FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
(As last amended by 34-32231, eff. 6/3/93.)
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period.........to.........
Commission file number 0-13083
CONSOLIDATED CAPITAL PROPERTIES V
(Exact name of small business issuer as specified in its charter)
California 94-2918560
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (864) 239-1000
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 .
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) CONSOLIDATED CAPITAL PROPERTIES V
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 1996
Assets
Cash and cash equivalents:
Unrestricted $ 686
Restricted - tenant security deposits 99
Investments 108
Accounts receivable 29
Escrows for taxes and insurance 185
Restricted escrows 290
Other assets 348
Investment properties:
Land $ 1,969
Buildings and related personal property 18,253
20,222
Less accumulated depreciation (12,782) 7,440
$ 9,185
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 12
Tenant security deposits 101
Accrued taxes 304
Other liabilities 206
Mortgage notes payable 10,604
Partners' Deficit
General partner $ (19)
Special limited partners (55)
Limited partners (179,617 units
issued and outstanding) (1,968) (2,042)
$ 9,185
See Accompanying Notes to Consolidated Financial Statements
b) CONSOLIDATED CAPITAL PROPERTIES V
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Rental income $1,008 $1,227 $2,992 $ 3,550
Other income 27 31 124 217
Total revenues 1,035 1,258 3,116 3,767
Expenses:
Operating 343 490 1,099 1,591
General and administrative 60 67 196 270
Maintenance 139 241 379 610
Depreciation 286 345 853 988
Interest 233 335 726 1,009
Property taxes 96 145 272 448
Total expenses 1,157 1,623 3,525 4,916
Loss before extraordinary item (122) (365) (409) (1,149)
Extraordinary loss on refinancing (22) - (22) --
Net loss (144) (365) (431) (1,149)
Net loss allocated to
general partners (.2%) $ -- $ (1) $ (1) $ (2)
Net loss allocated to
limited partners (99.8%) (144) (364) (430) (1,147)
$ (144) $ (365) $ (431) $(1,149)
Net loss per limited
partnership unit:
Loss before extraordinary item $ (.68) $(2.03) $(2.27) $ (6.39)
Extraordinary loss on
refinancing (.12) -- (.12) --
Net loss per limited
partnership unit $ (.80) $(2.03) $(2.39) $ (6.39)
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
c) CONSOLIDATED CAPITAL PROPERTIES V
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
For the Nine Months Ended September 30, 1996
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited Special
Partnership General Limited Limited
Units Partner Partners Partners Total
<S> <C> <C> <C> <C> <C>
Original capital
contributions 180,037 $ 1 $ -- $45,009 $45,010
Partners' deficit at December
31, 1995 179,617 $ (18) $ (56) $(1,537) $(1,611)
Amortization of
timing difference (Note D) -- -- 1 (1) --
Net loss for the
nine months ended
September 30, 1996 -- (1) -- (430) (431)
Partners' deficit at
September 30, 1996 179,617 $ (19) $ (55) $(1,968) $(2,042)
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
d) CONSOLIDATED CAPITAL PROPERTIES V
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (431) $(1,149)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 853 988
Amortization of lease commissions, discounts,
and loan costs 117 127
Casualty gain -- (32)
Extraordinary loss on refinancing 22 --
Change in accounts:
Restricted cash 9 (57)
Accounts receivable (7) (51)
Escrows for taxes and insurance 9 74
Other assets 18 9
Accounts payable (216) 171
Tenant security deposit liabilities (16) (9)
Accrued taxes (26) (71)
Other liabilities (41) 169
Net cash provided by
operating activities 291 169
Cash flows from investing activities:
Property improvements and replacements (155) (403)
Deposits to restricted escrows (213) (42)
Receipts from restricted escrows -- 26
Proceeds from sale of investments 100 398
Net insurance proceeds on casualty item -- 32
Net cash (used in) provided by
investing activities (268) 11
Cash flows from financing activities:
Payments on mortgage notes payable (166) (76)
Repayment of mortgage note payable (2,925) --
Proceeds from long-term borrowings 2,800 --
Loan costs paid (102) --
Prepayment penalty (22) --
Net cash used in financing activities (415) (76)
Net (decrease) increase in cash and cash equivalents (392) 104
Cash and cash equivalents at beginning of period 1,078 240
Cash and cash equivalents at end of period $ 686 $ 344
Supplemental disclosure of cash flow information:
Cash paid for interest $ 681 $ 812
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
e) CONSOLIDATED CAPITAL PROPERTIES V
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements of Consolidated Capital
Properties V ("the Partnership" or "Registrant") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of ConCap Equities, Inc. (the "General
Partner"), all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three and nine month periods ended September 30, 1996, are not necessarily
indicative of the results that may be expected for the fiscal year ending
December 31, 1996. For further information, refer to the financial statements
and footnotes thereto included in the Partnership's annual report on Form 10-KSB
for the fiscal year ended December 31, 1995.
