing of the termination of the Partnership and final distribution of cash
will depend upon the nature and extent of liabilities and contingencies which
exist or may arise. Such contingencies may include legal and other fees
stemming from litigation involving the Partnership including, but not limited
to, the lawsuits discussed in "Item 3. Legal Proceedings". In the absence of
any contingency, the reserves will be paid within twelve months of the last
property being sold. In the event a contingency exists, reserves may by held by
the Partnership for a longer period of time.
The 8280 Greensboro Drive Office Building located in McLean, Virginia had a
successful leasing campaign in 1996, with the renewal and expansion of
approximately 70,000 square feet of leases, including Deltek, the largest
tenant in the building. Deltek extended its leases for five years. The
property's occupancy at year-end was 98%. The Washington, D.C. market has 175
office buildings totaling 19 million square feet with an average occupancy rate
of 92% at the end of 1996.
GSB Office Building is located just outside Philadelphia in Bala Cynwyd,
Pennsylvania. Approximately 55,000 square feet of the property was leased in
1996, including the renewal of two of its largest tenants, Strategic Marketing
and Levland Advertising, for five year lease terms. The property's occupancy at
year end 1996 was 98%. The Bala Cynwyd submarket has twenty-three office
buildings totaling 2.6 million square feet, with an average occupancy of 95% at
the end of 1996.
In August 1996 the Partnership sold the Oxford Square Apartments in an all cash
sale for $10,500,000. From the proceeds of the sale, the Partnership paid
$387,578 in selling costs. Pursuant to the terms of the sale, the Partnership
was required to hold back $250,000 of the proceeds until September 1996. The
full amount of the holdback was released in September 1996. The proceeds from
the sale were distributed to the Tax-exempt Limited Partners in October 1996,
in accordance with the Partnership Agreement. See Note 10 of Notes to the
Financial Statements for additional information.
In November 1996, the Partnership sold the Oxford Hills Apartments in an all
cash sale for $22,278,500. From the proceeds of the sale, the Partnership paid
$475,139 in selling costs. Pursuant to the terms of the sale, the Partnership
was required to hold back $250,000 of the proceeds until March 1997. The
remaining available proceeds from the sale were distributed to the Tax-exempt
Limited Partners in January 1997, in accordance with the Partnership Agreement.
See Notes 10 and 14 of Notes to the Financial Statements for additional
information.
<PAGE>
In December 1996, the Partnership sold the Park Center office building in an
all cash sale for $8,300,000. From the proceeds of the sale, the Partnership
paid $271,460 in selling costs. Pursuant to the terms of the sale, the
Partnership is required to hold back $200,000 of the proceeds until June 1997.
The remaining proceeds were distributed to the Tax-exempt Limited Partners in
January 1997, in accordance with the Partnership Agreement. See Notes 10 and 14
of Notes to the Financial Statements for additional information.
The Pacific Center Office Buildings were owned by a joint venture consisting of
the Partnership and an affiliate. In December 1996, the joint venture sold the
property in an all cash sale for $15,950,000. From the proceeds of the sale,
the joint venture paid $431,045 in selling costs. The net proceeds from the
sale were $15,518,955, of which $11,965,854 was the Partnership's share. The
remaining proceeds were distributed to the Tax-exempt Limited Partners in
January 1997, in accordance with the Partnership Agreement. See Notes 7 and 10
of Notes to Financial Statements.
In March 1997, the Partnership sold the GSB Office Building in an all cash sale
for $19,575,000. From the proceeds of the sale, the Partnership paid $638,495
in selling costs. Pursuant to the terms of the sale, the Partnership is
required to hold back $500,000 of the proceeds until December 1997. The
remaining proceeds will be distributed to the Tax-exempt Limited Partners in
1997. See Note 14 of Notes to Financial Statements for additional information.
The Partnership made four distributions to Limited Partners totaling $7.00,
$8.50 and $10.00 per Interest in each of 1996, 1995 and 1994, respectively, to
the Taxable Limited Partners and four distributions totaling $52.32, $11.32 and
$13.32 per Interest in each of 1996, 1995 and 1994, respectively, to the
Tax-exempt Limited Partners. The 1996 distributions to Tax-exempt Limited
Partners include Net Cash Proceeds of $43.00 per Interest from the sale of
Oxford Square Apartments and the 1995 repayment of the Fairview Plaza II loan
repayment. Distributions of Cash Flow have remained unchanged ($1.75 per
Taxable Interest, and $2.33 per Tax-exempt Interest) since the third quarter of
1995. Cash flow decreased in 1995 as compared to 1994 due to capital
improvement programs undertaken at several of the Partnership's properties and
significant leasing costs incurred at two of the Partnership's office
buildings. See Statement of Partners' Capital for additional information.
In January 1997, the Partnership paid $42,419,669 ($10.00 per Taxable Interest
and $134.30 per Tax-exempt Interest) to Limited Partners, representing the
regular quarterly distribution of available cash flow of $1.75 per Taxable
Interest and $2.33 per Tax-exempt Interest, a special Net Cash Receipts
distribution of $8.25 per Taxable Interest and $10.97 per Tax-exempt Interest,
and a special Net Cash Proceeds distribution to Tax-exempt Limited Partners of
$121.00 per Interest from proceeds from the 1996 sale of the Oxford Hills
Apartments and the Park Center and Pacific Center office buildings. In
addition, during January 1997, the Partnership paid $385,259 to the General
Partner as its distributive share of Net Cash Receipts distributed for the
fourth quarter of 1997 and made a contribution of $128,420 to the Repurchase
Fund.
<PAGE>
Including the January 1997 distribution, Limited Partners have received
distributions totaling $244.35 per $500.00 Taxable Interest (of which $231.36
represents Net Cash Receipts and $12.99 represents Net Cash Proceeds) and
$507.77 per $500.00 Tax-exempt Interest (of which $307.78 represents Net Cash
Receipts and $199.99 represents Net Cash Proceeds). Future distributions will
be made from proceeds from the sale of the Partnership's remaining properties.
In light of results to date, the General Partner does not anticipate that
Taxable investors will recover all of their original investment.
During 1996, the General Partner used amounts placed in the Repurchase Fund to
repurchase 1,217 Interests from Limited Partners at a cost of $296,033. In
February 1997, the Partnership discontinued the repurchase of Interests from
Limited Partners.
Changing interest rates can impact real estate values in several ways.
Generally, declining interest rates may lower the cost of capital allowing
buyers to pay more for a property whereas rising interest rates may increase
the cost of capital and lower the price of real estate.
Inflation has several types of potentially conflicting impacts on real estate
investments. Short-term inflation can increase real estate operating costs
which may or may not be recovered through increased rents and/or sales prices,
depending on general or local economic conditions. In the long-term, inflation
can be expected to increase operating costs and replacement costs and may lead
to increased rental revenues and real estate values.
Item 8. Financial Statements and Supplementary Data
- ---------------------------------------------------
See Index to Financial Statements and Financial Statement Schedule in this
Form 10-K.
The supplemental financial information specified by Item 302 of Regulation S-K
is not applicable.
The net effect of the differences between the financial statements and the tax
returns is summarized as follows:
December 31, 1996 December 31, 1995
----------------------- -------------------------
Financial Tax Financial Tax
Statements Returns Statements Returns
----------- ------------ ----------- ------------
Total assets $84,820,412 $100,203,133 $76,467,433 $121,136,136
Partners' capital
(deficit) accounts:
General Partner (44,343) 368,617 (302,421) (51,020)
Limited Partners 84,282,848 117,778,976 74,471,189 119,065,499
Net income:
General Partner 617,999 779,558 562,077 738,085
Limited Partners 26,482,792 1,673,937 2,267,180
<PAGE>
Per Limited Partner-
ship Interest 73.72 (A) 4.66 (A)
(A) The net income is $47.70 per Tax-exempt Interest and $6.99 per Taxable
Interest for 1996 and $5.98 per Tax-exempt Interest and $8.50 per Taxable
Interest for 1995.
Item 9. Changes in and Disagreements with Accountants on Accounting and
- -----------------------------------------------------------------------
Financial Disclosure
- --------------------
On September 14, 1995 the Registrant approved the engagement of Coopers &
Lybrand L.L.P. as its independent accountants for the fiscal year ending
December 31, 1995 to replace the firm of Ernst & Young LLP, who were dismissed
as auditors of the Registrant effective September 14, 1995. The General Partner
of the Registrant approved the change in auditors.
The reports of Ernst & Young LLP on the Registrant's financial statements for
each of the two fiscal years ended December 31, 1994 did not contain an adverse
opinion or a disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope, or accounting principles.
In connection with the audits of the Registrant's financial statements for each
of the two fiscal years ended December 31, 1994, and in the subsequent interim
period, there were no disagreements with Ernst & Young LLP on any matters of
accounting principles or practices, financial statement disclosure, or auditing
scope and procedures which, if not resolved to the satisfaction of Ernst &
Young LLP would have caused Ernst & Young LLP to make reference to the matter
in their report.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
- -----------------------------------------------------------
(a) Neither the Registrant nor Balcor Equity Partners-I, its General Partner,
has a Board of Directors.
(b, c & e) The names, ages and business experience of the executive officers
and significant employees of the General Partner of the Registrant are as
follows:
TITLE OFFICERS
Chairman, President and Chief Thomas E. Meador
Executive Officer
Senior Vice President Alexander J. Darragh
Senior Vice President James E. Mendelson
Senior Vice President John K. Powell, Jr.
Managing Director, Chief Jayne A. Kosik
Financial Officer, Treasurer
and Assistant Secretary
Thomas E. Meador (age 49) joined Balcor in July 1979. He is Chairman, President
and Chief Executive Officer and has responsibility for all ongoing day-to-day
activities at Balcor. He is a Director of The Balcor Company. He is also Senior
Vice President of American Express Company and is responsible for its real
estate operations worldwide. Prior to joining Balcor, Mr. Meador was employed
at the Harris Trust and Savings Bank in the commercial real estate division
where he was involved in various lending activities. Mr. Meador received his
M.B.A. degree from the Indiana University Graduate School of Business.
Alexander J. Darragh (age 42) joined Balcor in September 1988 and is
responsible for due diligence analysis and real estate advisory services for
Balcor and American Express Company. He also has supervisory responsibility for
Balcor's environmental matters. Mr. Darragh received masters' degrees in Urban
Geography from Queen's University and in Urban Planning from Northwestern
University.
James E. Mendelson (age 34) joined Balcor in July 1984 and is responsible for
Balcor's property sales activities. He also has supervisory responsibility for
Balcor's accounting, financial, treasury, investor services and investment
administration functions. From 1989 to 1995, Mr. Mendelson was Vice President -
Transaction Management and Vice President - Senior Transaction Manager and had
responsibility for various asset management matters relating to real estate
investments made by Balcor, including negotiations for the restructuring of
mortgage loan investments. Mr. Mendelson received his M.B.A. degree from the
University of Chicago.
<PAGE>
John K. Powell, Jr. (age 46) joined Balcor in September 1985 and is responsible
for portfolio and asset management matters relating to Balcor's partnerships.
Mr. Powell also has supervisory responsibility for Balcor's risk management
function. He received a Master of Planning degree from the University of
Virginia. Mr. Powell has been designated a Certified Real Estate Financier by
the National Society for Real Estate Finance and is a full member of the Urban
Land Institute.
Jayne A. Kosik (age 39) joined Balcor in August 1982 and, as Chief Financial
Officer, is responsible for Balcor's financial, human resources and treasury
functions. From June 1989 until October 1996, Ms. Kosik had supervisory
responsibility for accounting functions relating to Balcor's public and private
partnerships. She is also Treasurer and a Managing Director of The Balcor
Company. Ms. Kosik is a Certified Public Accountant.
(d) There is no family relationship between any of the foregoing officers.
(f) None of the foregoing officers or employees are currently involved in any
material legal proceedings nor were any such proceedings terminated during the
fourth quarter of 1996.
Item 11. Executive Compensation
- -------------------------------
The Registrant paid $6,063 in 1996 with respect to one of the executive
officers and directors of the General Partner. Certain of the remaining
officers receive compensation from The Balcor Company (but not from the
Registrant) for services performed for various affiliated entities, which may
include services performed for the Registrant. However, the General Partner
believes that any such compensation attributable to services performed for the
Registrant is immaterial to the Registrant. The Registrant has not paid and
does not propose to pay any remuneration to the remaining executive officers
and directors of the General Partner. See Note 10 of Notes to Financial
Statements for the information relating to transactions with affiliates.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- -----------------------------------------------------------------------
(a) The following entity is the sole Limited Partner which owns beneficially
more than 5% of the outstanding Limited Partnership Interests of the
Registrant:
Name and Amount and
Address of Nature of
Beneficial Beneficial Percent
Title of Class Owner Ownership of Class
- -------------- ---------------- ---------------- ----------------
Limited Walton Street 27,951.51 7.00%
Partnership Capital Acquisition Limited
Interests Co. II, L.C.C. Partnership
Chicago, Interests
Illinois
<PAGE>
Limited Beattie 15,050.81 3.77%
Partnership Place Limited
Interests Greenville, Partnership
South Carolina Interests
While Beattie Place individually owns less than 5% of the Interests, for
purposes of this Item 12, Beattie Place is an affiliate of Walton Street
Capital Acquisition Co. II, L.C.C. and, collectively, they own 10.77% of the
Interests.
(b) Balcor Equity Partners-I (principally through the Repurchase Fund) and its
officers and partners own as a group the following Limited Partnership
Interests of the Registrant:
Amount
Beneficially
Title of Class Owned Percent of Class
-------------- ------------- ----------------
Limited Partnership 11,497.18 3.20%
Interests
Relatives and affiliates of the officers and partners of the General Partner do
not own any Interests.
(c) The Registrant is not aware of any arrangements, the operation of which may
result in a change of control of the Registrant.
Item 13. Certain Relationships and Related Transactions
- -------------------------------------------------------
(a & b) See Note 9 of Notes to Financial Statements for additional information
relating to transactions with affiliates.
See Note 4 of Notes to Financial Statements for information relating to the
Partnership Agreement and the allocation of distributions and profits and
losses.
(c) No management person is indebted to the Registrant.
(d) The Registrant has no outstanding agreements with any promoters.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
- ------------------------------------------------------------------------
(a)
(1 & 2) See Index to Financial Statements and Financial Statement Schedule in
this Form 10-K.
(3) Exhibits:
(3) The Amended and Restated Agreement of Limited Partnership and Amended and
Restated Certificate of Limited Partnership, previously filed as Exhibits 3 and
4.1, respectively, to Amendment No. 2 to the Registrant's Registration
Statement on Form S-11 dated October 4, 1983 (Registration No. 2-85270), are
incorporated herein by reference.
(4) Form of Confirmation regarding Interests in the Registrant set forth as
Exhibit 4.2 to the Registrant's Report on Form 10-Q for the quarter ended
June 30, 1992 (Commission File No. 2-85270) is incorporated herein by
reference.
(10) Material Contracts:
(a) Agreement of Sale and attachment thereto relating to the sale of Oxford
Square Apartments, Casselberry, Florida, previously filed as Exhibit (2) to the
Registrant's Report on Form 8-K dated July 5, 1996 is incorporated herein by
reference.
(b) Agreement of Sale and attachment thereto relating to the sale of Oxford
Hills Apartments, St. Louis County, Missouri, previously filed as Exhibit (2)
to the Registrant's Report on Form 8-K dated October 16, 1996 is incorporated
herein by reference.
(c) (i) Agreement of Sale and attachment thereto relating to the sale of GSB
Office Building, Bala Cynwyd, Pennsylvania, previously filed as Exhibit (2) to
the Registrant's Report on Form 8-K dated December 2, 1996 is incorporated
herein by reference.
