FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________to _________
Commission file number 2-85829
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II (Exact name
of small business issuer as specified in its charter)
New York 13-3202289
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 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___
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
June 30, 2000
<TABLE>
<CAPTION>
Assets
<S> <C>
Cash and cash equivalents $ 1,155
Receivables and deposits 82
Other assets 182
Investment property:
Land $ 1,287
Buildings and related personal property 6,820
8,107
Less accumulated depreciation (5,970) 2,137
$ 3,556
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 65
Tenant security deposit liabilities 62
Accrued property taxes 71
Other liabilities 31
Mortgage note payable 4,200
Partners' Capital (Deficit)
General partner $ 34
Limited partners (37,273 units issued and
outstanding) (907) (873)
$ 3,556
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
b)
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
(Restated) (Restated)
Revenues:
<S> <C> <C> <C> <C>
Rental income $ 354 $ 340 $ 714 $ 654
Other income 50 19 62 38
Total revenues 404 359 776 692
Expenses:
Operating 160 157 319 285
General and administrative 52 35 82 77
Depreciation 82 69 160 137
Interest 66 69 134 139
Property taxes 36 38 74 75
Total expenses 396 368 769 713
Income (loss) before equity in net income
of joint venture, discontinued operations
and gain on sale of investment in joint
venture 8 (9) 7 (21)
Equity in net income of joint venture -- 41 50 97
Income before gain on sale of investment
in joint venture and discontinued
operations 8 32 57 76
Gain on sale of investment in joint venture -- -- 2,674 --
Income from continuing operations 8 32 2,731 76
Income from discontinued operations -- 21 -- 6
Net income $ 8 $ 53 $ 2,731 $ 82
Net income allocated to general partner $ -- $ 1 $ 27 $ 1
Net income allocated to limited partners 8 52 2,704 81
$ 8 $ 53 $ 2,731 $ 82
Per limited partnership unit:
Income before gain on sale of
investment in joint venture and
discontinued operations $ 0.21 $ 0.84 $ 1.52 $ 2.01
Gain on sale of investment in joint
venture -- -- 71.02 --
Income from continuing operations 0.21 0.84 72.54 2.01
Income from discontinued operations -- 0.56 -- 0.16
Net income $ 0.21 $ 1.40 $ 72.54 $ 2.17
Distributions per limited partnership unit $ 96.91 $ -- $ 96.91 $ --
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
c)
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partner Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 37,273 $ 1 $18,637 $18,638
Partners' capital at
December 31, 1999 37,273 $ 7 $ 1 $ 8
Distributions to limited partners -- -- (3,612) (3,612)
Net income for the six months
ended June 30, 2000 -- 27 2,704 2,731
Partners' capital (deficit) at
June 30, 2000 37,273 $ 34 $ (907) $ (873)
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
d)
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
2000 1999
Cash flows from operating activities:
<S> <C> <C>
Net income $ 2,731 $ 82
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 160 222
Amortization of lease commissions and loan costs 11 23
Equity in net income of joint venture (50) (97)
Bad debt expense, net 31 101
Gain on sale of investment in joint venture (2,674) --
Change in accounts:
Receivables and deposits 12 (26)
Other assets (1) 3
Accounts payable (12) 6
Tenant security deposit liabilities (2) (4)
Accrued property taxes 71 (42)
Other liabilities (65) 4
Net cash provided by operating activities 212 272
Cash flows from investing activities:
Distribution received from joint venture 117 275
Proceeds from sale of investment in joint venture 3,000 --
Property improvements and replacements (170) (123)
Lease commissions paid -- (8)
Net cash provided by investing activities 2,947 144
Cash flows from financing activities:
Payments on mortgage notes payable (64) (80)
Repayment of mortgage note payable (3,058) --
Proceeds from mortgage note payable 4,200 --
Loan costs paid (161) --
Distributions to limited partners (3,612) --
Net cash used in financing activities (2,695) (80)
Net increase in cash and cash equivalents 464 336
Cash and cash equivalents at beginning of period 691 613
Cash and cash equivalents at end of period $ 1,155 $ 949
Supplemental disclosure of cash flow information:
Cash paid for interest $ 144 $ 175
At December 31, 1999, approximately $33,000 of property improvements and
replacements were in accounts payable.
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
e)
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements of Drexel Burnham Lambert Real
Estate Associates II (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 the DBL Properties Corporation ("DBL" or
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 six month periods ended June 30, 2000, are
not necessarily indicative of the results that may be expected for the fiscal
year ending December 31, 2000. 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, 1999.
Certain reclassifications have been made to the 1999 balances to conform to the
2000 presentation.
Note B - Transactions with Related Parties
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all Partnership activities.
The Partnership Agreement provides for certain payments to affiliates for
services and reimbursements of certain expenses incurred by affiliates on behalf
of the Partnership. The following transactions with affiliates of the General
Partner were incurred during the six months ended June 30, 2000 and 1999:
2000 1999
(in thousands)
Property management fees (included in
operating expense) $ 36 $ 35
Reimbursement for services of affiliates
(included in investment property and
general and administrative expense) 27 22
During the six months ended June 30, 2000 and 1999, affiliates of the General
Partner were entitled to receive 5% of gross receipts from the Partnership's
residential property for providing property management services. The Partnership
paid to such affiliates approximately $36,000 and $35,000 for the six month
periods ended June 30, 2000 and 1999, respectively.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $27,000 and $22,000 for the
six months ended June 30, 2000 and 1999, respectively.