Certain reclassifications have been made to the 1995 information to conform to
the 1996 presentation.
Investments
Investments consisting primarily of U.S. Treasury Notes with original maturities
of more than 90 days, are considered to be held-to-maturity securities.
NOTE B - TRANSACTIONS WITH RELATED PARTIES
The Partnership has paid property management fees based upon collected gross
rental revenues for property management services in each of the nine month
periods ended September 30, 1996 and 1995. In December 1994, affiliates of the
General Partner assumed day-to-day property management responsibilities for all
of the Partnership's properties with the exception of the Fourth and Race Tower,
which was managed by a third party until it was sold in December 1995. Property
management fees of approximately $152,000 and $160,000 were paid to affiliates
of the General Partner for each of the nine months ended September 30, 1996 and
1995, respectively. These fees are included in operating expenses.
The Partnership Agreement also provides for reimbursement to the General Partner
and its affiliates for costs incurred in connection with the administration of
Partnership activities. Reimbursements for services of affiliates of
approximately $127,000 and $144,000 were paid to the General Partner and its
affiliates during each of the nine months ended September 30, 1996 and 1995,
respectively.
During the nine months ended September 30, 1996, the Partnership paid an
affiliate of the General Partner approximately $12,000 for loan costs which were
capitalized and included in other assets in the accompanying Consolidated
Balance Sheet. These loan costs related primarily to the refinancing of the
Sutton Place Apartments (See "Note F").
NOTE B - TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
In July 1995, the Partnership began insuring its properties under a master
policy through an agency and insurer unaffiliated with the General Partner. An
affiliate of the General Partner acquired, in the acquisition of a business,
certain financial obligations from an insurance agency which was later acquired
by the agent who placed the current year's master policy. The current agent
assumed the financial obligations to the affiliate of the General Partner who
receives payment on these obligations from the agent. The amount of the
Partnership's insurance premiums accruing to the benefit of the affiliate of the
General Partner by virtue of the agent's obligations is not significant.
NOTE C - COMMITMENT
The Partnership is required to maintain working capital reserves for normal
repairs, replacements, working capital and contingencies of not less than 5% of
Net Invested Capital as defined in the Partnership Agreement. In the event
expenditures are made from these reserves, operating revenue shall be allocated
to such reserves to the extent necessary to maintain the foregoing level. Cash
and cash equivalents, tenant security deposits and investments totalling
approximately $893,000, are less than the reserve requirement of approximately
$1,761,000 at September 30, 1996. The Partnership intends to replenish the
working capital reserve from cash flow from operations after consideration of
any capital improvement needs of the properties. The Partnership's recent cash
flows from operations, however, have not been sufficient to replenish the
reserve and there is no assurance that future levels of cash flow from
operations will be adequate to accomplish this objective. The working capital
requirement must be met prior to any consideration for distributions to the
partners.
NOTE D - CHANGE IN STATUS OF NON-CORPORATE GENERAL PARTNER
In the year ended December 31, 1991, the Partnership Agreement was amended to
convert the General Partner interests held by the non-corporate General Partner,
Consolidated Capital Group ("CCG"), to that of special limited partners
("Special Limited Partners"). The Special Limited Partners do not have a vote
and do not have any of the other rights of a Limited Partner except the right to
inspect the Partnership's books and records; however, the Special Limited
Partners will retain the economic interest in the Partnership which they
previously owned as a general partner. ConCap Equities, Inc. ("CEI") became the
sole general partner of the Partnership effective December 31, 1991. In
connection with CCG's conversion, a special allocation of gross income was made
to the Special Limited Partners in order to eliminate their tax basis negative
capital account.
After the conversion, the various owners of interests in the Special Limited
Partners transferred portions of their interests to CEI so that CEI now holds
a .2% interest in all allocable items of income, loss and distribution. The
difference between the Special Limited Partners' capital accounts for
financial statement and tax reporting purposes is being amortized as the
components of the timing differences which created the balance reverse.
NOTE E - DEBT RESTRUCTURING
The Partnership restructured the debt on the 51 North High Building and made
a principal prepayment (without penalty) of $700,000 in January 1996. In
addition to this payment, the lender reduced the note's face amount by an
additional $700,000 and the stated interest rate of the note was reduced from
13.5% to 9%. The maturity date of June 1, 2004, was unchanged.
The debt restructuring was accounted for as a modification of terms. The
total future cash payments under the restructured loan exceed the carrying
value of the loan as of the date of restructure. Consequently, the carrying
amount of the loan was reduced only by the $700,000 principal prepayment
actually paid with no gain being recognized on the restructuring. Interest
on the restructured debt accrues at an imputed rate of 4%, the rate required
to equate the present value of the total future cash payments under the new
terms to the carrying amount of the loan at the date of restructure.