(ii) First Amendment to Agreement of Sale relating to the sale of the GSB
Office Building, Bala Cynwyd, Pennsylvania, previously filed as Exhibit (99)(a)
to the Registrant's Report on Form 8-K dated January 6, 1997 is incorporated
herein by reference.
(iii) Second Amendment to Agreement of Sale relating to the sale of the GSB
Office Building, Bala Cynwyd, Pennsylvania, previously filed as Exhibit (99)(b)
to the Registrant's Report on Form 8-K dated January 6, 1997 is incorporated
herein by reference.
(iv) Letter dated January 30, 1997 relating to the sale of the GSB Office
Building, Bala Cynwyd, Pennsylvania, previously, is attached hereto.
<PAGE>
(d)(i) Agreement of Sale dated January 6, 1997 and attachment thereto relating
to the sale of the 8280 Greensboro Drive Office Building, McLean, Virginia,
previously filed as Exhibit (2) to the Registrant's Report on Form 8-K dated
January 6, 1997 is incorporated herein by reference.
(ii) Affidavit of Due Diligence Termination Notice relating to the sale of the
8280 Greensboro Drive Office Building, McLean, Virginia, is attached hereto.
(iii) Agreement of Sale dated March 11, 1997 and attachment thereto relating to
the sale of the 8280 Greensboro Drive Office Building, McLean, Virginia, is
attached hereto.
(iv) Letter Agreement dated March 12, 1997 relating to the sale of the 8280
Greensboro Drive Office Building, McLean, Virginia, is attached hereto.
(v) Second Amendment to Agreement of Sale relating to the sale of the 8280
Greensboro Drive Office Building, McLean, Virginia, is attached hereto.
(16) Letter from Ernst & Young LLP dated September 19, 1995 regarding the
change in the Registrant's certifying accountant previously filed as Exhibit 16
to the Registrant's Report on Form 8-K/A dated October 27, 1995 (Commission
File No. 2-85270) is hereby incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for 1996 is attached hereto.
(b) Reports on Form 8-K:
(i) Report on Form 8-K dated October 16, 1996 was filed reporting the execution
of a contract for the sale of Oxford Hills Apartments, St. Louis County,
Missouri and the Pacific Center Office Buildings, Dallas, Texas.
(ii) Report on Form 8-K dated December 2, 1996 was filed reporting the
execution of a contract for the sale of GSB Office Building, Bala Cynwyd,
Pennsylvania, and the closing of the sales of Oxford Hills Apartments, St.
Louis County, Missouri, Park Center Office Building, Maitland, Florida, and the
Pacific Center Office Building, Dallas, Texas.
(iii) Report on Form 8-K dated January 6, 1997 was filed reporting the
execution of a contract for the sale of 8280 Greensboro Drive Office Building,
McLean, Virginia, and the reduction of the sale price and the extension of the
closing date of the sale of the GSB Office Building, Bala Cynwyd, Pennsylvania.
(c) Exhibits: See Item 14(a)(3) above.
(d) Financial Statement Schedules: See Index to Financial Statements and
Financial Statement Schedule in this Form 10-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.
BALCOR EQUITY PENSION INVESTORS-I
By: /s/ Jayne A. Kosik
-----------------------------
Jayne A. Kosik
Managing Director and Chief
Financial Officer (Principal
Accounting Officer) of Balcor Equity
Partners-I, the General Partner
Date: March 26, 1997
---------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
- ---------------------- ------------------------------- ------------
President and Chief Executive
Officer (Principal Executive
Officer) of Balcor Equity
/s/ Thomas E. Meador Partners-I, the General Partner March 26, 1997
- --------------------- --------------
Thomas E. Meador
Managing Director and Chief
Financial Officer (Principal
Accounting Officer) of Balcor
Equity Partners-I, the General
/s/ Jayne A. Kosik Partner March 26, 1997
- --------------------- --------------
Jayne A. Kosik
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
Report of Independent Accountants
Report of Independent Auditors
Financial Statements:
Balance Sheets, December 31, 1996 and 1995
Statements of Partners' Capital, for the years ended December 31, 1996, 1995
and 1994
Statements of Income and Expenses, for the years ended December 31, 1996, 1995
and 1994
Statements of Cash Flows, for the years ended December 31, 1996, 1995 and 1994
Notes to Financial Statements
Financial Statement Schedule:
III - Real Estate and Accumulated Depreciation, as of December 31, 1996
Financial Statement Schedules, other than that listed, are omitted for the
reason that they are inapplicable or equivalent information has been included
elsewhere herein.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Balcor Equity Pension Investors-I:
We have audited the accompanying balance sheets of Balcor Equity Pension
Investors-I (An Illinois Limited Partnership) as of December 31, 1996 and
1995 and the related statements of partners' capital, income and expenses, and
cash flows for each of the two years in the period ended December 31, 1996.
We have also audited the accompanying financial statement schedule. These
financial statements and the financial statement schedule are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements and the financial statement
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 financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Balcor Equity Pension
Investors-I at December 31, 1996 and 1995 and the results of its operations
and its cash flows for each of the two years in the period ended December 31,
1996, 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.
As described in Note 2 to the financial statments, the Partnership Agreement
provides for the dissolution of the Partnership upon the disposition of all
its real estate interests. The Partnership is presently marketing for sale
its remaining real estate assets. Upon disposition of its remaining real
estate assets and resolution of the litigation described in Note 13 to the
financial statements, the Partnership intends to cease operations and dissolve.
/s/ Coopers & Lybrand, L.L.P.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
March 24, 1997
REPORT OF INDEPENDENT AUDITORS
To the Partners of
Balcor Equity Pension Investors-I:
We have audited the accompanying statements of partners' capital, income and
expenses and cash flows of Balcor Equity Pension Investors-I (An Illinois
Limited Partnership) for the year ended December 31, 1994. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of Balcor
Equity Pension Investors-I for the year ended December 31, 1994, in conformity
with generally accepted accounting principles.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Chicago, Illinois
March 6, 1995
BALCOR EQUITY PENSION INVESTORS - I
(An Illinois Limited Partnership)
BALANCE SHEETS
December 31, 1996 and 1995
ASSETS
1996 1995
-------------- --------------
Cash and cash equivlants $ 50,292,449 $ 11,305,552
Accounts and accrued interest receivable 704,044 436,233
Prepaid expenses 126,457 208,240
Deferred expenses, net of accumulated
amortization of $252,417 in 1996
and $610,552 in 1995 388,847 447,989
-------------- --------------
51,511,797 12,398,014
-------------- --------------
Investment in real estate:
Land 4,398,007 10,753,713
Buildings and improvements 48,195,641 94,459,569
-------------- --------------
52,593,648 105,213,282
Less accumulated depreciation 19,285,033 41,143,863
-------------- --------------
Investment in real estate, net
of accumulated depreciation 33,308,615 64,069,419
-------------- --------------
$ 84,820,412 $ 76,467,433
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 302,533 $ 238,377
Due to affiliates 97,196 27,398
Accrued real estate taxes 204,076
Security deposits 182,178 491,955
-------------- --------------
Total liabilities 581,907 961,806
Commitments and Contingencies
Affiliate's minority interest in
joint venture 1,336,859
Limited Partners' capital (359,229
Partnership Interests issued and
outstanding) 84,282,848 74,471,189
<PAGE>
BALCOR EQUITY PENSION INVESTORS - I
(An Illinois Limited Partnership)
BALANCE SHEETS
December 31, 1996 and 1995
(Continued)
General Partner's deficit (44,343) (302,421)
-------------- --------------
Total Partners capital 84,238,505 74,168,768
-------------- --------------
$ 84,820,412 $ 76,467,433
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PENSION INVESTORS - I
(An Illinois Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
for the years ended December 31, 1996, 1995 and 1994
Partners' Capital (Deficit) Accounts
------------------------------------------
General Limited
Total Partner Partners
--------------- ------------- ------------
Balance at December 31, 1993 $ 80,242,121 $ (361,783)$ 80,603,904
Cash distributions (A) (5,143,724) (514,372) (4,629,352)
Net income for the year
ended December 31, 1994 1,205,826 448,802 757,024
--------------- ------------- ------------
Balance at December 31, 1994 76,304,223 (427,353) 76,731,576
Cash distributions (A) (4,371,469) (437,145) (3,934,324)
Net income for the year
ended December 31, 1995 2,236,014 562,077 1,673,937
--------------- ------------- ------------
Balance at December 31, 1995 74,168,768 (302,421) 74,471,189
Cash distributions (A) (17,031,054) (359,921) (16,671,133)
Net income for the year
ended December 31, 1996 27,100,791 617,999 26,482,792
--------------- ------------- ------------
Balance at December 31, 1996 $ 84,238,505 $ (44,343)$ 84,282,848
=============== ============= ============
(A) Summary of cash distributions paid per Limited Partnership Interest:
1996 1995 1994
Taxable --------------- ------------- ------------
--------
First Quarter $ 1.75 $ 2.50 $ 2.50
Second Quarter 1.75 2.50 2.50
Third Quarter 1.75 1.75 2.50
Fourth Quarter 1.75 1.75 2.50
Tax-exempt
----------
First Quarter 2.33 3.33 3.33
Second Quarter 2.33 3.33 3.33
Third Quarter 2.33 2.33 3.33
Fourth Quarter 45.33 2.33 3.33
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PENSION INVESTORS - I
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the years ended December 31, 1996, 1995 and 1994
1996 1995 1994
--------------- ------------- ------------
Income:
Rental $ 14,299,598 $ 15,051,128 $ 14,844,273
Service 1,755,248 1,768,853 1,949,797
Interest on short-term
investments 915,471 472,431 352,782
Interest on loan receivable 395,906 211,507
--------------- ------------- ------------
Total income 16,970,317 17,688,318 17,358,359
--------------- ------------- ------------
Expenses:
Depreciation 3,561,739 3,676,624 3,597,776
Amortization of deferred
expenses 319,997 142,928 106,292
Property operating 8,232,023 8,900,522 9,723,304
Real estate taxes 1,167,490 1,146,044 1,358,958
Property management fees 651,010 689,037 721,850
Administrative 822,261 656,146 655,733
Loss on collection of mortgage
loan receivable 228,372
--------------- ------------- ------------
Total expenses 14,754,520 15,439,673 16,163,913
--------------- ------------- ------------
Income before gain on sale of
properties and affiliate's
minority interest in income
from joint venture 2,215,797 2,248,645 1,194,446
Gain on sales of properties 27,175,053
Affiliate's minority interest in
(income) loss from joint
venture (2,290,059) (12,631) 11,380
--------------- ------------- ------------
Net income $ 27,100,791 $ 2,236,014 $ 1,205,826
--------------- ------------- ------------
Net income allocated to General
Partner $ 617,999 $ 562,077 $ 448,802
=============== ============= ============
Net income allocated to Limited
Partners $ 26,482,792 $ 1,673,937 $ 757,024
=============== ============= ============
<PAGE>
BALCOR EQUITY PENSION INVESTORS - I
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the years ended December 31, 1996, 1995 and 1994
(Continued)
Net income per Limited
Partnership Interest (359,229
issued and outstanding) $ 73.72 $ 4.66 $ 2.11
=============== ============= ============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PENSION INVESTORS - I
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1996, 1995 and 1994
1996 1995 1994
--------------- ------------- ------------
Operating activities:
Net income $ 27,100,791 $ 2,236,014 $ 1,205,826
Adjustments to reconcile net
income to net cash
provided by operating
activities:
Gain on sales of
properties (27,175,053)
Affiliate's minority
interest in income
(loss)from joint venture 2,290,059 12,631 (11,380)
Depreciation of properties 3,561,739 3,676,624 3,597,776
Amortization of deferred
expenses 319,997 142,928 106,292
Loss on collection of
mortgage loan receivable 228,372
Payment of deferred
expenses (260,855) (235,621) (27,921)
Net change in:
Accounts and accrued
interest receivable (267,811) (271,348) 336,648
Prepaid expenses 81,783 (138,121) 27,049
Accounts payable 64,156 26,701 (526,800)
Due to affiliates 69,798 (74,819) 5,238
Accrued real estate
taxes (204,076) 889 (37,602)
Escrow liabilities (16,088) (328)
Security deposits (309,777) (20,651) (7,797)
--------------- ------------- ------------
Net cash provided by
operating activities 5,270,751 5,567,511 4,667,001
--------------- ------------- ------------
Investing activities:
Proceeds from sales of
properties 57,028,500
Payment of selling costs (1,565,222)
Collection of principal pay-
ments on loan receivable 3,906,969 167,342
Improvements to properties (1,089,160) (845,966) (766,068)
--------------- ------------- ------------
Net cash provided by or used
in investing activities 54,374,118 3,061,003 (598,726)
--------------- ------------- ------------
<PAGE>
BALCOR EQUITY PENSION INVESTORS - I
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1996, 1995 and 1994
(Continued)
Financing activities:
Distributions to Limited
Partners (16,671,133) (3,934,324) (4,629,352)
Distributions to General
Partner (359,921) (437,145) (514,372)
Contributions from joint ven-
ture partner - affiliate 54,938 48,400
Distributions to joint venture
partner - affiliate (3,681,856) (158,493) (17,999)
--------------- ------------- ------------
Net cash used in financing
activities (20,657,972) (4,529,962) (5,113,323)
--------------- ------------- ------------
Net change in cash and
cash equivalents $ 38,986,897 $ 4,098,552 $ (1,045,048)
Cash and cash equivalents
at beginning of year 11,305,552 7,207,000 8,252,048
--------------- ------------- ------------
Cash and cash equivalents
at end of year $ 50,292,449 $ 11,305,552 $ 7,207,000
=============== ============= ============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PENSION INVESTORS-I
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Nature of the Partnership's Business:
Balcor Equity Pension Investors-I is engaged principally in the operation of
residential and commercial real estate, with real estate investments remaining
at December 31, 1996 located in McLean, Virginia and Bala Cynwyd, Pennsylvania.
2. Partnership Termination:
The Partnership Agreement provides for the dissolution of the Partnership upon
the occurrence of certain events, including the disposition of all interests in
real estate. During 1996, the Partnership sold the Oxford Square and Oxford
Hills apartment complexes. Additionally, the Partnership sold the Pacific
Center Office Buildings, which was owned by a joint venture consisting of the
Partnership and an affiliate. During 1997, the Partnership sold the GSB Office
Building and has entered into a contract to sell the 8280 Greensboro Drive
Office Building. The timing of the termination of the Partnership and final
distribution of cash will depend upon the nature and extent of liabilities and
contingencies which exist or may arise. Such contingencies may include legal
and other fees stemming from litigation involving the Partnership including,
but not limited to, the lawsuits discussed in Note 13 of Notes to the Financial
Statements. In the absence of any contingency, the reserves will be paid within
twelve months of the last property being sold. In the event a contingency
exists, reserves may be held by the Partnership for a longer period of time.
3. Accounting Policies:
(a) The preparation of the financial statements in conformity with generally
accepted accounting principles requires the General Partner to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could vary from those estimates.
(b) Depreciation expense is computed using the straight-line method. Rates
used in the determination of depreciation are based upon the following
estimated useful lives:
Years
-----
Buildings and improvements 20 to 40
Furniture and fixtures 5
Maintenance and repairs are charged to expense when incurred. Expenditures for
improvements are charged to the related asset account.
<PAGE>
As properties are sold, the related costs and accumulated depreciation are
removed from the respective accounts. Any gain or loss on disposition is
recognized in accordance with generally accepted accounting principles.
(c) Interest income on loan receivable consisted of monthly payments received
from the borrower, which were recorded in the period they were earned as
determined by the terms of the loan agreement. The accrual of interest was
discontinued when a loan became ninety days contractually delinquent or sooner,
when in the opinion of the General Partner, an impairment had occurred in the
value of the collateral property securing the loan.