<PAGE>
AIMCO and its affiliates currently own 6,900 limited partnership units in the
Partnership representing 18.512% of the outstanding units. A number of these
units were acquired pursuant to tender offers made by AIMCO or its affiliates.
It is possible that AIMCO or its affiliates will make one or more additional
offers to acquire additional limited partnership interests in the Partnership
for cash or in exchange for units in the operating partnership of AIMCO. Under
the Partnership Agreement, unitholders holding a majority of the Units are
entitled to take action with respect to a variety of matters. When voting on
matters, AIMCO would in all likelihood vote the Units it acquired in a manner
favorable to the interest of the General Partner because of their affiliation
with the General Partner.
Note C - Investment in Joint Venture and Sale of Investment in Joint Venture
Table Mesa
Table Mesa Shopping Center Partnership was formed in 1985, as a joint venture to
own and operate a shopping center in Boulder, Colorado. The Partnership owned a
50% interest in this joint venture. The Partnership's equity in the operations
of Table Mesa, after an adjustment for allocation of depreciation based on its
basis in the property, amounted to income of approximately $50,000 and $97,000
for the six months ended June 30, 2000 and 1999, respectively. The Partnership's
equity in the operations of Table Mesa amounted to income of approximately
$41,000 for the three months ended June 30, 1999. On March 17, 2000, the
Partnership sold its investment in joint venture, Table Mesa Shopping Center
("Table Mesa") for approximately $3,000,000. The Partnership realized a gain of
approximately $2,674,000 on the sale during the first quarter of 2000.
The Table Mesa joint venture agreement provides, among other things, that the
Partnership shall be entitled to receive a cash flow preference, as defined, of
$252,000 per year, which is equivalent to a 9% return on the Partnership's
initial cash investment. The annual preference is not cumulative. During the six
months ended June 30, 2000 and 1999, the Partnership received distributions from
the Table Mesa joint venture of approximately $117,000 and $275,000,
respectively.
Summarized results of operations for Table Mesa for the three months ended March
31, 2000 and the six months ended June 30, 1999, are as follows (in thousands):
Three Months Ended Six Months Ended
March 31, 2000 June 30, 1999
Total revenues $ 451 $1,203
Total expenses (346) (976)
Net income $ 105 $ 227
<PAGE>
Note D - Refinancing
On June 30, 2000, the Partnership refinanced the mortgage encumbering
Presidential House. Interest on the new mortgage is 7.96%. Interest on the old
mortgage was 8.00%. The refinancing replaced indebtedness of approximately
$3,058,000, including accrued interest of approximately $20,000 with a new
mortgage in the amount of $4,200,000. Payments of approximately $35,000 are due
on the first day of each month until the loan matures on July 1, 2020. The prior
note matured in September 1999.
Note E - Distributions
The Partnership distributed approximately $3,612,000 to the limited partners
($96.91 per limited partnership unit) during the six month period ended June 30,
2000. These distributions consisted of approximately $2,970,000 ($79.68 per
limited partnership unit) of proceeds from the sale of the Partnership's
investment in the Table Mesa joint venture and approximately $642,000 ($17.23
per limited partnership unit) of cash from operations. No distributions were
made during the six month period ended June 30, 1999.
Note F - Discontinued Operations
On September 9, 1999, the Partnership sold Wendover Business Park II ("Wendover
II") to an unaffiliated third party. Wendover II was the only commercial
property owned by the Partnership and represented one segment of the
Partnership's operations. Due to the sale of this property, the results of the
commercial segment have been shown as income from discontinued operations. The
revenues of this property were approximately $117,000 and $207,000 and the
restated income from operations was approximately $21,000 and $6,000 for the
three and six months ended June 30, 1999, respectively.
Note G - Segment Reporting
Description of the types of products and services from which each reportable
segment derives its revenues:
The Partnership had two reportable segments: residential property and commercial
property. The Partnership's residential property segment consists of an
apartment complex in North Miami Beach, Florida. The Partnership rents apartment
units to tenants for terms that are typically twelve months or less. On
September 9, 1999, the commercial property was sold to an unrelated party.
Therefore, the commercial segment is reflected as discontinued operations (see
"Note F" for further discussion).
Measurement of segment profit or loss:
The Partnership evaluates performance based on segment profit (loss) before
depreciation. The accounting policies of the reportable segments are the same as
those of the Partnership as described in the Partnership's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1999.
<PAGE>
Factors management used to identify the enterprise's reportable segments:
The Partnership's reportable segments are investment properties that offer
different products and services. The reportable segments are managed separately
because they provide distinct services with different types of products and
customers.
Segment information for the three and six month periods ended June 30, 2000 and
1999, is shown in the tables below (in thousands). The "Other" column includes
Partnership administration related items and income and expense not allocated to
the reportable segment.