To facilitate the debt restructuring of the 51 North High Building in 1996,
the property was placed into a lower-tier partnership known as 51 North High
Street, L.P. in which the Partnership is the 99.99% limited partner. The
Partnership retained substantially all economic benefits from the property.
NOTE F - NOTE REFINANCING
In July 1996, to facilitate the refinancing of the first mortgage
indebtedness secured by the Sutton Place Apartments, the property was
transferred to a lower-tier partnership known as Sutton Place CCPV, L.P., in
which the Partnership is the 99.99% limited partner. The Partnership
retained substantially all economic benefits from the property.
Under the terms of the refinancing agreement which was completed September 6,
1996, the new $2.8 million mortgage note which bears interest at 9.125% and
matures in October 2003, replaced the previous mortgage note of approximately
$2.2 million. As a result of the refinancing, the Partnership incurred a
$22,000 prepayment penalty which resulted in an extraordinary loss on
refinancing. In conjunction with the refinancing, a capital improvement
reserve of approximately $164,000 was established and approximately $102,000
in loan costs were incurred. These loan costs will be amortized over the
life of the loan.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment properties consist of two apartment complexes and
one commercial property. The following table sets forth the average occupancy
of the properties for the nine months ended September 30, 1996 and 1995:
Average Occupancy
1996 1995
Aspen Ridge Apartments
Chicago, Illinois 94% 91%
Sutton Place Apartments
Corpus Christi, Texas 93% 90%
51 North High Street Building
Columbus, Ohio 89% 85%
The occupancy increase at Aspen Ridge Apartments is due to an improved tenant
base from stricter qualification procedures which have resulted in more stable
occupancy levels. The occupancy increase at Sutton Place Apartments resulted
from additional military troops being relocated to Corpus Christi. The increase
in occupancy at the 51 North High Street Building is due to existing tenants
leasing additional space.
The Partnership realized a loss before extraordinary item of $122,000 and
$409,000 for the three and nine months ended September 30, 1996, respectively,
compared to a loss of $365,000 and $1,149,000 for the three and nine
months ended September 30, 1995, respectively. The decreased loss before
extraordinary item primarily resulted from the sale of the Fourth and Race Tower
office building in December 1995.
The sale of Fourth and Race Tower resulted in decreases in rental and other
income. Other income also decreased due to lower lease cancellation fees,
cleaning and damage fees and fewer late charges at the Sutton Place Apartments
due to a stronger tenant base. Additionally, the Partnership received no
dividends on its investment in Southmark Preferred Stock during 1996 which
further reduced other income. The Partnership received approximately $21,000 in
dividends during the nine months ended September 30, 1995. These decreases in
other income were partially offset by a property tax refund received during the
nine months ended September 30, 1996, resulting from an appeal of the 1994 taxes
for the 51 North High Street Building. Property operations, maintenance,
depreciation and property taxes also decreased due to the Fourth and Race Tower
sale. General and administrative expenses decreased due to reduced expense
reimbursements as well as reduced legal costs. Expense reimbursements were
higher in 1995 as a result of the costs associated with the Dallas partnership
administration staff. Legal costs were higher in 1995 related to the marketing
for sale of the Fourth and Race Tower. The decrease in interest expense is due
to a debt restructure which lowered the imputed interest rate substantially and
a principal payment of $700,000 at 51 North High in January 1996. (See "Note E"
in the Notes to Consolidated Financial Statements in "Item 1"). The decrease in
tax expense is a result of the reduction in the assessed value of the 51 North
High Street Building in 1996 and the sale of the Fourth and Race Tower in
December of 1995.
The $22,000 extraordinary loss on refinancing realized during the three months
ended September 30, 1996, related to the refinancing of Sutton Place Apartments.
Through this refinancing, a new $2,800,000 mortgage note, which bears interest
at 9.125% and matures in October 2003, was obtained. As a result of the
refinancing, the Partnership realized a $22,000 prepayment penalty resulting in
the extraordinary loss.
During the nine months ended September 30, 1995, the Partnership realized a
casualty gain as a result of a fire at the Fourth and Race Tower on June 5,
1995. The total insurance proceeds received exceeded the total estimated costs
of replacing the equipment destroyed resulting in a casualty gain of $32,000
which is included in other income.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of each of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expense. As part of
this plan, the General Partner attempts to protect the Partnership from the
burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
General Partner will be able to sustain such a plan.