Once a loan was placed on non-accrual status, income was recorded only as cash
payments were received from the borrower until such time as the borrower
demonstrated an ability to make regular payments under the terms of the
original or renegotiated loan agreement. The Partnership received a prepayment
of its last mortgage loan receivable in December 1995.
For loans on which the Partnership had agreed to a modification of terms as a
result of financial difficulties experienced by the borrower, interest income
payments earned subsequent to the date of modification for which payment was
deferred to a later date were recorded only as they were received from the
borrower.
(d) Loan losses on mortgage notes receivable were charged to income and an
allowance account was established when the General Partner believed the loan
balance would not be recovered. The General Partner assessed the collectibility
of each loan on a periodic basis through a review of the collateral property
operations, the property value and the borrower's ability to repay the loan.
Upon foreclosure, the loan net of allowance was transferred to real estate held
for sale, after the fair value of the property less costs of disposal was
assessed. Upon the transfer to real estate, a new basis in the property was
established.
Effective January 1, 1995 the Partnership adopted Statement of Financial
Accounting Standards, No. 121 (SFAS 121), "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed Of". Under SFAS 121, the
Partnership records its investments in real estate at the lower of cost or fair
value, and periodically assesses, but not less than on an annual basis,
possible impairment to the value of its properties. The General Partner
estimates the fair value of its properties based on the current sales price
less estimated closing costs. In the event the General Partner determines an
impairment in value has occurred, and the carrying amount of the real estate
asset will not be recovered, a provision is recorded to reduce the carrying
basis of the property to its estimated fair value. The General Partner
considers the methods referred to above to result in a reasonable measurement
of a property's fair value, unless other factors affecting the property's value
indicate otherwise.
(e) Deferred expenses consist of leasing commissions which are amortized over
the life of each respective lease.
<PAGE>
(f) Revenue is recognized on an accrual basis in accordance with generally
accepted accounting principles. Income from operating leases with significant
abatements and/or scheduled rent increases is recognized on a straight line
basis over the respective lease term. Service income includes reimbursements of
operating costs such as real estate taxes, maintenance and insurance and is
recognized as revenue in the period the applicable costs are incurred.
(g) The Financial Accounting Standard Board's Statement No. 107, "Disclosures
About Fair Value of Financial Instruments", requires disclosure of fair value
information about financial instruments for which it is practicable to estimate
that value. Since quoted market prices are not available for the Partnership's
financial instruments, fair values have been based on estimates using present
value techniques. These techniques are significantly affected by the assumption
used, including the discount rate and estimates of future cash flows. In that
regard, the derived fair value estimates cannot be substantiated by comparison
to independent markets and, in many cases, may not be realized in immediate
settlement of the instrument. Statement No. 107 does not apply to all balance
sheet items and excludes certain financial instruments and all non-financial
instruments such as real estate and investment in joint ventures from its
disclosure requirements.
(h) Cash and cash equivalents include all unrestricted, highly liquid
investments with an original maturity of three months or less. Cash is held in
one financial institution.
(i) The Partnership is not liable for Federal income taxes and each partner
recognizes his proportionate share of the Partnership income or loss in his tax
return; therefore, no provision for income taxes is made in the financial
statements of the Partnership.
4. Partnership Agreement:
The Partnership was organized in July 1983. The Partnership Agreement provides
for Balcor Equity Partners-I to be the General Partner and for the admission of
Limited Partners through the sale of up to 800,000 Limited Partnership
Interests at $500 per Interest, 359,229 of which were sold on or prior to
February 24, 1984, the termination date of the offering.
Operating Income of the Partnership is allocated 10% to the General Partner and
90% to the Limited Partners; however, certain components are specially
allocated as described in the Partnership Agreement. Operating Losses and
certain other components are allocated 1% to the General Partner and 99% to the
Limited Partners pursuant to the provisions of the Partnership Agreement.
Net Cash Receipts available for distribution are distributed as follows: 90% to
all Limited Partners; 7 1/2% to the General Partner as its distributive share
from Partnership operations; and 2 1/2% to the General Partner for allocation
to the Repurchase Fund which may be utilized to repurchase Interests from
Limited Partners pursuant to the provisions of the Partnership Agreement.
<PAGE>
Amounts placed in the Repurchase Fund may, at the sole discretion of the
General Partner and subject to certain limitations, as set forth in the
Partnership Agreement, be used to repurchase Interests from existing Limited
Partners. During 1996, the General Partner used amounts placed in the
Repurchase Fund to repurchase 1,217 Interests from Limited Partners at a cost
of $296,033. All repurchases of Interests have been made at 90% of the then
current valuation of such Limited Partnership Interests at the previous quarter
end less any distributions made after the previous quarter end. Distributions
pertaining to repurchased Interests are paid to the Repurchase Fund. To the
extent that amounts in the Repurchase Fund were not utilized to repurchase
Interests, such amounts were invested in short-term interest-bearing
instruments with earnings thereon credited to the Repurchase Fund. In February
1997, the Partnership discontinued the repurchase of Limited Partnership
Interests. An amount not to exceed the amount originally allocated to the
Repurchase Fund will be returned to the Partnership at liquidation which will
be accounted for as a capital contribution from the General Partner, if
necessary to permit payment to the Limited Partners of their Original Capital
plus any deficiency in their Liquidation Preference.
When and as the Partnership sells its real properties, the Net Cash Proceeds
resulting therefrom which are available for distribution will be distributed
only to holders of Interests until such time as they have received an amount
equal to their Original Capital plus 6% per annum, non-compounded, on Adjusted
Original Capital (Liquidation Preference). Net Cash Proceeds will be
distributed among the Taxable and Tax-exempt Limited Partners in accordance
with the Partnership Agreement. Thereafter, the General Partner will receive
10% of further distributed Net Cash Proceeds, which shall be returned to the
Partnership if necessary to permit payment to the Limited Partners of any
deficiency in the return of their Original Capital and their Preferential
Cumulative Distribution on Adjusted Original Capital in amounts ranging from
10% to 16% per annum (depending on the type of investor and the month and year
in which Interests were purchased).
The Partnership Agreement provides for different allocations of profits and
losses and Net Cash Receipts and Net Cash Proceeds distributions to Limited
Partners depending on whether the investor originally acquiring the Interest
was a taxable or tax-exempt entity.
5. Investment in Loan Receivable:
In December 1995, the Partnership received $3,932,676 as payment in full under
the contractual terms of the Fairview Plaza III Office Building mortgage loan.
The amount received consisted of funds advanced of $3,745,406 and a prepayment
premium of $187,270. The Partnership recognized a loss on collection of
mortgage loan receivable of $228,372 representing the difference between the
amount repaid under the contractual terms of the note and the carrying amount
for financial statement purposes.
The Fairview Plaza III Office Building mortgage loan had been classified as a
non-accrual loan as a result of delinquency and other noncompliance with the
terms of the loan agreement and was therefore considered an impaired loan.
<PAGE>
Under the terms of the original loan agreement, the Partnership would have
received interest income of approximately $1,100,000 during 1995 and $1,200,000
during 1994, respectively. The Partnership recorded interest income on this
loan of approximately $195,000 (cash basis) during 1995, and $221,000 (cash
basis) during 1994. The average recorded investment in the impaired loan during
the year ended December 31, 1995 was approximately $4,054,709.
6. Management Agreements:
As of December 31, 1996, both of the properties owned by the Partnership are
under management agreements with a third-party management company. These
management agreements provide for annual fees of 3% to 6% of gross operating
receipts.
7. Affiliate's Minority Interest in Joint Venture:
The Pacific Center Office Buildings were owned by a joint venture between the
Partnership and an affiliate. Profits and losses were allocated 77.09% to the
Partnership and 22.91% to the affiliate. All assets, liabilities, income and
expenses of the joint venture are included in the financial statements of the
Partnership with the appropriate adjustment for profit or loss for the
affiliate's participation. Net distributions of $3,626,918 and $158,493, were
made to the joint venture partner during 1996 and 1995, and net contributions
of $30,401 were received from the joint venture partner in 1994. The property
was sold in December 1996 and the joint venture recognized a gain on the sale
of $8,881,597 of which $2,034,774 is the joint venture partners share.
8. Tax Accounting:
The Partnership keeps its books in accordance with the Internal Revenue Code,
rules and regulations promulgated thereunder and existing interpretations
thereof. The accompanying financial statements, which are prepared in
accordance with generally accepted accounting principles ("GAAP"), will differ
from the tax returns due to the different treatment of various items as
specified in the Internal Revenue Code. The net effect of these accounting
differences is that the net income for 1996 in the financial statements is
$11,092,187 more than the tax income of the Partnership for the same period
resulting primarily from differences in the commercial property capitalization
policy for tax and GAAP and its effects on sales calculations, which was
partially offset by higher tax basis depreciation.
9. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates are:
Year Ended Year Ended Year Ended
12/31/96 12/31/95 12/31/94
-------------- -------------- --------------
Paid Payable Paid Payable Paid Payable
------ ------- ------ ------- ------ -------
Mortgage servicing fees None None $ 9,625 $ 569 $ 9,625 $ 802
Property management fees None None None None 663,299 None
<PAGE>
Reimbursement of expenses
to the General Partner,
at cost:
Accounting $18,148 $14,241 69,227 5,662 87,470 30,226
Data processing 3,101 2,398 29,559 2,201 57,714 13,007
Investor communi-
cations None None 10,066 None 30,605 8,983
Legal 12,975 10,093 28,821 2,350 25,026 12,774
Portfolio management 88,864 68,872 133,190 16,552 114,105 28,793
Other 3,373 1,592 10,561 64 11,024 7,632
The Partnership participates in an insurance deductible program with other
affiliated partnerships in which the program pays claims up to the amount of
the deductible under the master insurance policies for its properties. The
program is administered by an affiliate of the General Partner who receives no
fee for administering the program; however, the General Partner is reimbursed
for program expenses. The Partnership paid premiums to the deductible insurance
program of $24,406, $98,265 and $116,846 for 1996, 1995 and 1994, respectively.
Allegiance Realty Group, Inc., an affiliate of the General Partner, managed
the Partnership's properties until the affiliate was sold to a third party in
November 1994.
10. Property Sales:
(a) In August 1996, the Partnership sold the Oxford Square Apartments in an all
cash sale for $10,500,000. From the proceeds of the sale, the Partnership paid
$387,578 in selling costs. The basis of the property was $7,897,992, which is
net of accumulated depreciation of $3,486,872. For financial statement
purposes, the Partnership recognized a gain of $2,214,430 from the sale of this
property.
(b) In November 1996, the Partnership sold the Oxford Hills Apartments in an
all cash sale for $22,278,500. From the proceeds of the sale, the Partnership
paid $475,139 in selling costs. The basis of the property was $8,351,921, which
is net of accumulated depreciation of $11,056,013. For financial statement
purposes, the Partnership recognized a gain of $13,451,440.
(c) In December 1996, the Partnership sold the Park Center Office Building in
an all cash sale for $8,300,000. From the proceeds of the sale, the Partnership
paid $271,460 in selling costs. The basis of the property was $5,400,954, which
is net of accumulated depreciation of $2,596,589. For financial statement
purposes, the Partnership recognized a gain of $2,627,586.
(d) The Pacific Center Office Buildings were owned by a joint venture
consisting of the Partnership and an affiliate. The Partnership and the
affiliate hold participating percentages in the joint venture of 77.09% and
22.91%, respectively. In December 1996, the joint venture sold the property in
an all cash sale for $15,950,000. From the proceeds of the sale, the joint
venture paid $431,045 in selling costs. The basis of the property was
$6,637,358, which is net of accumulated depreciation of $8,281,094. For
financial statement purposes, the Partnership recognized a gain of $8,881,597
from the sale of this property, of which $2,034,774 is the minority joint
venture partner's share.
<PAGE>
11. Rentals under Operating Leases:
The Partnership receives rental income from the leasing of office space under
operating leases. The minimum future rentals (excluding amounts representing
executory costs such as taxes, maintenance and insurance) to be received by the
Partnership for the 8280 Greensboro Drive Office Building based on operating
leases held at December 31, 1996 are approximately as follows:
1997 $ 2,990,000
1998 3,046,000
1999 2,843,000
2000 2,173,000
2001 1,512,000
Thereafter 626,000
------------
$ 13,190,000
============
The Partnership is subject to the usual business risks regarding the collection
of these rentals.
Approximately 29% and 20% of the space at 8280 Greensboro Drive Office Building
is leased to Deltek Systems Inc. and McGuire, Woods, Battle & Booth,
respectively. Of the Partnership's total rental income recognized during 1996,
8% and 6% relates to Deltek Systems Inc. and McGuire, Woods, Battle & Booth,
respectively. Deltek Systems lease runs through March 2002 and McGuire, Woods,
Battle, & Booth's lease runs through August 2000.
12. Fair Value of Financial Instruments:
The carrying amounts and fair values of the Partnership's financial instruments
at December 31, 1996 are as follows:
The carrying value of cash and cash equivalents, accounts and accrued interest
receivable and accounts payable approximates fair value.
13. Contingencies:
The Partnership is currently involved in a lawsuit whereby the Partnership, the
General Partner and certain third parties have been named as defendants seeking
damages relating to tender offers to purchase interests in the Partnership and
nine affiliated partnerships initiated by the third party defendants in 1996.
The defendants continue to vigorously contest this action. The action has been
dismissed with prejudice and plaintiffs have filed an appeal. It is not
determinable at this time whether or not an unfavorable decision in this action
would have a material adverse impact on the Partnership's financial position,
results of operations or liquidity. The Partnership believes that it has
meritorious defenses to contest the claims.
The Partnership is currently involved in a lawsuit whereby the Partnership and
certain affiliates have been named as defendants alleging certain federal
<PAGE>
securities law violations with regard to the adequacy and accuracy of
disclosures of information concerning, as well as the marketing efforts related
to, the offering of the Limited Partnership Interests of the Partnership. The
defendants continue to vigorously contest this action. A plaintiff class has
not yet been certified, and no determination of the merits have been made. It
is not determinable at this time whether or not an unfavorable decision in this
action would have a material adverse impact on the Partnership's financial
position, results of operations or liquidity. The Partnership believes that it
has meritorious defenses to contest the claims.
14. Subsequent Events:
(a) In January 1997, the Partnership paid $42,419,669 ($10.00 per Taxable
Interest and $134.30 per Tax-exempt Interest) to the holders of Limited
Partnership Interests representing a regular quarterly distribution of
available Cash Flow for the fourth quarter of 1996 of $1.75 per Taxable
Interest and $2.33 per Tax-exempt Interest, a special Net Cash Receipts
distribution of $8.25 per Taxable Interest and $10.97 per Tax-exempt Interest
and a special distribution of Net Cash Proceeds of $121.00 per Tax-exempt
Interest representing available proceeds from the sale of four of the
Partnership's properties during the fourth quarter of 1996.
(b) In March 1997, the Partnership sold the GSB Office Building in an all cash
sale for $19,575,000. From the proceeds of the sale, the Partnership paid
$638,495 in selling costs. The basis of the property was $13,048,410, which is
net of accumulated depreciation of $14,610,352. For financial statement
purposes, the Partnership will recognize a gain of approximately $5,888,000
from the sale of this property during the first quarter of 1997.