<TABLE>
<CAPTION>
Three months ended June 30, 2000 Residential Other Totals
<S> <C> <C> <C>
Rental income $ 354 $ -- $ 354
Other income 18 32 50
Interest expense 66 -- 66
Depreciation 82 -- 82
General and administrative expense -- 52 52
Segment profit (loss) 28 (20) 8
Six months ended June 30, 2000 Residential Other Totals
Rental income $ 714 $ -- $ 714
Other income 27 35 62
Interest expense 134 -- 134
Depreciation 160 -- 160
General and administrative expense -- 82 82
Equity in income of joint venture -- 50 50
Gain on sale of investment in joint venture -- 2,674 2,674
Segment profit 54 2,677 2,731
Total assets 2,465 1,091 3,556
Capital expenditures for investment property 137 -- 137
</TABLE>
<TABLE>
<CAPTION>
Three months ended June 30, 1999 Residential Commercial Other Totals
(discontinued)
<S> <C> <C> <C> <C>
Rental income $ 340 $ -- $ -- $ 340
Other income 15 -- 4 19
Interest expense 69 -- -- 69
Depreciation 69 -- -- 69
General and administrative
expense -- -- 35 35
Equity in income of joint venture -- -- 41 41
Segment profit 22 21 10 53
Six months ended June 30, 1999 Residential Commercial Other Totals
(discontinued)
Rental income $ 654 $ -- $ -- $ 654
Other income 30 -- 8 38
Interest expense 139 -- -- 139
Depreciation 137 -- -- 137
General and administrative
expense -- -- 77 77
Equity in income of joint venture -- -- 97 97
Segment profit 48 6 28 82
Total assets 2,381 1,927 1,204 5,512
Capital expenditures for
investment properties 117 6 -- 123
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-QSB and other filings with the Securities
and Exchange Commission made by the Partnership from time to time. The
discussion of the Partnership's business and results of operations, including
forward-looking statements pertaining to such matters, does not take into
account the effects of any changes to the Partnership's business and results of
operations. Accordingly, actual results could differ materially from those
projected in the forward-looking statements as a result of a number of factors,
including those identified herein.
The Partnership owns and operates one investment property: Presidential House at
Sky Lake ("Presidential"), a residential apartment complex located in North
Miami Beach, Florida. The average occupancy for Presidential was 96% and 93% for
the six months ended June 30, 2000 and 1999, respectively. The Partnership
attributes the increase in occupancy to improved marketing efforts.
Results of Operations
The Partnership realized net income of approximately $2,731,000 and $82,000 for
the six months ended June 30, 2000 and 1999, respectively. The Partnership
realized net income of approximately $8,000 and $53,000 for the three month
periods ended June 30, 2000 and 1999, respectively. The increase in net income
for the six months ended June 30, 2000 is primarily attributable to the gain on
the sale of the investment in joint venture on March 17, 2000. The Partnership
realized income before gain on the sale of investment in joint venture and
discontinued operations of approximately $57,000 and $76,000 for the six month
periods ended June 30, 2000 and 1999, respectively. This decrease is primarily
due to a decrease in equity in net income of the joint venture and an increase
in total expenses partially offset by an increase in total revenues. The
Partnership realized income before gain on sale of investment in joint venture
and discontinued operations for the three month period ended June 30, 2000 and
1999 of approximately $8,000 and $32,000, respectively. This decrease is
primarily as a result of decreases in income from discontinued operations and
equity in the net income of the joint venture.
Total expenses for the six month period ended June 30, 2000 increased primarily
as a result of increased operating expenses and depreciation expense. The
increase in operating expenses is primarily attributed to increased insurance
expense and property expense at Presidential House. Insurance expense increased
as a result of increased policy premiums in 2000 and insurance refunds received
during 1999. Property expense increased as a result of increased salary expense
and utility costs. Depreciation expense increased due to the depreciation of
fixed asset additions during the past twelve months. Total expenses for the
three month period ended June 30, 2000 increased primarily as a result of
increased depreciation expense, as discussed above, and general and
administrative expenses. General and administrative expenses increased for the
three month period ended June 30, 2000 as a result of increased professional
expenses related to the management of the Partnership. The increase in total
revenues for the three and six months ended June 30, 2000, is primarily due to
an increase in rental and other income. Rental income increased as a result of
increased occupancy at Presidential House as noted above. The increase in other
income is primarily due to increased interest income on cash held in interest
bearing accounts for the period ended June 30, 2000 compared to the same period
in 1999. The increase in other income is also attributed to a decrease in bad
debt expense. Bad debt expense decreased as a result of improved delinquencies
during the three and six month periods ended June 30, 2000.
Included in general and administrative expenses at both June 30, 2000 and 1999,
are management reimbursements to the General Partner allowed under the
Partnership Agreement. In addition, costs associated with the quarterly and
annual communications with investors and regulatory agencies and the annual
audit required by the Partnership Agreement are included.
On March 17, 2000, the Partnership sold its investment in joint venture, Table
Mesa Shopping Center ("Table Mesa") for approximately $3,000,000. The
Partnership realized a gain of approximately $2,674,000 on the sale during the
first quarter of 2000.