At September 30, 1996, the Partnership held cash and cash equivalents of
$686,000 compared to $344,000 at September 30, 1995. Net cash provided by
operating activities increased primarily due to the elimination of the negative
cash flows of the Fourth and Race Tower subsequent to the building sale in late
1995, as well as paying $131,000 less in interest for 1996 compared to 1995,
partially offset by increased payments of certain repair and maintenance items
related to painting and other unit interior and exterior maintenance incurred in
December of 1995. Net cash used in investing activities increased primarily due
to increased deposits to restricted escrows resulting from the Sutton Place
refinancing as well as a reduction in long-term investments maturing in 1996,
partially offset by reduced property improvements and replacements. Net cash
used in financing activities increased due primarily to the payment on the 51
North High Street Building debt in January 1996, and the refinancing of the
Sutton Place Apartments mortgage as noted above.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the property to adequately maintain the physical assets
and other operating needs of the Partnership. Such assets are currently thought
to be sufficient for any near-term needs of the Partnership. The mortgage
indebtedness of $10,604,000, net of discount, matures at various times with
balloon payments due at maturity, at which time the properties will either be
refinanced or sold. Future cash distributions will depend on the levels of net
cash generated from operations, reserve requirements, capital expenditure
requirements, property sales and the availability of cash reserves. During each
of the nine months ended September 30, 1996 and 1995, no distributions were
declared or paid.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
Exhibit 10.21, Promissory Note dated September 6, 1996, between Sutton Place
CCPV, L.P., a South Carolina limited partnership and First Union National
Bank of North Carolina, a national banking association.
(b) Reports on Form 8-K.
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CONSOLIDATED CAPITAL PROPERTIES V
By: CONCAP EQUITIES, INC.
General Partner
By: /s/Carroll D. Vinson
Carroll D. Vinson
President
By: /s/Robert D. Long, Jr.
Robert D. Long, Jr.
Vice President/CAO
Date: November 7, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Consolidated
Capital Properties V 1996 Third Quarter 10-QSB and is qualified in its entirety
by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000725614
<NAME> CONSOLIDATED CAPITAL PROPERTIES V
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 686
<SECURITIES> 108
<RECEIVABLES> 29
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 20,222
<DEPRECIATION> 12,782
<TOTAL-ASSETS> 9,185
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 10,604
0
0
<COMMON> 0
<OTHER-SE> (2,042)
<TOTAL-LIABILITY-AND-EQUITY> 9,185
<SALES> 0
<TOTAL-REVENUES> 3,116
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,525
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 726
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> (22)
<CHANGES> 0
<NET-INCOME> (431)
<EPS-PRIMARY> (2.39)<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
PROMISSORY NOTE
$2,800,000.00 September 6, 1996
FOR VALUE RECEIVED, the undersigned, Sutton Place CCPV, L.P., a South
Carolina limited partnership ("Borrower"), whose address is One Insignia
Financial Plaza, Greenville, South Carolina 29601, promises to pay to the order
of First Union National Bank of North Carolina, a national banking association
("Lender"), at the office of Lender at One First Union Center, DC6, 301 South
College Street, Charlotte, North Carolina 28288-0166, or at such other place as
Lender may designate to Borrower in writing from time to time, the principal sum
of TWO MILLION EIGHT HUNDRED THOUSAND AND 00/100 DOLLARS ($2,800,000.00)
together with interest on so much thereof as is from time to time outstanding
and unpaid, from the date of the advance of the principal evidenced hereby, at
the rate of Nine and One Hundred Twenty-Five Thousandths (9.125%) percent per
annum (the "Note Rate"), in lawful money of the United States of America, which
shall at the time of payment be legal tender in payment of all debts and dues,
public and private.
ARTICLE I - TERMS AND CONDITIONS
1.01 Payment of Principal and Interest. Said interest shall be computed
hereunder based on a 360-day year and based on twelve (12) 30-day months for
each full calendar month and on the actual number of days elapsed for any
partial month in which interest is being calculated. In computing the number of
days during which interest accrues, the day on which funds are initially
advanced shall be included regardless of the time of day such advance is made,
and the day on which funds are repaid shall be included unless repayment is
credited prior to close of business. Payments in federal funds immediately
available in the place designated for payment received by Lender prior to 2:00
p.m. local time at said place of payment shall be credited prior to close of
business, while other payments may, at the option of Lender, not be credited
until immediately available to Lender in federal funds in the place designated
for payment prior to 2:00 p.m. local time at said place of payment on a day on
which Lender is open for business. Such principal and interest shall be payable
in equal consecutive monthly installments of $23,195.93 each, beginning on the
first day of the second full calendar month following the date of this Note
(or on the first day of the first full calendar month following the date hereof,
in the event the advance of the principal amount evidenced by this Note is the
first day of a calendar month), and continuing on the first day of each and
every month thereafter through and including September 1, 2003, and on October
1, 2003 (the "Maturity Date"), at which time the entire outstanding principal
balance hereof, together with all accrued but unpaid interest thereon, shall be
due and payable in full. Each such monthly installment shall be applied first
to the payment of accrued interest and then to reduction of principal. If the
advance of the principal amount evidenced by this Note is made on a date other
than the first day of a calendar month, then Borrower shall pay to Lender
contemporaneously with the execution hereof interest at the Note Rate for a
period from the date hereof through and including the first day of the next
succeeding calendar month.