<PAGE>
BALCOR EQUITY PENSION INVESTORS-I
(An Illinois Limited Partnership)
<TABLE>
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
as of December 31, 1996
<CAPTION>
Col. A Col. B Col. C Col. D
- ---------------------- -------- ------------------------ ----------------------------------
Initial Cost Cost Adjustments
to Partnership Subsequent to Acquisition
------------------- ---------------------------------
Buildings Carrying Reduction
Encum- and Im- Improve- Costs of Basis
Description brances Land provements ments (a) (b)
- ----------------------- ------- ----------- ------------ --------- ------- -------------
<S> <C> <C> <C> <C> <C> <C>
8280 Greensboro Drive
Office Building,
197,000 sq. ft.,
McLean, VA None $4,595,052 $32,581,745 $1,182,04 $(13,423,952)
GSB Office Building,
228,000 sq. ft.,
Bala Cynwyd, PA None 1,417,000 20,078,955 6,106,839 $55,968
---------- ----------- ---------- ------- ------------
Total $6,012,052 $52,660,700 $7,288,880 $55,968 $(13,423,952)
========== =========== ========== ======= ============
</TABLE>
<PAGE>
BALCOR EQUITY PENSION INVESTORS-I
(An Illinois Limited Partnership)
<TABLE>
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
as of December 31, 1996
(Continued)
<CAPTION>
Col. A Col. E Col. F Col. G Col. H Col. I
- --------------------- ------------------------------------- ---------- ----------- -------- -------------
Gross Amounts at Which Life Upon
Carried at Close of Period Which Depre-
------------------------------------- ciation in
Buildings Accumulated Date Date Latest Income
and Im- Total Deprecia- of Con- Acq- Statement
Description Land provements (c)(d) tion(d) struction uired is Computed
- --------------------- ----------- ----------- ----------- ----------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
8280 Greensboro Drive
Office Building,
197,000 sq. ft.,
McLean, VA $2,977,313 $21,957,573 $24,934,886 $4,921,410 1987 12/90(e) (f)
GSB Office Building,
228,000 sq. ft.,
Bala Cynwyd, PA 1,420,694 26,238,068 27,658,762 14,363,623 1959 7/84 (f)
----------- ----------- ----------- -----------
Total $4,398,007 $48,195,641 $52,593,648 $19,285,033
=========== =========== =========== ===========
</TABLE>
<PAGE>
BALCOR EQUITY PENSION INVESTORS-I
(An Illinois Limited Partnership)
NOTES TO SCHEDULE III
(a) Consists of legal fees, appraisal fees, title costs and other related
professional fees.
(b) The carrying basis of the 8280 Greensboro Drive office building was reduced
in 1991 and 1993 due to a permanent impairment in the value of the property.
In addition, amounts held in escrow on behalf of the borrower of the 8280
Greensboro Drive Office Building were used in 1991 to reduce the basis of this
property.
(c) The aggregate cost of land for Federal income tax purposes is $5,991,293
and the aggregate cost of buildings and improvements for Federal income tax
purposes is $63,830,612. The total of these is $69,821,905.
(d) Reconciliation of Real Estate
-----------------------------
1996 1995 1994
---------- ---------- ----------
Balance at beginning of year $105,213,282 $104,367,316 $103,601,248
Additions during year:
Improvements 1,089,160 845,966 766,068
Reductions during year:
Sale of Investments 53,708,794
------------ ------------ ------------
Balance at end of year $52,593,648 $105,213,282 $104,367,316
============ ============ ============
Reconciliation of Accumulated Depreciation
------------------------------------------
1996 1995 1994
---------- ---------- ----------
Balance at beginning of year $41,143,863 $37,467,239 $33,869,463
Depreciation expense for
the year 3,561,739 3,676,624 3,597,776
Sale of Investments ($25,420,569)
----------- ----------- -----------
Balance at end of year $19,285,033 $41,143,863 $37,467,239
=========== =========== ===========
<PAGE>
(e) During 1990, this property was acquired at a foreclosure sale.
(f) Depreciation expense is computed based upon the following estimated useful
lives:
Years
-----
Buildings and improvements 20 to 40
Furniture and fixtures 5
<PAGE>
January 30, 1997
Via FAX and UPS Via FAX and UPS
WRGSB Associates The Balcor Company
c/o The Balcor Company Bannockburn Lake Office Plaza
2355 Waukegan Road, Suite A200 2355 Waukegan Road, Suite A200
Bannockburn, IL 60015 Bannockburn, IL 60015
Attn.: Ilona Adams Attn.: James Mendelson
(847) 317-4462 (847) 317-4462
Re: GSB Building, One Belmont Avenue, Bala Cynwyd, PA
Ladies and Gentlemen:
The undersigned, Berwind Property Group, Inc., ("Purchaser") has entered into
that certain Agreement of Sale with WRGSB Associates, as Seller, dated December
11, 1996 as amended by First Amendment dated December 23, 1996 and Second
Amendment dated January 6, 1997 (as so amended, the "Agreement of Sale").
Pursuant to Section 2 of the Second Amendment, Purchaser hereby elects to
extend the Closing Date (as defined in the Agreement of Sale) to March 7, 1997.
Purchaser has or will deposit the additional sum of $100,000 with the Escrow
Agreement, which sum shall be added to the Earnest Money.
Sincerely,
BERWIND PROPERTY GROUP, INC.
/s/ Roy C. Perry
- ----------------------------
Roy C. Perry
Vice President
/jfm
cc: Phillip Schechter - via fax (847) 317-4462
Wayne Osoba - via fax - (312) 558-6538
<PAGE>
AFFIDAVIT OF DUE DILIGENCE TERMINATION NOTICE
The undersigned, having been first duly sworn, does hereby affirm, depose
and state that Trammel Crow NE Inc., as Purchaser under that certain Agreement
of Sale dated January 6, 1997, providing for the sale of property located in
Fairfax, Virginia and known as Tysons Corner has terminated the Agreement of
Sale pursuant to Paragraph 7.1 thereof.
The undersigned demands return of all earnest money deposited under the
Agreement of Sale pursuant to its right therein.
IN WITNESS WHEREOF, the undersigned has executed this Affidavit on the
21st day of January, 1997.
TRAMMELL CROW NE, INC., a Delaware corporation
By: /s/ Robert J. Murphy
------------------------------------
Name: Robert J. Murphy
Its: EVP
<PAGE>
AGREEMENT OF SALE
THIS AGREEMENT OF SALE (this "Agreement"), is entered into as of the 11th
day of March, 1997, by and between RREEF AMERICA L.L.C., a Delaware limited
liability company ("Purchaser"), and TYSONS CORNER LIMITED PARTNERSHIP, an
Illinois limited partnership ("Seller").
W I T N E S S E T H:
1. PURCHASE AND SALE. Purchaser agrees to purchase and Seller agrees to sell
at the price of Thirty-One Million Seventy Thousand And No/100 Dollars
($31,070,000.00) (the "Purchase Price"), that certain property commonly known
as 8280 Greensboro Drive, McLean, Virginia, legally described on Exhibit A
attached hereto and all buildings, structures and other improvements on such
property and all equipment, machinery and other apparatus used in connection
with the operation and occupancy of such property (collectively, the
"Property"). Included in the Purchase Price is all of Seller's right, title and
interest in and to any personal property located within or used in connection
with the Property, including without limitation, all of the personal property
set forth on Exhibit B attached hereto (the "Personal Property"), all right,
title and interest of Seller, if any, in and to: (a) all open or proposed
highways, streets, roads, avenues, alleys, easements, strips, gores and
rights-of-way in, on, across, in front of, contiguous to, abutting or adjoining
the Property, (b) all plans and specifications, (c) all transferable licenses,
permits, guaranties and warranties relating to the zoning, land use, ownership,
operation, occupancy, construction or maintenance of the Property, (d) all
fixtures, equipment (including computers) and supplies owned by Seller located
on the Property, (e) all leases, subleases, lease guaranties, rights and
privileges of Seller pertaining to the Property, (f) those service contracts
described in Exhibit H, which Purchaser prior to the Closing expressly agrees
to assume at Closing (subject to Section 9.2.3 herein); and (g) all other
tangible and intangible assets of any nature relating to the Property or the
Personal Property, including without limitation, all of Seller's rights in all
engineering studies, reports, drawings and prints relating to the construction
of the Property, all copyrights, logos, designs, trademarks, trade names,
service marks and all goodwill associated with the Property, all other works of
art, graphic designs and other intellectual or intangible property (excluding,
however, all computer software, databases, programs and other documentation
used by Seller or Seller's Manager) used by Seller in connection with the
Property, and all claims and causes of action arising out of or in connection
with the Property (other than claims for delinquent rents and other tenant
obligations for which Seller has received no credit pursuant to Paragraph
12.2).
2. PURCHASE PRICE. The Purchase Price shall be paid by Purchaser as follows:
2.1. Not later than two (2) business days after Purchaser has received
from Seller a fully executed original of this Agreement, the sum of Fifty
Thousand and No/100 Dollars ($50,000.00) (the "Earnest Money") to be held in
escrow ("Escrow") established at Near North Title Corporation ("Escrow Agent")
by and in accordance with the provisions of the Escrow Agreement ("Escrow
Agreement") attached hereto as Exhibit C.
<PAGE>
2.2. On the second (2nd) business day after the expiration of the
Inspection Period, the sum of Two Hundred Fifty Thousand and No/100 Dollars
($250,000.00) to be held in Escrow by and in accordance with the Escrow
Agreement (from and after the additional deposit of $250,000.00 by Purchaser,
any reference to "Earnest Money" shall mean $300,000.00).
2.3. On the "Closing Date" (hereinafter defined), the balance of the
Purchase Price, adjusted in accordance with the prorations, by federally wired
"immediately available" funds, on or before 11:00 a.m Chicago time.
3. TITLE COMMITMENT AND SURVEY.
3.1. Attached hereto as Exhibit D is a copy of a title commitment for an
owner's standard title insurance policy issued by Near North National Title
Corporation, as agent for First American Title Insurance Corporation
(hereinafter referred to as "Title Insurer") dated February 4, 1997 for the
Property (the "Title Commitment"). The Title Commitment shall be conclusive
evidence of good title as therein shown as to all matters to be insured by the
title policy, subject only to the exceptions therein stated. On the Closing
Date, Seller shall cause the Title Insurer to deliver to Purchaser an ALTA
extended coverage owner's policy of title insurance (1970, if available) in
conformance with the previously delivered Title Commitment, subject to
Permitted Exceptions and Unpermitted Exceptions (as said terms are defined
below) waived by Purchaser (the "Title Policy"). Seller shall pay the costs of
the Title Commitment and the portion of the Title Policy premium attributable
to standard coverage and Purchaser shall pay for the cost of any endorsements
(other than endorsements obtained by Seller in order to insure over Unpermitted
Exceptions) to, and extended coverage on, the Title Policy.
3.2. Purchaser has received a survey of the Property prepared by Sumner
Consulting dated October 19, 1996 (the "Existing Survey"). Seller shall pay
the costs of the Existing Survey and Seller, at Seller's cost, shall cause the
Existing Survey to be updated and certified to Purchaser, as required by
Purchaser, and Seller shall deliver the certified survey (the "Updated Survey")
to Purchaser within 20 days after the date hereof. The Updated Survey shall be
made in accordance with Purchaser's survey standards furnished to Seller.
3.3. The obligation of Purchaser and Seller to pay various costs set forth
in Paragraphs 3.1 and 3.2 shall survive the termination of this Agreement.
3.4. On or before the date ten (10) business days after Purchaser shall
have received from Seller the Updated Survey (the "Title Date") and all
underlying documents described in the Title Commitment, Purchaser shall advise
Seller in writing if any exceptions to title shown on the Title Commitment are
disapproved by Purchaser or any matters on the Updated Survey are unacceptable
to Purchaser. If Purchaser does not so advise Seller on or before the Title
Date, all exceptions to title shown on the Title Commitment shall be deemed
Permitted Exceptions and all matters shown on the Existing Survey shall be
deemed acceptable to Purchaser. For purposes of this Agreement, "Permitted
Exceptions" shall mean: (a) general real estate taxes, association assessments,
special assessments, special district taxes and related charges not yet due and
payable; (b) matters shown on the Updated Survey not disapproved by Purchaser
<PAGE>
in writing as provided above; (c) matters caused by the actions of Purchaser;
and (d) the title exceptions set forth in the Title Commitment not disapproved
in writing by Purchaser as provided above, to the extent that same affect the
Property. Seller agrees to execute a standard Title Insurer's Owner's
statement in the form customarily used in Virginia in order to assist Purchaser
in obtaining extended coverage but shall not be obligated to incur any cost or
liability (other than on account of the Owner's statement) in providing such
assistance. All exceptions to title other than those described above in this
Paragraph as Permitted Exceptions shall be referred to as "Unpermitted
Exceptions". With respect to Unpermitted Exceptions for liens and encumbrances
of a definite or ascertainable amount securing borrowed money, mechanics liens
or for unpaid real estate taxes and assessments arising out of an affirmative
action of Seller (such as execution of a mortgage, entering into a contract for
construction work on the Property or non-payment of real estate taxes)
("Monetary Unpermitted Exceptions"), the indebtedness giving rise to such
Monetary Unpermitted Exceptions will be paid at the Closing and the lien
thereby released and removed. Any Unpermitted Exceptions to title which are
insured over by the Title Insurer and reasonably approved as such by Purchaser,
as provided herein, shall be deemed Permitted Exceptions. If Seller fails to
have any Unpermitted Exceptions (other than a Monetary Unpermitted Exception)
removed or insured over prior to the date thirty (30) days after Seller's
receipt of Purchaser's notice of Unpermitted Exceptions, Purchaser may elect,
by written notice to Seller given not later than ten (10) days after the end of
such 30 day period, (i) to accept title as it then is (in which case such
exceptions shall be deemed "Permitted Exceptions"), or (ii) to terminate this
Agreement, and all of the rights and remedies of the parties hereto, except for
Purchaser's obligation to indemnify Seller and restore the Property, as more
fully set forth in Paragraph 7 and the Earnest Money, and all accrued interest
thereon, shall be returned to Purchaser. In the event Seller fails to have any
Unpermitted Exception (other than a Monetary Unpermitted Exception) removed or
insured over prior to the Closing, the time of the Closing shall be delayed to
give effect to said aforementioned time periods. Purchaser shall have the
right to pay Monetary Unpermitted Exceptions at Closing, if Seller fails to do
so, and the Purchase Price shall be reduced as a result of any such payments
made by Purchaser.
4. PAYMENT OF CLOSING COSTS.
In addition to the costs set forth in Paragraphs 3.1 and 3.2, Seller and
Purchaser shall each pay for one-half of the costs of the documentary or
transfer stamps to be paid with reference to the "Deed" (hereinafter defined)
and all other stamps, intangible, transfer, documentary, recording, sales tax
and surtax imposed by law with reference to any other sale documents delivered
in connection with the sale of the Property to Purchaser, except that any
Grantor's tax shall be paid by Seller. Except as otherwise provided in
Paragraph 8, Purchaser shall pay all other charges of the Escrow Agent in
connection with this transaction. Seller and Purchaser shall also pay closing
costs as described in Paragraph 8. Purchaser shall not be required to incur
title charges or escrow fees in excess of those that would be charged by Title
Insurer and Escrow Agent on account of using Near North National Title Company.
<PAGE>
5. CONDITION OF TITLE.
5.1. If, prior to "Closing" (as hereinafter defined), a date-down to the
Title Commitment or the Updated Survey discloses any new Unpermitted Exception,
Seller shall have thirty (30) days from the date of Purchaser's notification to
Seller of such new Unpermitted Exception (which will be given by Purchaser, if
at all, not later than five (5) business days after Purchaser's receipt of the
date-down to the Title Commitment or the Updated Survey and any related
underlying documents, as applicable), at Seller's expense, to (i) bond over
with a bonding company reasonably satisfactory to Purchaser, cure and/or have
any Unpermitted Exceptions which, in the aggregate, do not exceed $75,000.00,
removed from the Title Commitment or to have the Title Insurer commit to insure
against loss or damage that may be occasioned by such Unpermitted Exceptions on
the condition that the form of endorsement shall be reasonably satisfactory to
Purchaser, or (ii) have the right, but not the obligation, to bond over (with a
bonding company reasonably satisfactory to Purchaser), cure and/or have any
Unpermitted Exceptions which, in the aggregate, equal or exceed $75,000.00,
removed from the Title Commitment or to have the Title Insurer commit to insure
against loss or damage that may be occasioned by such Unpermitted Exceptions on
the condition that the form of endorsement shall be reasonably satisfactory to
Purchaser. In such event, the time of Closing shall be delayed, if necessary,
to give effect to said aforementioned time periods. If Seller fails to cure or
have said Unpermitted Exception removed or have the Title Insurer commit to
insure as specified above within said thirty (30) day period or if Seller
elects not to exercise its rights under (ii) in the preceding sentence,
Purchaser may terminate this Agreement upon notice to Seller within five (5)
days after the expiration of said thirty (30) day period. Absent notice from
Purchaser to Seller in accordance with the preceding sentence, Purchaser shall
be deemed to have elected to take title subject to said Unpermitted Exception.