On September 9, 1999, the Partnership sold Wendover Business Park II ("Wendover
II") to an unaffiliated third party. Wendover II was the only commercial
property owned by the Partnership and represented one segment of the
Partnership's operations. Due to the sale of this property, the results of the
commercial segment have been shown as income from discontinued operation. The
revenues of this property were approximately $117,000 and $207,000 and the
restated income from operations was approximately $21,000 and $6,000 for the
three and six months ended June 30, 1999, respectively.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of its investment property 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.
Capital Resources and Liquidity
At June 30, 2000, the Partnership had cash and cash equivalents of approximately
$1,155,000 as compared to approximately $949,000 at June 30, 1999. For the six
months ended June 30, 2000, cash and cash equivalents increased approximately
$464,000 from the Partnership's year ended December 31, 1999. The increase in
cash and cash equivalents is due to approximately $2,947,000 of cash provided by
investing activities and approximately $212,000 of cash provided by operating
activities partially offset by approximately $2,695,000 of cash used in
financing activities. Cash provided by investing activities consists of proceeds
from the sale of the investment in joint venture and distributions from the
joint venture partially offset by property improvements and replacements. Cash
used in financing activities consists of repayment of the existing loan balance
at Presidential House, loan costs in relation to the refinance, distributions to
the limited partners, and payments on the mortgage encumbering the Partnership's
investment property partially offset by proceeds from the refinance of the loan
encumbering Presidential House. The Partnership invests its working capital
reserves in a money market account.
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 asset
and other operating needs of the Partnership and to comply with Federal, state,
and local legal and regulatory requirements. Capital improvements planned for
the Partnership's remaining investment property are detailed below.
Presidential House
Approximately $149,000 has been budgeted for 2000 for capital improvements at
Presidential House consisting primarily of floor covering replacements,
appliance replacements, structural improvements, plumbing improvements, and
swimming pool enhancements. During the six months ended June 30, 2000, the
Partnership completed approximately $137,000 of budgeted and unbudgeted capital
improvements consisting primarily of exterior painting, floor covering
replacements, structural and other building improvements. These improvements
were funded from operating cash flow. Additional improvements may be considered
and will depend on the physical condition of the property as well as operating
cash flow and anticipated cash flow generated by the property.
The Partnership's current assets are thought to be sufficient for any near term
needs (exclusive of capital improvements) of the Partnership. On June 30, 2000,
the Partnership refinanced the mortgage encumbering Presidential House. The
interest rate on the new mortgage is 7.96%. The interest rate on the old
mortgage was 8.00%. The refinancing replaced indebtedness of approximately
$3,058,000, including accrued interest of approximately $20,000 with a new
mortgage in the amount of $4,200,000. Payments of approximately $35,000 are due
on the first day of each month until the loan matures on July 1, 2020. The prior
note matured in September 1999.
The Partnership distributed approximately $3,612,000 to the limited partners
($96.91 per limited partnership unit) during the six month period ended June 30,
2000. These distributions consisted of approximately $2,970,000 ($79.68 per
limited partnership unit) of proceeds from the sale of the Partnership's
investment in the Table Mesa joint venture and approximately $642,000 ($17.23
per limited partnership unit) of cash from operations. No distributions were
made during the six month period ended June 30, 1999. The Partnership's
distribution policy is reviewed on an annual basis. Future cash distributions
will depend on the levels of net cash generated from operations, the
availability of cash reserves, and the timing of the debt maturity, refinancing,
and/or property sale. There can be no assurance, however, that the Partnership
will generate sufficient funds from operations after required capital
improvements to permit further distributions to its partners in the remainder of
2000 or subsequent periods.
<PAGE>
PART II - OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
Exhibit 10.10, Multifamily Note dated June 29, 2000, by and
between Drexel Burnham Lambert Estate Associates II, a New
York limited partnership, and ARCS Commercial Mortgage Co.,
L.P., a California limited partnership.
Exhibit 27, Financial Data Schedule, is filed as an exhibit
to this report.
b) Reports on Form 8-K:
None filed during the quarter ended June 30, 2000.
<PAGE>
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.
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
By: DBL Properties Corporation
Its General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
and Controller
Date:
<PAGE>
Exhibit 10.10
FHLMC# 002685043
EXHIBIT "C"
MULTIFAMILY NOTE
(MULTISTATE)
US $4,200,000.00 As of June 29, 2000
FOR VALUE RECEIVED, the undersigned ("Borrower") jointly and severally (if
more than one) promises to pay to the order of ARCS COMMERCIAL MORTGAGE CO.,
L.P., a California limited partnership, the principal sum of FOUR MILLION TWO
HUNDRED THOUSAND AND 00/100 Dollars (US $4,200,000.00), with interest on the
unpaid principal balance at the annual rate of Seven and 96/100 percent (7.96%).
1. Defined Terms. As used in this Note, (i) the term "Lender" means the
holder of this Note, and (ii) the term "Indebtedness" means the principal of,
interest on, or any other amounts due at any time under, this Note, the Security
Instrument or any other Loan Document, including prepayment premiums, late
charges, default interest, and advances to protect the security of the Security
Instrument under Section 12 of the Security Instrument. "Event of Default" and
other capitalized terms used but not defined in this Note shall have the
meanings given to such terms in the Security Instrument.