1.02 Prepayment.
(a) This Note may be prepaid in whole but not in part (except as
otherwise specifically provided herein) at any time after the second (2nd)
anniversary of this Note provided (i) written notice of such prepayment is
received by Lender not more than sixty (60) days and not less than thirty (30)
days prior to the date of such prepayment, (ii) such prepayment is accompanied
by all interest accrued hereunder and all other sums due hereunder and under the
other Loan Documents (as hereinafter defined), and (iii) if such prepayment
occurs prior to the date that is six (6) months prior to the Maturity Date,
Lender is paid a prepayment fee in an amount equal to the greater of (A) one
(1%) percent of the principal amount being prepaid or (B) the positive excess of
(1) the present value ("PV") of all future installments of principal and
interest due under this Note including the principal amount due at maturity
(collectively, "All Future Payments"), discounted at an interest rate per annum
equal to the sum of (a) the Treasury Constant Maturity Yield Index published
during the second full week preceding the date on which such premium is payable
for instruments having a maturity coterminous with the remaining term of this
Note, and (b) fifty (50) basis points over (2) the principal amount of this Note
outstanding immediately before such prepayment [(PV of All Future Payments) -
(principal balance at time of prepayment) = prepayment fee]. "Treasury Constant
Maturity Yield Index" shall mean the average yield for "This Week" as reported
by the Federal Reserve Board in Federal Reserve Statistical Release H.15(519).
If there is no Treasury Constant Maturity Yield Index for instruments having a
maturity coterminous with the remaining term of this Note, then the index shall
be equal to the weighted average yield to maturity of the Treasury Constant
Maturity Yield Indices with maturities next longer and shorter than such
remaining average life to maturity, calculated by averaging (and rounding upward
to the nearest whole multiple of 1 /100 of 1% per annum, if the average is not
such a multiple) the yields of the relevant Treasury Constant Maturity Yield
Indices (rounded, if necessary, to the nearest 1/100 of 1% with any figure of
1/200 of 1% or above rounded upward). In the event that any prepayment fee is
due hereunder, Lender shall deliver to Borrower a statement setting forth the
amount and determination of the prepayment fee, and, provided that Lender shall
have in good faith applied the formula described above, Borrower shall not have
the right to challenge the calculation or the method of calculation set forth in
any such statement in the absence of manifest error, which calculation may be
made by Lender on any day during the thirty (30) day period preceding the date
of such prepayment. Lender shall not be obligated or required to have actually
reinvested the prepaid principal balance at the Treasury Constant Maturity Yield
or otherwise as a condition to receiving the prepayment fee. No prepayment fee
or premium shall be due or payable in connection with any prepayment of the
indebtedness, in whole, evidenced by this Note made on or after the date that is
six (6) months prior to the Maturity Date. In addition to the aforesaid
prepayment fee if, upon any such prepayment (whether prior to or after the date
that is six (6) months prior to the Maturity Date), the aforesaid prior written
notice has not been timely received by Lender, the prepayment fee shall be
increased by an amount equal to the lesser of (i) thirty (30) days' unearned
interest computed on the outstanding principal balance of this Note so prepaid
and (ii) unearned interest computed on the outstanding principal balance of this
Note so prepaid for the period from, and including, the date of prepayment
through the otherwise stated maturity date of this Note.
(b) Partial prepayments of this Note shall not be permitted,
except partial prepayments resulting from Lender applying insurance or
condemnation proceeds to reduce the outstanding principal balance of this Note
as provided in the Security Instrument (as hereinafter defined), in which event
no prepayment fee or premium shall be due. No notice of prepayment shall be
required under the circumstance specified in the preceding sentence. No
principal amount repaid may be reborrowed. Partial payments of principal shall
be applied to the unpaid principal balance evidenced hereby but such application
shall not reduce the amount of the fixed monthly installments required to be
paid pursuant to Section 1.01 above.
(c) Except as otherwise expressly provided in Section 1.02(b)
above, the prepayment fees provided above shall be due, to the extent permitted
by applicable law, under any and all circumstances where all or any portion of
this Note is paid prior to the Maturity Date, whether such prepayment is
voluntary or involuntary (including, without limitation, any prepayment made
prior to the second anniversary of the date hereof), even if such prepayment
results from Lender's exercise of its rights upon Borrower's default and
acceleration of the maturity date of this Note (irrespective of whether
foreclosure proceedings have been commenced), and shall be in addition to any
other sums due hereunder or under any of the other Loan Documents. No tender of
a prepayment of this Note with respect to which a prepayment fee is due shall be
effective unless such prepayment is accompanied by the prepayment fee. Any
tender of payment of such indebtedness made prior to the second anniversary date
hereof, whether voluntary or involuntary, must include a prepayment fee computed
as provided in Section 1.02(a) above plus an additional prepayment fee of one
percent (1%) of the principal balance of this Note.