Purchaser may, at Purchaser's sole cost and expense, and without any liability
to Seller, bond over any Unpermitted Exception. If Purchaser terminates this
Agreement in accordance with the terms of this Paragraph 5.1, this Agreement
shall become null and void without further action of the parties and all
Earnest Money theretofore deposited into the Escrow by Purchaser together with
any interest accrued thereon, shall be returned to Purchaser, and neither party
shall have any further liability to the other, except for Purchaser's
obligation to indemnify Seller and restore the Property, as more fully set
forth in Paragraph 7.
5.2. Seller agrees to convey fee simple title to the Property to
Purchaser by limited warranty deed (the "Deed") in the form of Exhibit E and
otherwise in recordable form subject only to the Permitted Exceptions and any
Unpermitted Exceptions waived by Purchaser.
5.3. Seller agrees that if any special assessment applicable to the
Property is enacted prior to the Closing Date, notwithstanding Paragraph
3.4(b), Purchaser shall have the right to terminate this Agreement by written
notice to Seller within five (5) business days after Purchaser has actual
notice of such enactment. If this Agreement is terminated in accordance with
the terms of this Paragraph 5.3, this Agreement shall be null and void without
further action of the parties and all Earnest Money, together with accrued
interest thereon shall be returned to Purchaser, and neither party shall have
any further liability to the other, except for Purchaser's obligation to
indemnify Seller, as more fully set forth in Paragraph 7.1.
<PAGE>
6. CONDEMNATION, EMINENT DOMAIN, DAMAGE AND CASUALTY.
6.1. Except as provided in the indemnity provisions contained in
Paragraph 7.1 of this Agreement, Seller shall bear all risk of loss with
respect to the Property up to the earlier of the dates upon which either
possession or title is transferred to Purchaser in accordance with this
Agreement. Notwithstanding the foregoing, in the event of damage to the
Property by fire or other casualty prior to the Closing Date, repair of which
would cost less than or equal to $100,000.00 (as determined by Seller in good
faith) Purchaser shall not have the right to terminate its obligations under
this Agreement by reason thereof, but Seller shall have the right to elect to
either repair and restore the Property to Purchaser's reasonable satisfaction
(in which case the Closing Date shall be extended until completion of such
restoration) or to assign and transfer to Purchaser on the Closing Date all of
Seller's right, title and interest in and to all insurance proceeds paid or
payable to Seller on account of such fire or casualty, and Seller shall pay to
Purchaser at the Closing the amount of Seller's insurance deductible. Seller
shall promptly notify Purchaser in writing of any such fire or other casualty
and Seller's determination of the cost to repair the damage caused thereby. In
the event of damage to the Property by fire or other casualty prior to the
Closing Date, repair of which would cost in excess of $100,000.00 (as
determined by Seller in good faith), then this Agreement may be terminated at
the option of Purchaser, which option shall be exercised, if at all, by
Purchaser's written notice thereof to Seller within ten (10) business days
after Purchaser receives written notice of such fire or other casualty and
Seller's determination of the amount of such damages, and upon the exercise of
such option by Purchaser this Agreement shall become null and void, the Earnest
Money deposited by Purchaser shall be returned to Purchaser together with
interest thereon, and neither party shall have any further liability or
obligations hereunder. In the event that Purchaser does not exercise the
option set forth in the preceding sentence, the Closing shall take place on the
Closing Date and Seller shall assign and transfer to Purchaser on the Closing
Date all of Seller's right, title and interest in and to all insurance proceeds
paid or payable to Seller on account of the fire or casualty, and Seller shall
pay to Purchaser at the Closing the amount of Seller's insurance deductible.
6.2. If between the date of this Agreement and the Closing Date, any
condemnation or eminent domain proceedings are initiated or threatened by a
notice to Seller from a governmental authority which might result in the taking
of any part of the Property or the taking or closing of any right of access to
the Property, Seller shall immediately notify Purchaser of such occurrence. In
the event that the taking of any part of the Property shall: (i) materially
impair access to the Property; (ii) cause any material non-compliance with any
applicable law, ordinance, rule or regulation of any federal, state or local
authority or governmental agencies having jurisdiction over the Property or any
portion thereof or cause the property to be a non-conforming use or structure;
(iii) materially and adversely impair the use of the Property as it is
currently being operated, or (iv) result in the loss of a portion of a
building, parking spaces or improvements constituting an amenity (hereinafter
collectively referred to as a "Material Event"), Purchaser may:
<PAGE>
6.2.1. terminate this Agreement by written notice to Seller, in
which event the Earnest Money deposited by Purchaser, together with interest
thereon, shall be returned to Purchaser and all rights and obligations of the
parties hereunder with respect to the closing of this transaction will cease;
or
6.2.2. proceed with the Closing, in which event Seller shall assign
to Purchaser all of Seller's right, title and interest in and to any award made
in connection with such condemnation or eminent domain proceedings.
6.2.3. Purchaser shall notify Seller, within ten (10) business
days after Purchaser's receipt of Seller's notice of condemnation or eminent
domain event under Paragraphs 6.2.1 or 6.2.2, whether Purchaser elects to
exercise its rights under Paragraph 6.2.1 or Paragraph 6.2.2. Closing shall be
delayed, if necessary, until Purchaser makes such election. If Purchaser fails
to make an election within such ten (10) business day period, Purchaser shall
be deemed to have elected to exercise its rights under Paragraph 6.2.2. If
between the date of this Agreement and the Closing Date, any condemnation or
eminent domain proceedings are initiated which do not constitute a Material
Event, Purchaser shall be required to proceed with the Closing, in which event
Seller shall assign to Purchaser all of Seller's right, title and interest in
and to any award made in connection with such condemnation or eminent domain
proceedings.
7. INSPECTION AND AS-IS CONDITION.
7.1. During the period commencing on January 29, 1997 and ending at 5:00
p.m. Chicago time on March 20, 1997 (said period being herein referred to as
the "Inspection Period"), Purchaser and the agents, engineers, employees,
contractors and surveyors retained by Purchaser have entered and may continue
to enter upon the Property, at any reasonable time and upon reasonable prior
notice to Seller, to inspect the Property, the Personal Property and all other
property to be purchased by Purchaser pursuant to this Agreement, including a
review of leases located at the Property, and to conduct and prepare such
studies, tests and surveys as Purchaser may deem reasonably necessary and
appropriate. In connection with Purchaser's review of the Property, Seller
agrees to deliver to Purchaser copies of the current rent roll for the
Property, the current delinquency report for the Property, the most recent real
estate tax and insurance bills, utility account numbers, service contracts, and
unaudited year end 1996 and year-to-date (through January 31, 1997) operating
statements.
All of the foregoing tests, investigations and studies to be conducted
under this Paragraph 7.1 by Purchaser shall be at Purchaser's sole cost and
expense, and if as a result of Purchaser's investigations and inspections of
the Property there is damage or injury to persons or property, Purchaser shall
restore the Property to the condition existing prior to the performance of such
tests or investigations by or on behalf of Purchaser. Purchaser shall not
allow or permit any liens or encumbrances to arise or exist against the
Property or any part thereof as a result of its inspections. Purchaser shall
defend, protect, indemnify and hold Seller and any affiliate, parent of Seller,
<PAGE>
and all shareholders, employees, officers and directors of Seller or Seller's
affiliate or parent (hereinafter collectively referred to as "Affiliate of
Seller") harmless from any and all actual loss, liability or damages (including
without limitation, reasonable attorney's fees, court costs and costs of appeal
but excluding consequential damages) suffered or incurred by Seller or
Affiliates of Seller for injury to persons or property caused by Purchaser or
Purchaser's agents entry on the Property in the course of performing any test
or inspection on the Property, including, without limitation, mechanics liens,
provided that Purchaser also agrees to defend and hold Seller harmless from any
injuries, damages or claims of any nature which Purchaser's servants, agents or
employees may have suffered as a result of Purchaser's inspection of the
Property. Purchaser shall undertake its obligation to defend set forth in the
preceding sentence using attorneys selected by Seller, in Seller's reasonable
discretion.
Prior to commencing any such tests, studies and investigations, Purchaser
shall furnish to Seller a certificate of insurance evidencing not less than
$1,000,000 of comprehensive general public liability insurance insuring the
person, firm or entity performing such tests, studies and investigations and
listing Seller and Purchaser as additional insureds thereunder.
If Purchaser is dissatisfied with the results of the tests, studies or
investigations performed or information received pursuant to this Paragraph
7.1, Purchaser shall have the right to terminate this Agreement by giving
written notice of such termination to Seller at any time prior to the
expiration of the Inspection Period. If written notice is not received by
Seller pursuant to this Paragraph 7.1 prior to the expiration of the Inspection
Period, then the right of Purchaser to terminate this Agreement pursuant to
this Paragraph 7.1 shall be waived. If Purchaser terminates this Agreement by
written notice to Seller prior to the Title Date as provided above or if
Purchaser shall terminate this Agreement pursuant to Paragraph 3.4, the Earnest
Money shall be immediately paid to Purchaser, together with any interest earned
thereon, and neither Purchaser nor Seller shall have any right, obligation or
liability under this Agreement, except for Purchaser's obligation to indemnify
Seller and restore the Property, as more fully set forth in this Paragraph 7.1.
Notwithstanding anything contained herein to the contrary, the terms of this
Paragraph 7.1, shall survive the Closing and the delivery of the Deed and
termination of this Agreement.
7.2. Except with respect to the representations and warranties contained
herein, Purchaser acknowledges and agrees (a) that it will be purchasing the
Property and the Personal Property based solely upon its inspections and
investigations of the Property and the Personal Property, and (b) that
Purchaser will be purchasing the Property and the Personal Property "AS IS" and
"WITH ALL FAULTS", based upon the condition of the Property and the Personal
Property as of the date of this Agreement, wear and tear and loss by fire or
other casualty or condemnation excepted. Without limiting the foregoing,
Purchaser acknowledges that, except as may otherwise be specifically set forth
elsewhere in this Agreement, neither Seller nor its consultants, brokers or
agents have made any representations or warranties of any kind upon which
Purchaser is relying as to any matters concerning the Property or the Personal
<PAGE>
Property, including, but not limited to, the condition of the land or any
improvements comprising the Property, the existence or non-existence of
"Hazardous Materials" (as hereinafter defined), economic projections or market
studies concerning the Property, any development rights, taxes, bonds,
covenants, conditions and restrictions affecting the Property, water or water
rights, topography, drainage, soil, subsoil of the Property, the utilities
serving the Property or any zoning or building laws, rules or regulations or
"Environmental Laws" (hereinafter defined) affecting the Property. Seller
makes no representation or warranty that the Property complies with Title III
of the Americans with Disabilities Act or any fire code or building code.
Except with respect to a breach by Seller of any representation or warranty
expressly contained herein relating to Environmental Laws or Hazardous
Materials, Purchaser hereby releases Seller and the Affiliates of Seller from
any and all liability in connection with any claims which Purchaser may have
against Seller or the Affiliates of Seller relating directly or indirectly to
the existence of asbestos or Hazardous Materials on, or environmental
conditions of, the Property, whether known or unknown. Except with respect to
a breach by Seller of any representation or warranty expressly contained herein
relating to Environmental Laws or Hazardous Materials, Purchaser hereby agrees
not to assert any claims for contribution, cost recovery or otherwise, against
Seller or the Affiliates of Seller, relating directly or indirectly to the
existence of asbestos or Hazardous Materials on, or environmental conditions
of, the Property, whether known or unknown. As used herein, "Environmental
Laws" means all federal, state and local statutes, codes, regulations, rules,
ordinances, orders, standards, permits, licenses, policies and requirements
(including consent decrees, judicial decisions and administrative orders)
relating to the protection, preservation, remediation or conservation of the
environment or worker health or safety, all as amended or reauthorized, or as
hereafter amended or reauthorized, including without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), 42 U.S.C. Section 9601 et seq., the Resource Conservation and
Recovery Act of 1976 ("RCRA"), 42 U.S.C. Section 6901 et seq., the Emergency
Planning and Community Right-to-Know Act ("Right-to-Know Act"), 42 U.S.C.
Section 11001 et seq., the Clean Air Act ("CAA"), 42 U.S.C. Section 7401
et seq., the Federal Water Pollution Control Act ("Clean Water Act"), 33 U.S.C.
Section 1251 et seq., the Toxic Substances Control Act ("TSCA"), 15 U.S.C.
Section 2601 et seq., the Safe Drinking Water Act ("Safe Drinking Water Act"),
42 U.S.C. Section 300f et seq., the Atomic Energy Act ("AEA"), 42 U.S.C.
Section 2011 et seq., the Occupational Safety and Health Act ("OSHA"),
29 U.S.C. Section 651 et seq., and the Hazardous Materials Transportation Act
(the "Transportation Act"), 49 U.S.C. Section 1802 et seq. As used herein,
"Hazardous Materials" means: (1) "hazardous substances," as defined by CERCLA;
(2) "hazardous wastes," as defined by RCRA; (3) any radioactive material
including, without limitation, any source, special nuclear or by-product
material, as defined by AEA; (4) asbestos in any form or condition;
(5) polychlorinated biphenyls; (6) petroleum, crude oil or any fraction or
derivative of petroleum or crude oil; and (7) any other material, substance or
waste to which liability or standards of conduct may be imposed under any
Environmental Laws. Notwithstanding anything contained herein to the contrary,
the terms of this Paragraph 7.2 shall survive the Closing and the delivery of
the Deed and termination of this Agreement.
<PAGE>
7.3. Seller has provided to Purchaser certain unaudited historical
financial information regarding the Property relating to certain periods of
time in which Seller owned the Property. Seller and Purchaser hereby
acknowledge that such information has been provided to Purchaser at Purchaser's
request solely as illustrative material. Except as expressly set forth herein,
Seller makes no representation or warranty that such material is complete or
accurate or that Purchaser will achieve similar financial or other results with
respect to the operations of the Property, it being acknowledged by Purchaser
that Seller's operation of the Property and allocations of revenues or expenses
may be vastly different than Purchaser may be able to attain. Purchaser
acknowledges that it is a sophisticated and experienced purchaser of real
estate and further that Purchaser has relied upon its own investigation and
inquiry with respect to the operation of the Property, except with respect to
the representations and warranties of Seller expressly contained herein and
releases Seller and the Affiliates of Seller from any liability with respect to
such historical information, except with respect to a breach of a
representation or warranty of Seller contained herein. Notwithstanding
anything contained herein to the contrary, the terms of this Paragraph 7.3
shall survive the Closing and the delivery of the Deed and termination of this
Agreement.
7.4. Seller has provided to Purchaser the following existing reports:
Phase I Environmental Site Assessment prepared by Law Associates, Inc. as
Project No. 1392-2128-01, dated August 6, 1992 and Report of Facility Survey to
Identify Asbestos-Containing Materials Within 8280 Greensboro Drive, dated
October 1, 1992, prepared by Law Engineering, Inc. as Project No. 486-9545-02
(collectively, the "Existing Report"). Seller makes no representation or
warranty concerning the accuracy or completeness of the Existing Report.