2. Address for Payment. All payments due under this Note shall be payable
at 26901 Agoura Road, Suite 200, Calabasas Hills, California 91301, or such
other place as may be designated by written notice to Borrower from or on behalf
of Lender.
3. Payment of Principal and Interest. Principal and interest shall be paid
as follows:
(a) Unless disbursement of principal is made by Lender to Borrower on the
first day of the month, interest for the period beginning on the date of
disbursement and ending on and including the last day of the month in which such
disbursement is made shall be payable simultaneously with the execution of this
Note. Interest under this Note shall be computed on the basis of a 360-day year
consisting of twelve 30-day months.
(b) Consecutive monthly installments of principal and interest, each in
the amount of THIRTY-FIVE THOUSAND TWENTY-SIX AND 00/100 Dollars (US
$35,026.00), shall be payable on the first day of each month beginning on August
1, 2000, until the entire unpaid principal balance evidenced by this Note is
fully paid. Any accrued interest remaining past due for 30 days or more shall be
added to and become part of the unpaid principal balance and shall bear interest
at the rate or rates specified in this Note, and any reference below to "accrued
interest" shall refer to accrued interest which has not become part of the
unpaid principal balance. Any remaining principal and interest shall be due and
payable on July 1, 2020 or on any earlier date on which the unpaid principal
balance of this Note becomes due and payable, by acceleration or otherwise (the
"Maturity Date"). The unpaid principal balance shall continue to bear interest
after the Maturity Date at the Default Rate set forth in this Note until and
including the date on which it is paid in full.
(c) Any regularly scheduled monthly installment of principal and interest
that is received by Lender before the date it is due shall be deemed to have
been received on the due date solely for the purpose of calculating interest
due.
4. Application of Payments. If at any time Lender receives, from Borrower
or otherwise, any amount applicable to the Indebtedness which is less than all
amounts due and payable at such time, Lender may apply that payment to amounts
then due and payable in any manner and in any order determined by Lender, in
Lender's discretion. Borrower agrees that neither Lender's acceptance of a
payment from Borrower in an amount that is less than all amounts then due and
payable nor Lender's application of such payment shall constitute or be deemed
to constitute either a waiver of the unpaid amounts or an accord and
satisfaction.
5. Security. The Indebtedness is secured, among other things, by a
multifamily mortgage, deed to secure debt or deed of trust dated as of the date
of this Note (the "Security Instrument"), and reference is made to the Security
Instrument for other rights of Lender as to collateral for the Indebtedness.
6. Acceleration. If an Event of Default has occurred and is continuing,
the entire unpaid principal balance, any accrued interest, the prepayment
premium payable under Paragraph 10, if any, and all other amounts payable under
this Note and any other Loan Document shall at once become due and payable, at
the option of Lender, without any prior notice to Borrower. Lender may exercise
this option to accelerate regardless of any prior forbearance.
7. Late Charge. If any monthly amount payable under this Note or under the
Security Instrument or any other Loan Document is not received by Lender within
TEN (10) days after the amount is due, Borrower shall pay to Lender, immediately
and without demand by Lender, a late charge equal to FIVE (5%) percent of such
amount. Borrower acknowledges that its failure to make timely payments will
cause Lender to incur additional expenses in servicing and processing the loan
evidenced by this Note (the "Loan"), and that it is extremely difficult and
impractical to determine those additional expenses. Borrower agrees that the
late charge payable pursuant to this Paragraph represents a fair and reasonable
estimate, taking into account all circumstances existing on the date of this
Note, of the additional expenses Lender will incur by reason of such late
payment. The late charge is payable in addition to, and not in lieu of, any
interest payable at the Default Rate pursuant to Paragraph 8.
8. Default Rate. So long as (a) any monthly installment under this Note
remains past due for 30 days or more, or (b) any other Event of Default has
occurred and is continuing, interest under this Note shall accrue on the unpaid
principal balance from the earlier of the due date of the first unpaid monthly
installment or the occurrence of such other Event of Default, as applicable, at
a rate (the "Default Rate") equal to the lesser of 4 percentage points above the
rate stated in the first paragraph of this Note or the maximum interest rate
which may be collected from Borrower under applicable law. If the unpaid
principal balance and all accrued interest are not paid in full on the Maturity
Date, the unpaid principal balance and all accrued interest shall bear interest
from the Maturity Date at the Default Rate. Borrower also acknowledges that its
failure to make timely payments will cause Lender to incur additional expenses
in servicing and processing the Loan, that, during the time that any monthly
installment under this Note is delinquent for more than 30 days, Lender will
incur additional costs and expenses arising from its loss of the use of the
money due and from the adverse impact on Lender's ability to meet its other
obligations and to take advantage of other investment opportunities, and that it
is extremely difficult and impractical to determine those additional costs and
expenses. Borrower also acknowledges that, during the time that any monthly
installment under this Note is delinquent for more than 30 days or any other
Event of Default has occurred and is continuing, Lender's risk of nonpayment of
this Note will be materially increased and Lender is entitled to be compensated
for such increased risk. Borrower agrees that the increase in the rate of
interest payable under this Note to the Default Rate represents a fair and
reasonable estimate, taking into account all circumstances existing on the date
of this Note, of the additional costs and expenses Lender will incur by reason
of the Borrower's delinquent payment and the additional compensation Lender is
entitled to receive for the increased risks of nonpayment associated with a
delinquent loan.