1.03 Security. The indebtedness evidenced by this Note and the
obligations created hereby are secured by that certain Deed of Trust and
Security Agreement (the "Security Instrument") from Borrower to Lender, dated as
of the date hereof, concerning property located in Corpus Christie, Texas. The
Security Instrument together with this Note and all other documents to or of
which Lender is a party or beneficiary now or hereafter evidencing, securing,
guarantying, modifying or otherwise relating to the indebtedness evidenced
hereby, are herein referred to collectively as the "Loan Documents". All of the
terms and provisions of the Loan Documents are incorporated herein by reference.
Some of the Loan Documents are to be filed for record on or about the date
hereof in the appropriate public records.
1.04 Default. It is hereby expressly agreed that should any default
occur in the payment of principal or interest as stipulated above and such
payment is not made within fifteen (15) days of the date such payment is due
(provided that no grace period is provided for the payment of principal and
interest due on the Maturity Date), or should any other default occur under any
of the Loan Documents which is not cured within any applicable grace or cure
period, then a default shall exist hereunder, and in such event the indebtedness
evidenced hereby, including all sums advanced or accrued hereunder or under any
other Loan Document, and all unpaid interest accrued thereon, shall, at the
option of Lender and without notice to Borrower, at once become due and payable
and may be collected forthwith, whether or not there has been a prior demand for
payment and regardless of the stipulated date of maturity. In the event that
any payment (other than the payment of principal due on the Maturity Date) due
under the Note is not received by Lender on the date when due (subject to the
applicable grace period), then in addition to any default interest payments due
hereunder, Borrower shall also pay to Lender a late charge in an amount equal to
five percent (5.0%) of the amount of such overdue payment. So long as any
default exists hereunder beyond any applicable grace or cure period, regardless
of whether or not there has been an acceleration of the indebtedness evidenced
hereby, and at all times after maturity of the indebtedness evidenced hereby
(whether by acceleration or otherwise), interest shall accrue on the outstanding
principal balance of this Note at a rate per annum equal to four percent (4.0%)
plus the interest rate which would be in effect hereunder absent such default or
maturity, or if such increased rate of interest may not be charged or collected
under applicable law, then at the maximum rate of interest, if any, which may be
charged or collected from Borrower under applicable law (the "Default Interest
Rate"), and such default interest shall be immediately due and payable.
Borrower acknowledges that it would be extremely difficult or impracticable to
determine Lender's actual damages resulting from any late payment or default,
and such late charges and default interest are reasonable estimates of those
damages and do not constitute a penalty. The remedies of Lender in this Note or
in the Loan Documents, or at law or in equity, shall be cumulative and
concurrent, and may be pursued singly, successively or together in Lender's
discretion. Time is of the essence of this Note. In the event this Note, or
any part hereof, is collected by or through an attorney-at-law, Borrower agrees
to pay all costs of collection including, but not limited to, reasonable
attorneys' fees.
1.05 Exculpation. Notwithstanding anything in the Loan Documents to the
contrary, but subject to the qualifications hereinbelow set forth, Lender agrees
that (i) Borrower shall be liable upon the indebtedness evidenced hereby and for
the other obligations arising under the Loan Documents to the full extent (but
only to the extent) of the security therefor, the same being all properties
(whether real or personal), rights, estates and interests now or at any time
hereafter securing the payment of this Note and/or the other obligations of
Borrower under the Loan Documents (collectively, the "Security Property"), (ii)
if default occurs in the timely and proper payment of all or any part of such
indebtedness evidenced hereby or in the timely and proper performance of the
other obligations of Borrower under the Loan Documents, any judicial or other
proceedings brought by Lender against Borrower shall be limited to the
preservation, enforcement and foreclosure, or any thereof, of the liens,
security titles, estates, assignments, rights and security interests now or at
any time hereafter securing the payment of this Note and/or the other
obligations of Borrower under the Loan Documents, and no attachment, execution
or other writ of process shall be sought, issued or levied upon any assets,
properties or funds of Borrower other than the Security Property except with
respect to the liability described below in this section, and (iii) in the event
of a foreclosure of such liens, security titles, estates, assignments, rights or
security interests securing the payment of this Note and/or the other
obligations of Borrower under the Loan Documents, no judgment for any deficiency
upon the indebtedness evidenced hereby shall be sought or obtained by Lender
against Borrower, except with respect to the liability described below in this
section; provided, however, that, notwithstanding the foregoing provisions of
this section, Borrower shall be fully and personally liable and subject to legal
action (a) for proceeds paid under any insurance policies (or paid as a result
of any other claim or cause of action against any person or entity) by reason of
damage, loss or destruction to all or any portion of the Security Property, to
the full extent of such proceeds not previously delivered to Lender, but which,
under the terms of the Loan Documents, should have been delivered to Lender, (b)