Purchaser hereby releases Seller and the Affiliates of Seller from any
liability whatsoever with respect to the Existing Report, or, including,
without limitation, the matters set forth in the Existing Report, and the
accuracy and/or completeness of the Existing Report. Furthermore, Purchaser
acknowledges that it will be purchasing the Property with all faults disclosed
in the Existing Report. Notwithstanding anything contained herein to the
contrary, the terms of this Paragraph 7.4 shall survive the Closing and the
delivery of the Deed and termination of this Agreement. Nothing in the
preceding limits Purchaser's right to terminate this Agreement in the time and
manner specified in Paragraph 7.1.
8. CLOSING. The closing of this transaction (the "Closing") shall be on
April 16, 1997 (the "Closing Date"), at the office of the Escrow Agent, or on
such other date prior to April 16, 1997 as may be agreed to by Seller and
Purchaser (which date shall be the "Closing Date" for purposes of this
Agreement) at which time Seller shall deliver possession of the Property to
Purchaser. This transaction shall be closed through the Escrow with the Escrow
Agent in accordance with the general provisions of the usual and customary form
of deed and money escrow for similar transactions in Virginia, or at the option
of either party, the Closing shall be a "New York style" closing at which the
Purchaser shall wire the Purchase Price to Escrow Agent on the Closing Date and
prior to the release of the Purchase Price to Seller, Purchaser shall receive
the Title Policy or marked up commitment dated the date of the Closing Date.
In the event of a New York style closing, Seller shall deliver to Title Insurer
any customary affidavit in connection with a New York style closing. All
closing and escrow fees shall be divided equally between the parties hereto.
<PAGE>
9. CLOSING DOCUMENTS.
9.1. On or prior to the Closing Date, Seller and Purchaser shall execute
and deliver to one another a joint closing statement. Seller shall provide
Purchaser with an estimated closing statement within ten (10) days after
receipt of a written request by Purchaser and in any event no later than April
14, 1997. In addition, Purchaser shall deliver to Seller the balance of the
Purchase Price, an assumption of the documents set forth in Paragraph 9.2.3 and
9.2.4 and such other documents as may be reasonably required by the Title
Insurer in order to consummate the transaction as set forth in this Agreement.
9.2. On the Closing Date, Seller shall deliver to Purchaser the following
(each of which shall be a condition to Purchaser's obligations under this
Agreement):
9.2.1. the Deed (in the form of Exhibit E attached hereto),
subject to Permitted Exceptions and those Unpermitted Exceptions waived by
Purchaser;
9.2.2. a bill of sale conveying the Personal Property (in the
form of Exhibit F attached hereto);
9.2.3. assignment and assumption of intangible property (in the form
attached hereto as Exhibit G), including, without limitation, the service
contracts set forth on Exhibit H;
9.2.4. an assignment and assumption of leases and security deposits
in the form attached hereto as Exhibit I;
9.2.5. non-foreign affidavit (in the form of Exhibit J attached
hereto);
9.2.6. original, and/or copies of, leases affecting the Property in
Seller's possession (which shall be delivered at the Property);
9.2.7. all documents and instruments reasonably required by the
Title Insurer to issue the Title Policy, including the Owners statement
referred to in Paragraph 3.4;
9.2.8. possession of the Property to Purchaser, subject to the terms
of leases;
9.2.9. evidence of the termination and leasing of the management
agreement;
9.2.10. notice to the tenants of the Property of the transfer of
title and assumption by Purchaser of the landlord's obligation under the leases
and the obligation to refund the security deposits (in the form of Exhibit K);
9.2.11. an updated rent roll;
9.2.12. an insured closing letter;
9.2.13. State of Virginia Real Estate Transfer Declaration;
<PAGE>
9.2.14. A certificate of Seller, dated as of the Closing Date,
reaffirming that all representations and warranties of Seller under this
Agreement are true, correct and complete as of the Closing Date in all material
respects, subject to the terms of Section 16.4; and
In addition to the above deliveries, Seller shall use commercially
reasonable efforts to obtain a replacement letter of credit from Verner,
Liipfert, Bernhard, McPhearson and Hand, Chartered, in the amount of Thirteen
Thousand Four Hundred Dollars ($13,400.00) in favor of Purchaser. In the event
Seller fails to obtain such letter of credit, Seller shall not be liable to
Purchaser for the amount of the letter of credit.
10. PURCHASER'S DEFAULT. THE EARNEST MONEY DEPOSITED INTO THE ESCROW PURSUANT
TO THIS AGREEMENT IS TO SECURE THE TIMELY PERFORMANCE BY PURCHASER OF ITS
OBLIGATIONS AND UNDERTAKINGS UNDER THIS AGREEMENT. IN THE EVENT OF A DEFAULT
OF THE PURCHASER UNDER THE PROVISIONS OF THIS AGREEMENT WHICH RESULTS IN ESCROW
FAILING TO CLOSE ON OR BEFORE THE CLOSING DATE, SELLER SHALL RETAIN ALL OF THE
EARNEST MONEY AND THE INTEREST THEREON AS SELLER'S SOLE RIGHT TO DAMAGES OR ANY
OTHER REMEDY, EXCEPT FOR PURCHASER'S OBLIGATIONS TO INDEMNIFY SELLER AND
RESTORE THE PROPERTY AS SET FORTH IN PARAGRAPH 7.1 HEREOF. THE PARTIES HAVE
AGREED THAT SELLER'S ACTUAL DAMAGES, IN THE EVENT OF A DEFAULT BY PURCHASER,
WOULD BE EXTREMELY DIFFICULT OR IMPRACTICAL TO DETERMINE. THEREFORE, BY
PLACING THEIR INITIALS BELOW, THE PARTIES ACKNOWLEDGE THAT THE EARNEST MONEY
HAS BEEN AGREED UPON, AFTER NEGOTIATION, AS THE PARTIES' REASONABLE ESTIMATE OF
SELLER'S DAMAGES.
11. SELLER'S DEFAULT. IF THIS SALE IS NOT COMPLETED BECAUSE OF SELLER'S
DEFAULT UNDER THIS AGREEMENT, PURCHASER'S SOLE REMEDY SHALL BE THE RETURN OF
ALL EARNEST MONEY TOGETHER WITH ANY INTEREST ACCRUED THEREON, AND THIS
AGREEMENT SHALL THEN BECOME NULL AND VOID AND OF NO EFFECT AND THE PARTIES
SHALL HAVE NO FURTHER LIABILITY TO EACH OTHER AT LAW OR IN EQUITY, EXCEPT FOR
PURCHASER'S OBLIGATIONS TO INDEMNIFY SELLER AND RESTORE THE PROPERTY AS SET
FORTH MORE FULLY IN PARAGRAPH 7 AND THE RIGHT OF PURCHASER TO RECEIVE FROM
SELLER ITS ACTUAL, DOCUMENTED THIRD PARTY EXPENSES INCURRED IN THE PERFORMANCE
OF ITS DUE DILIGENCE HEREUNDER AND THE PREPARATION OF THE AGREEMENT, NOT TO
EXCEED $75,000 IN THE AGGREGATE. NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO
THE CONTRARY, IF SELLER'S DEFAULT IS ITS WILLFUL REFUSAL TO DELIVER ANY OF THE
CONVEYANCE DOCUMENTS SET FORTH IN PARAGRAPHS 9.2.1 THROUGH 9.2.13, INCLUSIVE,
THEN PURCHASER WILL BE ENTITLED TO SUE FOR SPECIFIC PERFORMANCE.
12. PRORATIONS.
12.1. Rents (exclusive of delinquent rents [i.e. unpaid on the Closing
Date], but including prepaid rents); refundable security deposits (which will
be assigned to and assumed by Purchaser and credited to Purchaser at Closing);
parking fees; service contracts described on Exhibit H; water and other utility
charges; fuels; prepaid operating expenses; real and personal property taxes
prorated on a "net" basis (i.e., adjusted for all tenant's liability, if any,
for such items); operating expenses which are reimbursable by the tenants for
the period prior to the Closing Date less any amount previously paid by the
<PAGE>
tenants shall be credited to Seller; and other similar items shall be adjusted
ratably as of 11:59 p.m. on the date prior to the Closing Date, and credited
against the balance of the cash due at Closing. Assessments payable in
installments which are due subsequent to the Closing Date shall be paid by
Purchaser. If the amount of any of the items to be prorated is not then
ascertainable, the adjustments thereof shall be on the basis of the most recent
ascertainable data. All prorations will be final except as to delinquent rent
referred to in Paragraph 12.2 below, and except as provided below in this
section. The parties agree to make such post-closing readjustments as may be
required due to errors and omissions in the prorations. At any time prior to
October 31, 1997, Purchaser, at Purchaser's cost, may conduct an audit, at
reasonable times and upon reasonable advance notice to Seller, of Seller's
books and records to verify the accuracy of the prorations and readjustments to
the prorations required under this Paragraph.
12.2. All rent paid following the Closing Date by any tenant of the
Property who is indebted under a lease for basic rent for any period prior to
the Closing Date after the payment to Purchaser of all current rent and any
past due rent owed to Purchaser shall be deemed a "Post-Closing Receipt". At
Closing, Seller shall provide Purchaser with a statement of all delinquent
rentals as of the Closing. Within fifteen (15) days following each receipt by
Purchaser of a Post-Closing Receipt, Purchaser shall pay such Post-Closing
Receipt to Seller. Purchaser shall use commercially reasonable efforts to
collect all amounts which, upon collection, would constitute Post-Closing
Receipts hereunder but shall have no obligation to bring legal action. If
Purchaser expends funds to collect rent due prior to the Closing Date,
Purchaser shall be reimbursed its collection expenses from any delinquent rent
collected. Within 120 days after the Closing Date, Purchaser shall deliver to
Seller a reconciliation statement of Post-Closing Receipts through the first 90
days after the Closing Date. Upon the delivery of the Post-Closing Receipts
reconciliation, Purchaser shall deliver to Seller any Post-Closing Receipts
owing to Seller and not previously delivered to Seller in accordance with the
terms hereof. Seller retains the right, at Seller's cost, to conduct an audit,
at reasonable times and upon reasonable advance notice to Purchaser, of
Purchaser's books and records to verify the accuracy of the Post-Closing
Receipts reconciliation statement. Paragraph 12 of this Agreement shall
survive the Closing and the delivery and recording of the deed.
12.3. Purchaser shall receive at Closing a credit equal to the amount
of any unsatisfied obligations for outstanding tenant improvement and leasing
commission obligations set forth in Exhibit N which are identified as Seller's
obligation ("Seller's Pre-Existing Obligations"). Purchaser agrees to assume
(without a credit from Seller) the payment of those outstanding tenant
improvement and leasing commission obligations set forth in Exhibit N which are
identified as Purchaser's obligation ("Purchaser's Pre-Existing Obligations").
To the extent Seller pays any amounts toward Purchaser's Pre-Existing
Obligations prior to Closing and provides evidence of such payment satisfactory
to Purchaser then Seller shall receive a credit from Purchaser therefor.
Seller shall receive a credit, if any, as provided in Paragraph 25. Purchaser
shall assume at Closing all third party construction contracts for the
performance of tenant improvement work and leasing commission agreements in
connection with those leases (i) which give rise to Seller's Pre-Existing
Obligations, (ii) which give rise to Purchaser's Pre-Existing Obligations and
(iii) for which Purchaser is assuming the obligations pursuant to Paragraph 25
herein.
<PAGE>
13. RECORDING. Neither this Agreement nor a memorandum thereof shall be
recorded and the act of recording by Purchaser shall be an act of default
hereunder by Purchaser and subject to the provisions of Paragraph 10 hereof.
14. ASSIGNMENT. The Purchaser shall not have the right to assign its interest
in this Agreement without the prior written consent of the Seller. Any
assignment or transfer of, or attempt to assign or transfer, Purchaser's
interest in this Agreement shall be an act of default hereunder by Purchaser
and subject to the provisions of Paragraph 10 hereof. Notwithstanding the
foregoing, Purchaser may assign its interest in this Agreement without the
consent of Seller to (i) any entity in which Purchaser owns a controlling
interest or for which Purchaser is the investment advisor, or (ii) the Los
Angeles County Employees Retirement Association ("LACERA") or a wholly-owned
subsidiary of LACERA, provided that Purchaser remains liable for and the
assignee assumes the obligations of Purchaser hereunder with respect to
indemnifications and amounts payable in the event of a termination of this
Agreement, including, without limitation, damages. Upon such assignment,
Purchaser (but not the assignee) shall be released from all other liabilities
and obligations hereunder. If any assignee of Purchaser under this Agreement
petitions or applies for relief in bankruptcy or Assignee is adjudicated as a
bankrupt or insolvent, or Assignee files any petition, application for relief
or answer-seeking or acquiescing in any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief for
itself under any present or future federal, state or other statute, law, code
or regulation relating to bankruptcy, insolvency, or other relief for debtors
(collectively, a "Bankruptcy Filing") on or before the Closing Date, said
Bankruptcy Filing shall be a default under this Agreement and Purchaser shall
indemnify Seller for all costs, attorney's fees and expenses of Seller
resulting from Seller's efforts to obtain the Earnest Money as liquidated
damages and to clear title to the Property from any encumbrance resulting from
the Bankruptcy Filing.
15. BROKER. The parties hereto represent and warrant that no broker
commission or finder fee is due and payable in connection with this transaction
other than to Insignia Mortgage and Investment Company ("Seller's Broker") (to
be paid by Seller). Purchaser has informed Seller that Purchaser has agreed to
pay CB Commercial a fee, prior to or at Closing, in the event the transaction
contemplated by this Agreement closes, and Purchaser shall, prior to Closing,
provide Seller with a copy of its broker's agreement with CB Commercial.
Seller's commission to Seller's Broker shall only be payable out of the
proceeds of the sale of the Property in the event the transaction set forth
herein closes. Purchaser shall indemnify, defend and hold Seller and
Affiliates of Seller harmless from any claim whatsoever (including without
limitation, reasonable attorney's fees, court costs and costs of appeal) from
anyone claiming by or through the indemnifying party any fee, commission or
compensation on account of this Agreement, its negotiation or the sale hereby
contemplated other than to Seller's Broker. Seller shall indemnify, defend and
hold Purchaser harmless from any claim whatsoever (including without
limitation, reasonable attorney's fees, court costs and costs of appeal) from
anyone claiming by or through the indemnifying party any fee, commission or
compensation on account of this Agreement, its negotiation or the sale hereby
<PAGE>
contemplated other than to CB Commercial. The indemnifying party shall
undertake its obligations set forth in this Paragraph 15 using attorneys
selected by the indemnifying party and reasonably acceptable to the indemnified
party. The provisions of this Paragraph 15 will survive the Closing and
delivery of the Deed.
16. REPRESENTATIONS AND WARRANTIES.
16.1. Any reference herein to Seller's knowledge or notice of any matter
or thing shall only mean such actual knowledge of Tom Molina (asset manager)
("Seller's Representative") or notice that has actually been received or sent
by Seller's Representative, and any representation or warranty of the Seller is
based upon those matters of which the Seller's Representative has actual
knowledge or receipt. Except as set forth in the previous two sentences, any
knowledge or notice given, had or received by any of Seller's agents, servants
or employees shall not be imputed to Seller, the general partner or limited
partners of Seller, the subpartners of the general partner or limited partners
of Seller or Seller's Representative. A copy of Paragraph 16.2 shall be
delivered to the on-site manager of the Property within two (2) business days
after the execution by Seller of this Agreement, with a request to advise Tom
Molina within two (2) business days after receipt by the on-site manager as to
the accuracy and truthfulness of the representations and warranties. If the
on-site manager indicates that any of the representations or warranties were
incorrect, Seller shall notify Purchaser as to the response of the on-site
manager by no later than March 10, 1997. If the on-site manager responds that
any of the representations or warranties were incorrect then the terms of
Paragraph 16.4 herein shall apply. If Seller fails to so notify Purchaser,
Purchaser shall be entitled to conclude that the on-site manager reviewed the
representations and warranties and that they are correct.