9. Limits on Personal Liability.
(a) Except as otherwise provided in this Paragraph 9, Borrower shall have
no personal liability under this Note, the Security Instrument or any other Loan
Document for the repayment of the Indebtedness or for the performance of any
other obligations of Borrower under the Loan Documents, and Lender's only
recourse for the satisfaction of the Indebtedness and the performance of such
obligations shall be Lender's exercise of its rights and remedies with respect
to the Mortgaged Property and any other collateral held by Lender as security
for the Indebtedness. This limitation on Borrower's liability shall not limit or
impair Lender's enforcement of its rights against any guarantor of the
Indebtedness or any guarantor of any obligations of Borrower.
(b) Borrower shall be personally liable to Lender for the repayment of a
portion of the Indebtedness equal to Zero percent (0%)of the ORIGINAL principal
balance of this Note, plus any other amounts for which Borrower has personal
liability under this Paragraph 9.
(c) In addition to Borrower's personal liability under Paragraph 9(b),
Borrower shall be personally liable to Lender for the repayment of a further
portion of the Indebtedness equal to any loss or damage suffered by Lender as a
result of (1) failure of Borrower to pay to Lender upon demand after an Event of
Default all Rents to which Lender is entitled under Section 3(a) of the Security
Instrument and the amount of all security deposits collected by Borrower from
tenants then in residence; (2) failure of Borrower to apply all insurance
proceeds and condemnation proceeds as required by the Security Instrument; or
(3) failure of Borrower to comply with Section 14(d) or (e) of the Security
Instrument relating to the delivery of books and records, statements, schedules
and reports.
(d) For purposes of determining Borrower's personal liability under
Paragraph 9(b) and Paragraph 9(c), all payments made by Borrower or any
guarantor of this Note with respect to the Indebtedness and all amounts received
by Lender from the enforcement of its rights under the Security Instrument shall
be applied first to the portion of the Indebtedness for which Borrower has no
personal liability.
(e) Borrower shall become personally liable to Lender for the repayment of
all of the Indebtedness upon the occurrence of any of the following Events of
Default: (1) Borrower's acquisition of any property or operation of any business
not permitted by Section 33 of the Security Instrument; (2) a Transfer
(including, but not limited to, a lien or encumbrance) that is an Event of
Default under Section 21 of the Security Instrument, other than a Transfer
consisting solely of the involuntary removal or involuntary withdrawal of a
general partner in a limited partnership or a manager in a limited liability
company; or (3) fraud or written material misrepresentation by Borrower or any
officer, director, partner, member or employee of Borrower in connection with
the application for or creation of the Indebtedness or any request for any
action or consent by Lender.
(f) In addition to any personal liability for the Indebtedness, Borrower
shall be personally liable to Lender for (1) the performance of all of
Borrower's obligations under Section 18 of the Security Instrument (relating to
environmental matters); (2) the costs of any audit under Section 14(d) of the
Security Instrument; and (3) any costs and expenses incurred by Lender in
connection with the collection of any amount for which Borrower is personally
liable under this Paragraph 9, including fees and out of pocket expenses of
attorneys and expert witnesses and the costs of conducting any independent audit
of Borrower's books and records to determine the amount for which Borrower has
personal liability.
(g) To the extent that Borrower has personal liability under this
Paragraph 9, Lender may exercise its rights against Borrower personally without
regard to whether Lender has exercised any rights against the Mortgaged Property
or any other security, or pursued any rights against any guarantor, or pursued
any other rights available to Lender under this Note, the Security Instrument,
any other Loan Document or applicable law. For purposes of this Paragraph 9, the
term "Mortgaged Property" shall not include any funds that (1) have been applied
by Borrower as required or permitted by the Security Instrument prior to the
occurrence of an Event of Default or (2) Borrower was unable to apply as
required or permitted by the Security Instrument because of a bankruptcy,
receivership, or similar judicial proceeding.
10. Voluntary and Involuntary Prepayments.
(a) A prepayment premium shall be payable in connection with any
prepayment made under this Note as provided below:
(1) Borrower may voluntarily prepay all of the unpaid principal
balance of this Note on the last Business Day of a calendar month if Borrower
has given Lender at least 30 days prior notice of its intention to make such
prepayment. Such prepayment shall be made by paying (A) the amount of principal
being prepaid, (B) all accrued interest, (C) all other sums due Lender at the
time of such prepayment, and (D) the prepayment premium calculated pursuant to
Schedule A. For all purposes including the accrual of interest, any prepayment
received by Lender on any day other than the last calendar day of the month
shall be deemed to have been received on the last calendar day of such month.
For purposes of this Note, a "Business Day" means any day other than a Saturday,
Sunday or any other day on which Lender is not open for business. Borrower shall
not have the option to voluntarily prepay less than all of the unpaid principal
balance.
(2) Upon Lender's exercise of any right of acceleration under this
Note, Borrower shall pay to Lender, in addition to the entire unpaid principal
balance of this Note outstanding at the time of the acceleration, (A) all
accrued interest and all other sums due Lender, and (B) the prepayment premium
calculated pursuant to Schedule A.