for proceeds or awards resulting from the condemnation or other taking in lieu
of condemnation of all or any portion of the Security Property, or any of them,
to the full extent of such proceeds or awards not previously delivered to
Lender, but which, under the terms of the Loan Documents, should have been
delivered to Lender, (c) for all tenant security deposits or other refundable
deposits paid to or held by Borrower or any other person or entity in connection
with leases of all or any portion of the Security Property which are not applied
in accordance with the terms of the applicable lease or other agreement, (d) for
rent and other payments received from tenants under leases of all or any portion
of the Security Property paid more than one month in advance, (e) for rents,
issues, profits and revenues of all or any portion of the Security Property
received or applicable to a period after any notice of default from Lender
hereunder or under the Loan Documents in the event of any default by Borrower
hereunder or thereunder which are not either applied to the ordinary and
necessary expenses of owning and operating the Security Property or paid to
Lender, (f) for waste committed on the Security Property, damage to the Security
Property as a result of the intentional misconduct or gross negligence of
Borrower or any of its principals, officers or general partners, or any agent or
employee of any such persons, or any removal of the Security Property in
violation of the terms of the Loan Documents, to the full extent of the losses
or damages incurred by Lender on account of such failure, (g) for failure to pay
any valid taxes, assessments, mechanic's liens, materialmen's liens or other
liens which could create liens on any portion of the Security Property which
would be superior to the lien or security title of the Security Instrument or
the other Loan Documents, to the full extent of the amount claimed by any such
lien claimant, (h) for all obligations and indemnities of Borrower under the
Loan Documents relating to hazardous or toxic substances or compliance with
environmental laws and regulations to the full extent of any losses or damages
(including, but not limited to, those resulting from diminution in value of any
Security Property) incurred by Lender as a result of the existence of such
hazardous or toxic substances or failure to comply with environmental laws or
regulations, and (i) for fraud or material misrepresentation by Borrower or any
of its principals, officers, or general partners, any guarantor, any indemnitor
or any agent, employee or other person authorized or apparently authorized to
make statements or representations on behalf of Borrower, any principal, officer
or partner of Borrower, any guarantor or any indemnitor, to the full extent of
any losses, damages and expenses of Lender on account thereof. References
herein to particular sections of the Loan Documents shall be deemed references
to such sections as affected by other provisions of the Loan Documents relating
thereto. Nothing contained in this section shall (1) be deemed to be a release
or impairment of the indebtedness evidenced by this Note or the other
obligations of Borrower under the Loan Documents or the lien of the Loan
Documents upon the Security Property, or (2) preclude Lender from foreclosing
the Loan Documents in case of any default or from enforcing any of the other
rights of Lender except as stated in this section, or (3) limit or impair in any
way whatsoever the Indemnity and Guaranty Agreement and the Hazardous Substances
Indemnity Agreement each of even date executed and delivered in connection with
the indebtedness evidenced by this Note or release, relieve, reduce, waive or
impair in any way whatsoever, any obligation of any party to such Indemnity and
Guaranty Agreement and Hazardous Substances Indemnity Agreement.
ARTICLE II - GENERAL CONDITIONS
2.01 No Waiver: Amendment. No failure to accelerate the debt evidenced
hereby by reason of default hereunder, acceptance of a partial or past due
payment, or indulgences granted from time to time shall be construed (i) as a
novation of this Note or as a reinstatement of the indebtedness evidenced hereby
or as a waiver of such right of acceleration or of the right of Lender
thereafter to insist upon strict compliance with the terms of this Note, or (ii)
to prevent the exercise of such right of acceleration or any other right granted
hereunder or by any applicable laws; and Borrower hereby expressly waives the
benefit of any statute or rule of law or equity now provided, or which may
hereafter be provided, which would produce a result contrary to or in conflict
with the foregoing. No extension of the time for the payment of this Note or
any installment due hereunder, made by agreement with any person now or
hereafter liable for the payment of this Note shall operate to release,
discharge, modify, change or affect the original liability of Borrower under
this Note, either in whole or in part unless Lender agrees otherwise in writing.
This Note may not be changed orally, but only by an agreement in writing signed
by the party against whom enforcement of any waiver, change, modification or
discharge is sought.
2.02 Waivers. Presentment for payment, demand, protest and notice of
demand, intent to accelerate, acceleration, protest and nonpayment and all other
notices are hereby waived by Borrower. Borrower hereby further waives and
renounces, to the fullest extent permitted by law, all rights to the benefits of
any moratorium, reinstatement, marshalling, forbearance, valuation, stay,
extension, redemption, appraisement, exemption and homestead now or hereafter
provided by the Constitution and laws of the United States of America and of
each state thereof, both as to itself and in and to all of its property, real
and personal, against the enforcement and collection of the obligations
evidenced by this Note or the other Loan Documents.