16.2. Subject to the limitations set forth in Paragraph 16.1, Seller
hereby makes the following representations and warranties, which
representations and warranties are made to Seller's knowledge and which shall,
subject to Paragraph 16.4, be remade at Closing, and shall survive Closing to
the extent set forth in Paragraph 16.5:
(i) Seller has no knowledge of any pending or threatened litigation,
claim, cause of action or administrative proceeding concerning the Property,
except as set forth in Exhibit O;
(ii) Seller has the full right, power and authority to execute and deliver
this Agreement (and the documents and instruments to be executed and delivered
by Seller pursuant hereto) and consummate the transactions contemplated herein,
and this Agreement (and the documents and instruments to be executed and
delivered by Seller pursuant hereto) is the legal, valid and binding obligation
of Seller, enforceable in accordance with its terms, and does not and will not
at Closing violate or conflict with any provisions of any agreement to which
Seller is a party;
(iii) the rent roll attached hereto as Exhibit M (the "Rent Roll")
(which Seller will update as of March 14, 1997 and deliver such updated Rent
Roll to Purchaser by March 17, 1997, and which Seller will again update as of
the Closing Date) is accurate and complete but only as to the information
contained thereon as of the date set forth thereon;
<PAGE>
(iv) Seller has not received written notice from any governmental
authority that the Property or the use and operation of the Property is in
violation of applicable building codes, zoning or land use laws which has not
previously been corrected;
(v) Seller is not a "foreign person" within the meaning of section
1445(f)(3) of the Internal Revenue Code of 1986, as amended and that Seller
will furnish to Purchaser, at or prior to Closing, an affidavit in form
satisfactory to Purchaser confirming the same;
(vi) Seller has no employees working at the Property and following the
Closing Purchaser shall have no obligation to employ or continue to employ any
individual employed by Seller or its affiliates in connection with the
Property;
(vii) There are no service contracts affecting the Property, other
than the Service Contracts listed in Exhibit H, and Seller has received no
written notice of default with respect to any of the Service Contracts and
Seller has no knowledge of any default by Seller under any of the Service
Contracts;
(viii) Except as may be set forth in the Existing Report, Seller has
not received any written notice from any governmental authority having
jurisdiction over the Property of any uncured violation of any Environmental
Law with respect to the Property;
(ix) The Existing Report is the only environmental report of the Property
provided to or obtained by Seller; and
(x) The unaudited operating statements for 1996 and 1997 to date which
Seller has delivered to Purchaser are the same information which Seller relies
upon in making reports to its limited partners and in filing its federal income
tax returns.
16.3. Purchaser hereby represents and warrants to Seller that Purchaser
has the full right, power and authority to execute and deliver this Agreement
and consummate the transactions contemplated herein (and the documents and
instruments to be executed and delivered by Purchaser pursuant hereto), and
this Agreement is the legal, valid and binding obligation of Purchaser,
enforceable with its terms, and does not and will not at Closing violate or
conflict with any provisions of any agreement to which Purchaser is a party.
16.4. If at any time after the execution of this Agreement, either
Purchaser or Seller become aware of information which makes a representation
and warranty contained in this Agreement to become untrue in any material
respect, said party shall promptly disclose said information to the other party
hereto. Provided the party making the representation or warranty did not take
any deliberate actions to cause the representation or warranty in question to
become untrue in any material respect, said party shall not be in default under
this Agreement and the sole remedy of the other party shall be to terminate
this Agreement, except for Purchaser's obligation to indemnify Seller and
<PAGE>
restore the Property, as more fully set forth in Paragraph 7. Notwithstanding
anything contained herein to the contrary, if the status of any of the
tenancies changes from the date of the rent roll attached hereto and the date
of the rent roll delivered at Closing, provided the change in status is not
caused by a breach of Seller's covenants contained in Paragraph 16.6 herein,
then Purchaser shall not have the right to terminate this Agreement or make any
claim for a breach of a representation or warranty hereunder involving the rent
roll or tenancies thereunder; provided, however, that in the event Deltek
System, Inc. validly exercises a termination right in either of its leases (the
phrase "termination right" shall include terminations for cause on account of a
landlord default, but shall not include leases expiring by their terms), and
provided that such termination is not precipitated by the actions or Purchaser,
then Purchaser shall have the right to terminate this Agreement and recover its
Earnest Money, and neither party hereto will have any further obligations
except for those which survive the termination hereof. Purchaser and Seller
are prohibited from making any claims against the other party hereto after the
Closing with respect to any breaches of the other party's representations and
warranties contained in this Agreement that the claiming party has actual
knowledge of prior to the Closing.
16.5. The parties agree that the representations contained herein
shall survive Closing for a period of five (5) months (i.e., the claiming party
shall have no right to make any claims against the other party for a breach of
a representation or warranty after the expiration of five (5) months
immediately following Closing).
16.6. Seller covenants to operate, lease, maintain and manage the
Property in the same manner that it has managed, maintained, leased and
operated the Property during the period of Seller's ownership, subject to
reasonable wear and tear and casualty. Without limitation of the foregoing, so
long as this Agreement shall remain in effect: Seller shall maintain Seller's
current insurance coverage presently in effect; Seller shall not enter into any
letter of intent or contract to sell the Property with any third party; Seller
shall furnish Purchaser with monthly rent rolls, delinquency reports and
operating statements as they become available; Seller shall cooperate with
Purchaser's management personnel in arranging for a management transition; and
Seller agrees to terminate any and all management and leasing agreements
affecting the Property as of the Closing Date. Seller shall not without
Purchaser's written approval, which approval shall not be unreasonably
withheld, (a) amend in writing any Service Contract or (b) enter into any new
agreement of any type affecting the Property that would survive the Closing
Date unless terminable upon thirty (30) days' notice. Seller at its sole cost
and expense shall, after expiration of the Inspection Period, promptly send a
termination notice in connection with the Cintas Corporation contract.
Purchaser shall be responsible for all costs accruing under the Cintas
Corporation contract after the date of Closing (Seller estimates the cost of
terminating the Cintas Corporation contract to be approximately $150). With
respect to the Glen Industrial Communications ("GIC") contract, Seller shall
use reasonable efforts to obtain from GIC a letter agreement confirming that
the GIC contract is cancelleable at any time upon 30 days' written notice.
<PAGE>
16.7. The continued accuracy in all material respects of the aforesaid
representations and warranties (subject to Seller's right to update the Rent
Roll as set forth in Paragraph 16.2(iii) and the performance of Seller's
covenants set forth in this Agreement (including those in Section 16.6) shall
be a condition precedent to Purchaser's obligation to close. If at Closing any
of said representations and warranties shall not be correct at the time the
same is made in any material respect, Purchaser may, as its sole and exclusive
remedy, terminate this Agreement and recover the Earnest Money together with
any interest accrued thereon, and there shall be no further liability of either
party to the other, except for Purchaser's obligation to indemnify Seller and
restore the Property, as more fully set forth in Paragraph 7. Nothing in the
immediately preceding sentence shall be deemed to impair Purchaser's rights
under Paragraph 11 with respect to a breach by Seller of Seller's covenants
under this Agreement.
17. LIMITATION OF LIABILITY. None of any partners of Seller, Affiliate of
Seller or any of their respective beneficiaries, shareholders, partners,
officers, directors, agents or employees, heirs, successors or assigns shall
have any personal liability of any kind or nature for or by reason of any
matter or thing whatsoever under, in connection with, arising out of or in any
way related to this Agreement and the transactions contemplated herein, and
Purchaser hereby waives for itself and anyone who may claim by, through or
under Purchaser any and all rights to sue or recover on account of any such
alleged personal liability.
Notwithstanding anything contained herein to the contrary, Purchaser
hereby agrees that the maximum aggregate liability of Seller, in connection
with, arising out of or in any way related to a breach by Seller under this
Agreement or any document or conveyance agreement in connection with the
transaction set forth herein after the Closing shall be $600,000. Purchaser
hereby waives for itself and anyone who may claim by, through or under
Purchaser any and all rights to sue or recover from Seller any amount greater
than said limit.
18. TIME OF ESSENCE. Time is of the essence of this Agreement.
19. NOTICES. Any notice or demand which either party hereto is required or
may desire to give or deliver to or make upon the other party shall be in
writing and may be personally delivered or given or made by overnight courier
such as Federal Express, by facsimile transmission or made by United States
registered or certified mail addressed as follows:
TO SELLER: c/o The Balcor Company
Bannockburn Lake Office Plaza
2355 Waukegan Road
Suite A-200
Bannockburn, Illinois 60015
Attention: Ilona Adams
<PAGE>
with copies to: The Balcor Company
Bannockburn Lake Office Plaza
2355 Waukegan Road
Suite A-200
Bannockburn, Illinois 60015
Attention: James Mendelson
(847) 317-4360
(847) 317-4461 (FAX)
and to: Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
Attention: Daniel J. Perlman, Esq.
(312) 902-5532
(312) 902-1061 (FAX)
TO PURCHASER: RREEF Funds
875 North Michigan Avenue
Suite 4114
Chicago, Illinois 60611
Attention: Mr. James B. Gurley, Jr.
(312) 266-9300
(312) 266-9346 (FAX)
and one copy to: RREEF Funds
101 California Street
26th Floor
San Francisco, California 94111
Attention: Tracy DeMay
(415) 781-3300
(415) 781-2229 (FAX)
and
Jones, Day, Reavis & Pogue
555 W. Fifth Street, 46th Floor
Los Angeles, California 90013
Attention: Donald D. Gralnek, Esq.
(213) 243-2429
(213) 243-2539 (FAX)
subject to the right of either party to designate a different address for
itself by notice similarly given. Any notice or demand so given shall be
deemed to be delivered, received or made on the next business day if sent by
overnight courier, or the same day as given if sent by facsimile transmission
and received by 5:00 p.m. Chicago time or on the 4th business day after the
same is deposited in the United States Mail as registered or certified matter,
addressed as above provided, with postage thereon fully prepaid. Any such
notice, demand or document not given, delivered or made by registered or
certified mail, by overnight courier or by facsimile transmission as aforesaid
shall be deemed to be given, delivered or made upon receipt of the same by the
party to whom the same is to be given, delivered or made. Copies of all
notices shall be served upon the Escrow Agent.
<PAGE>
20. EXECUTION OF AGREEMENT AND ESCROW AGREEMENT. Purchaser will execute two
(2) copies of this Agreement and three (3) copies of the Escrow Agreement and
forward them to Seller for execution. Within two (2) business days after
receipt of a fully executed copy (which may be transmitted by telecopy or to
Purchaser's attorney) of this Agreement, Purchaser shall wire transfer the
Earnest Money to the Escrow Agent set forth in the Escrow Agreement. Seller
will forward one (1) copy of the executed Agreement to Purchaser and will
forward the following to the Escrow Agent:
(A) One (1) fully executed copy of this Agreement; and
(B) Three (3) copies of the Escrow Agreement signed by the parties with a
direction to execute two (2) copies of the Escrow Agreement and deliver a fully
executed copy to each of the Purchaser and the Seller.
21. GOVERNING LAW. The provisions of this Agreement shall be governed by the
laws of the Virginia, except that with respect to the retainage of the Earnest
Money as liquidated damages the laws of the State of Illinois shall govern.
22. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties and supersedes all other negotiations, understandings and
representations made by and between the parties and the agents, servants and
employees.
23. COUNTERPARTS. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same instrument.
24. CAPTIONS. Paragraph titles or captions contained herein are inserted as a
matter of convenience and for reference, and in no way define, limit, extend or
describe the scope of this Agreement or any provision hereof.
25. NEW LEASES. Seller shall not execute any new lease affecting the Property
or modify, amend or accept the surrender of any Lease (collectively or
individually a "Modification Agreement") of any of the Leases without
Purchaser's prior written consent. Upon requesting Purchaser's consent, Seller
shall deliver a complete copy of said proposed lease to Purchaser with a copy
of any brokerage commission agreement and statement as to the cost of any
tenant improvement work, contributions, and brokerage commissions due or to
become due in connection therewith (the "Disclosure Documents"). Purchaser's
consent shall be deemed given if Purchaser has not responded to the contrary
within five (5) business days after receipt of Seller's written request and the
complete copy of said lease or Modification Agreement and other material. If
approved by Purchaser, a complete copy of any such lease or Modification
Agreement shall be delivered to Purchaser within five (5) days of the full
execution thereof. With respect to all new leases or Modification Agreements,
provided Purchaser has approved the new lease to the extent said approval is
required, leasing costs and commissions, tenant improvements and contributions,
and reasonable attorneys' fees of Seller, shall be assumed and paid by
Purchaser (without a credit to Purchaser) or credited to Seller at Closing to
the extent Seller has paid any of said obligations prior to Closing.
<PAGE>
26. TENANT CERTIFICATE CONDITION TO CLOSING.
26.1. The following terms have been defined as follows for convenience
of reference:
(i) "Tenant Certificate" means a certificate, commonly known as an
estoppel certificate, signed by a tenant with respect to its Lease, either in
the form set forth on Exhibit L hereto or on such other form as is
substantially consistent with the requirements of the tenant's lease for such
certificates but in no event dated earlier than February 24, 1997.
(ii) "Seller Tenant Certificate" means a Tenant Certificate signed by
the Seller and limited to the "knowledge of Seller" (as defined in Paragraph 16
herein) with respect to a particular Lease for which the Tenant in question has
failed to execute and deliver a Tenant Certificate, in which case the Seller
Tenant Certificate shall be in the form of Exhibit L.
(iii) "Qualification" means any assertion in a Tenant Certificate
or Seller Tenant Certificate (whether in the form of Exhibit L or otherwise) of
(i) a claim, counterclaim, offset or defense against the landlord, (ii) a
default on the part of the landlord, (iii) unpaid credits, allowances or other
sums due from the landlord prior to the date of the estoppel (other than
expressly disclosed on Exhibit M or Exhibit N attached hereto or pursuant to a
new lease pursuant to Paragraph 25 herein), (iv) an unfulfilled construction or
other obligation on the part of the landlord prior to the date of estoppel
(other than expressly disclosed on Exhibit M or Exhibit N attached hereto or
pursuant to a new lease pursuant to Paragraph 25 herein), (v) information which
is contrary (x) to the information contained in the rent roll attached hereto
as Exhibit M or (y) the information pertaining to tenant allowances and
concessions and leasing commissions contained on Exhibit N, or (vi) a material
obligation of the landlord not contained in this Agreement or any written
material (including any lease) delivered by Seller to Purchaser;
(iv) "Unacceptable Qualification" means any Qualification other than
the following:
(a) a Qualification which is expressly disclosed on the rent
roll attached hereto as Exhibit M or the schedule attached hereto as Exhibit N
or a Qualification relating to non-payment of March or April, 1997 rent,
provided the same is not as a result of a default by Seller; or
(b) a Qualification expressly disclosed in this Agreement or
the Exhibits attached hereto and made a part hereof, such as litigation
disclosed on Exhibit O.
26.2. If a Qualification is not an Unacceptable Qualification, it
shall not affect Purchaser's obligations to close hereunder or give rise to any
liability from Seller to Purchaser.
26.3. Seller shall promptly request a Tenant Certificate in the form
of Exhibit L from all tenants, and shall in good faith pursue the collection of
the same. Seller shall deliver to Purchaser, upon Seller's receipt thereof,
all Tenant Certificates signed by tenants (whether in the form of Exhibit L or
otherwise).