(3) Any application by Lender of any collateral or other security to
the repayment of any portion of the unpaid principal balance of this Note prior
to the Maturity Date and in the absence of acceleration shall be deemed to be a
partial prepayment by Borrower, requiring the payment to Lender by Borrower of a
prepayment premium. The amount of any such partial prepayment shall be computed
so as to provide to Lender a prepayment premium computed pursuant to Schedule A
without Borrower having to pay out-of-pocket any additional amounts.
(b) Notwithstanding the provisions of Paragraph 10(a), no prepayment
premium shall be payable with respect to (A) any prepayment made no more than
ONE HUNDRED EIGHTY (180) days before the Maturity Date, or (B) any prepayment
occurring as a result of the application of any insurance proceeds or
condemnation award under the Security Instrument.
(c) Schedule A is hereby incorporated by reference into this Note.
(d) Any permitted or required prepayment of less than the unpaid principal
balance of this Note shall not extend or postpone the due date of any subsequent
monthly installments or change the amount of such installments, unless Lender
agrees otherwise in writing.
(e) Borrower recognizes that any prepayment of the unpaid principal
balance of this Note, whether voluntary or involuntary or resulting from a
default by Borrower, will result in Lender's incurring loss, including
reinvestment loss, additional expense and frustration or impairment of Lender's
ability to meet its commitments to third parties. Borrower agrees to pay to
Lender upon demand damages for the detriment caused by any prepayment, and
agrees that it is extremely difficult and impractical to ascertain the extent of
such damages. Borrower therefore acknowledges and agrees that the formula for
calculating prepayment premiums set forth on Schedule A represents a reasonable
estimate of the damages Lender will incur because of a prepayment.
(f) Borrower further acknowledges that the prepayment premium provisions
of this Note are a material part of the consideration for the Loan, and
acknowledges that the terms of this Note are in other respects more favorable to
Borrower as a result of the Borrower's voluntary agreement to the prepayment
premium provisions.
11. Costs and Expenses. Borrower shall pay all expenses and costs,
including fees and out-of-pocket expenses of attorneys and expert witnesses and
costs of investigation, incurred by Lender as a result of any default under this
Note or in connection with efforts to collect any amount due under this Note, or
to enforce the provisions of any of the other Loan Documents, including those
incurred in post-judgment collection efforts and in any bankruptcy proceeding
(including any action for relief from the automatic stay of any bankruptcy
proceeding) or judicial or non-judicial foreclosure proceeding.
12. Forbearance. Any forbearance by Lender in exercising any right or
remedy under this Note, the Security Instrument, or any other Loan Document or
otherwise afforded by applicable law, shall not be a waiver of or preclude the
exercise of that or any other right or remedy. The acceptance by Lender of any
payment after the due date of such payment, or in an amount which is less than
the required payment, shall not be a waiver of Lender's right to require prompt
payment when due of all other payments or to exercise any right or remedy with
respect to any failure to make prompt payment. Enforcement by Lender of any
security for Borrower's obligations under this Note shall not constitute an
election by Lender of remedies so as to preclude the exercise of any other right
or remedy available to Lender.
13. Waivers. Presentment, demand, notice of dishonor, protest, notice of
acceleration, notice of intent to demand or accelerate payment or maturity,
presentment for payment, notice of nonpayment, grace, and diligence in
collecting the Indebtedness are waived by Borrower and all endorsers and
guarantors of this Note and all other third party obligors.
14. Loan Charges. If any applicable law limiting the amount of interest or
other charges permitted to be collected from Borrower in connection with the
Loan is interpreted so that any interest or other charge provided for in any
Loan Document, whether considered separately or together with other charges
provided for in any other Loan Document, violates that law, and Borrower is
entitled to the benefit of that law, that interest or charge is hereby reduced
to the extent necessary to eliminate that violation. The amounts, if any,
previously paid to Lender in excess of the permitted amounts shall be applied by
Lender to reduce the unpaid principal balance of this Note. For the purpose of
determining whether any applicable law limiting the amount of interest or other
charges permitted to be collected from Borrower has been violated, all
Indebtedness that constitutes interest, as well as all other charges made in
connection with the Indebtedness that constitute interest, shall be deemed to be
allocated and spread ratably over the stated term of the Note. Unless otherwise
required by applicable law, such allocation and spreading shall be effected in
such a manner that the rate of interest so computed is uniform throughout the
stated term of the Note.
15. Commercial Purpose. Borrower represents that the Indebtedness is being
incurred by Borrower solely for the purpose of carrying on a business or
commercial enterprise, and not for personal, family or household purposes.
16. Counting of Days. Except where otherwise specifically provided, any
reference in this Note to a period of "days" means calendar days, not Business
Days.
17. Governing Law. This Note shall be governed by the law of the
jurisdiction in which the Land is located.
18. Captions. The captions of the paragraphs of this Note are for
convenience only and shall be disregarded in construing this Note.
19. Notices. All notices, demands and other communications required or
permitted to be given by Lender to Borrower pursuant to this Note shall be given
in accordance with Section 31 of the Security Instrument.