2.03 Limit of Validity. The provisions of this Note and of all
agreements between Borrower and Lender, whether now existing or hereafter
arising and whether written or oral, are hereby expressly limited so that in no
contingency or event whatsoever, whether by reason of demand or acceleration of
the maturity of this Note or otherwise, shall the amount paid, or agreed to be
paid ("Interest"), to Lender for the use, forbearance or retention of the money
loaned under this Note exceed the maximum amount permissible under applicable
law. To the extent of the applicability of Article 5069-1,04 of the Texas
Revised Civil Statutes, as amended, the maximum rate shall be based upon the
"indicated rate ceiling", but Lender reserves the right to implement, withdraw
or reinstate any other ceiling as an alternative to the indicated rate ceiling,
including the right to reinstate the indicated rate ceiling. If, from any
circumstance whatsoever, performance or fulfillment of any provision hereof or
of any agreement between Borrower and Lender shall, at the time performance or
fulfillment of such provision shall be due, exceed the limit for Interest
prescribed by law or otherwise transcend the limit of validity prescribed by
applicable law, then ipso facto the obligation to be performed or fulfilled
shall be reduced to such limit and if, from any circumstance whatsoever, Lender
shall ever receive anything of value deemed Interest by applicable law in excess
of the maximum lawful amount, an amount equal to any excessive Interest shall be
applied to the reduction of the principal balance owing under this Note in the
inverse order of its maturity (whether or not then due) or at the option of
Lender be paid over to Borrower, and not to the payment of Interest. All
Interest (including, but not limited to, any amounts or payments deemed to be
Interest) paid or agreed to be paid to Lender shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread throughout the full
period until payment in full of the principal balance of this Note so that the
Interest thereof for such full period will not exceed the maximum amount
permitted by applicable law. This Section 2.03 will control all agreements
between Borrower and Lender.
2.04 Use of Funds. Borrower hereby warrants, represents and covenants
that no funds disbursed hereunder shall be used for personal, family or
household purposes.
2.05 Unconditional Payment. Borrower is and shall be obligated to pay
principal, interest and any and all other amounts which become payable hereunder
or under the other Loan Documents absolutely and unconditionally and without any
abatement, postponement, diminution or deduction and without any reduction for
counterclaim or setoff. In the event that at any time any payment received by
Lender hereunder shall be deemed by a court of competent jurisdiction to have
been a voidable preference or fraudulent conveyance under any bankruptcy,
insolvency or other debtor relief law, then the obligation to make such payment
shall survive any cancellation or satisfaction of this Note or return thereof to
Borrower and shall not be discharged or satisfied with any prior payment thereof
or cancellation of this Note, but shall remain a valid and binding obligation
enforceable in accordance with the terms and provisions hereof, and such payment
shall be immediately due and payable upon demand.
2.06 Miscellaneous. This Note shall be interpreted, construed and
enforced according to the laws of the State of Texas. The terms and provisions
hereof shall be binding upon and inure to the benefit of Borrower and Lender and
their respective heirs, executors, legal representatives, successors,
successors-in-title and assigns, whether by voluntary action of the parties or
by operation of law. As used herein, the terms "Borrower" and "Lender" shall be
deemed to include their respective heirs, executors, legal representatives,
successors, successors-in-title and assigns, whether by voluntary action of the
parties or by operation of law. If Borrower consists of more than one person or
entity, each shall be jointly and severally liable to perform the obligations of
Borrower under this Note. All personal pronouns used herein, whether used in
the masculine, feminine or neuter gender, shall include all other genders; the
singular shall include the plural and vice versa. Titles of articles and
sections are for convenience only and in no way define, limit, amplify or
describe the scope or intent of any provisions hereof. Time is of the essence
with respect to all provisions of this Note. This Note and the other Loan
Documents contain the entire agreements between the parties hereto relating to
the subject matter hereof and thereof and all prior agreements relative hereto
and thereto which are not contained herein or therein are terminated.
Borrower's Tax Identification No.:
57-1053095
IN WITNESS WHEREOF, Borrower has executed this Note under seal as of the
date first above written.
SUTTON PLACE CCPV, L.P.,
a South Carolina limited partnership
By: Sutton Place GP Limited Partnership, d/b/a
Sutton CCPV, L.P.,
a South Carolina limited partnership,
its general partner
By: GP Services X, Inc.,
a South Carolina corporation,
its general partner
By: /s/ Robert D. Long, Jr.
Name: Robert D. Long, Jr.
Title: Vice President
STATE OF SOUTH CAROLINA)
) ss.
COUNTY OF GREENVILLE )
This instrument was acknowledged before me this September 6, 1996, by
Robert D. Long, Jr., Vice President of GP Services X, Inc., a South Carolina
corporation, on behalf of and as general partner of Sutton Place GP Limited
Partnership, a South Carolina limited partnership, on behalf of and as general
partner of SUTTON PLACE CCPV, L.P., a South Carolina limited partnership.
/s/ Nancy A. Dixon
Notary Public
My Commission Expires: 6/9/98