<PAGE>
26.4. It shall be a condition to Purchaser's obligations hereunder
(the "Estoppel Condition") that Seller deliver to Purchaser, at or prior to
April 10, 1997 (i) a Tenant Certificate from each tenant of the Property listed
in Exhibit P attached hereto ("Major Tenant"), and (ii) either a Tenant
Certificate or Seller Tenant Certificate from all non-Major Tenants in
connection with 100% of the rentable space occupied by non-Major Tenants. A
Tenant Certificate or Seller Tenant Certificate shall not be counted toward
satisfaction of the Estoppel Condition if such certificate discloses
Unacceptable Qualifications; provided that Unacceptable Qualifications with an
aggregate "Estoppel Qualification Sum" (hereinafter defined) of less than
$100,000 shall be permitted as provided herein. The "Estoppel Qualification
Sum" shall mean the following:
(i) if the claim asserted arises out of a defect which can be cured,
with the expenditure of money on a one time basis, such as a physical defect,
then such sum shall be calculated by a reasonable estimate of the cost to
repair or remediate said defect; and
(ii) if the claim asserted affects a continuing obligation of a
tenant under the lease, such as the payment of rent, then the claim shall be
calculated by (i) determining the amount of the claim on a per annum basis,
(ii) multiplying said amount by the number of years or partial years said claim
would affect the monetary obligations under the lease and (iii) discounting
said product on a present value basis using a discount rate of 10% per annum.
If the Unacceptable Qualifications have an Estoppel Qualification Sum of
less than $100,000 in the aggregate for all of the Leases, then Seller shall
either (i) grant Purchaser a credit at Closing for an amount equal to the
Estoppel Qualification Sum, or (ii) cure all conditions giving rise to an
Unacceptable Qualification on or before the Closing. The determination to
perform the covenant contained in subparagraphs (i) or (ii) in the preceding
sentence shall be made by Seller in its sole discretion. Provided Seller
performs its covenant in this Paragraph 26.4, the disclosure of Unacceptable
Qualifications having an Estoppel Qualification Sum of less than $100,000 in
the aggregate shall not affect Purchaser's obligations to close hereunder or
give rise to any additional liability from Seller to Purchaser.
26.5. If Seller delivers any Tenant Certificates without any
Qualifications after Closing to Purchaser containing all of the information
herein required from a tenant under a Lease for whom Seller has executed and
delivered a Seller Tenant Certificate at Closing, the Seller Tenant Certificate
executed and delivered by Seller at Closing shall become null and void and the
Tenant Certificate received from the tenant shall be substituted therefor.
Seller's liability under Seller Tenant Certificates shall be limited pursuant
to Paragraph 17 herein.
26.6. If Seller has not satisfied the Estoppel Condition on or before
April 10, 1997, then Purchaser shall have the right to terminate this Agreement
by delivering written notice to Seller on or before April 14, 1997. If
Purchaser exercises its rights to terminate in accordance with the terms of
this Paragraph 26.6, this Agreement shall be null and void without further
action of the parties and all Earnest Money theretofore deposited by Purchaser
<PAGE>
together with any interest accrued thereon, shall be returned to Purchaser, and
neither party shall have any further liability to the other, except for those
obligations which specifically survive the terms hereof. If Purchaser does not
terminate this Agreement pursuant to the first sentence of this Paragraph 26.6,
the parties shall proceed to Closing and (i) Purchaser shall receive a credit
at Closing equal to the amount of the Estoppel Qualification Sum of the
Unacceptable Qualifications contained in the Tenant Certificates and Seller
Tenant Certificates, up to an aggregate amount of $100,000 or (ii) Seller shall
cure all conditions giving rise to an Unacceptable Qualification Sum up to an
aggregate amount of $100,000. The determination to perform the covenant
contained in subparagraphs (i) or (ii) in the preceding sentence shall be made
by Seller in its sole discretion.
26.7. Notwithstanding anything contained herein to the contrary, if
Seller does not satisfy the Estoppel Condition because the Estoppel
Qualification Sum exceeds $100,000 and Purchaser has terminated the Agreement
pursuant to Paragraph 26.6, Seller shall have the right to vitiate Purchaser's
termination by written notice on or before 5:00 p.m. Chicago time on April 16,
1997 in which case the parties shall proceed to Closing and Seller shall either
(i) grant Purchaser at Closing a credit for an amount to the Estoppel
Qualification Sum or (ii) cure all conditions giving rise to an Unacceptable
Qualification on or before the Closing. The determination to perform the
covenant contained in subparagraphs (i) or (ii) in the preceding sentence shall
be made by Seller in its sole discretion.
27. AMENDMENTS AND WAIVERS. No addition to or modification of this Agreement
shall be effective unless set forth in writing and signed by the party against
whom the addition or modification is sought to be enforced. The party
benefitted by any condition or obligation may waive the same, but such waiver
shall not be enforceable by another party unless made in writing and signed by
the waiving party.
28. INVALIDITY OF PROVISION. If any provision of this Agreement as applied to
either party or to any circumstance shall be adjudged by a court of competent
jurisdiction to be void or unenforceable for any reason, the same shall in no
way affect (to the maximum extent permissible by law) any other provision of
this Agreement, the application of any such provision under circumstances
different from those adjudicated by the court, or the validity or
enforceability of this Agreement as a whole.
29. CONFIDENTIALITY. Purchaser and Seller hereby agree to use their best
efforts to hold in confidence all data and information in connection with the
negotiation and execution of this Agreement, including the terms of this
Agreement, and to not disclose such data and information to any third party,
except as such data and information may be included in any submission to the
Securities Exchange Commission, or as such disclosure may be required by any
federal, state or local law, any governmental authority, or any court order.
30. FURTHER ASSURANCES. Seller, at any time before or after Closing, shall,
at its own expense, execute, acknowledge and deliver any further deeds,
assignments, conveyances and other assurances, documents and instruments of
<PAGE>
transfer reasonably requested by Purchaser and shall take any other action
consistent with the terms of this Agreement that may reasonably be requested by
Purchaser for the purpose of transferring and confirming to Purchaser, or
reducing to Purchaser's possession, any or all of the Property or otherwise
carrying out the terms of this Agreement.
IN WITNESS WHEREOF, the parties hereto have put their hand and seal as of
the date first set forth above.
PURCHASER:
RREEF AMERICA L.L.C., a Delaware
limited liability company
By: /s/ James B. Gurley
----------------------------------
Name: James B. Gurley
----------------------------------
Its: Authorized Representative
----------------------------------
SELLER:
TYSONS CORNER LIMITED PARTNERSHIP,
an Illinois limited partnership
By: Tysons Corner Partners, Inc.,
an Illinois general partnership,
its general partner
By: /s/ John K. Powell, Jr.
-----------------------------------
Name: John K. Powell, Jr.
-----------------------------------
Its: Senior Vice President
-----------------------------------
<PAGE>
Tysons Corner
of Insignia Mortgage and Investment Company ("Seller's
Broker") executed this Agreement in its capacity as a real estate broker and
acknowledges that the fee or commission due it from Seller as a result of the
transaction described in this Agreement is as set forth in that certain Listing
Agreement, dated , 1997 between Seller and Seller's Broker (the
"Listing Agreement"). Seller's Broker also acknowledges that payment of the
aforesaid fee or commission is conditioned upon the Closing and the receipt of
the Purchase Price by the Seller. Seller's Broker agrees to deliver a receipt
to the Seller at the Closing for the fee or commission due Seller's Broker and
a release, in the appropriate form, stating that no other fees or commissions
are due to it from Seller or Purchaser.
Insignia Mortgage and Investment Company
By:
-----------------------------------------
<PAGE>
Exhibits
A - Legal
B - Personal Property
C - Escrow Agreement
D - Title Commitment
E - Deed
F - Bill of Sale
G - Assignment and Assumption of Intangible Property
H - Service Contracts
I - Assignment and Assumption of Leases and Security Deposits
J - Non-Foreign Affidavit
K - Notice to Tenants
L - Tenant Certificate
M - Rent Roll
N - Tenant Improvement Leasing Commission
O - Litigation
P - Major Tenants
<PAGE>
TYSONS CORNER LIMITED PARTNERSHIP
Bannockburn Lake Office Plaza
2355 Waukegan Road
Suite A200
Bannockburn, Illinois 60015
March 12, 1997
RREEF Funds
875 North Michigan Ave.
Suite 4114
Chicago, Illinois 60611
Attention: Mr. James B. Gurley, Jr.
(FAX) 312-266-9346
Jones, Day, Reavis & Pogue
555 W. Fifth Street, 46th Floor
Los Angeles, California 90013
Attention: Mary J. Garnett, Esq.
(FAX) 213-243-2539
Re: 8280 Greensboro Drive, McLean, Virginia
Gentlemen:
Reference is made to that certain Agreement of Sale (the "Agreement") by
and between TYSONS CORNER LIMITED PARTNERSHIP, an Illinois limited partnership
("Seller") and RREEF AMERICA L.L.C., a Delaware limited liability company,
("Purchaser"), dated as of March 11, 1997. All capitalized terms which are
used but not defined herein shall have the meanings ascribed to such terms in
the Agreement.
This letter is for the purpose of amending the Agreement of Sale as set
forth herein. Purchaser's acknowledgment of this letter shall constitute
Purchaser's agreement to the amendments contained herein.
Seller and Purchaser hereby agree to amend the Agreement as follows:
a. Section 1: Delete in subparagraph (f) the phrase ", which Purchaser prior
to the Closing expressly agrees to assume at Closing." Also, delete the
reference in subparagraph (f) to "Section 9.2.3" and substitute therefor
"Section 16.6".
b. Section 7.4: Add to the definition of "Existing Report" the following:
"Report on underground storage tank prepared for Rodney Lambert and Mike
Wieland, prepared by AEG, Inc. together with a memorandum from M. Wieland to
M. Fine, B. O'Neil and W. Leary dated August 8, 1994 and with exhibits and
materials supplied in connection with such report and memorandum by Seller to
Purchaser."
c. Section 9.1: Add in the third line after "Purchaser" and before "and" the
following: "setting forth the Closing Date (agreed upon pursuant to
Section 8)".
<PAGE>
d. Section 9.2.9: Delete the phrase "and leasing of the management
agreement" and substitute therefor the phrase "of the management and leasing
agreement".
e. Section 16.1: Delete in line 14 the reference to "March 10, 1997" and
substitute therefor "March 14, 1997".
f. Section 16.4: Delete in line 17 the phrase "actions or Purchaser" and
substitute therefor "actions of Purchaser".
g. Exhibit M: The Exhibit M (rent roll) attached hereto shall be substituted
in place of the Exhibit M previously attached to the Agreement.
h. Exhibit N: The Exhibit N (outstanding brokerage commissions and tenant
improvement work) attached hereto shall be substituted in place of the
Exhibit N previously attached to the Agreement.
Please execute the acknowledgment below, and return this letter agreement
to Sonny Ginsberg by fax (312-902-1061) and by mail c/o Katten Muchin & Zavis,
525 W. Monroe Street, 21st Floor, Chicago, IL 60661.
Very truly yours,
TYSONS CORNER LIMITED PARTNERSHIP, an Illinois
limited partnership
By: Tysons Corner Partners, Inc., an Illinois
general partnership, its general partner
By: /s/ James E. Mendelson
---------------------------------------
Name: James E. Mendelson
---------------------------------------
Its: Authorized Representative
----------------------------------------
ACCEPTED AND AGREED TO THIS
12th DAY OF MARCH, 1997
RREEF AMERICA L.L.C., a Delaware limited liability company
By: /s/ James B. Gurley, Jr.
---------------------------------------
Name: James B. Gurley, Jr.
---------------------------------------
Its: Authorized Representative
---------------------------------------
<PAGE>
SECOND AMENDMENT TO AGREEMENT OF SALE
THIS SECOND AMENDMENT TO AGREEMENT OF SALE (this "Amendment") is made and
entered into as of this 20th day of March, 1997, by and between RREEF AMERICA
L.L.C., a Delaware limited liability company (the "Purchaser") and TYSONS
CORNER LIMITED PARTNERSHIP, an Illinois limited partnership ("Seller").
WITNESSETH:
WHEREAS, Seller and Purchaser are parties to that certain Agreement of
Sale, dated March 11, 1997, which Agreement has been amended pursuant to a
letter amendment executed by Seller and Purchaser on March 12, 1997
(collectively, the "Agreement"); and
WHEREAS, Seller and Purchaser desire to amend the Agreement in accordance
with the terms of this Amendment.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. All terms not otherwise defined herein shall have the meanings ascribed to
each in the Agreement.
2. Purchaser hereby acknowledges that the Inspection Period has expired and
hereby waives its right to terminate the Agreement pursuant to Paragraph 7.1
thereof; provided that Purchaser shall have the right to terminate the
Agreement no later than March 27, 1997 in the event that Purchaser has not
received evidence by such time that Title Insurer will issue a zoning
endorsement in a form reasonably acceptable to Purchaser in connection with the
Title Policy.
3. Purchaser and Seller hereby acknowledge that the Purchase Price shall be
Thirty Million and No/100 Dollars ($30,000,000.00) rather than Thirty-One
Million Seventy Thousand and No/100 Dollars ($31,070,000.00) as previously
stated in Paragraph 1 of the Agreement.
4. With reference to Paragraph 3.4, Purchaser hereby waives its right to
disapprove any matters shown on the Updated Survey dated March 18, 1997, and
Purchaser hereby waives any right to terminate the Agreement based upon its
review of the Updated Survey. Moreover, Purchaser acknowledges that all
exceptions to title shown on the Title Commitment, effective as of February 4,
1997, and revised as Commitment No. 96-09-169FX (Revised V), other than Section
2 of Schedule B exceptions 1, 3 and 5, shall be deemed Permitted Exceptions
and Purchaser hereby waives its right to disapprove any such Permitted
Exceptions.
5. Except as amended and modified hereby, the Agreement shall be and remain
unmodified and in full force and effect in accordance with its terms, and each
and every one of its provisions, as amended and modified by this Second
Amendment, are hereby adopted, ratified and affirmed. In the event of any
conflict between the Agreement, or any other document, and this Second
Amendment, the terms, conditions and provisions hereof shall govern.
<PAGE>
6. This Amendment may be executed in counterparts each of which shall be
deemed an original, but all of which, when taken together shall constitute one
and the same instrument. To facilitate the execution of this Amendment, Seller
and Purchaser may execute and exchange by
telephone facsimile counterparts of the signature pages, with each facsimile
being deemed an "original" for all purposes
IN WITNESS WHEREOF, the parties have executed this Amendment as of
the date first set forth above.
PURCHASER:
RREEF AMERICA L.L.C., a Delaware limited
liability company
By: /s/ James B. Gurley, Jr.
----------------------------------------
Name: James B. Gurley, Jr.
----------------------------------------
Its: Authorized Representative
----------------------------------------
SELLER:
TYSONS CORNER LIMITED
PARTNERSHIP, an Illinois limited partnership
By: Tysons Corner Partners, Inc., an Illinois
general partnership, its general partner
By: /s/ Jerry M. Ogle
------------------------------------------
Name: Jerry M. Ogle
------------------------------------------
Its: Managing Director and Secretary
------------------------------------------
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 50293
<SECURITIES> 0
<RECEIVABLES> 704
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 51123
<PP&E> 52594
<DEPRECIATION> 19285
<TOTAL-ASSETS> 84820
<CURRENT-LIABILITIES> 582
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 84239
<TOTAL-LIABILITY-AND-EQUITY> 84820
<SALES> 0
<TOTAL-REVENUES> 41855
<CGS> 0
<TOTAL-COSTS> 10050
<OTHER-EXPENSES> 4704
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2216
<INCOME-TAX> 0
<INCOME-CONTINUING> 2216
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27101
<EPS-PRIMARY> 73.72
<EPS-DILUTED> 73.72
</TABLE>