20. Consent to Jurisdiction and Venue. Borrower agrees that any
controversy arising under or in relation to this Note shall be litigated
exclusively in the jurisdiction in which the Land is located (the "Property
Jurisdiction"). The state and federal courts and authorities with jurisdiction
in the Property Jurisdiction shall have exclusive jurisdiction over all
controversies which shall arise under or in relation to this Note. Borrower
irrevocably consents to service, jurisdiction, and venue of such courts for any
such litigation and waives any other venue to which it might be entitled by
virtue of domicile, habitual residence or otherwise.
21. WAIVER OF TRIAL BY JURY. BORROWER AND LENDER EACH (A) AGREES NOT TO
ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS NOTE OR THE
RELATIONSHIP BETWEEN THE PARTIES AS LENDER AND BORROWER THAT IS TRIABLE OF RIGHT
BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE
TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF
RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND
VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.
ATTACHED SCHEDULES. The following Schedules are attached to this Note:
| X | Schedule A Prepayment Premium (required)
| X | Schedule B Modifications to Multifamily Note
IN WITNESS WHEREOF, Borrower has signed and delivered this Note or has
caused this Note to be signed and delivered by its duly authorized
representative.
DREXEL BURNHAM LAMBERT REAL ESTATE
ASSOCIATES II LIMITED PARTNERSHIP, a
New York limited partnership
By:DBL PROPERTIES CORPORATION, a
New York corporation, Its General Partner
By:
Name: Patti K. Fielding
Title: Vice President
3-32022859
Borrower's Social Security/Employer ID Number
<PAGE>
SCHEDULE A
PREPAYMENT PREMIUM
Any prepayment premium payable under Paragraph 10 of this Note shall be computed
as follows:
(a) If the prepayment is made between the date of this Note and the date
that is ONE HUNDRED EIGHTY (180) months after the first day of the first
calendar month following the date of this Note (the "Yield Maintenance Period"),
the prepayment premium shall be the greater of:
(i) 1.0% of the unpaid principal balance of this Note; or
(ii) the product obtained by multiplying:
(A) the amount of principal being prepaid,
by
(B) the excess (if any) of the Monthly Note Rate over the Assumed
Reinvestment Rate,
by
(C) the Present Value Factor.
For purposes of subparagraph (ii), the following definitions shall
apply:
Monthly Note Rate: one-twelfth (1/12) of the annual interest rate
of the Note, expressed as a decimal calculated to five digits.
Prepayment Date: in the case of a voluntary prepayment, the date
on which the prepayment is made; in any other case, the date on
which Lender accelerates the unpaid principal balance of the
Note.
Assumed Reinvestment Rate: one-twelfth (1/12) of the yield rate
as of the date 5 Business Days before the Prepayment Date, on the
9.25% U.S. Treasury Security due February, 2015, as reported in
The Wall Street Journal, expressed as a decimal calculated to
five digits. In the event that no yield is published on the
applicable date for the Treasury Security used to determine the
Assumed Reinvestment Rate, Lender, in its discretion, shall
select the non-callable Treasury Security maturing in the same
year as the Treasury Security specified above with the lowest
yield published in The Wall Street Journal as of the applicable
date. If the publication of such yield rates in The Wall Street
Journal is discontinued for any reason, Lender shall select a
security with a comparable rate and term to the Treasury Security
used to determine the Assumed Reinvestment Rate. The selection of
an alternate security pursuant to this Paragraph shall be made in
Lender's discretion.
Present Value Factor: the factor that discounts to present value
the costs resulting to Lender from the difference in interest
rates during the months remaining in the Yield Maintenance
Period, using the Assumed Reinvestment Rate as the discount rate,
with monthly compounding, expressed numerically as follows:
[OBJECT OMITTED]
n = number of months remaining in Yield Maintenance Period
ARR = Assumed Reinvestment Rate
(b) If the prepayment is made after the expiration of the Yield
Maintenance Period but more than ONE HUNDRED EIGHTY (180) days before the
Maturity Date, the prepayment premium shall be 1.0% of the unpaid principal
balance of this Note.
<PAGE>
SCHEDULE B
MODIFICATIONS TO MULTIFAMILY NOTE
1. The first sentence of Paragraph 8 of the Note ("Default Rate") is hereby
deleted and replaced with the following:
So long as (a) any monthly installment under this Note remains past due
for more than thirty (30) days or (b) any other event of Default has
occurred and is continuing, interest under this Note shall accrue on the
unpaid principal balance from the earlier of the due date of the first
unpaid monthly installment or the occurrence of such other Event of
Default, as applicable, at a rate (the "Default Rate") equal to the lesser
of (1) the maximum interest rate which may be collected from Borrower
under applicable law or (2) the greater of (i) three percent (3%) above
the Interest Rate or (ii) four percent (4.0%) above the then-prevailing
Prime Rate. As used herein, the term "Prime Rate" shall mean the rate of
interest announced by The Wall Street Journal from time to time as the
"Prime Rate".
2. Paragraph 9(c) of the Note is amended to add the following subparagraph
(4): (4) failure by Borrower to pay the amount of the water and sewer
charges, taxes, fire, hazard or other insurance premiums, ground rents,
assessments or other charges in accordance with the terms of the Security
Instrument.
